As filed with the Securities and Exchange Commission on May 19, 1995
Registration No. 33-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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INTEGRATED DEVICE TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 94-2669985
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
2975 Stender Way
Santa Clara, California 95054
(408) 727-6116
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
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JACK MENACHE, ESQ.
INTEGRATED DEVICE TECHNOLOGY, INC.
2975 Stender Way
Santa Clara, California 95054
(408) 727-6116
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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COPIES TO:
DENNIS R. DEBROECK, ESQ. JEFFREY D. SAPER, ESQ.
EDWIN N. LOWE, ESQ. JOHN A. FORE, ESQ.
ROBERT A. FREEDMAN, ESQ. HOWARD S. ZEPRUN, ESQ.
Fenwick & West Wilson Sonsini Goodrich & Rosati
Two Palo Alto Square Professional Corporation
Palo Alto, California 94306 650 Page Mill Road
(415) 494-0600 Palo Alto, California 94304
(415) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
<TABLE>
<CAPTION>
C A L C U L A T I O N O F R E G I S T R A T I O N F E E
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Proposed Proposed
Maximum Maximum
Amount Offering Aggregate
Title of Each Class of to be Price Offering Amount of
Securities to be Registered Registered(1) Per Unit(2) Price(2) Registration Fee
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Convertible Subordinated
Notes due 2002 $ 172,500,000 100% $172,500,000 $59,482.76
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Common Stock, par value
$0.001 per share(3) (4) $ $ $
=============================================================================================
<FN>
(1) Includes $22,500,000 in principal amount of Notes that the Underwriters have
the option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933.
(3) Associated with the Common Stock are Preferred Stock Purchase Rights which
will not be exercisable or be evidenced separately from the Common Stock
prior to the occurrence of certain events.
(4) Represents such indeterminate number of shares of Common Stock as shall be
issuable upon conversion of the Notes.
</FN>
</TABLE>
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, Dated May 19, 1995
PROSPECTUS
$150,000,000
IMAGE: "IDT_LOGO"
% CONVERTIBLE SUBORDINATED NOTES DUE 2002
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Interest payable June 1 and December 1
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The Notes are convertible at the option of the holder at any time after 60
days following the latest date of original issuance thereof and prior to
maturity, unless previously redeemed or repurchased, into Common Stock, $.001
par value per share (the "Common Stock"), of Integrated Device Technology, Inc.
("IDT" or the "Company") at a conversion price of $ per share, subject
to adjustment in certain events. The Common Stock of the Company is traded on
The Nasdaq National Market under the symbol "IDTI." On May 18, 1995, the last
reported sale price of the Common Stock on The Nasdaq National Market was
$41.625 per share. See "Price Range of Common Stock." Interest on the Notes will
be payable semi-annually on June 1 and December 1 of each year, commencing
December 1, 1995.
Prior to June 2, 1998, the Notes are not redeemable at the option of the
Company. At any time on or after such date, the Notes are redeemable at the
option of the Company, in whole or in part, at the redemption prices set forth
herein plus accrued interest. See "Description of Notes--Optional Redemption by
the Company." No sinking fund is provided for the Notes. In the event that a
Designated Event (as defined) occurs, each holder of Notes will have the right,
subject to certain conditions and restrictions, to require the Company to offer
to repurchase all outstanding Notes, in whole or in part, owned by such holder
subject to certain conditions, at the repurchase prices set forth herein plus
accrued interest. See "Description of Notes--Repurchase at Option of Holders
Upon a Designated Event." The Notes will be subordinated in right of payment to
all existing and future Senior Indebtedness (as defined). See "Description of
Notes--Subordination." Application has been made for quotation of the Notes on
the Nasdaq Small-Cap Market under the symbol "IDTIG".
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The Securities Offered Hereby Involve a High Degree of Risk.
See "Risk Factors."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
==============================================================================
Price to Underwriting Discounts Proceeds to
Public(1) and Commissions(2) Company(1)(3)
- ------------------------------------------------------------------------------
Per Note...... 100% % %
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Total (4).... $150,000,000 $ $
==============================================================================
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(1) Plus accrued interest, if any, from June , 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $350,000.
(4) The Company has granted the Underwriters a 30-day option to purchase up to
$22,500,000 additional principal amount of Notes on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
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The Notes offered by this Prospectus are offered by the Underwriters
subject to prior sale, withdrawal, cancellation or modification of the offer
without notice, to delivery to and acceptance by the Underwriters and to certain
further conditions. It is expected that delivery of the Notes will be made at
the offices of Lehman Brothers Inc., New York, New York on or about June , 1995.
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LEHMAN BROTHERS
MONTGOMERY SECURITIES
SMITH BARNEY INC.
May , 1995
<PAGE>
AVAILABLE INFORMATION
Integrated Device Technology, Inc. ("IDT" or the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities being offered pursuant to this
Prospectus. This Prospectus, which forms a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain items of which are contained in or incorporated by reference as exhibits
to the Registration Statement as permitted by the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement including the exhibits filed or incorporated by reference therein.
Statements contained herein concerning the provisions of documents filed with,
or incorporated by reference in, the Registration Statement as exhibits are
necessarily summaries of such documents and each such statement is qualified in
its entirety by reference to the copy of the applicable documents filed with the
Commission.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference: (1) the Company's Annual
Report on Form 10-K for the fiscal year ended April 3, 1994; (2) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 1994; (3) the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 2,
1994; (4) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended January 1, 1995; (5) the description of the Company's Common Stock as set
forth in its Registration Statement on Form 8-B dated September 23, 1987, as
amended by the Company's Form 8 dated March 28, 1989; and (6) the description of
the Company's Preferred Share Purchase Rights as set forth in the Company's
Registration Statement on Form 8-A dated December 20, 1988, as amended by the
Company's Form 8-A/A dated February 27, 1992. All reports and other documents
subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such reports and
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus or the Registration
Statement.
The Company will provide without charge, upon written or oral request of any
person to whom a copy of this Prospectus is delivered, a copy of any or all of
the documents which have been or may be incorporated by reference in this
Prospectus, other than exhibits to such documents. Requests for such copies
shall be directed to Integrated Device Technology, Inc., 2975 Stender Way, Santa
Clara, CA 95054, Attention: Chief Financial Officer, telephone (408) 727-6116.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY OR SHARES OF THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere or incorporated by reference in this Prospectus. The
Company's fiscal year ends on the Sunday closest to March 31 and the first,
second and third fiscal quarters end on the Sunday closest to June 30, September
30 and December 31, respectively. As a result, there were 53 weeks in fiscal
1994 and 52 weeks in fiscal 1995. For ease of reference, month-end dates are
used herein except in the Consolidated Financial Statements and related notes
thereto. Except as otherwise noted, all information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option.
THE COMPANY
Integrated Device Technology, Inc. ("IDT" or the "Company") designs,
develops, manufactures and markets a broad range of high-performance
semiconductor products for the desktop computer, communications, office
automation and workstation/server markets. The Company focuses its development
efforts on providing proprietary and enhanced industry-standard products that
improve the performance of systems incorporating high-performance
microprocessors. The Company offers over 5,000 product configurations in four
product families: SRAM components and modules, specialty memory products, logic
circuits and RISC microprocessors and subsystems.
The Company has introduced over 50 new products in more than 600
configurations since the beginning of fiscal 1995. The Company believes that its
ability to introduce new, higher-performance products has resulted in it
becoming a market leader in SRAMs, SRAM cache modules, FIFO and multi-port
specialty memory products and high-speed CMOS logic circuits. The Company has
made significant investments and commitments in becoming a supplier of
RISC-based microprocessors and now offers a family of 20 microprocessor and
related peripheral products for the embedded systems and desktop computing
markets.
IDT operates sub-micron wafer fabrication facilities in San Jose and Salinas,
California. The Company's Salinas facility includes a 24,000 square foot, class
3, six-inch wafer fabrication line. The Company's San Jose facility includes a
24,000 square foot, class 1, six-inch wafer fabrication line. The Company is
also building a 192,000 square foot facility containing a 48,000 square foot,
class 1, eight-inch wafer fabrication line in Hillsboro, Oregon. The Company
continues to make significant investments to advance its proprietary CMOS
process technologies in order to improve product performance and lower product
costs through increased yields. The majority of IDT's current products are
manufactured using 0.65 micron processes, an increasing number of products are
being manufactured using the Company's new 0.5 micron processes and several
sub-0.5 micron CMOS processes are under development. IDT believes that
maintaining its own wafer fabrication capability facilitates the implementation
of advanced process technologies and new higher-performance product designs,
provides it with a reliable source of supply of semiconductors and allows it to
be more flexible in shifting production according to product demand.
The Company markets its products on a worldwide basis primarily to OEMs
through a variety of channels, including a direct sales force, distributors and
independent sales representatives. The Company's end-user customers include
Alcatel, AT&T, Apple Computer, Bay Networks, Canon, Cisco Systems, Compaq
Computer, Dell Computer, Digital Equipment, FORE Systems, Hewlett-Packard, IBM,
Intel, Motorola, NEC, Nokia, Olivetti, Siemens Nixdorf, Silicon Graphics, Sun
Microsystems and Tektronix.
The Company was incorporated in California in 1980 and reincorporated in
Delaware in September 1987. Its principal offices are located at 2975 Stender
Way, Santa Clara, California 95054 and its telephone number is (408) 727-6116.
<PAGE>
<TABLE>
THE OFFERING
<CAPTION>
<S> <C>
Securities Offered .........$150,000,000 principal amount of % Convertible Subordinated Notes due 2002
(the "Notes") to be issued under an indenture (the "Indenture") as more fully
described under "Description of Notes." The Company has granted to the
Underwriters an option for 30 days to purchase up to $22,500,000 additional
principal amount of Notes, solely to cover over- allotments.
Maturity ...................June 1, 2002.
Interest ...................Interest on the Notes is payable on the principal amount thereof at the rate
stated on the cover page of this Prospectus, semi-annually on each June 1 and
December 1, commencing December 1, 1995.
Conversion Rights .........The Notes are convertible at the option of the holder at any time after 60 days
following the latest date of original issuance thereof and prior to maturity,
unless previously redeemed or repurchased, into the Company's Common Stock at a
conversion price of $ per share, subject to adjustment under certain
conditions. See "Description of Notes-- Conversion."
Optional Redemption .......The Notes are not redeemable at the option of the Company prior to June 2, 1998.
At any time on or after such date, the Notes will be redeemable on at least 15
days' notice at the option of the Company, in whole or in part, at any time,
initially at % and thereafter at prices declining to 100% at maturity, together
with accrued interest. See "Description of Notes-- Optional Redemption by the
Company."
Repurchase at Option of
Holders Upon
Designated Event...........In the event that a Designated Event (as defined in the Indenture) occurs, each
holder of Notes will have the right, subject to certain conditions and
restrictions, to require the Company to offer to repurchase all outstanding
Notes, in whole or in part, owned by such holder, at the repurchase prices set
forth herein plus accrued interest. See "Description of Notes-- Repurchase at
Option of Holders Upon a Designated Event."
Subordination ..............The Notes are subordinate in right of payment to all existing and future Senior
Indebtedness (as defined in the Indenture) of the Company. As of March 31, 1995,
the Company had approximately $50.2 million of outstanding indebtedness which
constituted Senior Indebtedness. The Indenture contains no limitation on the
incurrence of Senior Indebtedness or other liabilities by the Company or its
subsidiaries. See "Description of Notes--Subordination."
Listing ....................Application has been made for quotation of the Notes on the Nasdaq Small-Cap
Market under the symbol "IDTIG". The Common Stock is traded on the Nasdaq
National Market under the symbol "IDTI."
Use of proceeds ............To equip a new wafer fabrication facility and construct and equip a new assembly
and test facility, expand existing wafer fabrication facilities, acquire other
capital equipment, fund the possible investments in or acquisitions of
complementary technologies, product lines or companies and for other general
corporate purposes, including working capital. See "Use of Proceeds."
</TABLE>
4
<PAGE>
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data and ratios)
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-------------------------------------------------------------------------
1991 1992(1) 1993 1994 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues ........................................ $ 198,559 $ 202,734 $ 236,263 $ 330,462 $ 422,190
Gross profit .................................... 98,611 75,915 103,978 170,835 242,538
Operating income (loss) ......................... 4,138 (29,316) 11,006 52,269 99,515
Income (loss) before provision
(benefit) for income taxes .................... 836 (34,768) 6,278 50,206 104,403
Net income (loss)(2) ............................ 1,226 (32,808) 5,336 40,165 78,302
Net income (loss) per share(2) .................. $ .05 $ (1.25) $ .18 $ 1.21 $ 2.09
Shares used in computing net income
(loss) per share .............................. 26,070 26,255 29,701 33,116 37,382
Ratio of earnings to fixed charges(3) ........... 1.11x -- 1.90x 8.95x 24.75x
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995
-------------------------
ACTUAL AS ADJUSTED(4)
--------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital ............................................................................................$271,695 $417,970
Total assets ............................................................................................... 561,975 708,250
Total debt ................................................................................................. 42,498 192,498
Stockholders' equity........................................................................................ 414,531 414,531
<FN>
- ----------
(1) In fiscal 1992, the Company recorded restructuring and other charges of
$24.8 million.
(2) The Company's exemption from Malaysian income taxes expired in fiscal 1994.
See Note 11 of Notes to Consolidated Financial Statements included herein
("Consolidated Financial Statements").
(3) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated income (loss) before income taxes plus
fixed charges and (ii) fixed charges consist of interest expense incurred
and the portion of rental expense under operating leases deemed by the
Company to be representative of the interest factor. Earnings were
inadequate to cover fixed charges by $8.3 million in fiscal 1992.
(4) Adjusted to give effect to the sale by the Company of the Notes offered
hereby and the receipt of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."
</FN>
</TABLE>
<PAGE>
RISK FACTORS
In addition to the other information contained in or incorporated by
reference in this Prospectus, the following risk factors should be considered
carefully in evaluating the Company and its business before purchasing the
shares of Common Stock offered hereby.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS; DEPENDENCE ON COMPUTER AND
COMMUNICATIONS INDUSTRIES
IDT's past operating results have been, and its future operating results may
be, subject to quarterly fluctuations due to a wide variety of factors including
the timing of new product and process technology announcements and introductions
by the Company or its competitors, competitive pricing pressures, fluctuations
in manufacturing yields, changes in the mix of products sold, availability and
costs of raw materials, the cyclical nature of the semiconductor industry,
industry-wide wafer-processing capacity, economic conditions in various
geographic areas and costs associated with other events, such as an expansion of
production capability or litigation. For example, the Company's results in
fiscal 1991 were adversely affected by a delay in the introduction of a
higher-speed 256K (kilobit) SRAM (Static Random Access Memory) and a 1 Meg
(megabit) SRAM, an industry-wide decrease in demand for logic products and, in
late 1991, significant price competition in the SRAM market. In addition, due
primarily to the write-down of excess inventory and underutilized capital
assets, accruals for patent litigation defense costs and charges related to
closure of an older wafer fabrication facility, the Company incurred a
significant loss in fiscal 1992. Any unfavorable changes in manufacturing
yields, product mix, supply or costs of raw materials, delays in new product or
process technology introductions, underutilization of manufacturing capacity,
unfavorable market conditions, increased price competition, intellectual
property rights or other factors could adversely affect the Company's operating
results. Although the Company has benefited in recent periods from SRAM market
conditions characterized by excess demand over supply and resultant favorable
pricing memory markets have historically been characterized by declining prices.
The Company believes industry wide capacity for SRAM production is increasing in
response to these market conditions. As a result, any significant price declines
for SRAM products in the future, either due to decreased demand or increased
supply, could adversely affect the Company's operating results.
The Company's operating results are also affected by the market's acceptance
of the Company's and its customers' products and the level and timing of orders
received. The Company ships a substantial portion of its quarterly sales in the
last month of a quarter. If anticipated shipments in any quarter do not occur,
the Company's operating results for that quarter could be adversely affected. In
addition, a substantial percentage of the Company's products are incorporated
into computer and computer-related products, which have historically been
characterized by significant fluctuations in demand which in turn have affected
the demand for components used in these computers. Furthermore, the Company's
operating results are affected by the demand for microprocessors, particularly
advanced microprocessors such as the Intel Pentium and the PowerPC, that utilize
SRAM cache memory. Any decline in the demand for advanced microprocessors could
adversely affect the Company's sales of SRAM components and modules, which could
adversely affect the Company's operating results. In addition, demand for
certain of the Company's products is dependent upon growth in the communications
market. A slowdown in the computer and related peripherals or communications
markets could adversely affect the Company's operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CURRENT CAPACITY LIMITATIONS AND RISKS ASSOCIATED WITH PLANNED EXPANSION
The Company has been operating its wafer fabrication facilities in Salinas
and San Jose and its assembly operations in Malaysia near installed equipment
capacity since fiscal 1994. As a result, the Company has not been able to take
advantage of all market opportunities presented to it. Due to long production
lead times and current capacity constraints, any failure by the Company to
adequately forecast the mix of product demand could adversely affect the
Company's sales and operating results. For example, the Company's second quarter
fiscal 1995 results were relatively flat compared to its prior quarter results
due to a slowing in demand from networking customers and an inability to shift
production to other product areas where demand exceeded supply.
6
<PAGE>
To address its capacity requirements, in fiscal 1995 the Company initiated
and substantially completed the conversion of its Salinas wafer fabrication
facility from five-inch to six-inch wafers added incremental production
equipment to its San Jose wafer fabrication facility and completed a 40,000
square foot expansion of test and assembly facilities in Penang, Malaysia. In
addition, in August 1994 construction commenced on a leased 192,000 square foot
facility containing a 48,000 square foot, class 1, eight-inch wafer fabrication
line in Hillsboro, Oregon. The Company also recently acquired land in the
Philippines and intends to construct a 240,000 square foot assembly and test
facility over the next several years. Delays in the delivery of wafer
fabrication or test equipment to the Company's facilities could delay planned
increases in the Company's production capacity. In connection with the
construction, equipping and commencement of operations at the Oregon and
Philippine facilities, the Company faces a number of substantial additional
risks including, but not limited to, delays in construction, cost overruns,
equipment delays or shortages, manufacturing startup or process problems and
difficulties in hiring key managers and technical personnel. In addition, the
Company has never operated an eight-inch wafer fabrication facility and
eight-inch facilities and production equipment are relatively new to the
industry. Accordingly, the Company could incur unanticipated process or
production problems.
The Company's capacity additions will result in a significant increase in
fixed and operating expenses. If revenue levels do not increase sufficiently to
offset these additional expense levels, the Company's operating results could be
adversely impacted in future periods. In this regard, IDT has historically
expensed as period costs, rather than capitalized, the operating expenses
associated with bringing a fabrication facility to commercial production.
Although the Company does not expect the Oregon fabrication facility to
contribute to revenues until fiscal 1997, the Company will recognize substantial
operating expenses associated with the facility in fiscal 1996 and 1997. In
addition, in fiscal 1997, the Company will begin to recognize substantial
depreciation expenses upon commencement of commercial production but before
production of substantial volume is achieved. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The extensive production expansion programs, including, in particular, the
construction of new facilities in Oregon and the Philippines, could strain the
Company's management and engineering resources. This strain on resources could
be exacerbated by the geographic distances between the Company's facilities.
There can be no assurance that the Company will be able to hire additional
management, engineering and other personnel, as needed, to manage these
expansion programs effectively and to implement new production capacity in a
timely manner and within budget.
The Company believes other manufacturers are also expanding or planning to
expand their fabrication capacity over the next several years. There can be no
assurance that expansion by the Company and its competitors will not lead to
overcapacity in the Company's target markets, which could cause declines in
product prices that would adversely affect the Company's operating results. See
"Business--Manufacturing--Properties."
MANUFACTURING RISKS
The Company's CMOS (Complementary Metal Oxide Silicon) and BiCMOS (Bipolar
CMOS) manufacturing processes are highly complex, require advanced and costly
equipment and are continuously being modified in an effort to improve yields and
product performance. Minute impurities or other difficulties in the
manufacturing process can lower yields. From time to time, IDT has experienced
production difficulties that have caused delivery delays and quality problems.
There can be no assurance that the Company will not experience manufacturing
problems and product delivery delays in the future as a result of, among other
things, changes to its process technologies, ramping production, installing new
equipment at its facilities, and constructing facilities in Oregon and the
Philippines. See "Current Capacity Limitations and Risks Associated with Planned
Expansion." Further, the Company's existing wafer fabrication facilities are
located relatively near each other in northern California. If the Company were
unable to use these facilities, as a result of a natural disaster or otherwise,
the Company's operations would be materially adversely affected until the
Company were able to obtain other production capability. See "Business--
Manufacturing--Properties."
7
<PAGE>
DEPENDENCE ON NEW PRODUCTS AND TECHNOLOGIES
The market for the Company's products is characterized by significant price
competition, frequent new product introductions, rapidly changing technology and
evolving industry standards. Notwithstanding the Company's recent experience in
the SRAM market, average selling prices of the Company's products have
historically declined over time and this trend is expected to continue. To
offset these decreases, the Company relies on manufacturing cost reductions and
on timely introductions of new products that meet customers' needs. From time to
time the Company has experienced delays in product introductions. To remain
competitive the Company also must continue to devote significant resources to
advancing process technologies, reducing semiconductor die size, increasing
performance and improving manufacturing yields. IDT is currently converting the
manufacture of several products to its newer generation process technologies.
Often in the past, such conversions have temporarily adversely affected yields.
In particular, as process geometries become smaller, implementation becomes more
difficult. There can be no assurance that the Company will be able to develop
and introduce new products in a timely manner, that new products will gain
market acceptance or that new process technologies can be successfully
implemented. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Research and Development."
COMPETITION
The Company competes with a number of manufacturers in each of its major
product areas. Several of the Company's competitors have substantially greater
technical, marketing, manufacturing and financial resources than the Company. In
addition, several of the Company's foreign competitors receive assistance from
their respective governments, which may give them a competitive advantage. The
Company competes principally on the basis of technical innovation and product
performance, as well as on quality, price and product availability. The ability
of IDT to compete successfully depends upon a number of factors, including new
product and process technology introductions by IDT and its competitors,
customer acceptance of the Company's products, cost effective manufacturing,
assertion of intellectual property rights and general market and economic
conditions. Some of these factors are outside the Company's control. There can
be no assurance that the Company will be able to compete successfully in the
future against existing or potential competitors or that the Company's operating
results will not be adversely affected by increased price competition. See
"Business--Competition--Intellectual Property and Licensing."
CAPITAL NEEDS
The semiconductor industry is extremely capital intensive. To remain
competitive, the Company must continue to invest in advanced manufacturing and
test equipment. Capital expenditures in fiscal 1995 for the purchase of capital
equipment and expansion of facilities amounted to approximately $94.7 million.
In fiscal 1996 the Company expects to expend approximately $260 million for the
purchase of equipment for the Oregon facility, other ongoing capital
expenditures and initial funding for the Philippines test and assembly facility.
The Company currently estimates that the cost to construct and equip the Oregon
and Philippines facilities will be approximately $400 to $500 million and $75
million, respectively. Accordingly, the Company anticipates significant
continuing capital expenditures in the next several years. While the Company
believes that the proceeds from this offering, together with existing cash and
cash equivalents, cash flow from operations, existing credit facilities
(including a $60 million operating lease for the Oregon facility pursuant to
which the lessor will fund construction of the building and improvements) and
possible other financing arrangements for the new Oregon facility, will be
adequate to fund its anticipated capital expenditures and working capital needs
at least through fiscal 1996, there can be no assurance that the Company will
not be required to seek other financing sooner or that such financing, if
required, would be available on terms satisfactory to the Company. In this
regard, any adverse effect upon the Company's operating results due to a
significant downturn in industry pricing or otherwise could accelerate the
Company's need to seek additional outside capital. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
8
<PAGE>
INTELLECTUAL PROPERTY RISKS
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. In recent years,
there has been a growing trend of companies to resort to litigation to protect
their semiconductor technology from unauthorized use by others. The Company in
the past has been involved in patent litigation which adversely affected its
operating results. Although the Company has obtained patent licenses from
certain semiconductor manufacturers, the Company does not have licenses from a
number of semiconductor manufacturers who have a broad portfolio of patents. IDT
has been notified that it may be infringing patents issued to certain
semiconductor manufacturers and other parties, and is currently involved in
several license negotiations. There can be no assurance that additional claims
alleging infringement of intellectual property rights, including infringement of
patents that have been or may be issued in the future, will not be asserted in
the future. The intellectual property claims that have been or may be asserted
against the Company could require IDT to discontinue the use of certain
processes or cease the manufacture, use and sale of infringing products, to
incur significant litigation costs and damages, and to develop noninfringing
technology or to acquire licenses to the alleged infringed technology. There can
be no assurance that the Company would be able to obtain such licenses on
acceptable terms or to develop noninfringing technology. The failure to renew or
renegotiate existing licenses or significant increases in amounts payable under
these licenses could also have an adverse effect on the Company. In addition,
there can be no assurance that any patents issued to the Company will not be
challenged, invalidated or circumvented or that rights granted thereunder will
provide competitive advantages to the Company. Furthermore, the laws of certain
countries do not protect the Company's intellectual property rights to the same
extent as do the laws of the United States. See "Business--Intellectual Property
and Licensing."
CYCLICALITY OF SEMICONDUCTOR INDUSTRY
The semiconductor industry is highly cyclical and has been subject to
significant downturns at various times that have been characterized by
diminished product demand, production overcapacity and accelerated erosion of
average selling prices. In recent periods, the markets for the Company's
products, in particular SRAMs, have been characterized by excess demand over
supply and resultant favorable product pricing. These conditions represent a
departure from the long-term trend of declining average selling prices in the
semiconductor market. Any material increase in industry-wide production
capacity, shift in industry capacity toward products competitive with the
Company's products, reduced demand or reduced growth in demand, or other factors
could result in a rapid decline in product pricing and adversely affect the
Company's operating results.
MANAGEMENT OF GROWTH
The Company has experienced, and expects to experience in the future, growth
in the number of employees, the scope of its operations and the geographic area
of its operations. This growth has resulted in new and increased reponsibilities
for management personnel and has placed added pressures on the Company's
operating and financial systems. To manage future growth effectively, the
Company must hire additional management and technical personnel, integrate its
new employees into its overall operations and continue to improve its
operational, financial and management systems. If the Company is unable to
manage growth effectively or hire or retain qualified personnel, the Company's
business and results of operations could be materially and adversely affected.
See "Business--Employees."
DEPENDENCE ON THIRD PARTIES
The Company's manufacturing operations depend upon obtaining adequate raw
materials on a timely basis. The number of vendors of certain raw materials,
such as silicon wafers, ultra-pure metals and certain chemicals and gases, is
very limited. In addition, certain packages used by the Company require long
lead times and are available from only a few suppliers. From time to time,
vendors have extended lead times or limited supply to the Company due to
capacity constraints. The Company's results of operations would be adversely
affected if it were unable to obtain adequate supplies of raw materials in
9
<PAGE>
a timely manner or if there were significant increases in the costs of raw
materials. IDT has been dependent on the design capabilities of Quantum Effect
Design, Inc. ("QED"), a majority-owned subsidiary, for the design and
development of derivatives of MIPS RISC based microprocessors. There can be no
assurance that the Company will be able to maintain this design relationship
with QED or that QED will continue to be successful in developing new
microprocessors. See "Business--Manufacturing" and "--Research and Development."
INTERNATIONAL OPERATIONS
Substantially all of the Company's test operations and a significant portion
of its assembly operations are performed at IDT's facility in Penang, Malaysia.
IDT also uses subcontractors in Korea, the Philippines and Malaysia for certain
assembly operations. In addition, the Company plans to construct an assembly and
test facility in the Philippines. The Company's reliance on these overseas
facilities entails certain risks generally associated with doing business
abroad, such as foreign governmental regulations, currency fluctuations,
potential currency exchange controls, political unrest and disruptions or delays
in shipments. The Company's operations in Penang are subject to other specific
risks. There is currently a very low unemployment rate, and accordingly a
limited pool of skilled workers, in Penang. There can be no assurance that the
Company will be able to hire sufficient skilled personnel as it expands its
operations. In addition, due to current limitations on electrical power
availability in Penang, certain large consumers of power have been subject to
brief shutdowns on a weekly basis. While the Company is not a large consumer of
power and therefore has not been affected by such scheduled shutdowns, there can
be no assurance that, as IDT's and other manufacturers' operations in Penang
expand, electrical power shortages will not adversely affect the Company's
Malaysian operations. The Company's tax rate in fiscal 1996 will increase as a
result of decreased tax benefits associated with the Company's Malaysian
subsidiary. See Note 11 of Notes to Consolidated Financial Statements. If the
Company were unable to assemble or test products offshore, or if air
transportation to these foreign facilities were curtailed, the Company's
operations could be materially adversely affected.
A substantial percentage of the Company's revenues are derived from export
sales. In fiscal 1994 and 1995, export sales accounted for 32% and 39%,
respectively, of IDT's revenues. See Note 12 of Notes to Consolidated Financial
Statements. Export sales are generally denominated in local currencies. The
Company's offshore assembly and test operations and export sales are subject to
risks associated with foreign operations, including currency controls and
fluctuations, changes in local economic conditions, import and export controls,
as well as changes in tax laws, tariffs and freight rates. The Company attempts
to hedge against a portion of its short-term exposure to currency fluctuations.
There can be no assurance that the above factors will not adversely affect the
Company's operations in the future or that the Company will be successful in its
hedging efforts. See "Business--Marketing and Sales" and "--Manufacturing" and
Notes 1 and 2 of Notes to Consolidated Financial Statements.
INVENTORY VALUATION ISSUES
In connection with the Company's fiscal 1993 audit, the Company's independent
auditors identified a material weakness in the Company's internal controls with
respect to its inventory management system as it relates to determining the cost
of inventory. A material weakness indicates that a material error or
irregularity may occur in the Company's quarterly financial statements and may
not be detected on a timely basis by the Company's employees in the normal
course of performing their assigned functions, thereby possibly resulting in a
misstatement of the Company's quarterly financial statements. There were no
adjustments to the Company's financial statements in connection with the fiscal
1993 audit and no restatements of any quarterly periods in that year. Beginning
in fiscal 1994, the Company implemented programs aimed at improving its
inventory management and costing systems. The Company's independent auditors did
not identify any material weaknesses with respect to these systems in their
audits for fiscal 1994 and 1995 and noted improvements in the Company's systems,
but indicated that the Company's systems continue to have significant
limitations. While the Company continues to devote resources to the improvement
of its systems, there can be no assurance that the Company will successfully
implement systems that will completely resolve these issues. Failure to devote
adequate resources to address limitations in the Company's inventory management
and costing systems or to improve such systems to the extent sought could result
in a misstatement of operating results.
10
<PAGE>
ENVIRONMENTAL REGULATIONS
The Company is subject to a variety of foreign, federal, state and local
governmental regulations related to the discharge and disposal of toxic,
volatile or otherwise hazardous materials used in its manufacturing process.
While the Company believes that it has all environmental permits necessary to
conduct its business and that its activities conform to present environmental
regulations, increasing public attention has been focused on the environmental
impact of semiconductor operations. Any failure by the Company to control the
use of, or to restrict adequately the discharge of, hazardous materials under
present or future regulations could subject it to substantial liability or could
cause its manufacturing operations to be suspended. In addition, IDT could be
held financially responsible for remedial measures if its properties were found
to be contaminated whether or not the Company was responsible for such
contamination.
VOLATILITY OF STOCK PRICE
The Company's Common Stock has experienced substantial price volatility and
such volatility may occur in the future, particularly as a result of quarter to
quarter variations in the actual or anticipated financial results of the Company
or other companies in the semiconductor industry or in the markets served by the
Company, or announcements by the Company or its competitors regarding new
product introductions. In addition, the stock market has experienced extreme
price and volume fluctuations that have affected the market price of many
technology companies' stocks in particular and that have often been unrelated or
disproportionate to the operating performance of these companies. These factors
may adversely affect the market price of the Common Stock. See "Price Range of
Common Stock."
SUBORDINATION OF NOTES
The Notes will be unsecured subordinated obligations of the Company and will
be subordinate to the prior payment in full of all Senior Indebtedness (as
defined in the Indenture) of the Company and will be effectively subordinated to
all indebtedness and other liabilities of the Company's subsidiaries. As of
March 31, 1995, the Company had approximately $50.2 million of outstanding
indebtedness which constituted Senior Indebtedness. In addition, as of March 31,
1995 subsidiaries of the Company had outstanding an aggregate of approximately
$3.6 million of indebtedness to which the Notes are effectively subordinated.
The Indenture will not limit the amount of additional indebtedness, including
Senior Indebtedness, which the Company or any of its subsidiaries can create,
incur, assume or guarantee. During the continuance beyond any applicable grace
period of any default of the payment of principal of, premium, interest or any
other payment due on any Senior Indebtedness, no payment of principal, or
premium, if any, or interest on the Notes (including, but not limited to the
redemption price or repurchase price with respect to the Notes) may be made by
the Company. In addition, upon any distribution of assets of the Company
pursuant to any dissolution, winding up, liquidation or reorganization, the
payment of the principal of, or premium, if any, and interest on the Notes is
subordinated to the extent provided in the Indenture to the prior payment in
full of all Senior Indebtedness. By reason of the subordination, in the event of
the Company's liquidation or dissolution, holders of Senior Indebtedness may
receive more, ratably, and holders of the Notes may receive less, ratably, than
the other creditors of the Company.
In addition, the Notes are obligations exclusively of the Company and not of
any of its subsidiaries. The Company's cash flow and ability to service debt,
including the Notes, may be partially dependent upon the earnings of its
subsidiaries and the distribution of those earnings to the Company, or upon
other payments of funds by the subsidiaries to the Company. The subsidiaries are
separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make any funds
available therefor, whether by dividends, loans or other payments. In addition,
the payment of dividends and the making of loans and advances to the Company by
its subsidiaries may be subject to statutory, contractual or other restrictions,
are dependent upon the earnings of those subsidiaries and are subject to various
business considerations. Any right of the Company to receive assets of any of
its subsidiaries upon their liquidation or reorganization (and the consequent
right of the holders of the Notes to participate in these assets) will be
effectively subordinated to the claims of that subsidiary's creditors (including
trade creditors), except to the extent that the Company is itself recognized as
a
11
<PAGE>
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such subsidiary and
any indebtedness of such subsidiary senior to that held by the Company. See
"Description of Notes--Subordination."
LIMITATIONS ON REPURCHASE OF NOTES
Upon a Designated Event (as defined in the Indenture), each holder of Notes
will have certain rights, at the holder's option, to require the Company to
repurchase all or a portion of such holder's Notes. If a Designated Event were
to occur, there can be no assurance that the Company would have sufficient funds
to pay the repurchase price for all Notes tendered by the holders thereof. In
addition, the Company's repurchase of Notes as a result of the occurrence of a
Designated Event may be prohibited or limited by, or create an event of default
under, the terms of agreements relating to borrowings which the Company may
enter into from time to time, including agreements relating to Senior
Indebtedness. See "Description of Notes--Repurchase at Option of Holders Upon a
Designated Event."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes are a new issue of securities for which there is currently no
public market. Although application has been made for quotation of the Notes on
the Nasdaq Small-Cap Market, there can be no assurance that an active trading
market will develop or be maintained for the Notes. If a market for the Notes
does develop, the Notes may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities, the performance of the Company, the market price for the Company's
Common Stock, the performance of the semiconductor industry and other factors.
ANTI-TAKEOVER PROVISIONS
The Company has adopted a number of anti-takeover measures. The Company has
adopted a Stockholder Rights Plan, sometimes referred to as a poison pill,
designed to prevent hostile takeovers not approved by the Board of Directors.
See "Description of Capital Stock--Preferred Stock." In addition, the Company's
Certificate of Incorporation provides (i) that the affirmative vote of the
holders of at least 75% of the voting power of outstanding shares is required to
approve certain corporate transactions involving "related persons" and (ii) for
a staggered board of directors under which no more than three of the Company's
directors are elected in any year. The Company's bylaws also provide that
directors may be removed from office without cause only by the vote of holders
of at least 66 2/3% of the Company's outstanding shares. To the extent that the
required vote on a change in control and staggered Board elections would
discourage corporate transactions that would likely result in a change in the
Company's management, such management changes may be less likely to occur, or
could, under certain circumstances, permit the Company's Board of Directors or
minority stockholders to frustrate consummation of a business combination that
the holders of a majority of the voting stock of the Company might believe to be
in their best interests. In addition, the Board of Directors has the authority
to issue up to 5,000,000 shares of Preferred Stock (less the shares of Preferred
Stock reserved pursuant to the Stockholder Rights Plan) without any further vote
or action by the stockholders of the Company. Thus, the Board could issue
Preferred Stock with voting and conversion rights that could adversely affect
the voting power of the holders of Common Stock or with terms calculated to
delay or prevent a change in control of the Company or to make the removal of
management more difficult. In addition, Delaware law includes certain provisions
that may discourage takeovers. See "Description of Capital Stock." In addition,
these anti-takeover measures could adversely affect holders of the Notes in that
they could discourage transactions that would constitute a "Change of Control"
(as defined in the Indenture) or any other Designated Event (as defined in the
Indenture) that would trigger their rights to require the Company to repurchase
their Notes. See "Description of Notes--Repurchase at Option of Holders Upon a
Designated Event."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered by the
Company are estimated to be $146,275,000 ($168,269,000 if the Underwriters'
over-allotment option is exercised in full).
The Company intends to use the net proceeds of the offering to equip a new
wafer fabrication facility in Hillsboro, Oregon and construct and equip a new
assembly test facility in the Philippines, expand existing wafer fabrication
facilities, acquire other capital equipment and for general corporate purposes,
including working capital. A portion of the proceeds may also be used for the
acquisition or investment in complementary businesses, products or technologies.
However, at the present time the Company has no commitments or understandings,
nor are negotiations pending, with respect to any such investment or
acquisition. The Company believes that the proceeds of this offering, together
with existing cash and cash equivalents, short-term investments, cash flow from
operations, existing credit facilities and possible other financing arrangements
for the construction and equipping of the Oregon and Philippine facilities, will
be adequate to fund its anticipated capital expenditures and working capital
needs through at least fiscal 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
Pending their application, the proceeds from this offering will be invested in
short-term, interest bearing instruments.
PRICE RANGE OF COMMON STOCK
The Common Stock of the Company is traded on The Nasdaq National Market under
the symbol "IDTI." The following table sets forth the high and low last reported
sale prices for the Common Stock as reported by the Nasdaq National Market
during the fiscal quarters indicated.
HIGH LOW
-------- -------
Fiscal 1994:
First Quarter ...........................11-1/8 6-1/2
Second Quarter ..........................19-5/8 10-1/2
Third Quarter ...........................18-7/8 12-3/8
Fourth Quarter ..........................33-5/8 16-3/4
Fiscal 1995:
First Quarter ...........................31-3/8 23-7/8
Second Quarter ..........................28-7/8 16-1/4
Third Quarter ...........................30-1/16 18-1/2
Fourth Quarter ..........................40-3/4 28-3/8
Fiscal 1996:
First Quarter (through May 18, 1995) ...41-5/8 36-1/16
On May 18, 1995, the last reported sale price of the Common Stock was $41 5/8
per share. As of May 18, 1995, there were approximately 820 record holders of
the Common Stock.
DIVIDEND POLICY
The Company intends to retain any future earnings for use in its business
and, accordingly, does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of IDT at March, 31, 1995
and as adjusted to reflect the sale by the Company of the Notes offered hereby
and the receipt of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 31, 1995
-----------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long term obligations(1) .............................................. $ 5,903 $ 5,903
========= ========
Notes offered hereby ..................................................................... -- $150,000
Long-term obligations excluding current portion(1) ....................................... 36,595 36,595
--------- --------
Total long-term debt ..................................................................... 36,595 186,595
Stockholders' equity:
Preferred Stock; $.001 par value: 5,000,000 shares authorized;
no shares issued ..................................................................... -- --
Common Stock; $.001 par value: 65,000,000 shares authorized;
38,104,634 shares issued and outstanding (2) ......................................... 38 38
Additional paid-in capital ............................................................. 271,618 271,618
Retained earnings ...................................................................... 142,819 142,819
Cumulative translation adjustment ...................................................... 56 56
-------- --------
Total stockholders' equity ........................................................... $414,531 $414,531
-------- --------
Total capitalization ................................................................. $451,126 $601,126
======== ========
<FN>
- ----------
(1) See Notes 4 and 5 of Notes to Consolidated Financial Statements.
(2) Excludes 5,468,973 shares of Common Stock subject to stock options
outstanding at March 31, 1995 and an additional 1,258,934 shares of Common
Stock reserved for issuance under the Company's stock option and stock
purchase plans. See Note 9 of Notes to Consolidated Financial Statements.
</FN>
</TABLE>
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of March 31, 1994 and
1995 and for each of the years in the three-year period ended March 31, 1995
have been derived from IDT's Consolidated Financial Statements included
elsewhere in this Prospectus, which have been audited by Price Waterhouse LLP,
independent accountants, as indicated in their report thereon appearing
elsewhere herein. The following selected financial data as of March 31, 1991,
1992 and 1993 and for each of the years in the two-year period ended March 31,
1992 have been derived from audited consolidated financial statements not
included herein. The data set forth below are qualified in their entirety by
reference to, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and related notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
-------------------------------------------------------------------------
1991 1992(1) 1993 1994 1995
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues ........................................... $ 198,559 $ 202,734 $ 236,263 $ 330,462 $ 422,190
Cost of revenues ................................... 99,948 126,819 132,285 159,627 179,652
--------- --------- --------- --------- ---------
Gross profit ....................................... 98,611 75,915 103,978 170,835 242,538
--------- --------- --------- --------- ---------
Operating expenses:
Research and development ......................... 50,848 52,044 53,461 64,237 78,376
Selling, general and administrative .............. 43,625 48,721 39,511 54,329 64,647
Restructuring charge ............................. -- 4,466 -- -- --
--------- --------- --------- --------- ---------
Total operating expenses ....................... 94,473 105,231 92,972 118,566 143,023
--------- --------- --------- --------- ---------
Operating income (loss) ............................ 4,138 (29,316) 11,006 52,269 99,515
Interest expense ................................... (6,507) (7,045) (5,855) (5,165) (3,298)
Interest income and other, net ..................... 3,205 1,593 1,127 3,102 8,186
--------- --------- --------- --------- ---------
Income (loss) before provision
(benefit) for income taxes ....................... 836 (34,768) 6,278 50,206 104,403
Provision (benefit) for income taxes ............... (390) (1,960) 942 10,041 26,101
--------- --------- --------- --------- ---------
Net income (loss)(2) ............................... $ 1,226 $ (32,808) $ 5,336 $ 40,165 $ 78,302
--------- --------- --------- --------- ---------
Net income (loss) per share(2) ..................... $ .05 $ (1.25) $ .18 $ 1.21 $ 2.09
--------- --------- --------- --------- ---------
Shares used in computing net
income (loss) per share .......................... 26,070 26,255 29,701 33,116 37,382
========= ========= ========= ========= =========
Ratio of earnings to fixed charges(3) .............. 1.11x -- 1.90x 8.95x 24.75x
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
------------------------------------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital .......................... $ 63,539 $ 40,493 $ 50,885 $143,248 $271,695
Total assets ............................. 258,626 229,730 239,994 349,571 561,975
Total debt ............................... 73,858 66,100 62,295 51,646 42,498
Stockholders' equity ..................... 134,524 104,602 117,760 224,367 414,531
<FN>
- -------
(1) In fiscal 1992, the Company recorded restructuring and other charges of
$24.8 million.
(2) As described in Note 11 of Notes to Consolidated Financial Statements, the
Company's Malaysian subsidiary was granted a tax holiday which extended
through June 30, 1993. Such status had the effect of reducing the Company's
provision for taxes by approximately $0.9 million, $1.0 million, and $1.5
million, or $0.04, $0.04 and $0.05 per share, for the years ended March 31,
1991, 1992 and 1993, respectively. Management believes its effective tax
rate in 1996 will increase due to decreased tax benefits associated with its
Malaysian subsidiary.
(3) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated income (loss) before income taxes plus
fixed charges and (ii) fixed charges consist of interest expense incurred
and the portion of rental expense under operating leases deemed by the
Company to be representative of the interest factor. Earnings were
inadequate to cover fixed charges by $8.3 million in fiscal 1992.
</FN>
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
IDT designs, develops, manufactures and markets a broad range of
high-performance semiconductor products for the desktop computer,
communications, office automation and workstation/server markets. The Company's
revenues have increased from $236 million in fiscal 1993 to $330 million in
fiscal 1994 and to $422 million in fiscal 1995. This growth has been due to
increasing market acceptance of new products, the expansion of production output
through additions of capital equipment and improved manufacturing processes and
associated die shrinks and yield improvements, and improvements in overall
market conditions, including strong demand for SRAMS. During these periods, the
Company has achieved unit volume growth across all of its market segments. In
fiscal 1995 as a result of strong demand for fast SRAMs used as secondary cache
for 32-bit and 64-bit micropressors the Company shifted product mix in favor of
SRAMs. The higher selling prices of SRAMs in fiscal 1995 resulted in increasing
average selling prices on a company-wide basis for the year.
The Company's gross profit and operating profit margins have improved
significantly from 44.0% and 4.7%, respectively, in fiscal 1993 to 51.7% and
15.8%, respectively, in fiscal 1994 and to 57.5% and 23.6%, respectively, in
fiscal 1995. These improvements were due to economies of scale associated with
increased unit shipments, higher utilization of manufacturing capacity, wafer
fabrication process improvements, die shrinks and a mix shift to higher margin
products, particularly SRAMs.
The Company has been operating near installed equipment capacity since fiscal
1994. To address this situation, the Company initiated a significant capacity
expansion program in 1995, including conversion of the Company's Salinas wafer
fabrication facility from five-inch to six-inch wafers, purchase of incremental
wafer fabrication equipment for the Company's San Jose facility, expansion of
assembly and test facilities in Penang, Malaysia, construction of a new
eight-inch wafer fabrication facility in Oregon and the construction of a new
assembly and test facility in the Philippines. These programs required
substantial capital expenditures in fiscal 1995 and are expected to require a
substantially higher level of expenditures in fiscal 1996 and beyond. See
"Business--Manufacturing--Properties." The Company initiated and substantially
completed the equipment conversion of the Salinas facility in fiscal 1995, and
recently commenced its last manufacturing start of five-inch wafers in this
facility. The substantial portion of the addition of new equipment to the San
Jose facility has occurred and additional equipment will be added in fiscal
1996. The 40,000 square foot expansion of the Penang facilities was completed at
the end of fiscal 1995. It is expected that the Oregon facility will commence
production during fiscal 1996; however, the Oregon facility is not expected to
contribute to revenues until fiscal 1997. The Company has recently completed the
acquisition of land for the new test and assembly facility in the Philippines.
The increased operating expenses associated with the Company's capacity
expansion programs will adversely affect operating results until the Company
achieves volume production utilizing the new facilities and equipment. Although
the Company does not expect to generate revenues from its new Oregon fabrication
facility until fiscal 1997, the Company will recognize substantial operating
expenses associated with the facility in fiscal 1996 and 1997. The Company will
also begin to recognize in fiscal 1997 substantial depreciation expenses upon
commencement of commercial production but before production of substantial
volumes is achieved.
16
<PAGE>
The following table sets forth certain amounts, as a percentage of revenues,
from the Company's consolidated statements of operations for the three fiscal
years ended March 31, 1993, 1994 and 1995.
FISCAL YEAR ENDED MARCH 31,
--------------------------
1993 1994 1995
------ ------ -----
Revenues ....................................... 100.0% 100.0% 100.0%
Cost of revenues ............................... 56.0 48.3 42.5
------ ------ -----
Gross margin ................................... 44.0 51.7 57.5
------ ------ -----
Operating expenses:
Research and development ....................... 22.6 19.4 18.6
Selling, general and administrative ............ 16.7 16.5 15.3
------ ------ -----
Total operating expenses ....................... 39.3 35.9 33.9
------ ------ -----
Operating income ............................... 4.7 15.8 23.6
Net interest income ............................ (2.0) (0.6) 1.2
------ ------ -----
Income before provision for income taxes ....... 2.7 15.2 24.8
Provision (benefit) for income taxes ........... 0.4 3.0 6.2
------ ------ -----
Net income ..................................... 2.3% 12.2% 18.6%
====== ====== =====
Set forth below are selected financial data from the Company's consolidated
statements of operations for the last eight fiscal quarters, reflecting
continued improvements in the Company's operating results:
<TABLE>
<CAPTION>
FISCAL 1994 FISCAL 1995
--------------------------------------- -----------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------- --------- --------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ...... $72,766 $80,295 $85,330 $92,071 $95,043 $95,585 $105,765 $125,797
Gross profit . 33,948 39,967 45,419 51,501 54,632 55,574 60,528 71,804
Net income .... 4,628 7,733 11,625 16,179 16,878 17,006 19,799 24,619
Net income per
share ........ $ .15 $ .24 $ .35 $ .45 $ .47 $ .47 $ .54 $ .61
</TABLE>
RESULTS OF OPERATIONS
Fiscal Years 1993, 1994 and 1995. Revenues increased 27.8% to $422.2 million
in fiscal 1995, as compared to revenues of $330.5 million in fiscal 1994, which
in turn represented a 39.9% increase over revenues of $236.3 million in fiscal
1993. The increase in fiscal 1995 was attributable to the higher unit volumes
across all product families and sales channels. Sales in Asia-Pacific (excluding
Japan) and Europe increased substantially in fiscal 1995. In addition, much of
the increase in revenues was driven by increasing demand for fast SRAM memory
utilized by more powerful microprocessors, such as the Pentium and PowerPC,
which utilize secondary cache memory for enhanced system performance. As a
result of strong industry-wide demand and capacity constraints, SRAM prices were
generally higher throughout fiscal 1995 as compared to the prior year,
particularly in the second half of fiscal 1995. The Company also achieved in
fiscal 1995 higher unit sales of specialty memories and embedded
microprocessors, particularly in the telecommunications and networking markets.
In fiscal 1995 microprocessor sales were flat as compared to fiscal 1994, due to
a decline in sales of nonembedded microprocessors as a result of the Company's
strategic shift of focus toward sales of embedded microprocessors. Growth in
fiscal 1994 was due to increased unit sales across all product segments, with
the largest percentage increase in the microprocessor segment, as well as
favorable pricing during the fiscal year on certain products, offset in part by
lower selling prices for some products. Revenue growth in fiscal 1993 was
attributed to increases in product shipments across all market segments, offset
in part by price reductions on several major products. Toward the end of fiscal
1993, pricing firmed in the memory business segment, reversing a trend of steady
price erosion over several years, which had been driven in part by increased
demand across all market segments.
17
<PAGE>
Gross profit in fiscal 1995 increased 42.0% to $242.5 million, or 57.5% of
revenues, as compared to $170.8 million or 51.7% of revenues in fiscal 1994.
Gross profit increased 64.3% in fiscal 1994 from $104.0 million or 44.0% of
revenues in fiscal 1993. The improvements in gross profit and gross margins in
fiscal 1995 were primarily attributable to higher prices on certain products,
particularly SRAMs, higher manufacturing capacity utilization and lower costs
achieved through die shrinks. In fiscal 1995 the Company also continued a shift
to more advanced designs and wafer fabrication processes, which resulted in
increased die per wafer yields and therefore lower unit costs. More efficient
test and burn-in procedures also contributed to improved yields and reduced
manufacturing costs. In addition, selective acceptance of new orders as a result
of continued strong demand allowed the Company to shift manufacturing capacity
to higher-margin products. Gross profit also benefited in fiscal 1995 as
compared to fiscal 1994 as a result of a $3.5 million reduction in patent and
royalty expenses related to license agreements. However, the Company's industry
is characterized by patent claims and license agreements, and there can be no
assurance royalty expenses will not increase in the future. In recent periods
the pricing environment for SRAMs has been favorable, notwithstanding the
long-term trend of price declines in the semiconductor market. Significant price
declines for SRAMs or other products in the future could adversely affect the
Company's operating results. The improvement in gross profit in fiscal 1994 was
primarily attributable to greater capacity utilization, which lowered average
wafer manufacturing costs, significant increases in die per wafer due to wafer
fabrication process improvements, and a mix shift to products with higher
average selling prices, particularly microprocessors.
Research and development expenses increased 22.1% to $78.4 million or 18.6%
of revenues in fiscal 1995, as compared to $64.2 million or 19.4% of revenues in
fiscal 1994. In fiscal 1993, R&D expenses were $53.5 million or 22.6% of
revenues. The increases in R&D expenses were due primarily to continued
investments by the Company in both process technology and new product design and
development. In fiscal 1995, the Company introduced over 50 new products, with
more than 600 configurations, and continued to develop its CMOS processes at 0.5
micron geometries and below. A number of activities will cause absolute R&D
spending to increase substantially, including expansion of R&D activity in both
Atlanta, Georgia and Austin, Texas, new plant start-up costs associated with the
Oregon wafer fabrication facility, particularly in fiscal 1996, and further
development of new products and processes. IDT believes that the continuation of
a high level of R&D investment is essential to continue the flow of new
products.
Selling, general and administrative expenses increased 19% to $64.6 million
in fiscal 1995 or 15.3% of revenues, as compared to $54.3 million or 16.5% of
revenues in fiscal 1994. In fiscal 1993, SG&A expenses were $39.5 million or
16.7% of revenues. The increase in SG&A expenses in fiscal 1995 was attributable
to higher costs associated with the higher level of sales, including higher
sales commissions, employee profit sharing and management bonuses, and an
increase in sales personnel, particularly in Europe, although SG&A expenses did
not increase as rapidly as sales. The fiscal 1994 increase was primarily due to
increases in management bonuses, employee profit sharing and the variable
selling expenses associated with the revenue increase.
Interest expense totaled $3.3 million in fiscal 1995, compared to $5.2
million in fiscal 1994 and $5.9 million in fiscal 1993. Interest expense has
decreased as IDT has retired outstanding debt, primarily equipment financing.
IDT continues to impute interest on a long-term obligation associated with a
patent cross-license.
Interest income and other, net, increased to $8.2 million in fiscal 1995
compared to $3.1 million and $1.1 million in fiscal years 1994 and 1993,
respectively. The increase in interest income resulted from significantly higher
cash balances available for investments, due to cash generated from operations
and net proceeds from Common Stock offerings of $46.8 million in October 1993
and $97.6 million in December 1994. In fiscal 1995 interest income also
reflected the general increase in interest rates available for investment funds.
IDT also received approximately $1.0 million of royalty income in fiscal 1995
compared to $0.3 million in fiscal 1994 and none in fiscal 1993.
The effective tax rates for fiscal 1995, 1994 and 1993 of 25%, 20% and 15%,
respectively, differed from the U.S. statutory rate of 35% in fiscal 1995 and
1994 (34% for fiscal 1993) primarily due to earnings of
18
<PAGE>
foreign subsidiaries being taxed at lower rates, as well as the utilization of
research and development credits. In addition, fiscal years 1995 and 1994
benefited from the realization of certain deferred tax benefits for which a
valuation allowance was previously required. The Company expects that its
effective tax rate in 1996 will increase to approximately 32% due to decreased
tax benefits associated with its Malaysian subsidiary. See Note 11 of Notes to
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition improved during fiscal 1995. Cash and cash
equivalents and short-term investments increased from $121.8 million at the end
of fiscal 1994 to $232.1 million at the end of fiscal 1995. Working capital
increased from $143.2 million at March 31, 1994 to $271.7 million at March 31,
1995. These increases were due to improved profitability, as well as a public
stock offering in fiscal 1995 yielding net proceeds of approximately $97.6
million. As of March 31, 1995, the Company had $6.1 million available under
unsecured lines of credit, all of which are overseas. See Note 6 of Notes to
Consolidated Financial Statements.
During fiscal 1993, 1994 and 1995, the Company generated $37.2 million,
$100.1 million and $115.8 million, respectively, of cash flow from operations.
The largest single factor influencing cash flow from operations during fiscal
1993 was the depreciation resulting from the Company's San Jose wafer
fabrication facility. The improved operating results in fiscal 1994 and 1995
also had a significant impact on cash flow during those periods. The Company
anticipates that significant depreciation relating to the San Jose facility will
continue through at least fiscal 1996.
During fiscal 1993, 1994 and 1995, the Company's net cash used in investing
activities was $28.8 million, $68.9 million and $163.2 million, respectively, of
which $28.0 million, $37.4 million and $94.7 million, respectively, were used
for capital equipment and property and plant improvements. During fiscal 1993,
the Company's net cash used in financing activities was $5.9 million, due
primarily to net repayments of $8.8 million related primarily to capital
equipment financing. In fiscal 1994, financing activities generated $34.8
million, the primary source of which was net cash of $46.8 million as a result
of the Company's public equity offering in October 1993. This source was
partially offset by net repayments of equipment financing of $20.5 million. In
fiscal 1995 the Company's financing activities generated $89.2 million, the
primary source of which was net cash of $97.6 million as a result of the
Company's public equity offering in December 1994; these funds were partially
offset by net debt repayments of $14.4 million. See Notes 4, 5, 6 and 7 of Notes
to Consolidated Financial Statements for information regarding the Company's
various financing arrangements.
The Company has international subsidiaries which operate and sell products or
manufacture products in foreign markets. In addition, the Company's export sales
are generally denominated in local currencies. The Company also purchases
materials and equipment from foreign suppliers, and incurs labor costs,
particularly at its Malaysia assembly facility, in foreign currencies. As a
result, the Company is exposed to international factors such as changes in
foreign currency exchange rates, imposition of currency exchange controls or
changes in the economic conditions of the countries in which the Company
operates. The Company utilizes forward exchange contracts to hedge against the
short-term impact of foreign currency fluctuations on certain assets or
liabilities denominated in foreign currencies. At March 31, 1995, the Company
had outstanding various forward exchange contracts valued at approximately $18.5
million. See Note 2 of Notes to Consolidated Financial Statements.
In view of current and anticipated capacity requirements, the Company
anticipates capital expenditures of approximately $260 million in fiscal 1996,
principally in connection with its capacity expansion programs. In January 1995
the Company entered into a five-year, $60 million Tax Ownership Lease
transaction with respect to the new Oregon wafer fabrication facility. The lease
obligations are secured by the building and collateralized by cash and/or
investments (restricted securities) up to 105% of the lessor's construction cost
until completion of the building and 85% thereafter. Restricted securities
collateralizing this lease were $10.5 million at March 31, 1995 and are expected
to reach approximately $50 million by the completion of the facility in fiscal
1996. The Company is also contingently liable at the end of the lease to the
extent the lessor is not able to realize 85% of the construction costs of the
building upon sale or
19
<PAGE>
other disposition of the building by the lessor. The lease requires monthly
payments which vary based upon the London Interbank Offered Rate (LIBOR) plus
0.3% (6.425% at March 31, 1995). See Note 7 to Consolidated Financial
Statements. The Company may consider additional forms of financing to help meet
its anticipated capital needs for its new Oregon facility, including a possible
bond financing through the State of Oregon, which could yield proceeds of up to
$20 million or more. The Company currently estimates that the cost to construct
and equip the Oregon and Philippines facilities will be approximately $400 to
$500 million and $75 million, respectively. Accordingly, the Company anticipates
significant continuing capital expenditures in the next several years. See "Risk
Factors--Current Capacity Limitations and Risks Associated with Planned
Expansion" and "--Capital Needs."
The Company believes that the proceeds from this offering, together with
existing cash and cash equivalents, cash flow from operations, existing credit
facilities and possible other financing arrangements for the new facilities,
will be adequate to fund its anticipated capital expenditures and working
capital needs through at least fiscal 1996. There can be no assurance, however,
that the Company will not be required to seek other financing sooner or that
such financing, if required, will be available on terms satisfactory to the
Company.
20
<PAGE>
BUSINESS
IDT designs, develops, manufactures and markets a broad range of
high-performance semiconductor products for the desktop computer,
communications, office automation and workstation/server markets. The Company
focuses its development efforts on providing proprietary and enhanced
industry-standard products that improve the performance of systems incorporating
high-performance microprocessors. The Company offers over 5,000 product
configurations in four product families: SRAM components and modules, specialty
memory products, logic circuits and RISC microprocessors and subsystems. The
Company has made significant investments and commitments in becoming a supplier
of RISC based microprocessors and now offers a family of 20 microprocessor and
related peripheral products for the desktop computing and embedded systems
markets.
The Company markets its products on a worldwide basis primarily to OEMs
through a variety of channels, including a direct sales force, distributors and
independent sales representatives. The Company's end-user customers include
Alcatel, AT&T, Apple Computer, Bay Networks, Canon, Cisco Systems, Compaq
Computer, Dell Computer, Digital Equipment, FORE Systems, Hewlett Packard, IBM,
Intel, Motorola, NEC, Nokia, Olivetti, Siemens Nixdorf, Silicon Graphics, Sun
Microsystems and Tektronix.
BACKGROUND
Virtually all electronic systems--whether in personal computers, telephone
switches or automobiles--are designed around microprocessors. Memory and
input/output devices surround and control the flow of data to and from the
microprocessor. Continuing improvements in the speed and performance of
microprocessors have facilitated a trend toward making electronic systems
smaller, faster, more powerful and more accessible to users. However, in order
to take advantage of the full capabilities of the new generations of
microprocessors, electronic systems require faster and higher performance memory
and logic devices. In addition, the decreasing size of electronic systems has
led in many cases to the use of modules or subsystems that integrate a number of
semiconductor components. The foregoing trends are driving the demand for the
Company's four product families.
o SRAM Components and Modules. Today's higher-performance microcomputers
that use advanced microprocessors and more complex operating systems and
applications software require more memory, including SRAM cache memory,
DRAM (Dynamic Random Access Memory) main memory and disk memory. SRAM
cache memory provides intermediate storage between fast microprocessors
and relatively slow DRAM main memory. By serving as an intermediate
high-speed memory, SRAM cache memory significantly increases overall
system speed and performance. Personal computers based on Intel
microprocessor architectures through the 386 family generally did not
utilize SRAM cache memory. The high-performance 32-bit Intel 486
compatible family of microprocessors and 64-bit microprocessors, such as
the Intel Pentium microprocessor and the PowerPC microprocessor, have some
on-chip, or internal, SRAM cache memory. The increased speed of these
newer microprocessors, however, require additional external SRAM cache
memory for enhanced performance. The Company believes that a large portion
of 486-based PCs require SRAM cache memory and that substantially all
Intel Pentium and PowerPC-based computers require such memory. In
addition, low voltage (3.3 volt) SRAM cache memories are increasingly
being used to reduce power consumption in desktop and laptop computers.
o Specialty Memory Products. Complex electronic systems that have different
data transfer rates within the system or use multiple microprocessors may
utilize specialty memory products, such as FIFOs (First In/First Out
memory products) and multi-port memory devices, to enhance performance.
For example, communications systems increasingly use specialty memory
products to improve the flexibility and throughput of the systems. The
trend toward linking computer users within an office or an enterprise so
that they can share data and peripherals has led to the rapid growth of
high-performance local area networks ("LANs") and wide area networks
("WANs") and therefore the increased use of specialty memory products.
o Logic Circuits. The increasing speed, complexity and reduced size of
microprocessor-based systems often require the use of high-speed,
high-performance logic devices to interconnect the
21
<PAGE>
various elements in a system. While many general logic functions are
increasingly being integrated through the use of programmable logic
devices, many specialized logic elements, such as buffers, clock drivers
and memory drivers, continue to be implemented as discrete functions.
o RISC Microprocessors and Subsystems. Microprocessors manipulate and
control data in electronic systems through a fixed set of instructions.
Some microprocessor architectures use complex instruction set computing
("CISC") while other architectures focus on a reduced number, or subset,
of instructions ("RISC"). Substantially all personal computer systems
today use CISC microprocessors based on the Intel x86 architecture. RISC
microprocessors, however, generally operate at higher speeds than CISC
microprocessors, which has led to the increasing acceptance of RISC
microprocessors in workstations, servers and other high-performance
computers as well as embedded controllers for printers, copiers, facsimile
machines and other electronic products.
STRATEGY
IDT's strategy is to be a leading supplier of products that improve the
performance of microprocessor-based systems. The Company seeks to offer
innovative products with superior cost/performance by utilizing its expertise in
memory design and process technologies. Key elements of the Company's strategy
are:
o Develop High Performance Solutions for Growing Markets. IDT focuses its
development efforts on providing proprietary products and enhanced
industry-standard products for use in applications in the growing desktop
computer, communications, office automation and workstation/ server
markets. Since the beginning of fiscal 1995, the Company has introduced
over 50 new products in more than 600 configurations to meet the needs of
these markets. The Company believes that its emphasis on high-performance,
innovative products has resulted in its becoming a market leader in SRAMs,
SRAM cache modules, FIFOs, multi-port memory products and high-speed CMOS
logic circuits.
o Leverage Expertise in SRAM and Subsystem Design. IDT uses the extensive
experience it has gained in the design of SRAMs and subsystems since its
founding in 1980 to develop new memory products that provide higher
value-added solutions to IDT's customers. The Company is increasingly
integrating components from its various product families into single
devices or modules that provide increased functionality and can in turn be
more easily integrated into its customers' systems. For example, IDT
offers cache memory modules that include cache controller, cache tag SRAM
and cache SRAM components for personal computer applications, and the
SARAM device which incorporates both logic and memory functions for
enhanced functionality in network applications.
o Maintain Process Technology Leadership. The Company is committed to
continuously improving its CMOS process technologies in order to improve
product performance and lower product costs through improved yields. The
Company invests a substantial portion of its research and development
expenditures in order to advance its process technologies. The majority of
IDT's current products are manufactured using its 0.65 micron processes
and an increasing number are being manufactured using the Company's new
0.5 micron processes and sub-0.5 micron CMOS processes are under
development. IDT believes that its advanced process technology capability
allows it to design and manufacture state-of-the-art products, thereby
providing it with a competitive advantage.
o Control and Expand Production Capability. IDT believes that maintaining
its own wafer fabrication capability facilitates the implementation of
advanced process technologies and new higher- performance product designs,
provides it with a reliable source of supply of semiconductors and allows
it to be more flexible in shifting production according to product demand.
In addition, the Company has a greater ability to lower costs at
production volumes by matching manufacturing flow to the processes being
used. The Company has undertaken a significant program to invest in new
capital equipment and facilities in order to increase and improve its
capacity, including the construction and equipping of facilities in Oregon
and the Philippines. Through operating its own test facilities, the
Company believes it is able to maintain quality while controlling costs.
22
<PAGE>
PRODUCTS AND MARKETS
IDT offers over 5,000 product configurations in four product families: SRAM
components and modules, specialty memory products, logic circuits, and RISC
microprocessors and subsystems. During fiscal 1995, these product families
accounted for 40%, 28%, 21% and 11%, respectively, of product revenues. The
Company markets its products primarily to OEMs in the desktop computer,
communications, office automation and workstation/server markets. IDT's product
design efforts are focused on developing proprietary components and integrating
its components into single devices, modules or subsystems to meet the needs of
customers.
SRAMs. SRAMs are memory circuits used for storage and retrieval of data
during a computer system's operation. SRAMs do not require electrical
refreshment of the memory contents to ensure data integrity, allowing them to
operate at high speeds. SRAMs include substantially more circuitry than DRAMs,
resulting in higher production costs for a given amount of memory, and generally
command higher selling prices than the equivalent density DRAM. The market for
SRAMs is fragmented by differing demands for speed, power, density, organization
and packaging. As a result, there are a number of niche markets for SRAMs.
The Company is focused primarily on the cache memory segment of the SRAM
market. The Company's SRAM product strategy is to offer high-performance 5 volt
and 3.3 volt SRAM components and modules that have differentiated features
optimized to work with specified microprocessors, such as the Intel 486 and
Pentium families of microprocessors, the PowerPC microprocessor and the MIPS
RISC microprocessors. Cache memory provides an intermediate storage solution
between fast microprocessors and relatively slow DRAM main memory. Cache memory
operates at the speed of the microprocessor and increases the microprocessor's
efficiency by temporarily storing the most frequently used instructions and
data. Special cache tag SRAMs provide a look-up table function that tells the
cache controller which blocks of data are currently stored in the cache SRAMs.
IDT is a leading supplier of cache SRAM components and modules to personal
computer manufacturers. The Company offers a range of cache SRAMs, including
burst-mode cache SRAMs that support the Intel and PowerPC microprocessors, and
cache tag SRAMs . The Company's cache SRAM components are often integrated into
cache memory modules. These modules include the cache controller, cache tag SRAM
and cache SRAM components and are ready to plug into sockets on a computer
system's motherboard. IDT offers a series of standard and custom cache memory
modules for IBM and IBM- compatible PCs and PowerPC-based personal computers as
well as for certain RISC microprocessor-based systems.
The Company continues to develop its next generation SRAM products to meet
the growing cache memory needs of increasingly faster microprocessors. IDT's new
products are being designed to operate at higher speeds and provide greater
levels of integration.
In order to provide SRAM products that meet the varying needs of its
customers, IDT uses primarily CMOS and, to a lesser extent, BiCMOS process
technologies and offers 16K, 64K, 256K and 1 Meg density SRAMs in a number of
speed, organization, power and packaging configurations.
Specialty Memory Products. The Company's proprietary specialty memory
products include FIFOs and multi-port memory products that offer
high-performance features which allow communications and computer systems to
operate more effectively. FIFOs are used as rate buffers to transfer large
amounts of data at high speeds between separate devices or pieces of equipment
operating at different speeds within a system. Multi-port memory products are
used to speed data transfers and act as the link between multiple
microprocessors or between microprocessors and peripherals when the order of the
data to be transferred needs to be controlled. These products are currently used
primarily in peripheral interface, communications and networking products,
including bridges, hubs, routers and switches.
IDT is a leading supplier of both synchronous and asynchronous FIFOs and has
increasingly focused its resources on the design of synchronous FIFOs.
Synchronous FIFOs have been gaining greater market acceptance because they are
faster and provide an easier user interface. IDT's family of 9-bit SyncFIFOs are
being used in many of the newer networking products.
23
<PAGE>
The Company is a leading supplier of multi-port memory products. IDT's family
of multi-port memory products is composed primarily of dual-port asynchronous
devices. The Company also offers four-port products, a synchronous dual-port
device and a new device, known as a SARAM, that combines the flexibility of a
multi-port product with the ease of a FIFO. In addition, the Company is
developing a family of specialty memory products for the emerging asynchronous
transfer mode ("ATM") market. The first member of this ATM family, a SAR
(segmentation and reassembly), is a highly integrated, low cost interface device
for ATM network cards. Other members of the ATM family will include low-cost
physical media interface devices, as well as more highly-integrated SAR devices
for ATM networks.
Logic Circuits. IDT is a leading manufacturer of high-speed byte-wide and
double-density 16-bit CMOS logic circuits for high-performance applications.
Logic circuits control data communication between various elements of electronic
systems, such as between a microprocessor and a memory circuit. IDT offers a
wide range of logic circuit products, which support bus and backplane
interfaces, memory interfaces and other logic support applications where
high-speed, low power and high-output drive are critical. IDT's logic circuits
are used in a broad range of markets.
IDT's 16-bit family of logic products is available in small packages,
enabling board area to be reduced, and has gained increasing market acceptance.
These products are designed for new applications in which small size, low power
and extra low noise are as important as high speeds. IDT also supplies a series
of 8-bit and 16-bit 3.3 volt logic products and a 3.3 volt to 5 volt translator
circuit directed at the growing requirements for 3.3 volt systems in the
notebook and laptop computer and other markets. The Company also offers a family
of clock drivers and clock generators. These devices, placed at critical
positions in a system, correct the degradation of timing that occurs the further
the impulses travel from the main system clock.
RISC Microprocessor Components and Subsystems. IDT is a licensed manufacturer
of MIPS RISC microprocessors. IDT now manufactures MIPS architecture 32-bit and
64-bit standard microprocessors and IDT derivative products for the
communications, office automation, workstation/server and desktop computer
markets.
The Company focuses its RISC microprocessor design and marketing efforts
primarily on the embedded controller market. Embedded controllers are
microprocessors that control a single device such as a printer, copier or
network router. The Company sells several proprietary 32-bit derivative products
for the embedded controller market, including devices with on-circuit SRAM cache
memory and floating point functions.
In 1993, the Company introduced its ORION R4600 microprocessor, which is
capable of clock speeds of up to 150 MHz. The R4600 is a higher performance,
lower cost derivative of the 64-bit R4000 and R4400 microprocessors developed by
MIPS Computer Systems, which was acquired by Silicon Graphics in 1992 ("MIPS"),
and introduced by the Company and other MIPS licensees in 1992 and 1993,
respectively. The R4600 was developed for the Company and to the Company's
specifications by Quantum Effect Design, Inc. ("QED"), a consolidated
subsidiary. Systems based on the ORION family of microprocessors are targeted at
both embedded and desktop applications.
The Company also manufactures RISC subsystems, which are board level products
that contain MIPS RISC architecture microprocessors, cache SRAMs, logic circuits
and supporting software. These products are used in development systems for the
evaluation and design of hardware and software or are integrated into customers'
end-user systems, thereby reducing design cycle time.
CUSTOMERS
The Company markets and sells its products primarily to OEMs in the desktop
computer, communications, office automation and workstation/server markets.
Customers often purchase products from more than one of the Company's product
families.
24
<PAGE>
<TABLE>
The following is an alphabetical listing of current representative end-user
customers of the Company, by market:
<CAPTION>
DESKTOP COMPUTER COMMUNICATIONS OFFICE AUTOMATION WORKSTATION/SERVER
- ---------------- -------------- ----------------- ------------------
<S> <C> <C> <C>
Apple Computer Alcatel Canon Digital Equipment
AST Research AT&T Electronics For Imaging EMC
Compaq Computer Bay Networks QMS NEC
Dell Computer Cabletron Samsung Pyramid Technology
Gateway Computers Cisco Systems Tektronix Siemens Nixdorf
Groupe Bull Ericsson Texas Instruments Silicon Graphics
Hewlett-Packard FORE Systems Toshiba Sun Microsystems
IBM Fujitsu Xerox
ICL Motorola
Intel Nokia
Olivetti Siemens
</TABLE>
MARKETING AND SALES
IDT markets and sells its products primarily to OEMs through a variety of
channels, including a direct sales force, distributors and independent sales
representatives.
The Company had 50 direct sales personnel in the United States at March 31,
1995. Such personnel are located at the Company's headquarters and in 17 sales
offices in Alabama, California, Colorado, Florida, Illinois, Maryland,
Massachusetts, Minnesota, New Jersey, New York, Oregon and Texas, and are
primarily responsible for marketing and sales in those areas. IDT also utilizes
three national distributors, Hamilton Hallmark, Future Electronics and Wyle
Laboratories, and several regional distributors in the United States. Hamilton
Hallmark accounted for 15% and 13% of the Company's revenues in fiscal 1994 and
1995, respectively. In addition, IDT uses independent sales representatives,
which generally take orders on an agency basis while the Company ships directly
to the customer. The representatives receive commissions on all products shipped
to customers in their geographic area.
The Company had 31 direct sales personnel and eight sales offices located
outside of the United States at March 31, 1995. Sales activities outside North
America are generally controlled by IDT's subsidiaries located in France,
Germany, Hong Kong, Italy, Japan, Sweden and the United Kingdom. The Company
also has a sales office in Taiwan. The Company has recently increased its direct
marketing efforts to OEMs in Europe and to United States companies with
operations in the Asia/Pacific area. A significant portion of export sales,
however, continues to be made through international distributors, which tend not
to carry inventory or carry significantly smaller levels compared to domestic
distributors. During fiscal 1993, 1994 and 1995, export sales accounted for 36%,
32% and 39% of total revenues. Sales outside the United States are generally
denominated in local currencies. Export sales are subject to certain risks,
including currency controls and fluctuations, changes in local economic
conditions, import and export controls, and changes in tax laws, tariffs and
freight rates.
The Company's distributors typically maintain an inventory of a wide variety
of products, including products offered by IDT's competitors, and often handle
small or rush orders. Pursuant to distribution agreements, the Company grants
distributors the right to return slow-moving products for credit against other
products and offers protection to the distributors against inventory
obsolescence or price reductions. Revenue recognition of sales to distributors
is deferred until the products are resold by the distributor.
MANUFACTURING
IDT believes that maintaining its own wafer fabrication capability
facilitates the implementation of advanced process technologies and new
higher-performance product designs, provides it with a reliable source of supply
of semiconductors and allows it to be more flexible in shifting production
according to product demand. The Company currently operates sub-micron wafer
fabrication facilities in San Jose and Salinas, California. The Salinas
facility, first placed in production in fiscal 1986, includes a 24,000 square
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foot, class 3 (less than three particles 0.5 micron or greater in size per cubic
foot) fabrication line. The San Jose facility includes a 24,000 square foot,
class 1 (less than one particle 0.5 micron or greater in size per cubic foot),
six-inch wafer fabrication line that was first placed in production in March
1991. IDT also operates 145,000 square foot component assembly and test
facilities in Penang, Malaysia. Substantially all of the Company's test
operations and a significant portion of its assembly operations are performed at
its Malaysian facility. IDT also uses subcontractors, principally in Korea, the
Philippines and Malaysia, to perform certain assembly operations. If IDT were
unable to assemble or test products offshore, or if air transportation to these
locations were curtailed, the Company's operations could be materially adversely
affected. Additionally, foreign manufacturing exposes IDT to certain risks
generally associated with doing business abroad, including foreign governmental
regulations, currency controls and fluctuation, changes in local economic
conditions and changes in tax rates, tariffs and freight rates. In addition to
this offshore assembly and test capability, the Company has the capacity for
low-volume, quick-turn assembly in Santa Clara as well as limited test
capability in Santa Clara, San Jose and Salinas. Assembly and test of memory
modules and RISC subsystems takes place both domestically and offshore.
The Company has been operating its wafer fabrication facilities in Salinas
and San Jose and its assembly operations in Malaysia near installed equipment
capacity since fiscal 1994. To address its capacity requirements, in fiscal 1995
the Company initiated and substantially completed the conversion of its Salinas
wafer fabrication facility from five-inch to six-inch wafers, and recently
commenced its last manufacturing start of five-inch wafers in this facility. In
fiscal 1995 the Company also added incremental production equipment to its San
Jose facility and completed a 40,000 square foot expansion of test and assembly
facilities in Penang, Malaysia. In addition, in August 1994, construction
commenced on a 192,000 square foot facility containing a 48,000 square foot,
class 1, eight-inch wafer fabrication line in Hillsboro, Oregon. The Company
currently estimates that the cost to construct and equip the Oregon facility
will be approximately $400 to $500 million. The Company believes the
construction of a facility in Oregon reduces the Company's risk of a natural
disaster affecting all of its wafer fabrication facilities which are currently
located in Northern California. It is expected that the Oregon facility will
commence production during fiscal 1996; however, the Oregon facility is not
expected to contribute to revenues until fiscal 1997. In late fiscal 1995 the
Company acquired an interest in approximately 10 acres of land in the
Philippines and intends to construct a 240,000 square foot assembly and test
facility. Construction of the building is expected to begin in the second half
of fiscal 1996 and is projected to be completed in fiscal 1997. The Company
projects the cost to acquire the land, construct the building and equip the
facility in multiple phases will total approximately $75 million in capital
expenditures, of which less than $10 million will be spent in fiscal 1996 and
approximately $40 million in fiscal 1997. The Company faces a number of risks in
order to accomplish its goals to increase production in its existing plants and
to construct, equip and commence operations of the Oregon and Philippines
facilities. See "Risk Factors--Current Capacity Limitations and Risks Associated
with Planned Expansion" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company utilizes proprietary CMOS and BiCMOS process technologies
permitting sub-micron geometries. BiCMOS is a combination of bipolar and CMOS
technologies and is used for applications requiring higher speeds. The majority
of IDT's current products are manufactured using its proprietary 0.65 micron
processes, an increasing number are being manufactured using the Company's new
0.5 micron processes and the Company is currently developing several sub-0.5
micron CMOS processes.
Wafer fabrication involves a highly sophisticated, complex process that is
extremely sensitive to contamination. Integrated circuit manufacturing costs are
primarily determined by circuit size because the yield of good circuits per
wafer generally increases as a function of smaller die. Other factors affecting
costs include wafer size, number of process steps, costs and sophistication of
manufacturing equipment, packaging type, process complexity and cleanliness.
IDT's manufacturing process is complex, involving a number of steps including
wafer fabrication, plastic or ceramic packaging, burn-in and final test. The
Company continually makes changes to its manufacturing process to lower costs
and improve yields. From time to time the Company has experienced manufacturing
problems that have caused delays in shipments or increased costs. There can be
no assurance that IDT will not experience manufacturing problems in the future.
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The Company generally has been able to arrange for multiple sources of raw
materials, but the number of vendors capable of delivering certain raw
materials, such as silicon wafers, ultra-pure metals and certain chemicals and
gases is very limited. Some of the Company's packages, while not unique, have
very long lead times and are available from only a few suppliers. From time to
time vendors have extended lead times or limited supply to the Company due to
capacity constraints. These circumstances could reoccur and could adversely
affect IDT.
BACKLOG
IDT manufactures and markets primarily standard products. Sales are generally
made pursuant to standard purchase orders, which are frequently revised during
the agreement term to reflect changes in the customer's requirements. The
Company has also entered into master purchase agreements with several of its OEM
customers. These agreements do not require the OEMs to purchase minimum
quantities of the Company's products. Product deliveries are scheduled upon the
Company's receipt of purchase orders under the related OEM agreements.
Generally, these purchase orders and OEM agreements also allow customers to
reschedule delivery dates and cancel purchase orders without significant
penalties. Orders are frequently rescheduled, revised or cancelled. In addition,
distributor orders are subject to price adjustments both prior to, and
occasionally after, shipment. For these reasons, IDT believes that its backlog,
while useful for scheduling production, is not necessarily a reliable indicator
of future revenues.
RESEARCH AND DEVELOPMENT
IDT's competitive position has been established, to a large extent, through
its emphasis on the development of proprietary and enhanced performance
industry-standard products, and the development of advanced CMOS and BiCMOS
processes. IDT believes that its focus on continually advancing its process
technologies has allowed the Company to achieve cost reductions in the
manufacture of most of its products. The Company believes that a continued high
level of research and development expenditures is necessary to retain its
competitive position. The Company maintains research and development centers in
Northern California and Atlanta, Georgia and recently opened a facility in
Austin, Texas that will be focused on microprocessor related research and
development. In addition the new plant start-up costs associated with the Oregon
wafer fabrication facility will significantly increase research and development
expenditures in fiscal 1996. Research and development expenditures as a
percentage of revenues were 23%, 19% and 19% in fiscal 1993, 1994 and 1995,
respectively.
The Company's product development activities are focused on the design of new
circuits and modules that provide enhanced performance for growing applications.
In the SRAM family, IDT is utilizing its 5 volt and 3.3 volt SRAM and subsystem
design expertise to develop advanced SRAM cache memories and modules for
microcomputer systems based on Intel's 486 and Pentium families of
microprocessors and the PowerPC microprocessors, as well as MIPS RISC
microprocessors. IDT's efforts in the specialty memory products area are
concentrated on the development for the communications market of advanced
synchronous FIFOs and more sophisticated multi-port memory products. The Company
is also developing a family of specialty memory products for the emerging ATM
market, and a family of lower voltage logic devices for a broad range of
applications. In the RISC component and subsystems product family, the Company
is emphasizing the design of products for embedded control applications, such as
printers and telecommunications switches. The Company also continues to refine
its CMOS and BiCMOS process technologies to increase the speed and density of
circuits in order to provide customers with advanced products at competitive
prices, thus enhancing their competitive positions. The Company is currently
refining its CMOS process technology to achieve several sub-0.5 micron geometry
processes and converting the production of many products, particularly 3.3 volt
devices, to newer generation processes.
In fiscal 1992, the Company purchased an equity interest in QED, a newly
formed corporation. Pursuant to a development agreement between QED and the
Company, QED developed the ORION R4600 microprocessor for IDT. The Company
recently announced two new ORION derivative products being designed for IDT by
QED, the R4700 microprocessor targeted to desktop systems running WindowsNT or
UNIX operating systems, and the R4650 microprocessor targeted to embedded
applications. The Company owns such products, subject to the payment of
royalties and other fees to QED. IDT
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has licensed Toshiba and NKK to manufacture and market certain of these
products. There can be no assurance that QED will continue to design products
for the Company or be successful in developing such products.
COMPETITION
The semiconductor industry is intensely competitive and is characterized by
rapid technological advances, cyclical market patterns, price erosion, evolving
industry standards, occasional shortages of materials, intellectual property
disputes and high capital equipment costs. Many of the Company's competitors
have substantially greater technical, marketing, manufacturing and financial
resources than IDT. In addition, several foreign competitors receive assistance
from their governments in the form of research and development loans and grants
and reduced capital costs, which could give them a competitive advantage. The
Company competes in different product areas, to varying degrees, on the basis of
technical innovation and performance of its products, as well as quality, price
and product availability.
IDT's competitive strategy is to differentiate its products through
high-performance, innovative configurations and proprietary features or to offer
industry-standard products with higher speeds and/or lower power consumption.
There can be no assurance that price competition, introductions of new products
by IDT's competitors, delays in product introductions by IDT or other
competitive factors will not have a material adverse effect on the Company in
the future.
INTELLECTUAL PROPERTY AND LICENSING
IDT has obtained 49 patents in the United States and 18 abroad and has
numerous inventions in various stages of the patent application process. The
Company intends to continue to increase the scope of its patents. The Company
also relies on trade secret, copyright and trademark laws to protect its
products, and a number of the Company's circuit designs are registered pursuant
to the Semiconductor Chip Protection Act of 1984. This Act gives protection
similar to copyright protection for the patterns which appear on integrated
circuits and prohibits competitors from making photographic copies of such
circuits. There can be no assurance that any patents issued to the Company will
not be challenged, invalidated or circumvented, that the rights granted
thereunder will provide competitive advantages to the Company, or that the
Company's efforts generally to protect its intellectual property rights will be
successful.
In recent years, there has been a growing trend of companies to resort to
litigation to protect their semiconductor technology from unauthorized use by
others. The Company in the past has been involved in patent litigation which
adversely affected its operating results. Although the Company has obtained
patent licenses from certain semiconductor manufacturers, the Company does not
have licenses from a number of semiconductor manufacturers who have a broad
portfolio of patents. IDT has been notified that it may be infringing patents
issued to certain semiconductor manufacturers and other parties, and is
currently involved in several license negotiations. There can be no assurance
that additional claims alleging infringement of intellectual property rights,
including infringement of patents that have been or may be issued in the future,
will not be made against the Company in the future or that licenses, to the
extent required, will be available. Should licenses from any such claimant be
unavailable, or not be available on terms acceptable to the Company, the Company
may be required to discontinue its use of certain processes or the manufacture,
use and sale of certain of its products, to incur significant litigation costs
and damages, or to develop noninfringing technology. If IDT is unable to obtain
any necessary licenses, pass any increased cost of patent licenses on to its
customers or develop noninfringing technology, the Company could be materially
adversely affected. In addition, IDT has received patent licenses from several
companies that expire over time, and the failure to renew or renegotiate certain
of these licenses as they expire or significant increases in amounts payable
under these licenses could have an adverse effect on the Company.
On May 1, 1992, IDT and AT&T entered into a five-year royalty-free patent
cross-license agreement. As part of this agreement, patent litigation instituted
by AT&T was settled and dismissed. Under the agreement, IDT made a lump sum
payment and issued shares of its Common Stock to AT&T, granted a discount on
future purchases, and gave credit for future purchases of technology on a
nonexclusive basis.
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On December 10, 1992, IDT and Texas Instruments ("TI") entered into a
five-year patent cross- license agreement. As part of this agreement, patent
litigation instituted by TI was dismissed. Under the agreement, IDT granted to
TI a license to certain IDT technology and products and guaranteed TI that it
will realize certain revenues from the technology and products, and IDT will
develop certain products which will be manufactured and sold by both IDT and TI.
See Note 4 of Notes to Consolidated Financial Statements.
EMPLOYEES
At March 31, 1995, IDT and its subsidiaries employed approximately 2,965
people worldwide, of whom approximately 1,045 were in Penang. IDT's success
depends in part on its ability to attract and retain qualified personnel, who
are generally in great demand. Since its founding, the Company has implemented
policies enabling its employees to share in IDT's success. Examples are stock
option, stock purchase, profit sharing and special bonus plans for key
contributors. IDT has never had a work stoppage, no employees are represented by
a collective bargaining agreement, and the Company considers its employee
relations to be good.
PROPERTIES
The Company presently occupies six major facilities in California and
Malaysia as follows:
LOCATION FACILITY USE SQUARE FEET
- ---------------- ------------------------------------- -------------
Salinas ........... Wafer fabrication, SRAM and multi- 98,000
port memory operations
Santa Clara ....... Logic and RISC microprocessor 62,000
operations
Santa Clara ....... Administration and sales 43,700
Santa Clara ....... Administration and RISC subsystems 50,000
operations
Penang, Malaysia .. Assembly and test 145,000
San Jose .......... Wafer fabrication, process technology 135,000
development, FIFO and memory
subsystems operations, and research
and development
The Company leases its Salinas facility from Carl E. Berg, a director, and in
October 1994 purchased a 5.5 acre parcel adjacent to its Salinas facility for
$653,000 from Mr. Berg. IDT leases its Salinas and Santa Clara facilities under
leases expiring in 1999 through 2005. The lease for the Salinas facility has two
five-year renewal options. The Company owns its Malaysian and San Jose
facilities, although the Malaysian facility is subject to long-term ground
leases and the San Jose facility is subject to a mortgage. IDT leases offices
for its sales force in 17 domestic locations as well as Hong Kong, London,
Milan, Munich, Paris, Stockholm, Taipei and Tokyo. See Note 7 of Notes to
Consolidated Financial Statements for information concerning IDT's obligations
under operating and capital leases. The Company has purchased a 23 acre parcel
in Hillsboro, Oregon and construction has commenced on a 192,000 square foot
facility containing a 48,000 square foot, class 1, eight-inch wafer fabrication
line. It is expected that the Oregon facility will commence production during
fiscal 1996; however, the Oregon facility is not expected to contribute to
revenues until fiscal 1997. In late fiscal 1995 the Company acquired an interest
in approximately 10 acres of land in the Philippines and intends to construct a
240,000 square foot assembly and test facility. See "Risk Factors--Current
Capacity Limitations and Risks Associated With Planned Expansion."
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MANAGEMENT
The executive officers and directors of the Company, and their respective
ages as of April 30, 1995, are as follows:
NAME AGE POSITION
- -------------------- ----- -----------------------------------------------
D. John Carey .......59 Chairman of the Board
Leonard C. Perham ..51 Chief Executive Officer, President and Director
William B. Cortelyou 39 Vice President, Wafer Operations
Robin H. Hodge ......55 Vice President, Assembly and Test
Alan H. Huggins ....42 Vice President, Memory Division
Larry T. Jordan ....50 Vice President, Marketing
Daniel L. Lewis ....46 Vice President, Sales
Chuen-Der Lien ......32 Vice President, Technology Development
Jack Menache ........51 Vice President, General Counsel and Secretary
Richard R. Picard ..47 Vice President, Logic and Microprocessor
Products
L. Robert Phillips .50 Vice President, Manufacturing
William D. Snyder ..50 Vice President, Finance and Chief Financial
Officer
Carl E. Berg(1) ....57 Director
John C. Bolger(1) ..48 Director
Federico Faggin ....52 Director
- ----------
(1) Member of the Audit, Compensation and Stock Option Committees.
Mr. Carey was elected to the Board of Directors in 1980 and has been Chairman
of the Board since 1982. He served as Chief Executive Officer from 1982 until
his resignation in April 1991 and was President from 1982 until 1986. Mr. Carey
was a founder of Advanced Micro Devices ("AMD") in 1969 and was an executive
officer there until 1978.
Mr. Perham joined IDT in October 1983 as Vice President and General Manager,
SRAM Division. In October 1986, Mr. Perham was appointed President and Chief
Operating Officer and a director of the Company. In April 1991, Mr. Perham was
elected Chief Executive Officer. Prior to joining IDT, Mr. Perham held executive
positions at Optical Information Systems Incorporated and Zilog Inc.
Mr. Cortelyou joined IDT in 1982. In January 1990, he was elected Vice
President, Wafer Operations, Salinas. Mr. Cortelyou currently serves as Vice
President, Wafer Operations. Prior to joining IDT, Mr. Cortelyou was an engineer
at AMD.
Mr. Hodge joined IDT as Director of Assembly Operations in March 1989. In
January 1990, Mr. Hodge was elected Vice President, Assembly Operations. Mr.
Hodge currently serves as Vice President, Assembly and Test. From 1983 until
joining IDT, Mr. Hodge was Director of Assembly Operations for Maxim Integrated
Products.
Mr. Huggins joined IDT in 1983 and was elected Vice President in 1987. Mr.
Huggins currently serves as Vice President, Memory Division. Prior to joining
the Company, Mr. Huggins held various engineering positions at AMD.
Mr. Jordan joined IDT in July 1987 as Vice President, Marketing. Prior to
joining the Company, Mr. Jordan held management positions in marketing and sales
at SEEQ Technology, Inc. and Intel Corporation.
Mr. Lewis joined IDT in 1984 as Eastern Area Sales Manager. In June 1991, he
was elected Vice President, Sales. Prior to joining IDT, Mr. Lewis held
management positions at Avatar Technologies, Inc., Data General and Zilog.
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Dr. Lien joined IDT in 1987 and was elected Vice President, Technology
Development in April 1992. Prior to joining the Company, he held engineering
positions at Digital Equipment Corporation and AMD.
Mr. Menache joined IDT as Vice President, General Counsel and Secretary in
September 1989. From April 1989 until joining IDT, he was General Counsel of
Berg & Berg Developers. From 1986 until April 1989, he was Vice President,
General Counsel and Secretary of The Wollongong Group Inc.
Mr. Picard joined IDT in 1985. In 1989 he was elected Vice President, Static
RAM Product Line. In April 1990 he was appointed Vice President and General
Manager, Logic Products. He was elected Vice President, Logic and Microprocessor
Products in May 1993. Prior to joining IDT, Mr. Picard held management positions
at International Micro Circuits, Zilog and AMD.
Mr. Phillips joined IDT in March 1995 as Vice President, Manufacturing. Prior
to joining IDT, Mr. Phillips was Vice President of Fab, Assembly and Test
Operations at Vitesse Semiconductor and Edsun Labs, and was President of PMT
Manufacturing Technology, Inc.
Mr. Snyder joined the Company as Treasurer in 1985. In May 1990, he was
elected Vice President, Corporate Controller, and in September 1990 Mr. Snyder
was elected Vice President, Finance and Chief Financial Officer. Prior to
joining the Company, Mr. Snyder held financial management positions at Actrix
Computer, Zilog and Digital Equipment Corporation.
Mr. Berg has been a director of the Company since 1982. Mr. Berg has been a
partner of Berg & Berg Developers, a real estate development partnership, since
1979. He is a director of Valence Technology and Videonics.
Mr. Bolger has been a director of the Company since January 1993. Mr. Bolger
is a private investor. He was Vice President--Finance and Administration of
Cisco Systems, Inc., an internetworking systems manufacturer, from 1989 to 1992
and Vice President--Finance and Administration of KLA Instruments, Inc., an
optical inspection equipment manufacturer, from 1988 to 1989. Mr. Bolger is a
director of Data Race, Inc., Integrated Systems, Inc., Sanmina Corporation and
Teknekron Communications Systems, Inc.
Mr. Faggin has been a director of the Company since 1992. Mr. Faggin has been
President, Chief Executive Officer and Director of Synaptics, Inc., a neural
network research and development company, since 1986. He is a director of Aptix,
Inc., Atesla, Inc. and Orbit Semiconductor.
CERTAIN TRANSACTIONS
The Company leases its Salinas facility from Carl E. Berg, a director. The
Company paid rental expense of $1,396,000 and $1,527,000 during fiscal 1994 and
1995, respectively, under a lease agreement that expired in July 1995 and was
renewed through June 2005, with additional options to renew for successive
five-year periods through 2015. In September 1994 the Company exercised its
option to renew the lease at an annual rental expense of $927,000 from July 1995
through July 2005. In connection with the lease renewal, the Company was granted
a right of first refusal to purchase the Salinas facility on the same terms as a
third party offeree and an option to purchase the facility for a purchase price
of approximately $8,509,000 in a tax-free stock exchange. IDT's option is
exercisable for six months beginning on July 1, 2000. In October 1994, the
Company purchased from Mr. Berg a 5.5 acre parcel of undeveloped land adjacent
to its Salinas facility for $653,000.
The Company holds an approximately 56% equity interest in QED, a corporation
formed in 1991. Leonard C. Perham, the President and Chief Executive Officer and
a director of the Company, and Carl E. Berg are members of the board of
directors of QED. Mr. Berg also holds an approximately 5.6% equity interest in
QED. Pursuant to a development agreement between the Company and QED, QED is
developing for the Company derivative products based on MIPS' 64-bit
microprocessor architecture. During fiscal 1994 and 1995, the Company paid QED a
total of $3,075,000 and $2,625,000, respectively, for product development and
nonrecurring engineering. During fiscal 1995, the Company also incurred
royalties of $1,544,000 to QED. See "Business--Research and Development."
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The Company holds an approximately 16% equity interest in Monolithic System
Technology, Inc. ("MoSys"). Leonard C. Perham and Carl E. Berg are members of
the board of directors of MoSys. Mr. Berg also holds an equity interest of
approximately 18% of MoSys. MoSys is developing certain technology that, if
successfully reduced to practice, could relate to the Company's business. During
fiscal 1993 and 1994, the Company purchased a total of 333,500 shares of MoSys
preferred stock for a total of $667,000. During fiscal 1995, the Company
purchased 400,000 shares of MoSys preferred stock for a total of $2,000,000 and
paid MoSys $125,000 for technical support.
The Company has from time to time retained Phillip Perham, a contractor and
the brother of Leonard C. Perham, as an independent contractor to perform
certain construction services in connection with improvements and repairs to
various Company facilities. The Company paid Phillip Perham an aggregate of
approximately $177,570 and $134,250 for such services in fiscal 1994 and 1995,
respectively.
In April 1995, the Company loaned $100,000 to L. Robert Phillips, Vice
President, Manufacturing of the Company, pursuant to a promissory note to secure
a salary advance. The note is due and payable in May 1998 and Mr. Phillips is
obligated to pay interest annually at the rate of 6.69%. In the event that Mr.
Phillips exercises any stock options and sells the underlying shares or receives
a bonus or cash compensation other than salary, then one half of the net
proceeds of such receipts shall be used for repayment of the outstanding
principal.
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DESCRIPTION OF NOTES
The Notes are to be issued under an indenture to be dated as of June 1, 1995
(the "Indenture"), between the Company and The First National Bank of Boston, as
trustee (the "Trustee"). The Indenture will be substantially in the form filed
as an exhibit to the Registration Statement of which this Prospectus is a part,
with such changes as may be required by law or usage. The following descriptions
of certain provisions of the Indenture are intended as summaries only and are
qualified in their entirety by reference to the Indenture, including the
definitions therein of certain terms. Wherever particular Sections, Articles or
defined terms of the Indenture are referred to, such Sections, Articles or
defined terms are incorporated herein by reference. As used in this "Description
of Notes," the term "Company" means only Integrated Device Technology, Inc. and
not its subsidiaries.
GENERAL
The Notes will represent unsecured general obligations of the Company
subordinate in right of payment to certain other obligations of the Company as
described under "Subordination," and convertible into Common Stock as described
below under "Conversion." The Notes will be limited to $150,000,000 aggregate
principal amount ($172,500,000 if the over-allotment option is exercised in
full), will be issued in fully registered form only in denominations of $1,000
or any multiple thereof and will mature on June 1, 2002, unless earlier redeemed
at the option of the Company or repurchased by the Company at the option of the
holder upon a Designated Event (as defined in the Indenture).
The Notes will bear interest from June , 1995 at the annual rate set forth
on the cover page hereof, payable semi-annually on June 1 and December 1,
commencing on December 1, 1995, to holders of record at the close of business on
the preceding May 15 and November 15, respectively. Interest will be computed on
the basis of a 360-day year composed of twelve 30-day months.
Principal of and premium, if any, and interest on the Notes will be payable,
the transfer of Notes will be registrable, and the Notes may be presented for
conversion, at the office or agency of the Company maintained for such purposes
in the Borough of Manhattan, The City of New York, or the Corporate Trust Office
of the Trustee located in Canton, Massachusetts. In addition, payment of
interest may, at the option of the Company, be made by check mailed to the
address of the person entitled thereto as it appears in the Note register.
Interest payable to any holder of Notes having an aggregate principal amount in
excess of $5,000,000 shall, at the election of such holder, be paid by wire
transfer in immediately available funds.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof. No service charge will
be made for any registration or transfer or exchange of Notes, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. The Company is not required (i) to
issue, register the transfer of or exchange any Note during a period beginning
at the opening of business 15 days before the day of the mailing of a notice of
redemption and ending at the close of business on the date of such mailing, or
(ii) to register the transfer of or exchange any Note selected for redemption in
whole or in part, except the unredeemed portion of Notes being redeemed in part.
The Indenture does not contain any restrictions on the payment of dividends
or the repurchase of securities of the Company or any financial covenants. The
Indenture contains no covenants or other provisions to afford protection to
holders of Notes in the event of a highly leveraged transaction or a change in
control of the Company except to the extent described under "--Repurchase at
Option of Holders Upon a Designated Event" below.
CONVERSION
The holders of Notes will be entitled at any time after 60 days following the
original issuance thereof through the close of business on the final maturity
date of the Notes, subject to prior redemption or repurchase, to convert any
Notes or portions thereof (in denominations of $1,000 or multiples thereof) into
Common Stock of the Company, at the conversion price set forth on the cover page
of this Prospectus, subject to adjustment as described below. Except as
described below, no adjustment will be made on
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<PAGE>
conversion of any Notes for interest accrued thereon or for dividends on any
Common Stock issued. If Notes not called for redemption are converted after a
record date for the payment of interest and prior to the next succeeding
interest payment date, such Notes must be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount so converted. The Company is not required to issue fractional shares of
Common Stock upon conversion of Notes and, in lieu thereof, will pay a cash
adjustment based upon the market price of the Common Stock on the last business
day prior to the date of conversion. In the case of Notes called for redemption,
conversion rights will expire at the close of business on the business day
preceding the date fixed for redemption, unless the Company defaults in payment
of the redemption price.
The initial conversion price of $ per share of Common Stock is subject
to adjustment (under formulae set forth in the Indenture) in certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on
Common Stock of the Company; (ii) certain subdivisions and combinations of the
Common Stock; (iii) the issuance to all holders of Common Stock of certain
rights or warrants to purchase Common Stock; (iv) the dividend or other
distribution to all holders of Common Stock of shares of capital stock of the
Company (other than Common Stock) or evidences of indebtedness of the Company or
assets (including securities, but excluding those rights, warrants, dividends
and distributions referred to above and dividends and distributions in
connection with the liquidation, dissolution or winding up of the company or
paid exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of Common Stock in an aggregate amount that,
combined together with (A) all such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made plus (B) any
cash and the fair market value of other consideration payable in respect of any
tender offers by the Company or any of its subsidiaries for Common Stock
concluded within the preceding 12 months in respect of which no adjustment has
been made, exceeds 10% of the Company's market capitalization (being the product
of the then current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date for such distribution; and
(vi) the purchase of Common Stock pursuant to a tender offer made by the Company
or any of its subsidiaries which involves an aggregate consideration that,
together with (X) any cash and the fair market value of any other consideration
payable in any other tender offer made by the Company or any of its subsidiaries
for Common Stock expiring within 12 months preceding such tender offer in
respect of which no adjustment has been made plus (Y) the aggregate amount of
any such all-cash distributions referred to in clause (v) above to all holders
of Common Stock within the 12 months preceding the expiration of such tender
offer in respect of which no adjustments have been made, exceeds 10% of the
Company's market capitalization on the expiration of such tender offer.
The Indenture will provide that the Company will promptly (but in no event
later than September 30, 1995) amend its Stockholder Rights Plan to provide that
upon conversion of the Notes the holders will receive, in addition to the Common
Stock issuable upon such conversion, the Rights (whether or not the Rights have
separated from the Common Stock at the time of the conversion). See "Description
of Capital Stock--Rights Plan." The Indenture will also provide that, in the
event of the occurrence of certain events affecting the Rights prior to such
amendment, appropriate adjustments to the conversion price applicable to the
Notes will be made. In addition, the Indenture will provide that, if the Company
implements a new stockholder rights plan, such rights plan must provide that
upon conversion of the Notes the holders will receive, in addition to the Common
Stock issuable upon such conversion, such rights (whether or not such rights
have separated from the Common Stock at the time of such conversion).
Subject to the rights of holders of Notes described below under "Repurchase
at Option of Holders Upon a Designated Event," in the case of (i) any
reclassification or change of the Common Stock or (ii) a consolidation, merger
or combination involving the Company or a sale or conveyance to another
corporation of the property and assets of the Company as an entirety or
substantially as an entirety, in each case as a result of which holders of
Common Stock shall be entitled to receive stock, other securities, other
property or assets (including cash) with respect to or in exchange for such
Common Stock, the holders of the Notes then outstanding will be entitled
thereafter to convert such Notes into the kind and amount of shares of stock,
other securities or other property or assets which they would have owned or been
entitled
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to receive upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had such Notes been converted into Common Stock
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance (assuming, in a case in which the Company's
stockholders may exercise rights of election, that a holder of Notes would not
have exercised any rights of election as to the stock, other securities or other
property or assets receivable in connection therewith and received per share the
kind and amount received per share by a plurality of non-electing shares).
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price, the
holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations."
The Company from time to time may, to the extent permitted by law, reduce the
conversion price of the Notes by any amount for any period of at least 20 days,
in which case the Company shall give at least 15 days' notice of such decrease,
if the Board of Directors has made a determination that such decrease would be
in the best interests of the Company, which determination shall be conclusive.
The Company may, at its option, make such reductions in the conversion price, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. See "Certain Federal Income Tax
Considerations."
No adjustment in the conversion price will be required unless such adjustment
would require a change of at least 1% of the conversion price then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. Except
as stated above, the conversion price will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common Stock
or carrying the right to purchase any of the foregoing.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to June 2,
1998. At any time on or after that date, the Notes may be redeemed at the
Company's option on at least 15 but not more than 60 days' notice, as a whole
or, from time to time in part, at the following prices (expressed in percentages
of the principal amount), together with accrued interest to the date fixed for
redemption; provided that if a redemption date is an interest payment date, the
semi-annual payment of interest becoming due on such date shall be payable to
the holder of record as of the relevant record date.
If redeemed during the 12-month period beginning June 1:
REDEMPTION
YEAR PRICE
-------- --------
1998 .......................... %
1999 ..........................
2000 ..........................
2001 ..........................
and 100% at June 1, 2002.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000 or integral multiples
thereof by lot or, in its discretion, on a pro rata basis. If any Note is to be
redeemed in part only, a new Note or Notes in an aggregate principal amount
equal to the unredeemed principal portion thereof will be issued. If a portion
of a holder's Notes is selected for partial redemption and such holder converts
a portion of such Notes, such converted portion shall be deemed to be taken from
the portion selected for redemption.
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A DESIGNATED EVENT
The Indenture provides that if a Designated Event (as defined in the
Indenture) occurs, each holder of Notes shall have the right, at the holder's
option, to require the Company to repurchase all of such
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holder's Notes, or any portion thereof that is an integral multiple of $1,000,
on the date (the "repurchase date") that is 30 calendar days after the date of
the Company Notice (as defined in the Indenture), for cash at a price (expressed
as a percentage of the principal amount) equal to (i) % if the repurchase date
is during the 12-month period beginning June 1, 1995, (ii) % if the
repurchase date is during the 12-month period beginning June 1, 1996, (iii) %
if the repurchase date is during the 12-month period beginning June 1, 1997 and
thereafter at the redemption price set forth under "Optional Redemption by the
Company" which would be applicable to a redemption at the option of the Company
on the repurchase date, together with accrued interest, if any (the "repurchase
price").
Within 15 calendar days after the occurrence of a Designated Event, the
Company is obligated to mail to all holders of record of the Notes a notice (the
"Company Notice") of the occurrence of such Designated Event and of the
repurchase right arising as a result thereof. The Company must deliver a copy of
the Company Notice to the Trustee and cause a copy or a summary of such notice
to be published in a newspaper of general circulation in The City of New York.
To exercise the repurchase right, a holder of Notes must deliver, on or before
the 30th day after the date of the Company Notice, irrevocable written notice to
the Company (or an agent designated by the Company for such purpose) and the
Trustee of the holder's exercise of such right together with the Notes with
respect to which the right is being exercised, duly endorsed for transfer. The
submission of such notice together with such Notes pursuant to the exercise of a
repurchase right will be irrevocable on the part of the holder (unless the
Company fails to repurchase the Notes on the repurchase date) and the right to
convert such Notes will expire upon such submission.
"Designated Event" means a Change in Control (as defined in the Indenture) or
a Termination of Trading (as defined in the Indenture).
"Change in Control" means an event or series of events as a result of which
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) of shares representing more than 50% of
the combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company ("Voting Stock"), (ii) the
Company consolidates with or merges into any other corporation, or conveys,
transfers or leases all or substantially all of its assets to any person, or any
other corporation merges into the Company, and, in the case of any such
transaction, the outstanding common stock of the Company is changed or exchanged
as a result, unless the stockholders of the Company immediately before such
transaction own, directly or indirectly immediately following such transaction,
at least a majority of the combined voting power of the outstanding voting
securities of the corporation resulting from such transaction in substantially
the same proportion as their ownership of the Voting Stock immediately before
such transaction, or (iii) at any time Continuing Directors (as defined in the
Indenture) do not constitute a majority of the Board of Directors of the Company
(or, if applicable, a successor corporation to the Company); provided that a
Change in Control shall not be deemed to have occurred if either (x) the last
sale price of the Common Stock for any five trading days during the ten trading
days immediately preceding the Change in Control is at least equal to 115% of
the conversion price in effect on such day or (y) (a) at least 90% of the
consideration (excluding cash payments for fractional shares) in the transaction
or transactions constituting the Change in Control consists of common stock or
securities convertible into common stock that are, or upon issuance will be,
traded on a United States national securities exchange or approved for trading
on an established automated over-the-counter trading market in the United States
and (b) after giving effect to such transaction or transactions and for a period
of twelve months thereafter the Notes have a rating of "B3" or "B-" or better
(or equivalent ratings under successor ratings classification systems) by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board as of the date of this Prospectus
or (ii) who was nominated or elected by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Company's Board of Directors was recommended or endorsed by at
least a majority of the directors who were Continuing Directors at the time of
such nomination or election.
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Under this definition, if the current Board of Directors of the Company were to
approve a new director or directors and then resign, no Change in Control would
occur even though the current Board of Directors would thereafter cease to be in
office.
No quantitative or other established meaning has been given to the phrase
"all or substantially all" (which appears in the definition of Change in
Control) by courts which have interpreted this phrase in various contexts under
the laws of the State of New York. To the extent the meaning of such phrase is
uncertain, uncertainty will exist as to whether or not a Change in Control may
have occurred (and, accordingly, as to whether or not the holders of Notes will
have the right to require the Company to repurchase their Notes).
A "Termination of Trading" shall have occurred if the Common Stock (or other
common stock into which the Notes are then convertible) is neither listed for
trading on a United States national securities exchange nor approved for trading
on an established automated over-the-counter trading market in the United
States.
In the event of a Designated Event, any repurchase of the Notes could, absent
payment in full of any outstanding Senior Indebtedness or waiver, be prevented
by the subordination provisions of the Indenture. See "Subordination" below. The
Company may incur Senior Indebtedness under which a Designated Event may
constitute an event of default or the repurchase of Notes upon a Designated
Event may be prohibited. As a result, absent payment in full of any such Senior
Indebtedness or an appropriate waiver from the holders of the Senior
Indebtedness, a repurchase of the Notes could be prevented by the subordination
provisions of the Indenture. The Company's ability to pay cash to the holders of
Notes upon a repurchase may also be limited by certain financial covenants
contained in the Company's credit agreements. Failure by the Company to
repurchase the Notes when required will result in an Event of Default with
respect to the Notes whether or not such repurchase is permitted by the
subordination provisions.
Certain leveraged transactions sponsored by the Company's management or an
affiliate of the Company could constitute a Change in Control that would give
rise to the repurchase right. The Indenture does not provide the Company's Board
of Directors with the right to limit or waive the repurchase right in the event
of any such leveraged transaction. Conversely, the Company could, in the future,
enter into certain transactions, including certain recapitalization of the
Company, that would increase the amount of Senior Indebtedness (or other
indebtedness) outstanding at such time. There are no restrictions in the
Indenture or the Notes on the creation of additional Senior Indebtedness (or any
other indebtedness) of the Company or any of its subsidiaries and the incurrence
of significant amounts of additional indebtedness could have an adverse impact
on the Company's ability to service its debt, including the Notes. The Notes are
subordinate in right of payment to all existing and future Senior Indebtedness
as described under "--Subordination" below.
The right to require the Company to repurchase Notes as a result of a
Designated Event could have the effect of delaying, deferring of preventing a
Change of Control or other attempts to acquire control of the Company unless
arrangements have been made to enable the Company to repurchase all the Notes at
the repurchase date. Consequently, this right may render more difficult or
discourage a merger, consolidation or tender offer (even if such transaction is
supported by the Company's Board of Directors or is favorable to the
stockholders), the assumption of control by a holder of a large block of the
Company's shares and the removal of incumbent management.
No modification of the Indenture regarding the provisions on repurchase at
the option of any holder of a Note is permissible without the consent of the
holder of the Note so affected.
Rule 13e-4 under the Exchange Act requires, among other things, the
dissemination of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to holders of the Notes. The Company will comply with this
rule to the extent applicable at that time.
SUBORDINATION
The indebtedness evidenced by the Notes is, to the extent provided in the
Indenture, subordinate to the prior payment in full of all Senior Indebtedness
(as defined). During the continuance beyond any
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applicable grace period of any default in the payment of principal, premium,
interest or any other payment due on any Senior Indebtedness, no payment of
principal of, or premium, if any, or interest on the Notes (including, but not
limited to, the redemption price or repurchase price with respect to the Notes)
shall be made by the Company. In addition, upon any distribution of assets of
the Company upon any dissolution, winding up, liquidation or reorganization, the
payment of the principal of, or premium, if any, and interest on the Notes is to
be subordinated to the extent provided in the Indenture in right of payment to
the prior payment in full of all Senior Indebtedness.
By reason of the subordination provisions described above, in the event of
the Company's liquidation or dissolution, holders of Senior Indebtedness may
receive more, ratably, and holders of the Notes may receive less, ratably, than
the other creditors of the Company. Such subordination will not prevent the
occurrence of an Event of Default under the Indenture.
Subject to the qualifications described below, the term "Senior Indebtedness"
means the principal of, premium, if any, interest on, and any other payment due
pursuant to, any of the following, whether outstanding on the date of the
Indenture or thereafter incurred or created:
(a) All indebtedness of the Company for money borrowed (including, but not
limited to, any indebtedness secured by a security interest, mortgage or
other lien on the assets of the Company which is (i) given to secure all or
part of the purchase price of property subject thereto, whether given to the
vendor of such property or to another, or (ii) existing on property at the
time of acquisition thereof);
(b) All indebtedness of the Company evidenced by notes, debentures, bonds
or other securities (including but not limited to those which are convertible
or exchangeable for securities of the Company);
(c) All indebtedness of the Company due and owing with respect to letters
of credit (including, but not limited to, reimbursement obligations with
respect thereto);
(d) All lease obligations of the Company which are capitalized on the
books of the Company in accordance with generally accepted accounting
principles and all lease obligations of the Company under any lease or
related document (including a purchase agreement) which provides that the
Company is contractually obligated to purchase or cuase a third party to
purchase and thereby guarantee a minimum residual value of the leased
property to the landlord and the obilgations of the Company under such lease
or related document to purchase or to cause a third party to purchase such
leased property;
(e) All indebtedness consisting of commitment or standby fees due and
payable to lending institutions with respect to credit facilities available
to the Company;
(f) All indebtedness consisting of obligations of the Company due and
payable under interest rate and currancy swaps, floors, caps or other similar
arrangements intended to fix interest rate obligations or hedge foreign
currency exposure;
(g) All indebtedness of others of the kinds described in any of the
preceding clauses (a), (b), (c), (e) or (f) and all lease obligations of the
kind described in the preceding clause (d) assumed by or guaranteed in any
manner by the Company or in effect guaranteed by the Company through an
agreement to purchase, contingent or otherwise; and
(h) All renewals, extensions, refundings, deferrals, amendments or
modifications of indebtedness of the kinds described in any of the preceding
clauses (a), (b), (c), (e), (f) or (g)and all renewals or extensions of lease
obligations of the kinds described in any of the preceding clauses (d) or
(g);
unless in the case of any particular indebtedness, lease, renewal, extension,
refunding, amendment, modification or supplement, the instrument, lease or other
document creating or evidencing the same or the assumption or guarantee of the
same expressly provides that such indebtedness, lease, renewal, extension,
refunding, amendment, modification or supplement is not superior in right of
payment to, or pari passu with, the Notes. Notwithstanding the foregoing, Senior
Indebtedness shall not include (i) any indebtedness or lease obligations of any
kind of the Company to any subsidiary of the Company, a
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majority of the voting stock of which is owned, directly or indirectly, by the
Company, and (ii) indebtedness for trade payables or constituting the deferred
purchase price of assets or services incurred in the ordinary course of
business.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any of the terms of the Indenture, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Senior Indebtedness is paid in
full, then such payment or distribution will be held by the recipient in trust
for the benefit of holders of Senior Indebtedness of the Company or their
representative or representatives to the extent necessary to make payment in
full of all Senior Indebtedness of the Company remaining unpaid, after giving
effect to any concurrent payment or distribution, or provision therefor, to or
for the holders of Senior Indebtedness of the Company.
The Notes are obligations of the Company. Since the operations of the Company
are currently partially conducted through subsidiaries, the cash flow and the
consequent ability to service debt, including the Notes, of the Company, may be
partially dependent upon the earning of its subsidiaries and the distribution of
those earnings to, or upon loans, royalties, license fees, or other payments of
funds by those subsidiaries to, the Company. The subsidiaries are separate and
distinct legal entities, are less than wholly owned in certain cases, and have
no obligation, contingent or otherwise, to pay any amounts due pursuant to the
Notes or to make any funds available therefor, whether by dividends, loans or
other payments. In addition, the payment of dividends and the making of loans
and advances to the Company by its subsidiaries may be subject to statutory or
contractual restrictions, are dependent upon the earnings those subsidiaries and
are subject to various business considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Notes to participate in these assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except to
the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
As of March 31, 1995, the Company had outstanding indebtedness of
approximately $50.2 million that would have constituted Senior Indebtedness. In
addition, as of March 31, 1995 subsidiaries of the Company had outstanding an
aggregate $3.6 million of indebtedness. The amount of Senior Indebtedness or
indebtedness of subsidiaries may change in the future. The Indenture will not
limit the amount of additional indebtedness, including Senior Indebtedness,
which the Company can create, incur, assume or guarantee, nor will the Indenture
limit the amount of indebtedness which any subsidiary of the Company can create,
incur, assume or guarantee.
The Company is obligated to pay reasonable compensation to the Trustee and to
indemnify the Trustee against any losses, liabilities or expenses incurred by it
in connection with its duties relating to the Notes. The Trustee's claims for
such payments will be senior to those of holders of the Notes in respect of all
funds collected or held by the Trustee.
EVENTS OF DEFAULT AND REMEDIES
As Event of Default is defined in the Indenture as being default in payment
of the principal of, or premium, if any, on the Notes; default for 30 days in
payment of any installment of interest on the Notes; default by the Company for
60 days after notice in the observance or performance of any other covenants in
the Indenture; default in the payment of the repurchase price in respect of the
Note on the repurchase date therefor whether or not such payment is prohibited
by the subordination provisions of the Indenture; failure of the Company or any
Significant Subsidiary (as defined in the Indenture) to make any payment at
maturity, including any applicable grace period, in respect of indebtedness,
which term as used in the Indenture means obligations (other than non-recourse
obligations) of, or guaranteed or assumed by, the Company or any Significant
Subsidiary for borrowed money in excess of $25,000,000 and continuance of such
failure for 30 days after notice; a default with respect to any Indebtedness,
which default results in the acceleration of Indebtedness in an amount in excess
of $25,000,000 without such Indebtedness having been discharged or such
acceleration having been cured, waived, rescinded or annulled for 30 days after
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notice; or certain events involving bankruptcy, insolvency or reorganization of
the Company or any Significant Subsidiary. The Indenture provides that the
Trustee may withhold notice to the holders of the Notes of any default (except
in payment of principal, or premium, if any, or interest with respect to the
Notes) if the Trustee considers it in the interest of the holders of the Notes
to do so.
The Indenture provides that if any Event of Default shall have occurred and
be continuing, the Trustee or the holders of not less than 25% in principal
amount of the Notes then outstanding may declare the principal of and premium,
if any, on the Notes to be due and payable immediately, but if the Company shall
cure all defaults (except the nonpayment of interest on, premium, if any, and
principal of any Notes which shall have become due by acceleration) and certain
other conditions are met, such declaration may be canceled and past defaults may
be waived by the holders of a majority in principal amount of Notes then
outstanding.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to direct the time, method and place of conducting any
proceedings for any remedy available to the Trustee, subject to certain
limitations specified in the Indenture.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than 66 2/3% in principal amount of
the Notes at the time outstanding, to modify the Indenture or any supplemental
indenture or the rights of the holders of all Notes, except that no such
modification shall (i) extend the fixed principal of any Note, reduce the rate
or extend the time for payment of interest thereon, reduce the principal amount
thereof or premium, if any, thereon, reduce any amount payable upon redemption
or repurchase thereof, change the obligation of the Company to repurchase any
Note upon the happening of a Designated Event, impair or affect the right of a
holder to institute suit for the payment thereof, change the currency in which
the Notes are payable, impair the right to convert the Notes into Common Stock
subject to the terms set forth in the Indenture, or modify the provisions of the
Indenture with respect to the subordination of the Notes in a manner adverse to
the holders of the Notes, without the consent of the holder of each Note so
affected, or (ii) reduce the aforesaid percentage of Notes, without the consent
of the holders of all of the Notes outstanding.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain outstanding if (i) all outstanding Notes will become due and payable at
their scheduled maturity within one year or (ii) all outstanding Notes are
scheduled for redemption within one year, and, in either case, the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
outstanding Notes on the date of their scheduled maturity or the scheduled date
of redemption.
GOVERNING LAW
The Indenture and Notes will be governed by and construed in accordance with
the laws of the State of New York, without giving effect to such State's
conflicts of laws principles.
CONCERNING THE TRUSTEE
The First National Bank of Boston, the Trustee under the Indenture, has been
appointed by the Company as the initial paying agent, conversion agent and
registrar with regard to the Notes. The Company and its subsidiaries may
maintain deposit accounts and conduct other banking transactions with the
Trustee or its affiliates in the ordinary course of business, and the Trustee
and its affiliates may from time to time in the future provide the Company with
banking and financial services in the ordinary course of their business.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 65,000,000 shares of
Common Stock, par value $0.001 per share, and 5,000,000 shares of Preferred
Stock, par value $0.001 per share. The number of shares of Common Stock
outstanding on May 18, 1995 was 38,165,412 shares, held of record by
approximately 820 stockholders. There are no shares of Preferred Stock
outstanding.
COMMON STOCK
Subject to preferences that may be applicable to any Preferred Stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board of Directors may, from time to time,
determine in its sole discretion. Holders of Common Stock are also entitled to
one vote for each share of Common Stock held of record on all matters on which
holders of Common Stock are entitled to vote and may cumulate such votes in the
election of directors. The Common Stock is not entitled to preemptive rights and
is not subject to redemption. Upon liquidation, dissolution or winding up of the
Company, the assets legally available for distribution to stockholders are
distributable ratably among the holders of the Common Stock and of any
participating Preferred Stock and payment of creditors' claims. Each outstanding
share of Common Stock is fully paid and nonassessable. The Company's Common
Stock is traded on the Nasdaq National Market under the symbol "IDTI."
PREFERRED STOCK
The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock in one or more series, to establish from time to time the number
of shares to be included in each such series, to fix the designation, powers,
preferences and rights of the shares of each such series and any qualifications,
limitations or restrictions thereof, and to increase or decrease the number of
shares of any such series (but not below the number of shares of such series
then outstanding), without any further vote or action by the stockholders of the
Company. Thus, the Board of Directors, without stockholder approval, can issue
Preferred Stock with voting and conversion rights that could adversely affect,
among other things, the voting power of the holders of Common Stock. Because the
terms of the Preferred Stock may be fixed by the Board of Directors without
stockholder action, the Preferred Stock could be issued quickly with terms
calculated to delay or prevent a change in control of the Company or to make the
removal of management more difficult. Under certain circumstances, this could
have the effect of decreasing the market price of the Common Stock.
Stockholder Rights Plan. In December 1988, the Board of Directors of the
Company declared a dividend distribution of one preferred share purchase right
(a "Right") for each share of Common Stock of the Company outstanding as of the
close of business on December 20, 1988 and each share of Common Stock issued
thereafter (subject to certain limitations). The terms of the Rights are
governed by an agreement (the "Stockholder Rights Plan") between the Company and
The First National Bank of Boston, as Rights agent, which provides, among other
things, that after a Distribution Date (as defined below), each Right entitles
the registered holder to purchase from the Company 1/100 th of a share of the
Company's Series A Junior Participating Preferred Stock, $0.001 par value,
initially at a price of $50.00 (the "Purchase Price").
The Rights will expire ten years after the date of issuance, or December 20,
1988, unless earlier redeemed, and will become exercisable and transferable
separately from the Common Stock following the tenth day after (i) a public
announcement that a person or group has acquired beneficial ownership of 15% or
more of the Company's Common Stock or (ii) the commencement or announcement of
the intention to make a tender or exchange offer, the consummation of which
would result in ownership by a person or group of 15% or more of the Company's
Common Stock, or such other date after the occurrence of an event described in
clause (i) or (ii) above as may be determined by a majority of Directors not
affiliated with the acquiring group or person (the "Distribution Date"). If an
acquiror obtains 15% or more of the Company's Common Stock, (a) each Right will
(to the extent such Right is then exercisable) entitle the holder thereof (other
than the acquiror) to purchase, at the then-current Purchase Price, a number of
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shares of Common Stock having a then-current market value of twice the Purchase
Price, and (b) the Board of Directors may at any time after the acquiror has
obtained 15% or more of the Company's Common Stock (but not after the acquiror
acquires 50% or more of the outstanding Common Stock) cause each Right, other
than the Rights held by the acquiror, to be exchanged for one share of Common
Stock (subject to adjustment) or substitute consideration with a value equal to
such share. If (i) the Company is acquired in a merger or other business
combination in which the Company is not the surviving entity, (ii) an acquiring
entity merges into the Company and Common Stock of the Company is changed into
or exchanged for securities or assets of another person or (iii) 50% or more of
the Company's assets or earning power is sold or transferred, then each Right
will (to the extent such Right is then exercisable) entitle the holder thereof
(other than the acquiror) to purchase, at the then-current Purchase Price, a
number of shares of common stock of the acquiring person having a then-current
market value of twice the Purchase Price.
The Rights are redeemable at the Company's option for $.01 per Right at any
time on or prior to the tenth day after public announcement that a person or
group has acquired beneficial ownership of 15% or more of the Company's Common
Stock or such later date as may be determined by a majority of the Directors not
affiliated with the acquiring group or person.
The Indenture will provide that the Company will promptly (but in no event
later than September 30, 1995) amend the Stockholder Rights Plan to provide that
upon conversion of the Notes the holders will receive, in addition to the Common
Stock issuable upon such conversion, the Rights (whether or not the Rights have
separated from the Common Stock at the time of the conversion). The Indenture
will also provide that, in the event of the occurrence of certain events
affecting the Rights prior to such amendment, appropriate adjustments to the
conversion price applicable to the Notes will be made. In addition, the
Indenture will provide that, if the Company implements a new stockholder rights
plan, such rights plan must provide that upon conversion of the Notes the
holders will receive, in addition to Common Stock issuable upon such conversion,
such rights (whether or not such rights have separated from the Common Stock at
the time of such conversion).
Pursuant to the Rights Plan, 650,000 shares of authorized Preferred Stock
have been designated Series A Junior Participating Preferred Stock, and reserved
for issuance upon the exercise of Rights issued under the Stockholder Rights
Plan. The Series A Junior Participating Preferred Stock purchasable upon
exercise of the Rights will be nonredeemable and junior to any other series of
Preferred Stock the Company may issue (unless otherwise provided in the terms of
such stock). Each share of Series A Junior Participating Preferred Stock will
have a preferential cumulative quarterly dividend in an amount equal to $.25 per
share (or, if greater, 100 times the amount per share of all cash dividends
distributed to the holders of Common Stock or 200 times the aggregate amount of
all noncash dividends) declared on each share of Common Stock during the quarter
and, in the event of liquidation, the holders of Series A Junior Participating
Preferred Stock will receive a preferred liquidation payment equal to $5.00 per
share (or, if greater, 100 times the amount per share to be distributed to the
holders of Common Stock), plus accrued dividends. Each share of Series A Junior
Participating Preferred Stock will have 100 votes (subject to adjustment in
certain events), and will vote together with the shares of Common Stock. In
certain circumstances, the holders of Series A Junior Participating Preferred
Stock will be entitled to elect two directors. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are exchanged
for or changed into other securities, cash or other property, each share of
Series A Junior Participating Preferred Stock will be entitled to receive 100
times the amount and type of consideration received per share of Common Stock.
Although the Rights should not interfere with a business combination approved
by the Board of Directors in the manner set forth in the Stockholder Rights
Plan, they may cause substantial dilution to a person or group that attempts to
acquire the Company without such approval.
INCREASED VOTE REQUIREMENTS FOR CERTAIN BUSINESS COMBINATIONS
The Company's Certificate of Incorporation provides that the Company may not
enter into certain corporate transactions ("Business Combinations") involving
any "Related Person" unless the transactions
42
<PAGE>
are approved by, in addition to any affirmative vote ordinarily required under
Delaware law, the affirmative vote of the holders of at least 75% of the voting
power of outstanding voting shares, including the affirmative vote of the
holders of not less than 66-2/3 % of the outstanding voting shares not owned
directly or indirectly by any "Related Person." The term "Related Person" is
defined as a person who, together with the person's affiliates and associates,
beneficially owns 10% or more of the Company's outstanding voting shares. The
66-2/3 % voting requirement does not apply to any proposed Business Combination
approved by the affirmative vote of at least 90% of the Company's outstanding
voting shares. No supermajority vote is required if the Business Combination is
a merger or consolidation and the cash or fair market value of the property,
securities or other consideration to be received per share by the holders of
Common Stock of the Company in the Business Combination is not less than the
highest per share price paid by the Related Person in acquiring any of its
holdings of the Company's Common Stock within the two years prior to the
effective date of the Business Combination.
Although the purpose of these voting requirements is to protect the Company,
its stockholders and its employees from unfavorable corporate transactions, the
voting requirements could, under certain circumstances, permit the Company's
Board of Directors or minority stockholders to frustrate consummation of a
Business Combination that the holders of a majority of the voting stock of the
Company might believe to be in their best interests.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, the
Company is subject to Section 203 of the Delaware General Corporation Law (the
"DGCL") which restricts certain business combinations between the Company and an
"interested stockholder" (in general, a stockholder owning 15% or more of the
Company's outstanding voting stock) or its affiliates or associates for a period
of three years following the date on which the stockholder becomes an
"interested stockholder." The restrictions do not apply if (i) prior to an
interested stockholder becoming such, the Board of Directors approves either the
business combination or the transaction in which the stockholder becomes an
interested stockholder, (ii) upon consummation of the transaction in which the
stockholder becomes an interested stockholder, such interested stockholder owns
at least 85% of the voting stock of the Company outstanding at the time the
transaction commences (excluding shares owned by certain employee stock
ownership plans and persons who are both directors and officers of the Company)
or (iii) on or subsequent to the date an interested stockholder becomes such,
the business combination is both approved by the Board of Directors and
authorized at an annual or special meeting of the Company's stockholders, not by
written consent, but by the affirmative vote of at least 66 2/3 % of the
outstanding voting stock not owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is The First
National Bank of Boston.
43
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal income
tax considerations relevant to holders of the Notes. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive effect)
or different interpretations. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and non-United
States persons, may be subject to special rules. In addition, this discussion is
limited to persons that purchase the Notes in the offering and hold the Notes as
a "capital asset" within the meaning of Section 1221 of the Code.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
Conversion of Notes into Common Stock. In general, no gain or loss will be
recognized for federal income tax purposes on a conversion of the Notes into
shares of Common Stock. However, cash paid in lieu of a fractional share of
Common Stock will likely result in taxable gain (or loss), which will be capital
gain (or loss), to the extent that the amount of such cash exceeds (or is
exceeded by) the portion of the adjusted basis of the Note allocable to such
fractional share. The adjusted basis of shares of Common Stock received on
conversion will equal the adjusted basis of the Note converted, reduced by the
portion of adjusted basis allocated to any fractional share of Common Stock
exchanged for cash. The holding period of an investor in the Common Stock
received on conversion will include the period during which the converted Notes
were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes--Conversion." Section 305 of the Code
and the Treasury Regulations issued thereunder may treat the holders of the
Notes as having received a constructive distribution, resulting in ordinary
income (subject to a possible dividends received deduction in the case of
corporate holders) to the extent of the Company's then current and/or
accumulated earnings and profits (and resulting in gain or a return of capital,
depending on the amount of the distribution in excess of such earnings and
profits), if and to the extent that certain adjustments in the conversion price
that may occur in limited circumstances (particularly an adjustment to reflect a
taxable dividend to holders of Common Stock) increase the proportionate interest
of a holder of Notes in the fully diluted Common Stock, whether or not such
holder ever exercises its conversion privilege. Moreover, if there is not a full
adjustment to the conversion price of the Notes to reflect a stock dividend or
other event increasing the proportionate interest of the holders of outstanding
Common Stock in the assets or earnings and profits of the Company, then such
increase in the proportionate interest of the holders of the Common Stock
generally will be treated as a distribution to such holders, taxable as ordinary
income (subject to a possible dividends received deduction in the case of
corporate holders) to the extent of the Company's then current and/or
accumulated earnings and profits and taxable as gain, or treated as a return of
capital, depending on the amount of the distribution in excess of such earnings
and profits.
Market Discount. Investors acquiring Notes in this offering should note that
the resale of Notes may be adversely affected by the market discount provisions
of sections 1276 through 1278 of the Code. Under market discount rules, if a
holder of a Note purchases it at market discount in excess of a statutorily-
defined de minimis amount and thereafter recognizes gain upon a disposition or
retirement of the Note, then the lesser of the gain recognized or a portion of
the market discount that accrued on a ratable basis (or, if elected, on a
constant interest rate basis) generally will be treated as ordinary income at
the time of the disposition. Moreover, any market discount on a Note may be
taxable to an investor to the extent of appreciation at the time of certain
otherwise non-taxable transactions (e.g., gifts). Any accrued market discount
not previously taken into income prior to a conversion of a Note, however,
should (under Treasury Regulations not yet issued) carry over to the Common
Stock received on conversion and be treated as ordinary income upon a subsequent
disposition of such Common Stock to the
44
<PAGE>
extent of any gain recognized on such disposition. In addition, absent an
election to include market discount in income as it accrues, a holder of a
market discount debt instrument may be required to defer a portion of any
interest expense that otherwise may be deductible on any indebtedness incurred
or maintained to purchase or carry such instrument until the holder disposes of
the debt instrument in a taxable transaction.
Sale, Exchange or Retirement of Notes. Each holder of Notes generally will
recognize gain or loss upon the sale, exchange, redemption, repurchase,
retirement or other disposition of those Notes measured by the difference (if
any) between (i) the amount of cash and the fair market value of any property
received (except to the extent that such cash or other property is attributable
to the payment of accrued interest not previously included in income, which
amount will be taxable as ordinary income) and (ii) the holder's adjusted tax
basis in those Notes (including any market discount previously included in
income by the holder). Each holder of Common Stock into which the Notes are
converted, in general, will recognize gain or loss upon the sale, exchange,
redemption, repurchase or other disposition of the Common Stock measured under
rules similar to those described in the preceding sentence for the Notes.
Special rules may apply to redemptions or repurchases of Common Stock which may
result in significantly different treatment. Any such gain or loss recognized on
the sale, exchange, redemption, repurchase, retirement or other disposition of a
Note or share of Common Stock should be capital gain or loss (except for
redemptions and repurchases and except as discussed under "Market Discount"
above), and would be long-term capital gain or loss if the Note or the Common
Stock has been held for more than 12 months at the time of the sale or exchange.
An investor's initial basis in a Note will be the cash price it paid therefor.
Back-Up Withholding. A holder of Notes or Common Stock may be subject to
"back-up withholding" at a rate of 31% with respect to certain "reportable
payments," including interest payments, dividend payments and, under certain
circumstances, principal payments on the Notes. These back-up withholding rules
apply if the holder, among other things, (i) fails to furnish a social security
number or other taxpayer identification number ("TIN") certified under penalty
of perjury within a reasonable time after the request therefor, (ii) furnishes
an incorrect TIN, (iii) fails to report properly interest or dividends or (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalty of perjury, that the TIN furnished is the correct number and that
such holder is not subject to back-up withholding. A holder who does not provide
the Company with its correct TIN also may be subject to penalties imposed by the
IRS. Any amount withheld from a payment to a holder under the back-up
withholding rules is creditable against the holder's federal income tax
liability, provided the required information is furnished to the IRS. Back-up
withholding will not apply to payments made to certain holders, including
corporations, tax-exempt organizations and certain foreign persons, provided
their exemption from back-up withholding is properly established.
The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any "reportable payments" for each calendar year and the
amount of tax withheld, if any, with respect to such payments.
45
<PAGE>
UNDERWRITING
Lehman Brothers Inc., Montgomery Securities and Smith Barney Inc. (the
"Underwriters"), have severally agreed, subject to the terms and conditions of
the Underwriting Agreement, to purchase from the Company and the Company has
agreed to sell to each Underwriter the aggregate principal amount of Notes set
forth opposite the names of such Underwriters below:
PRINCIPAL
UNDERWRITERS AMOUNT OF NOTES
` --------------------- ---------------
Lehman Brothers Inc. ...................... $
Montgomery Securities ..................... $
Smith Barney Inc. .........................
---------------
Total ................................... $ 150,000,000
===============
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the Notes offered
hereby (other than those offered pursuant to the over-allotment option described
below) if any Notes are purchased. In the event of default by any Underwriter,
the Underwriting Agreement provides that, in certain circumstances, purchase
commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company has been advised that the Underwriters propose to offer the Notes
to the public initially at the public offering price set forth on the cover page
of this Prospectus and to certain selected dealers (which may include the
Underwriters) at such public offering price less a concession not to exceed %
of the principal amount of such Notes. The Underwriters may allow and such
dealers may reallow a concession not to exceed % of the principal amount of
such Notes to certain other dealers. After the initial offering to the public,
the public offering price, the concession to selected dealers and the
reallowance to other dealers may be changed.
The Notes are a new issue of securities. Application has been made for
quotation of the Notes on the Nasdaq Small-Cap Market under the symbol "IDTIG".
The Company has been advised by the Underwriters that they intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
The Company has granted the Underwriters an option to purchase, in the
aggregate, up to an additional $22,500,000 principal amount of Notes at the
initial public offering price less underwriting discounts and commissions,
solely to cover over-allotments. Such option may be exercised at any time until
30 days after the date of this Prospectus. To the extent that the Underwriters
exercise such option, each Underwriter will be committed, subject to certain
conditions, to purchase an additional amount of Notes proportionate to such
Underwriter's initial commitment as indicated in the preceding table.
The Company has agreed in the Underwriting Agreement to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Company has agreed not to register for sale, offer, sell, contract to
sell or otherwise dispose of, without the prior written consent of Lehman
Brothers Inc., as representative of the Underwriters, any shares of Common
Stock, any securities convertible into or exercisable or exchangeable for Common
Stock, or any rights to acquire Common Stock for a period of 90 days after the
date of this Prospectus; provided, however, that such restriction shall not
affect the ability of the Company or its subsidiaries to take any such actions
(i) in connection with any employee benefit or incentive plan of the Company or
(ii) in connection with the offering of the Notes made hereby or the conversion
thereof. In addition, certain of the Company's officers and board members have
agreed not to offer, sell, contract or otherwise dispose of, without the prior
written consent of Lehman Brothers Inc. as representative of the Underwriters,
any shares of Common Stock, any securities convertible into or exercisable or
exchangeable for Common Stock, or any rights to acquire Common Stock for a
period of 30 days after the date of this Prospectus.
46
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the Notes and the Common Stock issuable
upon conversion thereof will be passed upon for the Company by Fenwick & West,
Palo Alto, California. Certain legal matters will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation
("WSGR"), Palo Alto, California. In December 1994, the Company engaged WSGR as
special counsel to the Company in connection with the facilities lease
arrangement for the Company's Oregon wafer fabrication facility. See Note 7 of
Notes to Consolidated Financial Statements.
EXPERTS
The consolidated financial statements of IDT as of April 3, 1994 and April 2,
1995 and for each of the three years in the period ended April 2, 1995 included
in this Prospectus and the consolidated financial statements incorporated in
this Prospectus by reference to the Annual Report on Form 10-K for the year
ended April 3, 1994 have been so included or incorporated in reliance on the
reports of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
47
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Integrated Device Technology,
Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of stockholders' equity
present fairly, in all material respects, the financial position of Integrated
Device Technology, Inc. and its subsidiaries at April 3, 1994 and April 2, 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended April 2, 1995, in conformity with generally accepted
accounting principles. These consolidated financial statements are the
responsibility of the Company's management; our responsiblity is to express an
opinion on these consolidated financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
San Jose, California
April 21, 1995
F-1
<PAGE>
<TABLE>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
APRIL 3, APRIL 2,
1994 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................................$ 88,490 $130,211
Short-term investments .......................................... 33,351 101,874
Accounts receivable, net of allowance for returns and doubtful
accounts of $4,129 and $3,830 ................................. 40,643 71,974
Inventory ....................................................... 29,855 37,459
Deferred tax assets ............................................. 26,276 26,443
Prepayments and other current assets ............................ 3,858 7,013
---------- ----------
Total current assets .......................................... 222,473 374,974
---------- ----------
Property, plant and equipment, net ................................ 120,838 178,780
Other assets ...................................................... 6,260 8,221
---------- ----------
Total assets ..................................................$349,571 $561,975
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................$ 15,925 $ 39,814
Accrued compensation and related expense ........................ 16,528 22,889
Deferred income on shipments to distributors .................... 17,592 22,348
Income taxes payable ............................................ 1,964 1,716
Other accrued liabilities ....................................... 13,032 10,609
Current portion of long-term obligations ........................ 14,184 5,903
---------- ----------
Total current liabilities ..................................... 79,225 103,279
---------- ----------
Long-term obligations ............................................ 37,462 36,595
---------- ----------
Deferred tax liabilities ......................................... 8,517 7,570
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value: 5,000,000 shares authorized;
no shares issued ..............................................
Common stock; $.001 par value: 65,000,000 shares authorized;
33,405,552 and 38,104,634 shares issued and outstanding ...... 33 38
Additional paid-in capital ...................................... 160,221 271,618
Retained earnings ............................................... 64,517 142,819
Cumulative translation adjustment ............................... (404) 56
---------- ----------
Total stockholders' equity .................................... 224,367 414,531
---------- ----------
Total liabilities and stockholders' equity ....................$349,571 $561,975
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-2
<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED
---------------------------------
MARCH 28, APRIL 3, APRIL 2,
1993 1994 1995
----------- ---------- ----------
Revenues .....................................$236,263 $330,462 $422,190
Cost of revenues ............................. 132,285 159,627 179,652
----------- ---------- ----------
Gross profit ................................. 103,978 170,835 242,538
----------- ---------- ----------
Operating expenses:
Research and development ................... 53,461 64,237 78,376
Selling, general and administrative ....... 39,511 54,329 64,647
----------- ---------- ----------
Total operating expenses ................... 92,972 118,566 143,023
----------- ---------- ----------
Operating income ............................. 11,006 52,269 99,515
Interest expense ............................. (5,855) (5,165) (3,298)
Interest income and other, net ............... 1,127 3,102 8,186
----------- ---------- ----------
Income before provision for income taxes .... 6,278 50,206 104,403
Provision for income taxes ................... 942 10,041 26,101
----------- ---------- ----------
Net income ...................................$ 5,336 $ 40,165 $ 78,302
=========== ========== ==========
Net income per share .........................$ .18 $ 1.21 $ 2.09
=========== ========== ==========
Shares used in computing net income per share 29,701 33,116 37,382
=========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------
MARCH 28, APRIL 3, APRIL 2,
1993 1994 1995
-------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net income .............................................................. $ 5,336 $ 40,165 $ 78,302
Adjustments:
Depreciation and amortization ......................................... 37,140 37,594 38,816
Provision for losses on accounts receivable ........................... (742) 476 299
Changes in assets and liabilities:
Accounts receivable ................................................... (6,167) 2,071 (31,630)
Inventory ............................................................. (3,843) (2,618) (7,604)
Deferred tax assets ................................................... 2,616 (10,897) 4,012
Other assets .......................................................... (391) (1,247) (7,157)
Accounts payable ...................................................... (804) 106 23,889
Accrued compensation and related expense .............................. 3,158 9,799 6,361
Deferred income on shipments to distributors .......................... 1,093 7,142 4,756
Income taxes payable .................................................. 477 11,574 7,605
Other accrued liabilities ............................................. (679) 5,885 (1,846)
-------- --------- ---------
Net cash provided by operating activities ............................... 37,194 100,050 115,803
-------- --------- ---------
Investing activities:
Purchases of property, plant and equipment .............................. (28,010) (37,412) (94,717)
Purchases of short-term investments ..................................... (4,927) (40,221) (106,948)
Proceeds from sales of short-term investments ........................... 4,110 8,747 38,425
-------- --------- ---------
Net cash used for investing activities .................................. (28,827) (68,886) (163,240)
-------- --------- ---------
Financing activities:
Issuance of common stock, net ........................................... 2,981 55,337 103,549
Proceeds from borrowings ................................................ 32,161 2,731 --
Payment on capital leases and other debt ................................ (41,006) (23,271) (14,391)
-------- --------- ---------
Net cash provided by (used for) financing activities .................... (5,864) 34,797 89,158
-------- --------- ---------
Net increase in cash and cash equivalents ............................... 2,503 65,961 41,721
Cash and cash equivalents at beginning of period .......................... 20,026 22,529 88,490
-------- --------- ---------
Cash and cash equivalents at end of period ............................... 22,529 $ 88,490 $ 130,211
======== ========= =========
Supplemental disclosures:
Interest paid ........................................................... 5,893 $ 4,713 $ 2,698
Income taxes paid (refunded) ............................................ (2,050) 9,163 13,901
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
ADDITIONAL CUMULATIVE TOTAL
COMMON STOCK PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 29, 1992 ............................ 26,553,731 $ 27 $ 85,669 $ 19,016 $ (110) $ 104,602
Issuance of common stock ......................... 1,823,990 1 7,480 -- -- 7,481
Tax benefits of stock option
transactions ................................... -- -- 582 -- -- 582
Translation adjustment ........................... -- -- -- -- (241) (241)
Net income ....................................... -- -- -- 5,336 -- 5,336
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 28, 1993 ............................ 28,377,721 28 93,731 24,352 (351) 117,760
Issuance of common stock ......................... 2,027,831 2 9,241 -- -- 9,243
Issuance of common stock at $15.71 per
share, pursuant to public offering, net
of expenses of $366 ............................ 3,000,000 3 46,761 -- -- 46,764
Tax benefits of stock option
transactions ................................... -- -- 10,488 -- -- 10,488
Translation adjustment ........................... -- -- -- -- (53) (53)
Net income ....................................... -- -- -- 40,165 -- 40,165
---------- ---------- ---------- ---------- ---------- ----------
Balance, April 3, 1994 ............................. 33,405,552 33 160,221 64,517 (404) 224,367
Issuance of common stock ......................... 889,082 1 5,987 -- -- 5,988
Issuance of common stock at $25.675
per share, pursuant to public offering, net
of expenses of $261 ............................ 3,810,000 4 97,557 -- -- 97,561
Tax benefits of stock option
transactions ................................... -- -- 7,853 -- -- 7,853
Translation adjustment ........................... -- -- -- -- 460 460
Net income ....................................... -- -- -- 78,302 -- 78,302
---------- ---------- ---------- ---------- ---------- ----------
Balance, April 2, 1995 ............................. 38,104,634 $ 38 $ 271,618 $ 142,819 $ 56 $ 414,531
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The consolidated financial statements include the
accounts of Integrated Device Technology, Inc. (IDT or the Company) and all of
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated.
Fiscal Year. The Company's fiscal year ends on the Sunday nearest March 31.
Fiscal years 1993 and 1995 each included 52 weeks. The fiscal year ended on
April 3, 1994 was a 53-week year. The fiscal year-end of certain of the
Company's foreign subsidiaries is March 31, and the results of their operations
as of their fiscal year end have been combined with the Company's results of
operations as of April 2, 1995. Transactions during the intervening period were
not significant.
Cash, Cash Equivalents and Short-term Investments. Cash equivalents are
highly liquid investments with original maturities of three months or less at
the time of acquisition or with guaranteed on-demand buy-back provisions.
Short-term investments are valued at amortized cost, which approximates market.
The Company adopted Statement of Financial Accounting Standards (FAS) 115,
"Accounting for Certain Investments in Debt and Equity Securities" effective
April 4, 1994 as required by that pronouncement. The Statement requires
reporting of investments as either held to maturity, trading or available for
sale. The cumulative effect of adopting FAS 115 was not material to the
Company's financial position or results of operations. The Company's investments
are classified as available-for-sale as of April 2, 1995. Investment securities
classified as available-for-sale are measured at market value and net unrealized
gains or losses are recorded as a separate component of stockholders' equity
until realized. Any gains or losses on sales of investments are computed on
specific identification. As of April 2, 1995, gross realized and unrealized
gains and losses on investments available for sale were not material. Management
determines the appropriate classification of debt and equity securities at the
time of purchase and reevaluates the classification at each reporting date.
AVAILABLE-FOR-SALE SECURITIES APRIL 2, 1995
--------------------------------- ---------------
(IN THOUSANDS)
U.S. Government agency securities ........................... $ 36,262
State and local governments ................................... 94,345
Corporate securities .......................................... 73,160
Others ........................................................ 8,215
-------
Total debt and equity securities .............................. 211,982
-------
Less cash equivalents ......................................... 110,108
-------
Short-term investments ........................................ $101,874
=======
Short-term investments of $47,949,000 mature in less than one year and
$53,925,000 have maturities between one and four years.
Inventory. Inventory is stated at the lower of standard cost (which
approximates actual cost on a first-in, first-out basis) or market. Market is
based upon estimated realizable value reduced by normal gross margin. Inventory
at April 3, 1994 and April 2, 1995 was:
APRIL 3, 1994 APRIL 2, 1995
--------------- ---------------
(IN THOUSANDS)
Inventory:
Raw materials .......................... $ 2,834 $ 4,404
Work-in-process ........................ 10,201 16,977
Finished goods ......................... 16,820 16,078
-------- --------
$ 29,855 $ 37,459
======== ========
F-6
<PAGE>
Property, Plant and Equipment. Property, plant and equipment are stated at
cost. Depreciation is computed for property, plant and equipment using the
straight-line method over estimated useful lives of the assets. Leasehold
improvements and leasehold interests are amortized over the shorter of the
estimated useful lives of the assets or the remaining term of the lease.
Accelerated methods of depreciation are used for tax computations. Property,
plant and equipment at April 3, 1994 and April 2, 1995 were:
APRIL 3, 1994 APRIL 2, 1995
--------------- ---------------
(IN THOUSANDS)
Property, plant and equipment:
Land ............................................. $ 4,382 $ 6,076
Machinery and equipment .......................... 248,095 332,680
Building and leasehold improvements .............. 40,063 40,576
Construction-in-progress ......................... 76 5,553
---------- ---------
292,616 384,885
Accumulated depreciation and amortization ........ (171,778) (206,105)
---------- ---------
$ 120,838 $ 178,780
========== =========
Income Taxes. The Company accounts for income tax in accordance with
Statement of Financial Accounting Standards (FAS) 109, "Accounting for Income
Taxes". FAS 109 is an asset and liability approach which requires that the
expected future tax consequences of temporary differences between book and tax
bases of assets and liabilities be recognized as deferred tax assets and
liabilities.
Net Income Per Share. Net income per share is computed using the weighted
average number of shares of common stock outstanding during the year, plus
incremental common equivalent shares, if dilutive. Common stock equivalents
consist of stock options (using the treasury stock method).
Revenue Recognition. Revenue from product sales is generally recognized upon
shipment and a reserve is provided for estimated returns and discounts. A
portion of the Company's sales is made to distributors under agreements which
allow certain rights of return and price protection on products unsold by the
distributors. Related gross profits thereon are deferred until the products are
resold by the distributors.
Translation of Foreign Currencies. Accounts denominated in foreign currencies
have been translated in accordance with Statement of Financial Accounting
Standard (FAS) 52. The functional currency for the Company's sales operations is
the applicable local currency with the exception of the Hong Kong sales
subsidiary whose functional currency is the U.S. dollar. For subsidiaries whose
functional currency is the 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. For the Malaysian manufacturing and
the Hong Kong sales subsidiaries, where the functional currency is the U.S.
dollar, gains and losses resulting from the process of remeasuring foreign
currency financial statements into U.S. dollars are included in income.
Aggregate net foreign currency transaction gains (losses) totaled $(93,000),
$(232,000) and $348,000 in fiscal 1993, 1994 and 1995, respectively. The effect
of foreign currency exchange rate fluctuations on cash balances held in foreign
currencies have not been material.
Fair Value Disclosures of Financial Instruments. The estimated fair value of
financial instruments has been determined by the Company, using available market
information and valuation methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair value.
Accordingly, these estimates may not necessarily be indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies could have a
material effect on the estimated fair value amounts. The estimated fair value of
all of the Company's financial instruments at April 2, 1995 was not materially
different from the values presented in the consolidated balance sheet.
F-7
<PAGE>
Concentration of Credit Risk and Off-Balance-Sheet Risk. The Company markets
high-speed integrated circuits to OEMs and distributors primarily in the United
States, Europe and the Far East. The Company performs on-going credit
evaluations of its customers' financial conditions and limits the amount of
credit extended when deemed necessary but generally does not require collateral.
Management believes that any risk of loss is significantly reduced due to the
diversity of its products, customers and geographic sales areas. The Company
maintains a provision for potential credit losses and write-offs of accounts
receivable were insignificant in each of the three years ended April 2, 1995.
The Company sells a significant portion of its products through third-party
distributors. As a result of the merger of two of the Company's national
distributors, the receivable balance from the merged company is significant in
aggregate for fiscal 1994 and 1995. If the financial condition and operations of
this distributor deteriorate below critical levels, the Company's operating
results could be adversely affected. This distributor's receivable balance
represented 11% and 6% of total accounts receivable at April 3, 1994, and April
2, 1995, respectively.
NOTE 2--DERIVATIVE FINANCIAL STATEMENTS
The Company has foreign subsidiaries which operate and sell or manufacture
the Company's products in various global markets. As a result, the Company is
exposed to changes in foreign currency exchange rates. The Company primarily
utilizes forward exchange contracts to hedge against the short- term impact of
foreign currency fluctuations on certain assets or liabilities denominated in
foreign currencies. The total amount of these contracts is offset by the
underlying assets denominated in foreign currencies. The gains or losses on
these contracts are included in income as the exchange rates change. Management
believes that these forward contracts do not subject the Company to undue risk
due to foreign exchange movements because gains and losses on these contracts
are offset by losses and gains on the underlying assets, and transactions being
hedged. These forward exchange contracts are considered identifiable hedges and
realized and unrealized gains and losses are deferred until settlement of the
underlying commitments. At April 2, 1995 deferred losses aggregated $1,160,000
and there were no deferred gains.
Foreign exchange hedge positions, generally with maturities of less than four
months are as follows:
APRIL 3, 1994 APRIL 2, 1995
--------------- ---------------
(IN THOUSANDS OF U.S. DOLLARS)
Japanese Yen--Sell ........................... $ 7,234 $ 10,357
Japanese Yen--Buy ............................ -- 1,898
British Pound Sterling--Sell ................. 534 992
British Pound Sterling--Buy .................. 140 --
German Deutsche Mark--Sell ................... 1,736 142
German Deutsche Mark--Buy .................... 84 --
French Franc--Sell ........................... 2,079 69
French Franc--Buy ............................ 168 --
Malaysian Ringgits--Sell ..................... -- 3,022
Malaysian Ringgits--Buy ...................... -- 2,003
--------- --------
$ 11,975 $ 18,483
========= ========
The Company is exposed to credit-related losses if counterparties to
financial instruments fail to perform their obligations. However, it does not
expect any counterparties, which presently have high credit ratings, to fail to
meet their obligations. The Company controls credit risk through credit
approvals, limits and monitoring procedures including the use of high credit
quality counterparties.
F-8
<PAGE>
NOTE 3--OTHER ASSETS--INTANGIBLES
During fiscal 1993, IDT entered into various royalty-free patent
cross-license agreements. The patents licenses granted to IDT under these
agreements have been recorded at their cost of approximately $8,200,000 and are
being amortized on a straight-line basis over five years. The amortization
relating to patents licenses was $1,647,000 for both fiscal years 1994 and 1995.
NOTE 4--LONG-TERM OBLIGATIONS
The Company leases certain equipment under long-term leases or finances
purchases of equipment under bank financing agreements. Leased assets and assets
pledged under financing agreements which are included under property, plant and
equipment are as follows:
APRIL 3, 1994 APRIL 2, 1995
--------------- ---------------
(IN THOUSANDS)
Building improvements ............................ $ 6,907 $ --
Machinery and equipment .......................... 65,403 39,316
-------- -------
Less accumulated depreciation
and amortization ................................ 43,949 27,396
-------- -------
$28,361 $11,920
======== =======
The capital lease agreements and equipment financings are collateralized by
the related leased equipment and contain certain restrictive covenants.
Future minimum payments under capital leases and equipment financing
agreements, at varying interest rates (4.9%-11.0%) are as follows:
FISCAL YEAR (IN THOUSANDS)
-------------------------------------- --------------
1996 ..................................$ 5,845
1997 ................................... 3,023
1998 ................................... 1,480
1999 ................................... 3
2000 ................................... --
-------
Total minimum payments ................. 10,351
Less interest .......................... 948
-------
Present value of net minimum payments .. 9,403
Less current portion ................... 5,219
-------
$ 4,184
=======
During fiscal 1993, IDT recorded a long-term obligation in connection with
the dismissal of certain litigation and entering into a patent cross-license
agreement. The present values of the amount due at the end of the license term
were $7,471,000 and $7,581,000 at April 3, 1994 and April 2, 1995, respectively.
During the year, this amount payable has been reduced by an amount of royalty
income pursuant to certain guaranteed revenues realized on sales of IDT's
products. The Company is accreting $2,500,000 in future interest charges,
reflecting an 8% discount rate, from the recorded amount at April 2, 1995 to the
amount due at the end of the term using the effective interest method.
F-9
<PAGE>
NOTE 5--LONG-TERM DEBT
Long-term debt consists of the following:
APRIL 3, 1994 APRIL 2, 1995
--------------- ---------------
(IN THOUSANDS)
Mortgage payable bearing interest at 9.625%
due in monthly installments of $142,000
including interest through April 1, 2005
The note is secured by property and
improvements in San Jose, California ............ $11,543 $10,922
Term loan payable to a Malaysian bank at 8%
due in monthly installments of $54,000 .......... 791 --
------- -------
12,334 10,922
Less current portion ............................. 1,306 684
------- -------
$11,028 $10,238
======= =======
Principal payments required in the next five years and beyond are as follows
(in thousands): $684 (1996), $752 (1997), $828 (1998), $911 (1999) and $7,747
(2000 and beyond).
NOTE 6--LINES OF CREDIT
The Company's Malaysian subsidiary has unsecured revolving lines of credit
that allow borrowings up to $2,600,000 with three local banks. These lines have
no expiration date. At April 2, 1995 there were no outstanding borrowings
against these lines. The borrowing rate for these lines would be incurred at the
local bank's cost of funds plus 0.75% to 1% (7.25%-7.30% on April 2, 1995).
In fiscal 1995, the Company's Japanese subsidiary had a secured revolving
line of credit that allowed borrowings up to approximately $3,500,000. The line
of credit automatically extends until the Company requests termination. As of
April 2, 1995, no amounts were outstanding under this line of credit. The
borrowing rate for this line of credit is the local bank's short-term prime rate
existing at the borrowing date plus 0.2%. At April 2, 1995 this short-term
borrowing rate was 3.2%.
The Company also has foreign exchange facilities with several banks that
allow the Company to enter into foreign exchange contracts of up to $55,000,000,
of which $36,518,000 was available at April 2, 1995.
NOTE 7--COMMITMENTS
Lease Commitments. The Company leases most of its administrative and
manufacturing facilities under operating lease agreements which expire at
various dates through 2005. One facility was leased from a principal shareholder
and a director. The annual rent paid to this shareholder totaled approximately
$1,396,000, $1,396,000 and $1,527,000 in fiscal 1993, 1994 and 1995,
respectively. This stockholder lease expired during fiscal 1995 and was renewed
through June 2005.
In January 1995, the Company entered into a five-year $60 million Tax
Ownership Lease transaction to lease the wafer fabrication facility being
constructed for its use in Hillsboro, Oregon. This lease requires monthly
payments which vary based on the London Interbank Offered Rate (LIBOR) plus 0.3%
(6.425% at April 2, 1995). This lease also provides the Company with the option
of either acquiring the building at its original cost or arranging for the
building to be acquired at the end of the respective lease terms. The Company's
obligations under the lease are secured by a line of credit trust deed on the
building and collateralized by cash and/or investments (restricted securities)
up to 105% of the lessor's construction costs until completion of the building
which is scheduled for the third quarter of fiscal 1996 and 85% thereafter.
Restricted securities collateralizing this lease were $10,500,000 at April 2,
1995 and are expected to reach approximately $50,000,000 upon the completion of
the facility. The Company is also
F-10
<PAGE>
contingently liable under a first-loss clause for up to 85% of the constructed
costs of the building. In addition, the Company must maintain compliance with
certain financial convenants. Management believes that this contingent liability
will not have a material adverse effect on the Company's financial position or
results of operations.
The aggregate minimum rent commitments under all operating leases, including
the Hillsboro facility, which will be approximately $3,800,000 per year
beginning when the facility is completed, estimated to be the third quarter of
fiscal 1996, are as follows:
(FISCAL YEAR) (IN THOUSANDS)
-------------------- --------------
1996 ................$ 5,803
1997 ................. 7,567
1998 ................. 7,321
1999 ................. 7,309
2000 ................. 6,916
2001 and thereafter .. 6,861
-------
$41,777
=======
Rent expense for the years ended March 28, 1993, April 3, 1994 and April 2,
1995 totaled approximately $3,303,000, $3,488,000 and $3,326,000 respectively.
In March 1995, the Company paid a down payment of $925,000 on a conditional
purchase of land in the Philippines for the development of a test and
manufacturing facility. The total purchase commitment for this land is
$3,100,000.
As of April 2, 1995, five secured standby letters of credit were outstanding
totaling $8,635,000. Two letters of credit are held in connection with the
Company's workers compensation insurance and mature on June 30, 1995 and June
30, 1996. The other three letters of credit are required for international
purchases and expire June and December of 1995.
NOTE 8--SALE OF COMMON STOCK
In December 1994, the Company completed a public offering of 3,810,000 shares
of its Common Stock and received net proceeds of $97,600,000. The Company will
use the net proceeds from the offering for construction of its eight-inch wafer
fabrication facility in Hillsboro, Oregon, expansion of existing wafer
fabrication facilities in San Jose and Salinas, California, acquisition of
capital equipment and general corporate purposes, including working capital.
NOTE 9--STOCKHOLDERS' EQUITY
Stock Option Plans. The Company has stock option plans under which key
employees, officers, directors and consultants may be granted options to
purchase shares of the Company's common stock at prices which are not less than
fair market value at the date of grant. Options granted are generally
exercisable in 25% increments each year beginning one year after the grant date.
At April 2, 1995, options for 1,383,018 shares were exercisable at an
aggregate exercise price of $6,990,000. At April 3, 1994, options for 1,172,000
shares were exercisable at an aggregate exercise price of $4,856,000.
F-11
<PAGE>
Activity under the plans is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------------------------------
AVAILABLE AGGREGATE
FOR ISSUANCE NUMBER PRICE PER SHARE PRICE
---------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Balance, March 29, 1992 .................. 2,073,500 4,815,572 $ 3.25-$ 13.25 $ 18,287,000
Additional authorization
Granted ................................ (1,358,323) 1,358,323 $3.625-$ 8.25 6,701,000
Surrendered, canceled or expired ....... 254,930 (447,625) $ 3.25-$ 13.25 (1,810,000)
Exercised .............................. -- (529,371) $ 3.25-$ 7.50 (1,933,000)
---------- ---------- -------------
Balance, March 28, 1993 .................. 970,107 5,196,899 $ 3.25-$12.125 21,245,000
Additional authorization ............... 975,000
Granted ................................ (1,850,234) 1,850,234 $ 7.00-$25.375 26,599,000
Surrendered, canceled or expired ....... 284,010 (287,423) $ 3.25-$22.125 (1,738,000)
Exercised .............................. -- (1,780,613) $ 3.25-$17.625 (6,695,000)
---------- ---------- -------------
Balance, April 3, 1994 ................... 378,883 4,979,097 $ 3.25-$25.375 $ 39,411,000
Additional authorization ............... 1,675,000
Granted ................................ (1,512,056) 1,512,056 $16.50-$39.688 41,595,000
Surrendered, canceled or expired ....... 287,012 (283,601) $ 3.25-$39.688 (4,903,000)
Exercised .............................. -- (738,579) $ 3.25-$28.125 (3,529,000)
---------- ---------- -------------
Balance, April 2, 1995 ................... 828,839 5,468,973 $ 3.25-$39.688 $ 72,574,000
========== ========== =============
</TABLE>
Stock Purchase Plan. The Company has a stock purchase plan under which
employees and officers may purchase shares of the Company's common stock. The
purchase price at which shares may be purchased under this plan is 85% of the
lower of the fair market value on the first or last day of each quarterly plan
period. As of April 3, 1994 and April 2, 1995, 1,457,771 and 1,594,905 shares,
respectively, had been purchased by employees, net of repurchases by the
Company, under the terms of the plan agreements. At April 2, 1995, 430,095
shares were reserved and available for issuance under this plan.
Stockholder Rights Plan. In February 1992, the Board approved certain
amendments to the Company's Stockholder Rights Plan. Under the plan, the Company
declared a dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock. Each Right entitles the holder, under certain
circumstances, to purchase common stock of the Company with a value of twice the
exercise price of the Right. In addition, the Board of Directors may, under
certain circumstances, cause each Right to be exchanged for one share of common
stock or substitute consideration. The Rights are redeemable by the Company and
expire in 1998.
NOTE 10--EMPLOYEE BENEFITS PROFIT SHARING PLAN
Prior to September 24, 1993, under the Company's Profit Sharing Plan, the
Board of Directors could authorize semiannual contributions for the benefit of
employees of up to 10% of pre-tax earnings, before profit sharing. Half of the
annual contribution, net of expenses, was in the form of cash payments directly
to all domestic and Malaysian employees meeting certain service criteria, and
the residual half was contributed directly to the Company's Long-Term Incentive
Plan for the purchase of IDT Common Stock on behalf of the Company's employees.
F-12
<PAGE>
The Company received approval from the IRS to terminate the Long-Term
Incentive Plan effective September 24, 1993. Effective this date, all shares
were 100% vested and no additional shares of IDT stock will be added to this
account. Beginning September 27, 1993, all IDT employees received an increase in
their cash profit sharing from 5% to 7% and the Company contributed an
additional 1% of pre-tax profits, divided equally among all domestic employees,
to the Company's 401(k) plan.
Administrative expenses are netted against the Profit Sharing Plan
contribution. Contributions for the years ended March 28, 1993, April 3, 1994
and April 2, 1995 for this plan were $477,000, $5,128,000 and $8,360,000
respectively. There were no contributions for the year ended March 29, 1992.
NOTE 11--INCOME TAXES
The components of income before provision for income taxes are as follows:
MARCH 28, APRIL 3, APRIL 2,
1993 1994 1995
--------- -------- --------
(IN THOUSANDS)
United States ............... $ 2,240 $ 44,808 $ 96,524
Foreign ..................... 4,038 5,398 7,879
--------- -------- --------
$ 6,278 $ 50,206 $104,403
========= ======== ========
The provisions (benefits) for income taxes consist of the following:
MARCH 28, APRIL 3, APRIL 2,
1993 1994 1995
----------- ---------- -----------
(IN THOUSANDS)
Current income taxes (benefits):
United States ........................ $ (2,467) $ 14,699 $ 21,164
State ................................ -- 4,039 3,902
Foreign .............................. 102 798 668
---------- --------- ---------
(2,365) 19,536 25,734
---------- --------- ---------
Deferred (prepaid) income taxes:
United States ........................ 3,307 (5,379) (182)
State ................................ -- (4,116) 549
---------- --------- ---------
3,307 (9,495) 367
---------- --------- ---------
Provision for income taxes ........... $ 942 $ 10,041 $ 26,101
========== ========= =========
F-13
<PAGE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of deferred assets and liabilities are as follows:
APRIL 3, APRIL 2,
1994 1995
--------- --------
(IN THOUSANDS)
Deferred tax assets:
Deferred income on shipments to distributors ..... $ 7,466 $ 8,768
Non-deductible accruals and reserves ............. 13,527 8,980
Capitalized inventory and other expenses ......... 4,071 5,817
Capitalized research and development ............. 825 423
Other ............................................ 273 935
Refund receivables ............................... 2,451 1,520
--------- --------
Total deferred tax asset ......................... 28,613 26,443
Valuation allowance .............................. (2,337) --
--------- --------
Net deferred tax asset ........................... 26,276 26,443
--------- --------
Deferred tax liabilities:
Depreciation ..................................... (8,517) (7,570)
--------- --------
Total deferred tax liability ..................... (8,517) (7,570)
--------- --------
Net deferred tax asset ........................... $ 17,759 $ 18,873
========= ========
The provision for income taxes differs from the amount computed by applying
the U.S. statutory income tax rate of 35% for the years ended April 3, 1994 and
April 2, 1995 (34% for the year ended March 28, 1993) to income before the
provision (benefit) for income taxes as follows:
MARCH 28, APRIL 3, APRIL 2,
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
Provision at U.S. statutory rate of 34% ........$ 2,134 $ 17,572 $ 36,541
Earnings of foreign subsidiaries considered
permanently reinvested, less foreign taxes .... (1,701) (951) (2,444)
General business credits ........................ 0 (2,710) (6,504)
Tax rate differential ........................... 574 (1,167) --
State tax, net of federal benefit ............... -- 3,558 3,245
Valuation allowance ............................. 414 (6,108) (2,337)
Other ........................................... (479) (153) (2,400)
-------- -------- --------
Provision (benefit) for income taxes ............$ 942 $ 10,041 $26,101
======== ======== ========
The Company's Malaysian subsidiary operates under a tax holiday which
extended through July 1993. Management believes it is likely that carryovers of
depreciation from the tax holiday period along with expected additional
depreciation grants will defer the time when the Malaysian subsidiary will first
begin to pay local taxes beyond its year ended April 2, 1995.
The Company's intention is to permanently reinvest its earnings in all of its
foreign subsidiaries, except its German subsidiary, Integrated Device
Technology, GmbH. Accordingly, U.S. taxes have not been provided on
approximately $26,900,000 of unremitted earnings, of which approximately
$23,200,000 were earned by the Company's Malaysian subsidiary. Upon distribution
of those earnings in the form of dividends or otherwise, the Company will be
subject to both U.S. income taxes and various foreign country withholding taxes.
F-14
<PAGE>
NOTE 12--INDUSTRY SEGMENT, FOREIGN OPERATIONS
IDT operates predominantly in one industry segment and is engaged in the
design, development, manufacture and marketing of high-performance integrated
circuits. No single customer or distributor accounted for more than 10% of net
revenues in fiscal 1993. During fiscal 1994, two of the Company's national
distributors became one entity. Sales through this national distributor
accounted for 15% and 13% of net revenues for fiscal 1994 and 1995,
respectively. If these two distributors had been a single entity during fiscal
1993, it would have accounted for 16% of IDT's total revenues.
Major operations outside the United States include manufacturing facilities
in Malaysia and sales subsidiaries in Japan, the Pacific Rim, and throughout
Europe.
At April 3, 1994, and April 2, 1995 total liabilities for operations outside
of the United States were $20,704,000 and $42,065,000, respectively.
F-15
<PAGE>
The following is a summary extract of IDT's foreign operations by geographic
areas for fiscal 1993, 1994 and 1995:
<TABLE>
<CAPTION>
TRANSFERS
SALES TO BETWEEN OPERATING
UNAFFILIATED GEOGRAPHIC INCOME IDENTIFIABLE
CUSTOMERS AREAS NET REVENUE (LOSS) ASSETS
---------- ---------- --------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Fiscal year ended March 28, 1993
United States ........................... $ 152,303 $ 23,585 $ 175,888 $ 22,159 $ 198,993
Japan ................................... 23,022 -- 23,022 (419) 5,651
Europe .................................. 33,907 2,847 36,754 374 8,028
Asia-Pacific ............................ 27,031 20,566 47,597 4,715 24,155
Eliminations ............................ -- (46,998) (46,998) (94) (24,081)
Corporate ............................... -- -- -- (15,729) 27,248
---------- ---------- --------- ---------- ---------
Consolidated ............................ $ 236,263 -- $ 236,263 $ 11,006 $ 239,994
========== =========== ========= ========== ---------
Fiscal year ended April 3, 1994
United States ........................... $ 223,600 $ 42,500 $ 266,100 $ 70,788 $ 197,385
Japan ................................... 29,959 -- 29,959 (257) 8,033
Europe .................................. 60,064 3,274 63,338 677 8,182
Asia-Pacific ............................ 16,839 24,869 41,708 5,146 27,202
Eliminations ............................ -- (70,643) (70,643) (408) (24,470)
Corporate ............................... -- -- -- (23,677) 133,239
---------- ---------- --------- ---------- ---------
Consolidated ............................ $ 330,462 -- $ 330,462 $ 52,269 $ 349,571
========== =========== ========= ========== ---------
Fiscal year ended April 2, 1995
United States ........................... $ 256,014 $ 60,266 $ 316,280 $ 111,394 $ 292,501
Japan ................................... 36,974 -- 36,974 582 11,973
Europe .................................. 85,180 7,566 92,746 9,524 30,788
Asia-Pacific ............................ 44,022 30,929 74,951 5,812 36,855
Eliminations ............................ -- (98,761) (98,761) (217) (48,797)
Corporate ............................... -- -- -- (27,580) 238,655
---------- ---------- --------- ---------- ---------
Consolidated ............................ $ 422,190 -- $ 422,190 $ 99,515 $ 561,975
========== =========== ========= ========== ---------
</TABLE>
Transfers between geographic areas are accounted for at amounts which are
generally above cost and consistent with the rules and regulations of governing
tax authorities. Such transfers are eliminated in the consolidated financial
statements. Operating income by geographic areas reflect foreign earnings
reported by the foreign entities and does not include an allocation of general
corporate expenses. Identifiable assets are those assets that can be directly
associated with a particular foreign entity and thus do not include assets used
for general corporate purposes: cash and cash equivalents, short-term
investments and prepaid income taxes.
F-16
<PAGE>
NOTE 13--CROSS-LICENSE AGREEMENT
During fiscal 1993, the Company entered into a patent cross-license agreement
which obligated the payment of an amount of royalties dependent upon the level
of the Company's profitability. The amount of royalties accrued during fiscal
1994 was approximately $4,400,000 and has been included in other accrued
liabilities. The Company was not impacted by any further royalty payment from
this agreement beginning fiscal 1995.
F-17
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
----------
TABLE OF CONTENTS
PAGE
--------
Available Information ................... 2
Information Incorporated by Reference ... 2
Prospectus Summary ...................... 3
Risk Factors ............................ 6
Use of Proceeds ......................... 13
Price Range of Common Stock ............. 13
Dividend Policy ......................... 13
Capitalization .......................... 14
Selected Consolidated Financial Data .... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................. 16
Business ................................ 21
Management .............................. 30
Certain Transactions .................... 31
Description of Notes .................... 33
Description of Capital Stock ............ 41
Certain Federal Income Tax Considerations 44
Underwriting ............................ 46
Legal Matters ........................... 47
Experts ................................. 47
Report of Independent Accountants ....... F-1
Consolidated Financial Statements ....... F-2
=============================================================================
$150,000,000 SHARES
IMAGE: "IDT_LOGO"
% CONVERTIBLE SUBORDINATED
NOTES DUE 2002
----------
PROSPECTUS
May , 1995
----------
LEHMAN BROTHERS
MONTGOMERY SECURITIES
SMITH BARNEY INC.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemized statement of all estimated
expenses to be paid by the Company in connection with the issuance and
distribution of the securities being registered:
EXPENSES
----------
SEC registration fee ............................ $ 59,483
NASD filing fee ................................. 17,750
Nasdaq fee ...................................... 8,625
Transfer Agent fee .............................. 5,000
Printing and engraving expenses ................. 75,000
Legal expenses .................................. 75,000
Accounting fees and expenses .................... 45,000
Trustee fees .................................... 7,500
Rating Agency fee ............................... 40,000
Other securities laws fees and expenses ......... 10,000
Miscellaneous ................................... 6,642
--------
Total ......................................... $350,000
========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits a corporation to
grant indemnification to directors, officers and other agents in terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities, including expenses, arising in connection with the Securities Act
of 1933, as amended. Pursuant to the Bylaws of the Company, directors and
officers of the Company are indemnified to the full extent permitted by law
against all expenses (including attorneys' fees), judgments, fines or settlement
amounts incurred or paid by them in any action or proceeding, including any
action by or on behalf of the Company, on account of their service as an officer
or director of the Company. The Bylaws further provide that the rights conferred
under such Bylaws shall not be deemed exclusive of any other right to which such
persons may be entitled under the Delaware General Corporation Law, the
Company's Restated Certificate of Incorporation, any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise. The Restated Certificate
of Incorporation of the Company precludes, with certain exceptions, the Company
and its stockholders from recovering monetary damages from directors for
business decisions that breach such directors' fiduciary duty.
The Company also maintains directors and officers insurance policies which
insure directors and officers against losses arising from certain wrongful acts
in their official capacities and reimburses the Company for such loss for which
the Company has lawfully indemnified the directors and officers. In addition,
the Company has entered into an Indemnification Agreement with each of its
directors and officers whereby the Company has agreed to indemnify each director
and officer from and against any and all expenses, losses, claims, damages and
liabilities incurred by such director or officer while acting in his or her
official capacity.
Reference is made to the form of Underwriting Agreement filed as an exhibit
hereto pursuant to which the Underwriter may, under certain circumstances,
indemnify the directors and officers of the Company. Directors and officers of
the Company may also be indemnified in certain circumstances under the terms of
other underwriting agreements entered into by the Company in connection with
prior public offerings.
II-1
<PAGE>
ITEM 16. EXHIBITS.
1.1 Form of Underwriting Agreement.
4.1* Restated Certificate of Incorporation (previously filed as Exhibit 3A
to Registration Statement on Form 8-B dated September 23, 1987).
4.2* Certificate of Amendment of Restated Certificate of Incorporation
(previously filed as Exhibit 3(a) to the Registration Statement on
Form 8 dated March 28, 1989).
4.3* Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (previously filed as Exhibit 3(a) to the
Registration Statement on Form 8 dated March 28, 1989).
4.4* Bylaws dated January 25, 1993 (previously filed as Exhibit 3.4 to
Annual Report on Form 10-K for the Fiscal Year Ended March 28, 1993).
4.5* Amended and Restated Rights Agreement, dated as of February 27, 1992,
between the Company and The First National Bank of Boston (previously
filed as Exhibit 4.1 to Current Report on Form 8-K dated
February 27, 1992).
4.6 Form of Indenture between the Company and The First National Bank of
Boston, as Trustee, including Form of Notes.
5.1 Opinion of Fenwick & West.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Price Waterhouse LLP (see page II-5).
23.2 Consent of Fenwick & West (included in the Opinion of Counsel filed as
Exhibit 5.1 hereto).
24.1 Power of Attorney (see page II-4).
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of the
Trustee.
27.1 Financial Data Schedule (EDGAR version only).
- ----------
* These exhibits were previously filed with the Commission as indicated and are
incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities and Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that:
(a) for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-2
<PAGE>
(b) for the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the Trustee to act under subsection
(a) of Section 310 of the Commission under Section 305(b)(2) of the Trust
Indenture Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Santa Clara, California on this 18th day of May, 1995.
INTEGRATED DEVICE TECHNOLOGY, INC.
By: /s/ LEONARD C. PERHAM
------------------------------------
Leonard C. Perham
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of Integrated Device Technology,
Inc., a Delaware corporation, do hereby constitute and appoint Leonard C. Perham
and William D. Snyder, and each of them, the lawful attorneys and agents or
attorney and agent, with power and authority to do any and all acts and things
and to execute any and all instruments which said attorneys and agents, and any
one of them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that said attorneys and agents or any of them shall do or cause to be done by
virtue hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
SIGNATURE TITLE DATE
- --------------------- ---------------------------------------- ----------------
--------------------- Chairman of the Board May , 1995
D. John Carey
/s/ LEONARD C. PERHAM Chief Executive Officer, President and May 18, 1995
--------------------- Director (Principal Executive Officer)
Leonard C. Perham
/s/ WILLIAM D. SNYDER Vice President, Finance and Chief May 18, 1995
--------------------- Financial Officer (Principal Financial
William D. Snyder and Accounting Officer)
/s/ CARL E. BERG Director May 18, 1995
---------------------
Carl E. Berg
Director May , 1995
---------------------
John C. Bolger
/s/ FEDERICO FAGGIN Director May 18, 1995
---------------------
Federico Faggin
II-4
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated April 21, 1995 relating
to the consolidated financial statements of Integrated Device Technology, Inc.
which appears in such Prospectus. We also consent to the incorporation by
reference in the Prospectus constituting part of this Registration Statement on
Form S-3 of our report dated April 27, 1994 appearing on page 12 of Integrated
Device Technology, Inc.'s Annual Report on Form 10-K for the year ended April 3,
1994. We also consent to the references to us under the heading "Experts," "Risk
Factors" and "Selected Financial Data" in such Prospectus. However, it should be
noted that Price Waterhouse LLP has not prepared or certified such "Selected
Financial Data."
PRICE WATERHOUSE LLP
San Jose, California
May 18, 1995
II-5
<PAGE>
<TABLE>
INTEGRATED DEVICE TECHNOLOGY, INC.
INDEX TO EXHIBITS
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- -------- --------------- ----------------
<S> <C> <C>
1.1 Form of Underwriting Agreement.
4.1* Restated Certificate of Incorporation (previously filed as Exhibit 3A
to Registration Statement on Form 8-B dated September 23, 1987).
4.2* Certificate of Amendment of Restated Certificate of Incorporation
(previously filed as Exhibit 3(a) to the Registration Statement on
Form 8 dated March 28, 1989).
4.3* Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (previously filed as Exhibit 3(a) to the
Registration Statement on Form 8 dated March 28, 1989).
4.4* Bylaws dated January 25, 1993 (previously filed as Exhibit 3.4 to
Annual Report on Form 10-K for the Fiscal Year Ended March 28, 1993).
4.5* Amended and Restated Rights Agreement, dated as of February 27, 1992,
between the Company and The First National Bank of Boston (previously
filed as Exhibit 4.1 to Current Report on Form 8-K dated
February 27, 1992).
4.6 Form of Indenture between the Company and The First National Bank of
Boston, as Trustee, including Form of Notes.
5.1 Opinion of Fenwick & West.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Price Waterhouse LLP (see page II-5).
23.2 Consent of Fenwick & West (included in the Opinion of Counsel filed as
Exhibit 5.1 hereto).
24.1 Power of Attorney (see page II-4).
25.1 Statement of Eligibility under the Trust Indenture Act of 1939 of the
Trustee.
27.1 Financial Data Schedule (EDGAR version only).
<FN>
- ----------
* These exhibits were previously filed with the Commission as indicated and are
incorporated herein by reference.
</FN>
</TABLE>
$150,000,000
INTEGRATED DEVICE TECHNOLOGY, INC.
% CONVERTIBLE SUBORDINATED NOTES DUE 2002
Underwriting Agreement
May , 1995
LEHMAN BROTHERS INC.
MONTGOMERY SECURITIES
SMITH BARNEY INC.
c/o Lehman Brothers Inc.
American Express Tower
Three World Financial Center
New York, New York 10285
Dear Sirs:
Integrated Device Technology, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to you as the underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of $150,000,000 in principal
amount of % Convertible Subordinated Notes Due 2002 (the "Firm Notes") of the
Company. In addition, for the sole purpose of covering over-allotments in
connection with the sale of the Firm Notes, the Company proposes to grant to the
Underwriters an option to purchase up to an additional $22,500,000 aggregate
principal amount of its % Convertible Subordinated Notes Due 2002 (the "Option
Notes"). The Firm Notes and any Option Notes purchased pursuant to this
Underwriting Agreement are herein called the "Notes." The Notes are to be issued
pursuant to an Indenture (the "Indenture") to be entered into between the
Company and The First National Bank of Boston, as trustee (the "Trustee"), the
form of which has been filed as an exhibit to the Registration Statement (as
defined below). The Notes are convertible into shares of Common Stock, par value
$.001 per share (the "Common Stock"), of the Company, upon the terms and subject
to the conditions and adjustments set forth in the Indenture, at a conversion
price of $ per share, subject to adjustment under certain circumstances.
This is to confirm the agreement concerning the purchase of the Notes
from the Company by the Underwriters.
1. Representations and Warranties. The Company represents and warrants
to, and agrees with, each Underwriter that:
(a) A registration statement on Form S-3 (File No. )
with respect to the Notes (i) has been prepared by the Company in conformity
with the requirements of the
<PAGE>
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, (ii) has been filed with the
Commission under the Securities Act and (iii) has become effective under the
Securities Act. The Indenture has been qualified under the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). If any post-effective amendment
to such registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent such amendment has
been declared effective by the Commission. Copies of such registration statement
as amended to date have been delivered by the Company to the Underwriters. For
purposes of this Agreement, "Effective Time" means the date and the time as of
which such registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective Date"
means the date of the Effective Time; "Preliminary Prospectus" means each
prospectus included in such registration statement, or amendments thereof,
before it became effective under the Securities Act and any prospectus filed
with the Commission by the Company with the consent of the Underwriters pursuant
to Rule 424(a) of the Rules and Regulations; "Registration Statement" means such
registration statement, as amended at the Effective Time, including any
documents incorporated by reference therein and all information deemed to be a
part thereof as of the Effective Time pursuant to paragraph (b) of Rule 430A of
the Rules and Regulations ("Rule 430A"); and "Prospectus" means the form of
prospectus relating to the Notes, as first filed with the Commission pursuant to
paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations ("Rule
424(b)"); provided, however, that if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of the
Notes that differs from the Prospectus as first filed pursuant to paragraph (1)
or (4) of Rule 424(b) (whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b)), the term Prospectus shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters for
such use. Reference made herein to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the Securities Act as of the date
of such Preliminary Prospectus or Prospectus, as the case may be, and any
reference to any amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any documents filed under the
Securities Exchange Act of 1934 (the "Exchange Act") after the date of such
Preliminary Prospectus or Prospectus, as the case may be, and incorporated by
reference in such Preliminary Prospectus or Prospectus; and any reference to any
amendment to the Registration Statement shall be deemed to include any report of
the Company filed with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act after the Effective Time that is incorporated by reference in the
Registration Statement. The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus.
(b) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the Commission, as
the case may be, conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and do not and
-2-
<PAGE>
will not, as of the applicable effective date (as to the Registration Statement
and any post-effective amendment thereto) and as of the applicable filing date
(as to the Prospectus and any amendment or supplement thereto) contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, that the Company makes no representation or warranty as to information
contained in or omitted from the Registration Statement or the Prospectus or any
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by any Underwriter specifically for
inclusion therein; and the Indenture conforms in all material respects to the
requirements of the Trust Indenture Act and the applicable rules and regulations
thereunder.
(c) The documents which are incorporated by reference in the
Prospectus or from which information is so incorporated by reference, when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects with the requirements of the Securities Act
or the Exchange Act, as applicable, and the applicable rules and regulations,
and none of such documents contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and any further documents so filed and incorporated by
reference in the Prospectus will, when such documents become effective or are
filed with the Commission, as the case may be, conform in all material respects
to the requirements of the Securities Act and the Exchange Act, as applicable,
and the applicable rules and regulations and will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) Price Waterhouse LLP, who have certified certain financial
statements of the Company and whose reports appear in the Prospectus or are
incorporated by reference therein, are independent certified public accountants
as required by the Securities Act and the Rules and Regulations and were
independent accountants as required by the Securities Act and the Rules and
Regulations during the periods covered by the financial statements on which they
reported contained or incorporated in the Prospectus. The financial statements
and schedules (including the related notes) included or incorporated by
reference in the Registration Statement, any Preliminary Prospectus or the
Prospectus present fairly the financial condition, results of operations and
changes in financial condition of the entities purported to be shown thereby at
the dates and for the periods indicated, and such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated.
(e) The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 21 to the Annual Report on Form 10-K for the
Company's most recent fiscal year. The Company and each of its subsidiaries
other than Quantum Effect Design, Inc. ("QED") (herein collectively
-3-
<PAGE>
referred to as "subsidiaries"), have been duly incorporated and are validly
existing as corporations in good standing under the laws of their respective
jurisdictions of incorporation, with full power and authority (corporate and
other) to own and lease their properties and conduct their respective businesses
as described in the Prospectus; the Company owns all of the outstanding capital
stock of its subsidiaries (other than director's qualifying shares) free and
clear of all claims, liens, charges and encumbrances; the Company and each of
its subsidiaries are in possession of and operating in compliance with all
authorizations, licenses, permits, consents, certificates and orders material to
the conduct of their respective businesses, all of which are valid and in full
force and effect except where the failure to be in such possession or
compliance, or the failure of any such authorizations, licenses, permits,
consents, certificates or orders would not in any single case or in the
aggregate, have a material adverse affect upon the condition (financial or
otherwise), business, results of operations, properties or prospects of the
Company or the affected subsidiary; the Company and each of its subsidiaries are
duly qualified to do business and in good standing as foreign corporations in
each jurisdiction in which the ownership or leasing of properties or the conduct
of their respective businesses requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a material
adverse affect upon the condition (financial or otherwise), business, results of
operations, properties or prospects of the Company or the affected subsidiary;
and no proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.
QED has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the state of its incorporation, with full
power and authority (corporate and other) to own and lease its properties and
conduct its business as described in the Prospectus. The Company owns 2,200,000
shares of the Common Stock of QED and 1,440,000 shares of the Series A Preferred
Stock of QED, constituting approximately 48% of the Common Stock of QED and a
majority of the Preferred Stock of QED. The shares of capital stock of QED owned
by the Company are owned free and clear of all claims, liens, charges and
encumbrances; and were duly authorized and validly issued, are fully paid and
nonassessable. To the best knowledge of the Company, QED is in possession of and
operating in compliance with all authorizations, licenses, permits, consents,
certificates and orders material to the conduct of its business, all of which,
to the best knowledge of the Company, are in full force and effect except where
the failure to be in such possession or compliance, or the failure of any such
authorizations, licenses, permits, consents, certificates or orders would not in
any single case or in the aggregate, have a material adverse effect upon the
condition (financial or otherwise), business, results of operations, properties
or prospects of the Company or QED. To the best knowledge of the Company, QED is
duly qualified to do business and in good standing as a foreign corporation in
each jurisdiction in which the ownership or leasing of properties or the conduct
of its business requires such qualification, except for jurisdictions in which
the failure to so qualify would not have a material adverse effect upon the
condition (financial or otherwise), business, results of operations, properties
or prospects of the Company or QED; and to the best knowledge of the Company, no
proceeding has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
-4-
<PAGE>
qualification. To the best knowledge of the Company, the Company is the sole and
exclusive owner of the Products, as such term is defined in the Development and
License Agreement between the Company and QED dated as of January 13, 1992, as
amended. To the best knowledge of the Company, the representations and
warranties set forth in subparagraphs (i), (k), (l), (m), (n), (o), (s) and (y)
of this Section 2 are also true and correct with respect to QED. To the best
knowledge of the Company, QED does not own or control, directly or indirectly,
any corporation, association or other entity.
(f) All of the outstanding shares of Common Stock have been,
and the Notes, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly authorized, validly issued, fully paid and
nonassessable; all of the shares of Common Stock issuable upon conversion of the
Notes have been duly and validly authorized and reserved for issuance upon such
conversion and, when issued and delivered in accordance with the terms of the
Indenture, will be duly and validly issued, fully paid and non-assessable; the
Common Stock issuable upon conversion of the Notes conforms to the description
thereof contained in the Prospectus. Except as disclosed in the Registration
Statement and exhibits thereto, there are no preemptive rights or other rights
to subscribe for or to purchase, or any restriction upon the voting or transfer
of, any shares of Common Stock or other securities pursuant to the Company's
Restated Certificate of Incorporation, as amended, or By-laws or any agreement
or other instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries may be bound. Neither the
filing of the Registration Statement nor the offering or sale of the Notes as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any shares
of Common Stock or other securities of the Company. The capitalization of the
Company is as set forth in the Prospectus.
(g) The Indenture has been duly authorized and, when duly
executed by the proper officers of the Company (assuming due execution and
delivery by the Trustee) and delivered by the Company, will constitute a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or an implied covenant of good
faith and fair dealing; the Notes have been duly authorized, and, when duly
executed, authenticated, issued and delivered as provided in the Indenture, will
be duly and validly issued and outstanding, and will constitute valid and
binding obligations of the Company entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law); and the Notes, when issued and delivered,
will conform to the description thereof contained in the Prospectus.
-5-
<PAGE>
(h) Except as described in or contemplated by the Registration
Statement and the Prospectus, there has not been any material adverse change in
the condition (financial or other), results of operations, business or
prospects, of the Company and its subsidiaries taken as a whole from the date as
of which information is given in the Prospectus.
(i) The Company and each of its subsidiaries is not, and with
the giving of notice or lapse of time or both will not be, in violation of or in
default under, and the execution, delivery or performance of this Agreement and
the Indenture by the Company and the consummation of the transactions
contemplated hereby and thereby and the issuance and delivery of the Notes and
the Common Stock issuable upon conversion of the Notes, will not, conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, the charter or by-laws of the Company or any of its
subsidiaries or, in a manner which would have a material adverse effect on the
condition (financial or other), results of operations, business or prospects of
the Company and its subsidiaries taken as a whole, any loan agreement,
indenture, mortgage, deed of trust, or other agreement or instrument, to which
the Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound, or to which any of the properties or assets of the
Company or any of its subsidiaries is subject; the performance by the Company of
its obligations hereunder and under the Indenture will not violate any law,
rule, administrative regulation or decree of any court, or any governmental
agency or body having jurisdiction over the Company or any of its subsidiaries
or any of their properties or assets, or result in the creation or imposition of
any lien, charge, claim or encumbrance upon any property or asset of the Company
or any of its subsidiaries. Except for the registration of the Notes and the
Common Stock issuable upon conversion of the Notes under the Securities Act and
such consents, approvals, authorizations, registrations or qualifications as may
be required under the Exchange Act, the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), the rules of the National Association of Securities
Dealers, Inc. ("NASD") and applicable state securities laws in connection with
the purchase and distribution of the Notes by the Underwriters, no consent,
approval, authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution, delivery and
performance of this Agreement or the Indenture by the Company and the
consummation of the transactions contemplated hereby and the issuance of the
Common Stock upon conversion of the Notes.
(j) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding agreement of the
Company, and is enforceable against the Company in accordance with its terms,
except as the indemnification and contribution provisions hereunder may be
limited by federal or state securities laws and public policy related thereto
and except as enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or the effect of rules of law governing specific
performance, injunctive relief, or other equitable remedies (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
-6-
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(k) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as described in
or specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or written
agreement or other transaction which is not in the ordinary course of business
or which could result in a material reduction in the future revenues or earnings
of the Company and its subsidiaries; (ii) the Company and its subsidiaries have
not sustained any material loss or interference with their respective businesses
or properties from fire, flood, windstorm, accident or other calamity, whether
or not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock and the
Company and its subsidiaries are not in default in the payment of principal or
interest on any outstanding debt obligations; (iv) there has not been any change
in the capital stock (other than upon the issuance of capital stock on the
exercise of options and warrants or pursuant to a stock purchase plan, in each
case as described in or contemplated by the Registration Statement and the
Prospectus) or indebtedness material to the Company and its subsidiaries (other
than in the ordinary course of business); and (v) there has not been any
material adverse change in the condition (financial or otherwise), business,
properties, results of operations or prospects of the Company and its
subsidiaries.
(l) The Company and each of its subsidiaries has good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the Prospectus
or such as do not materially affect the value of such property and do not
materially interfere with the use made or proposed to be made of such property
by the Company and its subsidiaries; and all real property and buildings held
under lease by the Company and its subsidiaries are held under valid and binding
leases, with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its subsidiaries.
(m) Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for its
business, including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect.
(n) Except as disclosed in the Prospectus, there are no legal
or governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is or may be a party, or of which property owned or leased by the Company or any
of its subsidiaries is or may be the subject, or related to environmental or
employee matters, which action, suit or proceeding might, individually or in the
aggregate, prevent or adversely affect the transactions contemplated by this
Agreement or result in a material adverse change in the condition (financial or
otherwise), properties, business, results of operations or prospects of the
Company and its subsidiaries; and no labor disturbance
-7-
<PAGE>
by the employees of the Company or any of its subsidiaries exists or is imminent
which might be expected to affect adversely such condition, properties,
business, results of operations or prospects. Except for the Limited Exclusion
Order dated February 18, 1992 and the Order to Cease and Desist dated February
18, 1992, each issued by the United States International Trade Commission in
connection with Investigation No. 337-TA-315, and the determination of the
administrative law judge in connection therewith, neither the Company nor any of
its subsidiaries is a party or subject to the provisions of any injunction,
judgment, decree or order of any court, regulatory body, administrative agency
or other governmental body.
(o) The Company has not been advised, and has no reason to
believe, that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is or they are conducting business, including, without limitation,
all applicable local, state and federal, tax, employment and environmental laws
and regulations; except where failure to be so in compliance would not
materially adversely affect the condition (financial or otherwise), business,
results of operations, properties or prospects of the Company and its
subsidiaries.
(p) The Company has not taken and shall not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock or Notes to facilitate
the sale or resale of the Notes.
(q) The conditions for use of Form S-3, as set forth in the
General Instructions thereto, have been satisfied.
(r) There are no contracts or other documents which are
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and Regulations
which have not been described in the Prospectus or filed as exhibits to the
Registration Statement or incorporated therein by reference as permitted by the
Rules and Regulations.
(s) Each of the Company and its subsidiaries has filed all
federal, state, local and foreign income and franchise tax returns which have
been required to be filed through the date hereof and has paid all taxes
indicated by said returns and all assessments received by them to the extent
that such taxes have become due and are not being contested in good faith and no
tax deficiency has been determined adversely to the Company or any of its
subsidiaries which has had (nor does the Company have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its
subsidiaries, might have) a material adverse effect on the consolidated
financial position, stockholder's equity, results of operations, business or
prospects of the Company and its subsidiaries.
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<PAGE>
(t) Except as described in the Registration Statement, the
Company and its subsidiaries hold all material licenses, certificates and
permits from governmental authorities which are necessary to the conduct of
their business.
(u) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of toxic wastes,
medical wastes, hazardous wastes or hazardous substances by the Company or, to
the knowledge of the Company, any of its subsidiaries or predecessors in
interest at, upon or from any of the property owned or leased by the Company or
any of its subsidiaries in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require remedial
action under any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit, except for any violation or remedial action which would not
have, or could not be reasonably expected to have, singularly or in the
aggregate with all such violations and remedial actions, a material adverse
effect on the condition (financial or other), business, prospects or results of
operations of the Company and its subsidiaries taken as a whole; to the
knowledge of the Company, there has been no material spill, discharge, leak,
emission, injection, escape, dumping or release of any kind onto such property
or into the environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to or caused
by the Company or any of its subsidiaries or with respect to which the Company
has knowledge, except for any such spill, discharge, leak, emission, injection,
escape, dumping or release which would not have or would not be reasonably
likely to have, singularly or in the aggregate with all such spills, discharges,
leaks, emissions, injections, escapes, dumping and releases, a material adverse
effect on the condition (financial or other), business, prospects or results of
operations of the Company and its subsidiaries taken as a whole; and the terms
"hazardous wastes," "toxic wastes," "hazardous substances" and "medical wastes"
shall have the meanings specified in any applicable local, state, federal and
foreign laws or regulations with respect to environmental protection.
(v) No relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers, beneficial
owners of more than five percent of the Company's capital stock, customers or
suppliers of the Company on the other hand, which is required to be described in
the Prospectus and which is not so described.
(w) No labor disturbance by the employees of the Company or
its subsidiaries exists or, to the knowledge of the Company, is imminent which
might be expected to have a material adverse effect on the condition (financial
or other), results of operations, business or prospects of the Company and its
subsidiaries taken as a whole.
(x) The Company has obtained agreements from each director and
executive officer of the Company, providing that such person will not, for a
period of thirty (30) days after the Effective Date, directly or indirectly,
sell, offer to sell, contract to sell, or otherwise sell or dispose of, or agree
to dispose of, any shares of Common Stock or any options or warrants to purchase
any shares of Common Stock, or any securities convertible into or exchangeable
for any shares of Common Stock, other than (i) as a bona fide gift or gifts
where
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<PAGE>
prior notice is provided to you and the donee agrees to be bound to the
agreement or (ii) with the prior written consent of Lehman Brothers Inc., which
consent may be withheld at the sole discretion of Lehman Brothers Inc. Each such
person has also agreed and consented to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of shares
of Common Stock held by such person or entity, unless such person is in
compliance with the foregoing restrictions.
(y) Except as disclosed in or contemplated by the Prospectus
(i) the Company and its subsidiaries have sufficient trademarks, trade names,
patent rights, mask works, copyrights, licenses, approvals and governmental
authorizations to conduct their businesses as now conducted and as contemplated
to be conducted; (ii) the expiration of any trademarks, trade names, patent
rights, mask works, copyrights, licenses, approvals or governmental
authorizations, in any single case or in the aggregate, would not have a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company or its subsidiaries; and (iii)
the Company has no knowledge of any infringement by it or its subsidiaries of
trademark, trade name rights, patent rights, mask works, copyrights, licenses,
trade secret or other similar rights of others, and there is no claim being made
against the Company or its subsidiaries regarding trademark, trade name, patent,
mask work, copyright, license, trade secret or other infringement which could
have a material adverse effect on the condition (financial or otherwise),
business, results of operations, properties or prospects of the Company and its
subsidiaries.
(z) The Company and its subsidiaries have not been advised,
and have no reason to believe, that they are not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which they are conducting business, except where the failure to be so in
compliance would not materially and adversely affect the condition (financial or
other), results of operations, business or prospects of the Company and its
subsidiaries taken as a whole.
(aa) The Company and its subsidiaries are in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any of its subsidiaries would have any
liability; the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal from,
any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company or any of
its subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause the loss
of such qualification.
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<PAGE>
(bb) The Company (i) makes and keeps accurate books and
records and (ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with management's
policies or authorization and (B) transactions are recorded as necessary to
permit preparation of its consolidated financial statements and to maintain
accountability for assets of the Company and its subsidiaries, (C) access to its
assets is permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing assets at
reasonable intervals.
(cc) The Common Stock is listed on the Nasdaq National Market
and the Notes, upon notice of issuance, will be listed on the Nasdaq Small-Cap
Market.
(dd) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its subsidiaries, has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(ee) Neither the Company nor any subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the Commission thereunder.
(ff) The Company has not distributed and will not distribute
prior to the First Closing Date any offering material in connection with the
offering and sale of the Notes other than the Prospectus, the related
Preliminary Prospectus, the Registration Statement and the other materials
permitted by the Act.
(gg) Neither the Company nor any of its subsidiaries has at
any time during the last five (5) years (i) made any unlawful contribution to
any candidate for foreign office, or failed to disclose fully any contribution
in violation of law, or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States of any jurisdiction thereof.
2. Purchase of the Notes by the Underwriters.
(a) Subject to the terms and conditions and upon the basis of
the representations and warranties herein set forth, the Company agrees to issue
and sell to the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase at a price of _____% of the principal amount thereof
plus accrued interest from ___________, 1995 to the First Closing Date (as
defined herein), if any, the number of Firm Notes set forth opposite
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<PAGE>
such Underwriter's name in Schedule I hereto. The Underwriters agree to offer
the Firm Notes to the public as set forth in the Prospectus.
(b) The Company hereby grants to the Underwriters an option to
purchase from the Company, solely for the purpose of covering over-allotments in
the sale of Firm Notes, if any, all or any portion of the Option Notes for a
period of thirty (30) days from the date hereof at the purchase price set forth
above plus accrued interest from , 1995 to the Option Closing Date
(as defined herein). Option Notes shall be purchased from the Company, severally
and not jointly, for the accounts of the several Underwriters in proportion to
the number of Firm Notes set forth opposite such Underwriter's name in Schedule
I hereto, except that the respective purchase obligations of each Underwriter
shall be adjusted so that no Underwriter shall be obligated to purchase Option
Notes other than in $1,000 principal amounts.
3. Delivery of and Payment for Notes. Delivery of the Firm Notes, and
the Option Notes, if the option to purchase the same is exercised on or before
the third Business Day (as defined in Section 12 hereof) prior to the First
Closing Date, shall be made at the offices of Lehman Brothers Inc., 388
Greenwich Street (Cashier's Window, Main Level), New York, New York 10013 (or
such other place as mutually may be agreed upon), at 10:00 A.M., New York City
time, on the fifth full Business Day following the date of this Agreement or on
such later date as shall be determined by you and the Company (the "First
Closing Date").
The option to purchase Option Notes granted in Section 2 hereof may be
exercised during the term thereof by written notice to the Company from the
Underwriters. Such notice shall set forth the aggregate principal amount of
Option Notes as to which the option is being exercised and the time and date,
not earlier than either the First Closing Date or the second Business Day after
the date on which the option shall have been exercised nor later than the fifth
Business Day after the date of such exercise, as determined by the Underwriters,
when the Option Notes are to be delivered (the "Option Closing Date"). Delivery
and payment for such Option Notes shall be made at the offices set forth above
for delivery and payment of the Firm Notes. (The First Closing Date and the
Option Closing Date are herein individually referred to as the "Closing Date"
and collectively referred to as the "Closing Dates".)
Delivery of the Notes shall be made by or on behalf of the Company to
you, for the respective accounts of the Underwriters, against payment of the
purchase price therefor by certified or official bank check payable in New York
Clearing House funds to the order of the Company. The Notes shall be in fully
registered form in such names and denominations as you shall have requested at
least two full Business Days prior to the applicable Closing Date, and shall be
made available for checking and packaging in New York, New York or such other
location as may be designated by you at least one full Business Day prior to
such Closing Date. Time shall be of the essence, and delivery of the Notes at
the time and place specified in this Agreement is a further condition to the
obligations of each Underwriter.
4. Covenants. The Company covenants and agrees with each Underwriter
that:
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(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective and shall comply with the provisions of and make all requisite
filings with the Commission pursuant to Rule 430A of the Rules and Regulations
and shall notify you promptly (in writing, if requested) of all such filings.
The Company shall notify you promptly of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for additional information; the Company shall prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or the Prospectus which, in your opinion, may be
reasonably necessary or advisable in connection with the distribution of the
Notes; and the Company shall not file any amendment or supplement to the
Registration Statement or the Prospectus, or file any document under the
Exchange Act before the termination of the offering of the Notes by the
Underwriters if such document would be deemed to be incorporated by reference
into the Prospectus which filing is not consented to by you after reasonable
notice thereof; such consent not to be unreasonably withheld or delayed. The
Company shall advise you promptly, after notice thereof, of the issuance by the
Commission or any state or other regulatory body of any stop order or other
order suspending the effectiveness of the Registration Statement, suspending or
preventing the use of any Preliminary Prospectus or the Prospectus or suspending
the qualification of the Notes for offering or sale in any jurisdiction, or of
the initiation or threat of any proceedings for any such purpose, or of any
requests by the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information with respect thereto;
and the Company shall use its best efforts to prevent the issuance of any stop
order or other such order and, should a stop order or other such order be
issued, to obtain as soon as possible the withdrawal or lifting thereof.
(b) The Company shall furnish to each of the Underwriters and
to counsel for the Underwriters a signed copy of the Registration Statement as
originally filed and each amendment thereto filed with the Commission, including
all consents and exhibits filed therewith, and shall furnish to the Underwriters
such number of conformed copies of the Registration Statement, as originally
filed and each amendment thereto, the Prospectus and all amendments and
supplements to any of such documents (including any document filed under the
Exchange Act and deemed to be incorporated by reference into the Preliminary
Prospectus or Prospectus), in each case as soon as available and in such
quantities as the Underwriters may from time to time reasonably request.
(c) Within the time during which the Prospectus relating to
the Notes is required to be delivered under the Securities Act, the Company
shall comply with all requirements imposed upon it by the Securities Act, as now
and hereafter amended, and by the Rules and Regulations, as from time to time in
force, so far as is necessary to permit the continuance of sales of or dealings
in the Notes as contemplated by the provisions hereof and by the Prospectus. If
during such period any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to
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<PAGE>
state a material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if during such period it is
necessary to amend the Registration Statement or supplement the Prospectus to
comply with the Securities Act or to file any document, the Company shall
promptly notify you and shall amend the Registration Statement or supplement the
Prospectus or file such document (at the expense of the Company) so as to
correct such statement or omission or to effect such compliance.
(d) The Company shall promptly from time to time take such
action as the Underwriters may reasonably request to qualify the Notes and the
Common Stock issuable upon conversion of the Notes for offering and sale under
the securities laws of such jurisdictions as the Underwriters may request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Notes; provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction.
(e) The Company shall make generally available to its security
holders (and shall deliver to the Underwriters), in the manner contemplated by
Rule 158(b) under the Securities Act or otherwise, as soon as practicable but in
any event not later than 90 days after the end of its fiscal quarter in which
the first anniversary date of the Effective Date occurs, an earnings statement
satisfying the requirements of Section 11(a) of the Securities Act and covering
a period of at least 12 consecutive months beginning after the Effective Date.
(f) The Company shall not, during the ninety (90) days
following the Effective Date, except with the prior written consent of Lehman
Brothers Inc., offer for sale, sell or otherwise dispose, directly or
indirectly, of any shares of Common Stock or Notes (except for the issuance of
shares of Common Stock pursuant to existing options or options granted pursuant
to employee benefit plans or qualified stock option plans existing on the date
hereof, pursuant to employee stock purchase plans existing on the date hereof or
upon conversion of the Notes), sell or grant options, rights or warrants with
respect to any shares of Common Stock (other than pursuant to option plans and
employee stock purchase plans existing on the date hereof) or register shares of
its capital stock under the Securities Act for sale or disposition by others
(other than in respect of option plans and employee stock purchase plans
existing on the date hereof). The Company shall not take, directly or
indirectly, any action designed to cause or result in, or which might reasonably
be expected to constitute, the stabilization or manipulation of the price of the
shares of Common Stock or the Notes to facilitate the sale or resale of the
Notes.
(g) The Company shall apply the net proceeds of the sale of
the Notes as set forth in the Prospectus. The Company shall take such steps as
shall be necessary to ensure that the Company shall not become an "investment
company" within the meaning of such term under the Investment Company Act of
1940, as amended, and the rules and regulations thereunder.
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<PAGE>
(h) Whether or not this Agreement becomes effective or is
terminated or the sale of the Notes to the Underwriters is consummated, the
Company shall pay or cause to be paid (A) all expenses (including stock transfer
taxes) incurred in connection with the delivery to the several Underwriters of
the Notes, (B) all fees and expenses (including, without limitation, fees and
expenses of the Company's accountants and counsel, but excluding fees and
expenses of counsel for the Underwriters) in connection with the preparation,
printing, filing, delivery and shipping of the Registration Statement (including
the financial statements and schedules therein and all amendments and exhibits
thereto), each Preliminary Prospectus, the Prospectus, the Form T-1 filed in
connection with the Notes (the "Form T-1") and any amendments or supplements of
the foregoing and any documents incorporated by reference into any of the
foregoing and the printing, delivery and shipping of this Agreement and other
underwriting documents, including, but not limited to, Underwriters'
Questionnaires, Underwriters' Power of Attorney, Agreements Among Underwriters
and Selected Dealer Agreements, (C) all filing fees and fees and disbursements
of counsel to the Underwriters incurred in connection with the qualification of
the Notes under state securities laws as provided in Section 4(d) hereof and of
preparing, printing and distributing Preliminary and Final Blue Sky Memoranda
and a Legal Investment Survey, (D) the filing fee of the NASD, (E) any
applicable listing or other fees, (F) the cost and charges of any transfer agent
or registrar, (G) any fees charged by securities rating services for rating the
Notes, (H) the cost of printing the Indenture and the Notes, (I) the costs and
fees of any trustee with respect to the Indenture and (J) all other costs and
expenses incident to the performance of its obligations hereunder for which
provision is not otherwise made in this Section. It is understood, however,
that, except as provided in this Section, Section 6 and Section 8 hereof, the
Underwriters shall pay all of their own costs and expenses, including the fees
of their counsel, stock transfer taxes due upon resale of any of the Notes by
them and any advertising expenses incurred in connection with any offers they
may make. If the sale of the Notes provided for herein is not consummated by
reason of acts of the Company pursuant to Section 8 hereof which prevent this
Agreement from becoming effective, or by reason of any failure, refusal or
inability on the part of the Company to perform any agreement on its part to be
performed or because any other condition of the Underwriters' obligations
hereunder set forth in Section 5 hereof (other than those set forth in Section
5(l)) is not fulfilled or if the Underwriters shall decline to purchase the
Notes for any reason permitted under this Agreement (other than as a result of
any default by an Underwriter pursuant to Section 7 hereof), the Company shall
reimburse the several Underwriters for all reasonable out-of-pocket
disbursements (including fees and disbursements of counsel) incurred by the
Underwriters in connection with any investigation or preparation made by them in
respect of the marketing of the Notes or in contemplation of the performance by
them of their obligations hereunder.
(i) The Company shall on or prior to each Closing Date cause
the Notes to be purchased on such date by the Underwriters to be approved for
inclusion in the Nasdaq SmallCap Market, subject only to official notice of
issuance and shall take such action as shall be necessary to comply with the
rules and regulations of the Nasdaq Small-Cap Market with respect to such Notes.
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(j) The Company shall use its best efforts to complete the
listing of the Common Stock issuable upon conversion for the Notes on the Nasdaq
National Market prior to the initial issuance of such Common Stock.
(k) During the period of five (5) years hereafter, or, if
shorter, for so long as required by law, the Company will furnish to each of the
Underwriters: (i) as soon as practicable after the end of each fiscal year,
copies of the Annual Report of the Company containing the balance sheet of the
Company as of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other
report filed by the Company with the Commission, the NASD or any securities
exchange; and (iii) as soon as available, copies of any report or communication
of the Company mailed generally to holders of its Common Stock.
5. Conditions of Underwriters' Obligations. The respective obligations
of the Underwriters hereunder are subject to the accuracy, as of the date hereof
and as of each Closing Date (as if made at such Closing Date), of the
representations and warranties of the Company contained herein, to the
performance by the Company of its obligations hereunder and to each of the
following additional terms and conditions:
(a) The Prospectus shall have been filed with the Commission
in a timely fashion in accordance with Section 4(a) hereof, the Registration
Statement and all post-effective amendments to the Registration Statement shall
have become effective, all filings required by Rule 424 of the Rules and
Regulations shall have been made and no such filings shall have been made
without the consent of the Underwriters, the Indenture shall have been qualified
under the Trust Indenture Act, and the Form T-1 shall have become effective, and
the Underwriters shall have received notice of the foregoing not later than the
first full business day next following the date of this Agreement or on such
later date as shall be consented to in writing by the Under- writers; no stop
order suspending the effectiveness of the Registration Statement or any
amendment or supplement thereto shall have been issued; no proceedings for the
issuance of any such order shall have been initiated or threatened; and any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been disclosed
to you and complied with to your satisfaction.
(b) No Underwriter shall have been advised by the Company or
shall have discovered and disclosed to the Company that the Registration
Statement or the Prospectus or any amendment or supplement thereto, contains an
untrue statement of fact which in your opinion, or in the opinion of counsel to
the Underwriters, is material, or omits to state a fact which, in your opinion,
or in the opinion of counsel to the Underwriters, is material and is required to
be stated therein or is necessary to make the statement not misleading.
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(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Indenture, the
Notes, the Common Stock issuable upon conversion of the Notes, the Registration
Statement, the Form T-1 and the transactions contemplated hereby shall be
satisfactory in all respects to counsel for the Underwriters, and the Company
shall have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(d) On or prior to each Closing Date, you shall have received
from Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, counsel for
the Underwriters, such opinion or opinions with respect to corporate proceedings
by the Company, the form of Registration Statement and Prospectus (other than
financial statements and schedules and other financial data), the validity of
the Notes, and other related matters as you may reasonably request and such
counsel shall have received such documents and information as they request to
enable them to pass upon such matters.
(e) On each Closing Date there shall have been furnished to
you the opinion (addressed to the Underwriters) of Fenwick & West, counsel for
the Company, dated such Closing Date and in form and substance satisfactory to
the Underwriters, to the effect that:
(i) The Company and its subsidiaries in Japan and
Malaysia (the "Material Subsidiaries") has been duly organized and is validly
existing as a corporation in good standing under the laws of their respective
jurisdictions of incorporation, with corporate power and authority to own or
lease their respective properties and conduct its business as described in the
Prospectus; the Company and each of its Material subsidiaries is duly qualified
to transact business in all jurisdictions in which the conduct of its business
requires such qualification and where the failure to so qualify would have a
material adverse effect upon the Company and its subsidiaries taken as a whole.
(ii) QED has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation. To the best of such counsel's knowledge, QED is duly qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions where the ownership or leasing of properties or the conduct of its
business requires such qualification, except for such jurisdictions in which the
failure to so qualify would not have a material adverse effect on the Company or
QED, taken as a whole, and to such counsel's knowledge, QED has full corporate
power and authority to own, lease and operate its properties and conduct its
business as described in the Registration Statement and the Prospectus. To the
knowledge of such counsel, the Company owns 2,200,000 shares of Common Stock of
QED and 1,440,000 shares of the Series A Preferred of QED. To the knowledge of
such counsel, the shares of QED capital stock issued to the Company have been
duly and validly authorized and issued, are fully paid and nonassessable and are
owned beneficially by the Company free and clear of all liens, encumbrances,
equities, claims, security interests, voting trusts or other defects of tithes
whatsoever. To the best of such counsel's knowledge, QED is not in violation of
or default under a provision of its charter, bylaws, or
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other organizational document, or in violation, breach of or default with
respect to any provision of any agreement, lease, license or other instrument
between QED and the Company.
(iii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization" in the Prospectus,
as of the date set forth therein; the outstanding shares of its Common Stock
have been duly authorized and validly issued and are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; the shares of Common Stock issuable upon conversion of the Notes
have been duly authorized and reserved for issuance upon such conversion and,
when issued and delivered in accordance with the terms of this Agreement and the
Indenture, will be validly issued, fully paid and non-assessable and the
certificates evidencing the Common Stock issuable upon conversion of the Notes
are in due and proper form under Delaware law; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued and are fully paid, non-assessable and (except for
directors' qualifying shares, if any) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances or claims.
(iv) To the best of such counsel's knowledge, all
of the issued and outstanding shares of capital stock of the Company's Material
Subsidiaries have been duly and validly authorized and issued, are fully paid
and nonassessable and are owned beneficially by the Company (other than
director's qualifying shares, if any) free and clear of all liens, encumbrances,
equities, claims, security interests, voting trusts or other defects of title
whatsoever.
(v) Except as set forth in the Registration
Statement or exhibits thereto, there are no preemptive or other rights to
subscribe for or to purchase, or any restriction upon the transfer of, any Notes
or the Common Stock issuable upon conversion of the Notes pursuant to the
Company's Restated Certificate of Incorporation, as amended, or By-laws or any
agreement or other instrument known to such counsel to which the Company is a
party or by which it may be bound; and to such counsel's knowledge, neither the
filing of the Registration Statement nor the offering or sale of the Notes as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for the registration of any shares of Common
Stock or other securities of the Company.
(vi) The Registration Statement and all
post-effective amendments thereto have become effective under the Securities Act
and to the knowledge of such counsel no stop order proceedings with respect
thereto have been instituted or are pending or threatened under the Securities
Act; all filings required by Rule 424(b) of the Rules and Regulations have been
timely made; and the Indenture has been qualified under the Trust Indenture Act.
(vii) The statements under the caption,
"Description of Notes," in the Prospectus, insofar as such statements constitute
a summary of the documents or instruments referred to therein or matters of law
or regulation, fairly and correctly present in all material respects the
information required to be disclosed in the Prospectus with respect to such
documents and matters.
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(viii) To the best knowledge of such counsel, (i)
there are no contracts or documents required to be filed as exhibits to the
Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed or described as required; and (ii) there are
no legal or governmental proceedings pending or threatened (or contemplated by
governmental authorities) against the Company or any of its subsidiaries, or of
which any property or assets of the Company or any of its subsidiaries is the
subject, required to be described in the Prospectus that are not so described.
(ix) To the best knowledge of such counsel, each of
the Company and its subsidiaries is not in violation of its charter or by-laws.
Neither the execution nor the delivery of this Agreement and the Indenture nor
the consummation of the transactions contemplated hereby and thereby (including
the issuance and delivery of the Notes and the Common Stock issuable upon
conversion of the Notes) will result in a violation of the Company's (or any of
its subsidiaries') charter or by-laws or, to such counsel's knowledge, result in
the material breach or violation of any of the terms or provisions of, or
constitute a material default under, any material agreement, indenture or other
instrument to which the Company or any of its subsidiaries is a party or by
which it is bound, or to which any of the properties or assets of the Company or
any of its subsidiaries is subject, or, to such counsel's knowledge, any law,
rule, administrative regulation or decree known to such counsel of any court or
any governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or the properties or assets of the Company or any of its
subsidiaries, or, to such counsel's knowledge, result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or asset
of the Company or any of its subsidiaries, in any manner that might have a
material adverse effect on the condition (financial or other), results of
operations, business or business prospects of the Company and its subsidiaries
taken as a whole. Except for permits, consents and similar authorizations
required under the securities or "blue sky" laws of certain jurisdictions and by
the NASD (as to which such counsel need express no opinion), and under the
Securities Act, no permit, consent, approval, authorization, designation,
declaration or order of or filing by or with any court or regulatory,
administrative or other governmental agency or body is required in connection
with the execution, delivery and performance of this Agreement or the Indenture
by the Company and the consummation of the transactions contemplated hereby and
thereby and the issuance of the Common Stock upon conversion of the Notes,
except for such permits, consents, approvals, authorizations, designations,
declarations and orders which have been obtained.
(x) The Company has full right, power and authority
to enter into this Agreement and this Agreement has been duly authorized,
executed and delivered by the Company and constitutes the valid and binding
agreement of the Company, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as rights to indemnification or contribution
hereunder may be limited under federal and state securities laws and the
policies underlying such laws; the Indenture has been duly authorized, and when
duly executed by the proper officers of the Company (assuming due execution and
delivery by the Trustee) and delivered by the Company
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will constitute a valid and binding agreement of the Company enforceable against
the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law); the Notes have been duly authorized by the
Company, and when duly executed, authenticated, issued and delivered pursuant to
the Indenture, will be validly issued and outstanding, and will constitute valid
and binding obligations of the Company entitled to the benefits of the Indenture
and enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
In rendering such opinion Fenwick & West may rely as to matters
governed other than by the laws of the State of California, the corporate laws
of the State of Delaware or Federal laws on local counsel in such jurisdictions,
provided that in each case Fenwick & West shall state that they believe that
they and the Underwriters are justified in relying on such other counsel.
Such counsel shall also have furnished to the Underwriters a written
statement, addressed to the Underwriters and dated such Closing Date, in form
and substance satisfactory to the Underwriters, to the effect that (w) such
counsel has acted as counsel to the Company in connection with the preparation
of the Registration Statement (and the documents incorporated by reference
therein), and (x) based on the foregoing: (i) such counsel believes that the
Registration Statement, the Prospectus and each amendment or supplement thereto
comply as to form in all material respects with the requirements of the
Securities Act and the applicable Rules and Regulations thereunder (except that
such counsel need express no opinion as to the financial statements, schedules
and other financial and statistical information included therein) and the
documents incorporated by reference in the Prospectus and any further amendment
or supplement to any such incorporated document made by the Company prior to
such Closing Date when the documents incorporated by reference therein became
effective or were filed with the Commission, as the case may be, complied as to
form in all material respects with the requirements of the Securities Act or the
Exchange Act, as applicable, and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial
statements, schedules and other financial and statistical information included
therein); and (ii) no facts have come to the attention of such counsel which
lead it to believe that the Registration Statement, as of the Effective Date
(including information incorporated by reference therein), contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or that the Prospectus (including information incorporated by
reference therein) contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, provided that such counsel need express no view as to
financial statements, schedules and other financial and statistical information
included therein.
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(f) There shall have been furnished to you a certificate,
dated such Closing Date and addressed to you, signed by the Chief Executive
Officer and by the Chief Financial Officer of the Company to the effect that:
(i) the representations and warranties of the Company contained in this
Agreement are true and correct, as if made at and as of such Closing Date, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be complied with or satisfied at or prior to such
Closing Date; (ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that purpose has
been initiated or, to their knowledge, threatened; (iii) all filings required by
Rule 424(b) and Rule 430A of the Rules and Regulations have been made; (iv) the
signers of said certificate have carefully examined the Registration Statement
and the Prospectus, and any amendments or supplements thereto (including any
documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus), and such documents contain all statements and
information required to be included therein, and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not mislead- ing; and (v) since the
Effective Date there has occurred no event required to be set forth in an
amendment or supplement to the Registration Statement or the Prospectus which
has not been so set forth and there has been no document required to be filed
under the Exchange Act and the Rules and Regulations that upon such filing would
be deemed to be incorporated by reference into the Prospectus that has not been
so filed.
(g) Since the Effective Date, each of the Company and its
subsidiaries shall not have sustained any loss by fire, flood, accident or other
calamity, and shall not have become a party to or the subject of any litigation,
which is materially adverse to the Company and its subsidiaries taken as a
whole, and there shall not have been a material adverse change in the general
affairs, operations, business, prospects, key personnel, capitalization,
financial condition or net worth of the Company and its subsidiaries taken as a
whole, whether or not arising in the ordinary course of business, which loss,
litigation or change, in your judgment, shall render it impractical or
inadvisable to proceed with the payment for and delivery of the Notes.
(h) On each Closing Date you shall have received a letter of
Price Waterhouse LLP, independent accountants, dated such Closing Date and
addressed to you, confirming that they are independent certified public
accountants within the meaning of the Securities Act and the applicable
published Rules and Regulations and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, and stating, as of the date of such letter
(or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given or
incorporated in the Prospectus as of a date not more than five days prior to the
date of such letter), the conclusions and findings of such firm with respect to
the financial information and other matters covered by its letter delivered to
you concurrently with the execution of this Agreement, and confirming the
conclusions and findings set forth in such prior letter.
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(i) You should have received on or before the First Closing
Date, letters from each director and executive officer of the Company, in form
and substance satisfactory to you, confirming that for a period of thirty (30)
days after the Effective Date, such person will not sell or offer to sell,
contract to sell, or otherwise sell or dispose of, any shares of Common Stock or
any securities convertible into or exchangeable for shares of Common Stock,
owned directly by such person or with respect to which such person has the power
of disposition other than (i) as a bona fide gift or gifts where prior notice is
provided to you and the donee agrees to be bound by the foregoing agreement or
(ii) without the prior written consent of Lehman Brothers Inc., which consent
may be withheld at the sole discretion of Lehman Brothers Inc.. Each such person
shall also agree and consent to the entry of stock transfer instructions with
the Company's transfer agent and registrar against the transfer of shares of
Common Stock held by such person or entity, unless such person is in compliance
with the foregoing restrictions.
(j) You shall have been furnished such additional documents
and certificates as you or counsel for the Underwriters may reasonably request.
(k) Subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded the
Notes by any "nationally recognized statistical rating organization", as that
term is defined by the Commission for purposes of Rule 436(g)(2) of the Rules
and Regulations and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of any of the Company's Notes.
(l) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or minimum prices shall have
been established on either of such exchanges or such market by the Commission or
such exchange or other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by either
Federal or State authorities, (iii) the United States shall have become engaged
in hostilities or there is an escalation of hostilities involving the United
States or there is a declaration of a national emergency or war by the United
States, or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions, or the effect of
international conditions on the financial markets in the United States shall be
such, as to, in the judgment of a majority in interest of the several
Underwriters, make it inadvisable or impractical to proceed with the delivery of
the Notes.
(m) The Notes shall be approved for inclusion on the Nasdaq
Small-Cap Market, subject only to official notice of issuance.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and to counsel for the Underwriters. The Company
shall furnish to you conformed copies of such
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opinions, certificates, letters and other documents in such number as you shall
reasonably request. If any of the conditions specified in this Section 5 shall
not have been fulfilled when and as required by this Agreement, the Agreement
and all obligations of the Underwriters hereunder may be canceled at, or at any
time prior to, each Closing Date, by you. Any such cancellation shall be without
liability of the Underwriters to the Company. Notice of such cancellation shall
be given the Company in writing, or by telegraph or telephone and confirmed in
writing.
6. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Securities Act from and against any loss, claim, damage or
liability (or any action in respect thereof), joint or several, to which such
Underwriter or controlling person may become subject, under the Securities Act
or otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or in any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Notes under the securities laws thereof (any such
application, document or information being hereinafter referred to as a "Blue
Sky Application"), or (ii) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto or in any Blue Sky Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and shall reimburse each Underwriter or controlling person promptly
after receipt of invoices from such Underwriter or controlling person for any
legal or other expenses as reasonably incurred by such Underwriter or
controlling person in connection with investigating, preparing to defend or
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action (such reimbursement payments which
are not made to an Underwriter within thirty (30) days of a request for
reimbursement, shall bear interest at the prime rate as announced from time to
time by Bank of America NT&SA, San Francisco, California), notwithstanding the
possibility that payments for such expenses might later be held to be improper,
in which case such payments shall be promptly refunded; provided, however, that
the Company shall not be liable under this paragraph 6(a) in any such case to
the extent, but only to the extent, that any such loss, claim, damage, liability
or action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter specifically for use in the preparation of the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or any Blue Sky Application; and provided, further, that the
indemnity agreement contained in this Section 6(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or to
the benefit of any person controlling such Underwriter) from whom the person
asserting any
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such loss, claim, damage or liability purchased the Notes which are the subject
thereof if the Prospectus corrected such alleged untrue statement or omission
and if such Underwriter failed to send a copy of the Prospectus to such person
at or prior to the written confirmation of the sale of the Notes to such person
so long as the Company shall have complied with the provisions of Section 4(c)
hereof. For purposes of the last proviso to the immediately preceding sentence,
the term "Prospectus" shall not be deemed to include the documents incorporated
therein by reference, and no Underwriter shall be obligated to send or give any
supplement or amendment to any document incorporated by reference in any
Preliminary Prospectus or Prospectus to any person other than a person to whom
such Underwriter had delivered such incorporated document or documents in
response to a written request therefor.
(b) Each Underwriter severally, but not jointly, shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities Act, from and against
any loss, claim, damage or liability (or any action in respect thereof) to which
the Company or any such director, officer, or control person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or in any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and shall reimburse the Company and any
such director, officer or controlling person promptly after receipt of invoices
from the Company or any such director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company or any such director,
officer or controlling person in connection with investigating, preparing to
defend or defending against or appearing as a third-party witness in connection
with any such loss, claim, damage, liability or action notwithstanding the
possibility that payments for such expenses might later be held to be improper,
in which case such payments shall be promptly refunded; provided, however, that
such indemnification or reimbursement shall be available in each such case to
the extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Underwriter pursuant to Section 6(f) hereof; and provided further, however,
no Underwriter shall be required to contribute or make any payments under this
Section 6 which in the aggregate exceed the underwriting discounts and
commissions received by such Underwriter.
(c) Promptly after receipt by any indemnified party under
subsection (a) or (b) above of notice of any claim or the commencement of any
action, the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to so notify the indemnifying party shall not relieve
it from any liability which it may have under this Section 6 except to the
extent it has been prejudiced in any material respect by such failure or from
any liability which it may have to an indemnified
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party otherwise than under this Section 6. If any such claim or action shall be
brought against any indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate therein
and, to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under such subsection for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; except that the Underwriters shall have the
right to employ counsel to represent the Underwriters who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Underwriters against the Company under such subsection if, in your
reasonable judgment, it is advisable for such Underwriters to be represented by
separate counsel, and in that event the reasonable fees and expenses of such
separate counsel shall be paid by the Company. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Notes or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Underwriters on the other in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, or
actions in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Notes (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first
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sentence of this subsection (d). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigation, preparing to defend or
defending against any action or claim which is the subject of this subsection
(d). Notwithstanding the provisions of this subsection (d), no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Notes underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint. Each party entitled to contribution agrees that upon
the service of a summons or other initial legal process upon it in any action
instituted against it in respect to which contribution may be sought, it shall
promptly give written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
of any such service shall not relieve the party from whom contribution may be
sought for any obligation it may have hereunder or otherwise (except as
specifically provided in subsection (c) hereof).
(e) The obligations of the Company under this Section 6 shall
be in addition to any liability which the Company may otherwise have, and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Securities Act; and the obligations of
the Underwriters under this Section 6 shall be in addition to any liability that
the respective Underwriters may otherwise have, and shall extend, upon the same
terms and conditions, to each director of the Company (including any person who,
with his or her consent, is named in the Registration Statement as about to
become a director of the Company), to each officer of the Company who has signed
the Registration Statement and to each person, if any, who controls the Company
within the meaning of the Securities Act.
(f) The Company and the Underwriters severally confirm that
the statements with respect to the public offering of the Notes set forth: (i)
in the last paragraph of the front cover page of, (ii) in the first paragraph of
the inside front cover page of, and (iii) under the caption "Underwriting"
(except for the last two paragraphs thereof) in the Prospectus constitute the
only information furnished in writing to the Company by the Underwriters for use
in connection with the preparation of the Registration Statement, any
Preliminary Prospectus, and the Prospectus.
(g) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections 11(a)
and 11(b) hereof, including the amounts of any requested reimbursement payments
and the method of determining such amounts, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board
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of Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in Sections 11(a) and 11(b)
hereof and would not resolve the ultimate propriety or enforceability of the
obligation to reimburse expenses which is created by the provisions of such
Sections 11(a) and 11(b) hereof.
7. Substitution of Underwriters. If any Underwriter defaults in its
obligation to purchase the number of Notes which it has agreed to purchase under
this Agreement, the non-defaulting Underwriters shall be obligated to purchase
(in the respective proportions which the number of Notes set forth opposite the
name of each non-defaulting Underwriter in Schedule I hereto bears to the total
number of Notes less the number of Notes the defaulting Underwriter agreed to
purchase set forth in Schedule I hereto) the Notes which the defaulting
Underwriter agreed but failed to purchase; except that the nondefaulting
Underwriters shall not be obligated to purchase any of the Notes if the total
number of Notes which the defaulting Underwriter or Underwriters agreed but
failed to purchase exceed % of the total principal amount of Notes, and any
non-defaulting Underwriters shall not be obligated to purchase more than [110%]
of the principal amount of Notes set forth opposite its name in Schedule I
hereto plus the total principal amount of Option Notes purchasable by it
pursuant to the terms of Section 2 hereof. If the foregoing maximums are
exceeded, the non-defaulting Underwriters, and any other underwriters
satisfactory to you who so agree, shall have the right, but shall not be
obligated, to purchase (in such proportions as may be agreed upon among them)
all of the Notes. If the non-defaulting Underwriters or the other underwriters
satisfactory to you do not elect to purchase the Notes which the defaulting
Underwriter or Underwriters agreed but failed to purchase, the Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company except for the payment of expenses to be borne by the Company and the
Underwriters as provided in Section (4)(h) hereof and the indemnity and
contribution agreements of the Company and the Underwriters contained in Section
6 hereof.
Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have for damages caused by its default. If
the other underwriters satisfactory to you are obligated or agree to purchase
the Notes of a defaulting Underwriter, either you or the Company may postpone
the First Closing Date for up to seven full Business Days in order to effect any
changes that may be necessary in the Registration Statement or the Prospectus or
in any other document or agreement, and to file promptly any amendments or any
supplements to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary.
8. Effective Date and Termination.
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<PAGE>
(a) This Agreement shall become effective at 11:00 A.M., New
York City time, on the first full Business Day following the date hereof, or at
such earlier time after the Registration Statement becomes effective as you
shall first release the Firm Notes for sale to the public. You shall notify the
Company immediately after you have taken any action which causes this Agreement
to become effective. Until this Agreement is effective, it may be terminated by
the Company by giving notice as hereinafter provided to you, or by you by giving
notice as hereinafter provided to the Company, except that the provisions of
Section 4(h) and Section 6 shall at all times be effective. For purposes of this
Agreement, the release of the Firm Notes for sale to the public shall be deemed
to have been made when you release, by telegram or otherwise, firm offers of the
Firm Notes to securities dealers or release for publication a newspaper
advertisement relating to the Firm Notes, whichever occurs first.
(b) Until the First Closing Date, this Agreement may be
terminated by you by giving notice as hereinafter provided to the Company if (i)
the Company shall have failed, refused or been unable, at or prior to the First
Closing Date, to perform any agreement on its part to be performed hereunder or
(ii) any other condition to the Underwriters' obligations hereunder is not
fulfilled. Any termination of this Agreement pursuant to this Section 8 shall be
without liability on the part of the Company or any Underwriter, except as
otherwise provided in Sections 4(h) and 6 hereof.
Any notice referred to above may be given at the address specified in
Section 10 hereof in writing or by telegraph or telephone, and if by telegraph
or telephone, shall be immediately confirmed in writing.
9. Survival of Certain Provisions. The agreements contained in Section
6 hereof and the representations, warranties and agreements of the Company
contained in Sections 1 and 4 hereof shall survive the delivery of the Notes to
the Underwriters hereunder and shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement or any investigation made
by or on behalf of any indemnified party.
10. Notices. Except as otherwise provided in the Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company, such notice shall be in writing or by telegraph addressed to the
Company at 2975 Stender Way, Santa Clara, California 95054 Attention: Leonard C.
Perham, with a copy to Dennis R. DeBroeck, Fenwick & West, Two Palo Alto Square,
Suite 800, Palo Alto, California 94306; and (b) whenever notice is required by
the provisions of this Agreement to be given to the several Underwriters, such
notice shall be in writing or by telegraph addressed to you in care of Lehman
Brothers Inc., American Express Tower, Three World Financial Center, New York,
New York 10285. Attention: Syndicate Department with a copy to Jeffrey D. Saper,
Wilson, Sonsini, Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto,
California 94304-1050.
11. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company and their respective
successors. This Agreement and the
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terms and provisions hereof are for the sole benefit of only those persons,
except that (a) the representations, warranties, indemnities and agreements of
the Company contained in this Agreement shall also be deemed to be for the
benefit of the person or persons, if any, who control any Underwriter within the
meaning of Section 15 of the Securities Act and (b) the indemnity agreement of
the Underwriters contained in Section 6 hereof shall be deemed to be for the
benefit of directors of the Company, officers of the Company who signed the
Registration Statement and any person controlling the Company within the meaning
of Section 15 of the Securities Act. Nothing in this Agreement shall be
construed to give any person, other than the persons referred to in this
paragraph, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
12. Definition of "Business Day" and "Subsidiary." For purposes of this
Agreement, (a) "Business Day" means any day on which the New York Stock
Exchange, Inc. is open for trading, and (b) "subsidiary" has the meaning set
forth in Rule 405 of the Rules and Regulations.
13. Partial Unenforceability. The invalidity or unenforceability of any
Section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
choice of law or conflict of law principles thereof.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The headings used herein are inserted for convenience of
reference only and are not intended to be part of, or to effect the meaning or
interpretation of, this Agreement.
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<PAGE>
If the foregoing correctly sets forth the agreement between the Company
and the Underwriters, please confirm such agreement and your acceptance in the
space provided for that purpose below.
Very truly yours,
INTEGRATED DEVICE TECHNOLOGY, INC.
By:
---------------------------------------------
Leonard C. Perham
Chief Executive Officer
Confirmed and accepted as of
the date first above mentioned
LEHMAN BROTHERS INC.
MONTGOMERY SECURITIES
SMITH BARNEY SHEARSON INC.
By: LEHMAN BROTHERS INC.
By:
---------------------------------
Michael S. Wishart
Managing Director
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<PAGE>
SCHEDULE I
Underwriting Agreement dated May , 1995
Principal Amount
of Firm
Notes to be
Underwriter Purchased
----------- ---------
Lehman Brothers Inc........................................... $
Montgomery Securities.........................................
Smith Barney Shearson Inc.....................................
$150,000,000
===============================================================================
INTEGRATED DEVICE TECHNOLOGY, INC.
AND
THE FIRST NATIONAL BANK OF BOSTON
Trustee
INDENTURE
Dated as of June 1, 1995
% Convertible Subordinated Notes due 2002
===============================================================================
<PAGE>
CROSS REFERENCE SHEET*
--------------------------
Between
Provisions of Trust Indenture Act of 1939 and Indenture, dated as of
June 1, 1995, between Integrated Device Technology, Inc. and The First National
Bank of Boston, Trustee, providing for ___% Convertible Subordinated Notes due
2002:
Section of the Act Section of Indenture
----------------- --------------------
310(a)(1) and (2)................................. 8.9
310(a)(3) and (4)................................. Inapplicable
310(b)............................................ 8.8 and 8.10(b) and (d)
310(c)............................................ Inapplicable
311(a)............................................ 8.13
311(b)............................................ 8.13
311(c)............................................ Inapplicable
312(a)............................................ 6.1 and 6.2(a)
312(b)............................................ 6.2(b)
312(c)............................................ 6.2(c)
313(a)............................................ 6.3(a)
313(b)(1)......................................... Inapplicable
313(b)(2)......................................... 6.3(a)
313(c)............................................ 6.3(a)
313(d)............................................ 6.3(b)
314(a)............................................ 6.4
314(b)............................................ Inapplicable
314(c)(1) and (2)................................. 17.5
314(c)(3)......................................... Inapplicable
314(d)............................................ Inapplicable
314(e)............................................ 17.5
314(f)............................................ Inapplicable
315(a), (c) and (d)............................... 8.1
315(b)............................................ 7.8
315(e)............................................ 7.9
316(a)(1)......................................... 7.7
316(a)(2)......................................... Not required
316(a) (last sentence)............................ 9.4
316(b)............................................ 11.2
317(a)............................................ 7.2
317(b)............................................ 5.4 and 13.2
318(a)............................................ 17.7
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* This Cross Reference Sheet is not part of the Indenture.
<PAGE>
<TABLE>
TABLE OF CONTENTS
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ARTICLE I - DEFINITIONS........................................................................ 1
Section 1.1 Definitions........................................................................ 1
ARTICLE II - ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES.............................................................. 8
Section 2.1 Designation, Amount and Issue of Notes............................................. 8
Section 2.2 Form of Notes...................................................................... 8
Section 2.3 Date and Denomination of Notes; Payments of
Interest........................................................................... 8
Section 2.4 Execution of Notes................................................................. 10
Section 2.5 Exchange and Registration of Transfer of
Notes; Restrictions on Transfer; Depositary........................................ 11
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes......................................... 12
Section 2.7 Temporary Notes.................................................................... 13
Section 2.8 Cancellation of Notes Paid, Etc.................................................... 13
ARTICLE III - REDEMPTION OF NOTES................................................................ 14
Section 3.1 Redemption Prices.................................................................. 14
Section 3.2 Notice of Redemption; Selection of Notes........................................... 14
Section 3.3 Payment of Notes Called for Redemption............................................. 16
Section 3.4 Conversion Arrangement on Call for Redemption...................................... 17
ARTICLE IV - SUBORDINATION OF NOTES............................................................. 17
Section 4.1 Agreement of Subordination......................................................... 17
Section 4.2 Payments to Noteholders............................................................ 18
Section 4.3 Subrogation of Notes............................................................... 20
Section 4.4 Authorization by Noteholders....................................................... 21
Section 4.5 Notice to Trustee.................................................................. 21
Section 4.6 Trustee's Relation to Senior Indebtedness.......................................... 23
Section 4.7 No Impairment of Subordination..................................................... 23
Section 4.8 Certain Conversions Deemed Payment................................................. 23
ARTICLE V - PARTICULAR COVENANTS OF THE COMPANY................................................ 24
Section 5.1 Payment of Principal, Premium and Interest......................................... 24
Section 5.2 Maintenance of Office or Agency.................................................... 24
Section 5.3 Appointments to Fill Vacancies in Trustee's
Office............................................................................. 25
Section 5.4 Provisions as to Paying Agent...................................................... 25
Section 5.5 Existence.......................................................................... 26
Section 5.6 Stay, Extension and Usury Laws..................................................... 26
</TABLE>
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(CONTINUED)
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Section 5.7 Compliance Certificate............................................................. 27
Section 5.8 Further Instruments and Acts....................................................... 27
ARTICLE VI - NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY...................................... 27
Section 6.1 Noteholders' Lists................................................................. 27
Section 6.2 Preservation and Disclosure of Lists............................................... 27
Section 6.3 Reports by Trustee................................................................. 28
Section 6.4 Reports by Company................................................................. 28
ARTICLE VII - DEFAULTS AND REMEDIES.............................................................. 28
Section 7.1 Events of Default.................................................................. 28
Section 7.2 Payments of Notes on Default; Suit Therefor........................................ 31
Section 7.3 Application of Monies Collected by Trustee......................................... 33
Section 7.4 Proceedings by Noteholder.......................................................... 34
Section 7.5 Proceedings by Trustee............................................................. 35
Section 7.6 Remedies Cumulative and Continuing................................................. 35
Section 7.7 Direction of Proceedings and Waiver of
Defaults by Majority of Noteholders................................................ 36
Section 7.8 Notice of Defaults................................................................. 36
Section 7.9 Undertaking to Pay Costs........................................................... 36
Section 7.10 Delay or Omission Not Waiver....................................................... 37
ARTICLE VIII - CONCERNING THE TRUSTEE............................................................. 37
Section 8.1 Duties and Responsibilities of Trustee............................................. 37
Section 8.2 Reliance on Documents, Opinions, Etc............................................... 39
Section 8.3 No Responsibility for Recitals, Etc................................................ 40
Section 8.4 Trustee, Paying Agents, Conversion Agents or
Registrar May Own Notes............................................................ 40
Section 8.5 Monies to Be Held in Trust......................................................... 40
Section 8.6 Compensation and Expenses of Trustee............................................... 40
Section 8.7 Officers' Certificate as Evidence.................................................. 41
Section 8.8 Conflicting Interests of Trustee................................................... 41
Section 8.9 Eligibility of Trustee............................................................. 41
Section 8.10 Resignation or Removal of Trustee.................................................. 42
Section 8.11 Acceptance by Successor Trustee.................................................... 43
Section 8.12 Succession by Merger, Etc.......................................................... 44
Section 8.13 Limitation on Rights of Trustee as Creditor........................................ 45
ARTICLE IX - CONCERNING THE NOTEHOLDERS......................................................... 45
Section 9.1 Action by Noteholders.............................................................. 45
Section 9.2 Proof of Execution by Noteholders.................................................. 45
Section 9.3 Who Are Deemed Absolute Owners..................................................... 45
Section 9.4 Company-Owned Notes Disregarded.................................................... 46
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
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Section 9.5 Revocation of Consents; Future Holders Bound....................................... 46
ARTICLE X - NOTEHOLDERS' MEETINGS.............................................................. 47
Section 10.1 Purpose of Meetings................................................................ 47
Section 10.2 Call of Meetings by Trustee........................................................ 47
Section 10.3 Call of Meetings by Company or Noteholders......................................... 48
Section 10.4 Qualifications for Voting.......................................................... 48
Section 10.5 Regulations........................................................................ 48
Section 10.6 Voting............................................................................. 49
Section 10.7 No Delay of Rights by Meeting...................................................... 49
ARTICLE XI - SUPPLEMENTAL INDENTURES............................................................ 50
Section 11.1 Supplemental Indentures Without Consent of
Noteholders........................................................................ 50
Section 11.2 Supplemental Indentures with Consent of
Noteholders........................................................................ 51
Section 11.3 Effect of Supplemental Indentures.................................................. 52
Section 11.4 Notation on Notes.................................................................. 52
Section 11.5 Evidence of Compliance of Supplemental
Indenture to Be Furnished Trustee.................................................. 53
ARTICLE XII - CONSOLIDATION, MERGER, SALE, CONVEYANCE AND
LEASE.............................................................................. 53
Section 12.1 Company May Consolidate, Etc. on Certain
Terms.............................................................................. 53
Section 12.2 Successor Corporation to Be Substituted............................................ 53
Section 12.3 Opinion of Counsel to Be Given Trustee............................................. 54
ARTICLE XIII - SATISFACTION AND DISCHARGE OF INDENTURE............................................ 54
Section 13.1 Discharge of Indenture............................................................. 54
Section 13.2 Deposited Monies to Be Held in Trust by
Trustee............................................................................ 55
Section 13.3 Paying Agent to Repay Monies Held.................................................. 55
Section 13.4 Return of Unclaimed Monies......................................................... 55
Section 13.5 Reinstatement...................................................................... 56
ARTICLE XIV - IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS............................................................. 56
Section 14.1 Indenture and Notes Solely Corporate
Obligations........................................................................ 56
</TABLE>
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(CONTINUED)
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ARTICLE XV - CONVERSION OF NOTES................................................................ 57
Section 15.1 Right to Convert................................................................... 57
Section 15.2 Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for
Interest or Dividends.............................................................. 58
Section 15.3 Cash Payments in Lieu of Fractional Shares......................................... 59
Section 15.4 Conversion Price................................................................... 60
Section 15.5 Adjustment of Conversion Price..................................................... 60
Section 15.6 Effect of Reclassification, Consolidation,
Merger or Sale..................................................................... 71
Section 15.7 Taxes on Shares Issued............................................................. 72
Section 15.8 Reservation of Shares; Shares to Be Fully
Paid; Listing of Common Stock...................................................... 72
Section 15.9 Responsibility of Trustee.......................................................... 73
Section 15.10 Notice to Holders Prior to Certain Actions......................................... 74
ARTICLE XVI - REPURCHASE UPON A DESIGNATED EVENT................................................. 75
Section 16.1 Repurchase Right................................................................... 75
Section 16.2 Notices; Method of Exercising Repurchase
Right, Etc......................................................................... 75
Section 16.3 Certain Definitions................................................................ 77
ARTICLE XVII - MISCELLANEOUS PROVISIONS........................................................... 79
Section 17.1 Provisions Binding on Company's Successors......................................... 79
Section 17.2 Official Acts by Successor Corporation............................................. 79
Section 17.3 Addresses for Notices, Etc......................................................... 79
Section 17.4 Governing Law...................................................................... 80
Section 17.5 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee................................................. 80
Section 17.6 Legal Holidays..................................................................... 80
Section 17.7 No Security Interest Created....................................................... 80
Section 17.8 Trust Indenture Act to Control................................................. 81
Section 17.9 Benefits of Indenture.............................................................. 81
Section 17.10 Table of Contents, Headings, Etc................................................... 81
Section 17.11 Authenticating Agent............................................................... 81
Section 17.12 Execution in Counterparts.......................................................... 82
Exhibit A: Form of Note
</TABLE>
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<PAGE>
INDENTURE dated as of June , 1995 between INTEGRATED DEVICE
TECHNOLOGY, INC., a Delaware corporation (hereinafter sometimes called the
"Company", as more fully set forth in Section 1.1), and THE FIRST NATIONAL BANK
OF BOSTON, a national banking corporation (hereinafter sometimes called the
"Trustee", as more fully set forth in Section 1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its % Convertible Subordinated Notes due 2002
(hereinafter sometimes called the "Notes"), in an aggregate principal amount not
to exceed $172,500,000 and, to provide the terms and conditions upon which the
Notes are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by
the Notes, a form of assignment, a form of option to elect repayment upon a
Designated Event, a form of conversion notice and a certificate of transfer to
be borne by the Notes are to be substantially in the forms hereinafter provided
for; and
WHEREAS, all acts and things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes
are, and are to be, authenticated, issued and delivered, and in consideration of
the premises and of the purchase and acceptance of the Notes by the holders
thereof, the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture, which are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act
<PAGE>
(except as herein otherwise expressly provided or unless the context otherwise
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 the execution of this
Indenture. The words "herein," "hereof," "hereunder," and 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.
Affiliate: The term "Affiliate" of any specified person shall mean any
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any specified person means the
power to direct or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Board of Directors: The term "Board of Directors" shall mean the Board
of Directors of the Company or a committee of such Board duly authorized to act
for it hereunder.
Board Resolution: The term "Board Resolution" means a copy of a
resolution certified by the Secretary or an Assistant Secretary of the Company
to have been duly adopted by the Board of Directors, or duly authorized
committee thereof (to the extent permitted by applicable law), and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
Business Day: The term "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which the banking
institutions in The City of New York or the city in which the Corporate Trust
Office is located are authorized or obligated by law or executive order to close
or be closed.
Commission: The term "Commission" shall mean the Securities and
Exchange Commission.
Common Stock: The term "Common Stock" shall mean any stock of any class
of the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Notes shall include only shares of the class designated as common
stock of the Company at the date of this Indenture or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or
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involuntary liquidation, dissolution or winding up of the Company and which are
not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total number of
shares of such class resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from all such
reclassifications.
Company: The term "Company" shall mean Integrated Device Technology,
Inc., a Delaware corporation, and subject to the provisions of Article XII,
shall include its successors and assigns.
Conversion Price: The term "Conversion Price" shall have the meaning
specified in Article XV.
Corporate Trust Office: The term "Corporate Trust Office," or other
similar term, shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally administered, which
office is, at the date as of which this Indenture is dated, located at Blue
Hills Office Park, 150 Royall Street, Canton, Massachusetts 02021, Attention:
Corporate Trust Division, Mail Stop 45-02-15 (Integrated Device Technology, Inc.
% Convertible Subordinated Notes due 2002).
Default: The term "default" shall mean any event that is, or after
notice or passage of time, or both, would be, an Event of Default.
Designated Event: The term "Designated Event" shall have the meaning
specified in Article XVI.
Exchange Act: The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
Event of Default: The term "Event of Default" shall mean any event
specified in Section 7.1(a), (b), (c), (d), (e), (f), (g) or (h).
Indenture: The term "Indenture" shall mean this instrument as
originally executed or, if amended or supplemented as herein provided, as so
amended or supplemented.
Note or Notes: The terms "Note" or "Notes" shall mean any Note or
Notes, as the case may be, authenticated and delivered under this Indenture in
accordance with its terms.
Noteholder; holder: The terms "Noteholder" or "holder" as applied to
any Note, or other similar terms (but excluding the term
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<PAGE>
"beneficial holder"), shall mean any person in whose name at the time a
particular Note is registered on the Note registrar's books.
[Note register: The term "Note register" shall have the meaning
specified in Section 2.5.]
Officers' Certificate: The term "Officers' Certificate", when used with
respect to the Company, shall mean a certificate signed by the President, the
Chief Executive Officer, Executive or Senior Vice President or any Vice
President and by the Treasurer or any Assistant Treasurer, Secretary or any
Assistant Secretary or Controller of the Company, which is delivered to the
Trustee. Each such certificate shall include the statements provided for in
Section 17.5 if and to the extent required by the provisions of such Section.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion
in writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee, which is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
17.5 if and to the extent required by the provisions of such Section.
outstanding: The term "outstanding," when used with reference to Notes,
shall, subject to the provisions of Section 9.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for the payment or redemption
of which monies in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the
Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own paying agent); provided
that if such Notes are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as in Article III
provided, as the case may be, or provision satisfactory to the Trustee
shall have been made for giving such notice;
(c) Notes in lieu of which, or in substitution for which,
other Notes shall have been authenticated and delivered pursuant to the
terms of Section 2.6 unless proof satisfactory to the Trustee is
presented that any such Notes are held by bona fide holders in due
course; and
(d) Notes converted into Common Stock pursuant to Article XV
and Notes deemed not outstanding pursuant to Section 3.2.
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<PAGE>
Person: The term "person" shall mean a corporation, an association, a
partnership, an individual, a joint venture, a joint stock company, a trust, an
unincorporated organization or a government or an agency or a political
subdivision thereof.
Predecessor Note: The term "Predecessor Note" of any particular Note
shall mean every previous Note evidencing all or a portion of the same debt as
that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 2.6 in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note that it replaces.
Repurchase Price: The term "Repurchase Price" has the meaning specified
in Section 16.1.
Responsible Officer: The term "Responsible Officer", when used with
respect to the Trustee, shall mean an officer of the Trustee assigned to the
Corporate Trust Office of the Trustee, and any other officer of the Trustee to
whom such matter is referred to because of his knowledge of and familiarity with
the particular subject.
Rights Agreement: The term "Rights Agreement" means that certain Rights
Agreement, dated as of , between the Company and the Rights Agent (as
such term is defined therein) as amended from time to time.
Rights: The term "Rights" shall mean "Rights" as such term is defined
in the Rights Agreement or any New Rights Agreement (as defined in Section 15.5
hereof).
Securities Act: The term "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
Senior Indebtedness: The term "Senior Indebtedness" means the principal
of, premium, if any, interest on, and any other payment due pursuant to, any of
the following, whether outstanding on the date of the Indenture or thereafter
incurred or created:
(a) All indebtedness of the Company for money borrowed
(including, but not limited to, any indebtedness secured by a security
interest, mortgage or other lien on the assets of the Company which is
(i) given to secure all or part of the purchase price of property
subject thereto, whether given to the vendor of such property or to
another, or (ii) existing on property at the time of acquisition
thereof);
(b) All indebtedness of the Company evidenced by notes,
debentures, bonds or other securities (including but not
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limited to those which are convertible or exchangeable for securities
of the Company);
(c) All indebtedness of the Company due and owing with
respect to letters of credit (including, but not limited to,
reimbursement obligations with respect thereto);
(d) All lease obligations of the Company which are
capitalized on the books of the Company in accordance with generally
accepted accounting principles and all lease obligations of the Company
under any lease or related document (including a purchase agreement)
which provides that the Company is contractually obligated to purchase
or cause a third party to purchase and thereby guarantee a minimum
residual value of the leased property to the landlord and the
obligations of the Company under such lease or related document to
purchase or to cause a third party to purchase such leased property;
(e) All indebtedness consisting of commitment or standby fees
due and payable to lending institutions with respect to credit
facilities available to the Company;
(f) All indebtedness consisting of obligations of the Company
due and payable under interest rate and currency swaps, floors, caps or
other similar arrangements intended to fix interest rate obligations or
hedge foreign currency exposure;
(g) All indebtedness of others of the kinds described in any
of the preceding clauses (a), (b), (c), (e) or (f) and all lease
obligations of the kind described in the preceding clause (d) assumed
by or guaranteed in any manner by the Company or in effect guaranteed
by the Company through an agreement to purchase, contingent or
otherwise; and
(h) All renewals, extensions, refundings, deferrals,
amendments or modifications of indebtedness of the kinds described in
any of the preceding clauses (a), (b), (c), (e), (f) or (g) and all
renewals or extensions of lease obligations of the kinds described in
any of the preceding clauses (d) or (g);
unless in the case of any particular indebtedness, lease, renewal, extension,
refunding, amendment, modification or supplement, the instrument, lease or other
document creating or evidencing the same or the assumption or guarantee of the
same expressly provides that such indebtedness, lease, renewal, extension,
refunding, amendment, modification or supplement is not superior in right of
payment to, or pari passu with, the Notes. Notwithstanding the foregoing, Senior
Indebtedness shall not include (i) any indebtedness or lease obligations of any
kind of the Company to any subsidiary of the Company, a majority of the voting
stock of which is owned, directly or indirectly, by the Company, and (ii)
indebtedness for trade payables or constituting the deferred purchase price of
assets or services incurred in the ordinary course of business.
Significant Subsidiary: The term "Significant Subsidiary" means, with
respect to any person, a Subsidiary of such person that would constitute a
"significant subsidiary" as such term is defined under Rule 1.02(v) of
Regulation S-X of the Securities and Exchange Commission.
Subsidiary: The term "Subsidiary" means a corporation more than 50% of
the outstanding voting stock of which is owned,
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directly or indirectly, by the Company or by one or more other Subsidiaries, or
by the Company and one or more other Subsidiaries. For the purposes of this
definition, "voting stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
Trust Indenture Act: The term "Trust Indenture Act" shall mean the
Trust Indenture Act of 1939, as amended, as it was in force at the date of
execution of this Indenture, except as provided in Sections 11.3 and 15.6;
provided, however, that in the event the Trust Indenture Act of 1939 is amended
after the date hereof, the term "Trust Indenture Act" shall mean, to the extent
required by such amendment, the Trust Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" shall mean The First National Bank of
Boston until a successor replaces it pursuant to the applicable provisions of
this Indenture and thereafter shall mean such successor. The foregoing sentence
shall likewise apply to any subsequent such successor or successors.
The definitions of certain other terms are as specified in Article XV
and Article XVI.
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ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes. The Notes shall be
designated as " % Convertible Subordinated Notes due 2002". Notes not to
exceed the aggregate principal amount of $172,500,000 upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes upon the written order of the Company,
signed by its (a) President, Executive or Senior Vice President or any Vice
President and (b) Treasurer or Assistant Treasurer or its Secretary or any
Assistant Secretary, without any further action by the Company hereunder.
Section 2.2 Form of Notes. The Notes and the Trustee's certificate of
authentication to be borne by such Notes shall be in the form set forth in
Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, or to conform to usage.
The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of Interest. The
Notes shall be issuable in registered form without coupons in denominations of
$1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of its authentication, shall bear interest from the applicable
date and accrued interest shall be payable semiannually on each June 1 and
December 1, commencing December 1, 1995, as specified on the face of the form of
Note attached as Exhibit A hereto.
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The person in whose name any Note (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
interest payment date (including any Note that is converted after the record
date and on or before the interest payment date) shall be entitled to receive
the interest payable on such interest payment date notwithstanding the
cancellation of such Note upon any transfer, exchange or conversion subsequent
to the record date and prior to such interest payment date. Interest may, at the
option of the Company, be paid by check mailed to the address of such person on
the registry kept for such purposes; provided that, with respect to any holder
of Notes with an aggregate principal amount equal to or in excess of $5,000,000,
at the request of such holder in writing to the Company, interest on such
holder's Notes shall be paid by wire transfer in immediately available funds.
The term "record date" with respect to any interest payment date shall mean the
May 15 or November 15 preceding said June 1 or December 1.
Interest on the Notes shall be computed on the basis of a year of
twelve 30-day months.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any said June 1 or December 1 (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Noteholder on the relevant
record date by virtue of his having been such Noteholder; and such Defaulted
Interest shall be paid by the Company, at its election in each case, as provided
in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest to be paid on each Note and
the date of the payment (which shall be not less than twenty-five (25)
days after the receipt by the Trustee of such notice, unless the
Trustee shall consent to an earlier date), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a special record date for the payment of such Defaulted
Interest which shall be not more than fifteen (15) days and not less
than ten (10) days prior to the date of the payment and not less than
ten (10) days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify
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the Company of such special record date and, in the name and at the
expense of the Company, shall cause notice of the payment of such
Defaulted Interest and the special record date therefor to be mailed,
first-class postage prepaid, to each Noteholder as of such special
record date at his address as it appears in the Note register, not less
than ten (10) days prior to such special record date. Notice of the
proposed payment of such Defaulted Interest and the special record date
therefor having been so mailed, such Defaulted Interest shall be paid
to the persons in whose names the Notes (or their respective
Predecessor Notes) were registered at the close of business on such
special record date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes
may be listed or designated for issuance, and upon such notice as may
be required by such exchange or automated quotation system, if, after
notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Section 2.4 Execution of Notes. The Notes shall be signed in the name
and on behalf of the Company by the facsimile signature of its President, any of
its Executive or Senior Vice Presidents, or any of its Vice Presidents and
attested by the facsimile signature of its Secretary or any of its Assistant
Secretaries (which may be printed, engraved or otherwise reproduced thereon, by
facsimile or otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.11), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the
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execution of this Indenture any such person was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary. The Company shall cause to be kept at the
Corporate Trust Office of the Trustee a register (the register maintained in
such office and in any other office or agency of the Company designated pursuant
to Section 5.2 being herein sometimes collectively referred to as the "Note
register") in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration of Notes and of transfers of
Notes. Such register shall be in written form or in any form capable of being
converted into written form within a reasonable period of time. The Trustee is
hereby appointed "Note registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. The Company may appoint one or more
co-registrars in accordance with Section 5.2.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.
Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency. Whenever any Notes are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company, the Trustee, the Note registrar
or any co-registrar) be duly endorsed, or be accompanied by a written instrument
of transfer in form satisfactory to the Company and duly executed, by the
Noteholder thereof or his attorney duly authorized in writing.
No service charge shall be charged to the Noteholder for any exchange
or registration of transfer of Notes, but the Company may require payment of a
sum sufficient to cover any tax, assessments or other governmental charges that
may be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any
co-registrar shall be required to exchange or register a transfer of (a) any
Notes for a period of fifteen (15) days next preceding
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any selection of Notes to be redeemed or (b) any Notes called for redemption or,
if a portion of any Note is selected or called for redemption, such portion
thereof selected or called for redemption or (c) any Notes surrendered for
conversion or, if a portion of any Note is surrendered for conversion, such
portion thereof surrendered for conversion or (d) any Notes surrendered for
repurchase pursuant to Article XVI or, if a portion of any Note is surrendered
for repurchase pursuant to Article XVI, such portion thereof surrendered for
repurchase pursuant to Article XVI.
All Notes issued upon any transfer or exchange of Notes in accordance
with this Indenture shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture as the
Notes surrendered upon such registration of transfer or exchange.
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In case any
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request the Trustee or an authenticating
agent appointed by the Trustee shall authenticate and deliver, a new Note,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution for the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless for any loss, liability, cost or expense caused by or
connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company 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 connected
therewith. In case any Note which has matured or is about to mature or has been
called for redemption or submitted for repurchase or is about to be converted
into Common Stock shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Note, pay or authorize the payment
of or convert or authorize the conversion of the same (without surrender thereof
except in the case of a mutilated Note), as the case may be, if the applicant
for such payment or conversion shall furnish to the Company, to the Trustee and,
if applicable, to such authenticating agent such security or indemnity as may be
required by
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them to save each of them harmless for any loss, liability, cost or expense
caused by or connected with such substitution, and, in case of destruction, loss
or theft, evidence satisfactory to the Company, the Trustee and, if applicable,
any paying agent or conversion agent of the destruction, loss or theft of such
Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section
2.6 by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment or conversion of mutilated,
destroyed, lost or stolen Notes 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 or conversion of negotiable
instruments or other securities without their surrender.
Section 2.7 Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute and the Trustee or an authenticating agent
appointed by the Trustee shall, upon written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the definitive Notes but with such omissions, insertions and variations
as may be appropriate for temporary Notes, all as may be determined by the
Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Notes. Without unreasonable delay the Company will execute and
deliver to the Trustee or such authenticating agent definitive Notes and
thereupon any or all temporary Notes may be surrendered in exchange therefor, at
each office or agency maintained by the Company pursuant to Section 5.2 and the
Trustee or such authenticating agent shall authenticate and deliver in exchange
for such temporary Notes an equal aggregate principal amount of definitive
Notes. Such exchange shall be made by the Company at its own expense and without
any charge therefor. Until so exchanged, the temporary Notes shall in all
respects be entitled to the same benefits and subject to the same limitations
under this Indenture as definitive Notes authenticated and delivered hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered for
the purpose of payment, redemption, repurchase,
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conversion, exchange or registration of transfer, shall, if surrendered to the
Company or any paying agent or any Note registrar or any conversion agent, be
surrendered to the Trustee and promptly canceled by it, or, if surrendered to
the Trustee, shall be promptly canceled by it, and no Notes shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture. Upon written instructions of the Company, the Trustee shall destroy
canceled Notes and, after such destruction, shall deliver a certificate of such
destruction to the Company. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes unless and until the same are delivered
to the Trustee for cancellation.
ARTICLE III
REDEMPTION OF NOTES
Section 3.1 Redemption Prices. The Company may, at its option, redeem
all or from time to time any part of the Notes on any date prior to maturity,
upon notice as set forth in Section 3.2, and at the optional redemption prices
set forth in the form of Note attached as Exhibit A hereto, together with
accrued interest to the date fixed for redemption, provided, however, that no
such redemption shall be effected before June 2, 1998.
Section 3.2 Notice of Redemption; Selection of Notes. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and, in the case of any redemption pursuant to Section 3.1, it or, at
its request (which must be received by the Trustee at least ten (10) Business
Days prior to the date the Trustee is requested to give notice as described
below unless a shorter period is agreed to by the Trustee), the Trustee in the
name of and at the expense of the Company, shall mail or cause to be mailed a
notice of such redemption at least fifteen (15) and not more than sixty (60)
days prior to the date fixed for redemption to the holders of Notes so to be
redeemed as a whole or in part at their last addresses as the same appear on the
Note register (provided that if the Company shall give such notice, it shall
also give such notice, and notice of the Notes to be redeemed, to the Trustee).
Such mailing shall be by first class mail. The notice if mailed in the manner
herein provided shall be conclusively presumed to have been duly given, whether
or not the holder receives such notice. In any case, failure to give such notice
by mail or any defect in the notice to the holder of any Note designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note.
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Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the date fixed for redemption, the redemption
price at which Notes are to be redeemed, the place or places of payment, that
payment will be made upon presentation and surrender of such Notes, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice, and that on and after said date interest thereon or on the portion
thereof to be redeemed will cease to accrue. Such notice shall also state the
current Conversion Price and the date on which the right to convert such Notes
or portions thereof into Common Stock will expire. If fewer than all the Notes
are to be redeemed, the notice of redemption shall identify the Notes to be
redeemed. In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof will be issued.
On or prior to the last Business Day prior to the redemption date
specified in the notice of redemption given as provided in this Section, the
Company will deposit with the Trustee or with one or more paying agents (or, if
the Company is acting as its own paying agent, set aside, segregate and hold in
trust as provided in Section 5.4) an amount of money sufficient to redeem on the
redemption date all the Notes (or portions thereof) so called for redemption
(other than those theretofore surrendered for conversion into Common Stock) at
the appropriate redemption price, together with accrued interest to the date
fixed for redemption. If any Note called for redemption is converted pursuant
hereto, any money deposited with the Trustee or any paying agent or so
segregated and held in trust for the redemption of such Note shall be paid to
the Company upon its request, or, if then held by the Company shall be
discharged from such trust. If fewer than all the Notes are to be redeemed, the
Company will give the Trustee written notice in the form of an Officers'
Certificate not fewer than thirty (30) days (or such shorter period of time as
may be acceptable to the Trustee) prior to the redemption date as to the
aggregate principal amount of Notes to be redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes or portions thereof to be redeemed (in principal amounts of
$1,000 or integral multiples thereof), by lot or, in its sole discretion, on a
pro rata basis. If any Note selected for partial redemption is converted in part
after such selection, the converted portion of such Note shall be deemed (so far
as may be) to be the portion to be selected for redemption. The Notes (or
portions thereof) so selected shall be deemed duly selected for redemption for
all purposes hereof, notwithstanding that any such Note is converted as a whole
or in part before the mailing of the notice of redemption.
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Upon any redemption of less than all Notes, the Company and the Trustee
may (but need not) treat as outstanding any Notes surrendered for conversion
during the period of fifteen (15) days next preceding the mailing of a notice of
redemption and may (but need not) treat as not outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
Section 3.3 Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption, and on and
after said date (unless the Company shall default in the payment of such Notes
at the redemption price, together with interest accrued to said date) interest
on the Notes or portion of Notes so called for redemption shall cease to accrue
and such Notes shall cease after the close of business on the Business Day next
preceding the date fixed for redemption to be convertible into Common Stock and,
except as provided in Sections 8.5 and 13.4, to be entitled to any benefit or
security under this Indenture, and the holders thereof shall have no right in
respect of such Notes except the right to receive the redemption price thereof
and unpaid interest to the date fixed for redemption. On presentation and
surrender of such Notes at a place of payment in said notice specified, the said
Notes or the specified portions thereof to be redeemed shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption; provided that any
semi-annual payment of interest becoming due on the date fixed for redemption
shall be payable to the holders of such Notes registered as such on the relevant
record date subject to the terms and provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Notes or of any Event of Default of which,
in the case of any Event of Default other than under Section 7.1(a) or (b), a
Responsible Officer of the Trustee has knowledge. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any, shall, until paid or duly provided for, bear
interest from the date fixed for redemption at
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the rate borne by the Note and such Note shall remain convertible into Common
Stock until the principal and premium, if any, shall have been paid or duly
provided for.
Section 3.4 Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued to
the date fixed for redemption, of such Notes. Notwithstanding anything to the
contrary contained in this Article III, the obligation of the Company to pay the
redemption price of such Notes, together with interest accrued to the date fixed
for redemption, shall be deemed to be satisfied and discharged to the extent
such amount is so paid by such purchasers. If such an agreement is entered into,
a copy of which will be filed with the Trustee prior to the date fixed for
redemption, any Notes not duly surrendered for conversion by the holders thereof
may, at the option of the Company, be deemed, to the fullest extent permitted by
law, acquired by such purchasers from such holders and (notwithstanding anything
to the contrary contained in Article XV) surrendered by such purchasers for
conversion, all as of immediately prior to the close of business on the date
fixed for redemption (and the right to convert any such Notes shall be deemed to
have been extended through such time), subject to payment of the above amount as
aforesaid. At the direction of the Company, the Trustee shall hold and dispose
of any such amount paid to it in the same manner as it would monies deposited
with it by the Company for the redemption of Notes. Without the Trustee's prior
written consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Notes shall increase or otherwise affect any of
the powers, duties, responsibilities or obligations of the Trustee as set forth
in this Indenture, and the Company agrees to indemnify the Trustee from, and
hold it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Notes between the Company and such purchasers to which the Trustee has not
consented in writing, including the costs and expenses incurred by the Trustee
in the defense of any claim or liability arising out of or in connection with
the exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1 Agreement of Subordination. The Company covenants and
agrees, and each holder of Notes issued hereunder by
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his acceptance thereof likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article IV; and each person holding any
Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest on all
Notes issued hereunder shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to the prior payment in
full of all Senior Indebtedness, whether outstanding at the date of this
Indenture or thereafter incurred.
No provision of this Article IV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2 Payments to Noteholders. In the event and during the
continuation of any default in the payment of principal, premium, interest or
any other payment due on any Senior Indebtedness (or, in the case of Senior
Indebtedness for which there is a period of grace, in the event of such a
default that continues beyond the period of grace, if any, specified in the
instrument or lease evidencing such Senior Indebtedness), then, unless and until
such default shall have been cured or waived or shall have ceased to exist, no
payment shall be made by the Company with respect to the principal of, or
premium, if any, or interest on the Notes (including, but not limited to, the
redemption price or repurchase price with respect to the Notes to be redeemed or
repurchased, as provided in this Indenture) except payments made pursuant to
Article XIII from monies deposited with the Trustee pursuant thereto prior to
the happening of such default.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made on account of the principal (and premium, if any) or interest on the
Notes (except payments made pursuant to Article XIII from monies deposited with
the Trustee pursuant thereto prior to the happening of such dissolution,
winding-up, liquidation or reorganization or bankruptcy, insolvency,
receivership or other such proceedings); and upon any such dissolution or
winding-up or liquidation or reorganization or bankruptcy, insolvency,
receivership or other such proceedings, any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the holders of the Notes or the Trustee under
this Indenture
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would be entitled, except for the provision of this Article IV, shall (except as
aforesaid) be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
or by the holders of the Notes or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, or as otherwise required by law or a court order) or their
respective representative or representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing any Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay all Senior Indebtedness in full after giving effect
to any concurrent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the holders of the
Notes or to the Trustee under this Indenture.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of set-off or
otherwise), prohibited by the foregoing, shall be received by the Trustee under
this Indenture or by any holders of the Notes before all Senior Indebtedness is
paid in full, or provision is made for such payment in accordance with its
terms, such payment or distribution shall be held by the recipient or recipients
in trust for the benefit of, and shall be paid over or delivered to, the holders
of Senior Indebtedness or their respective representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution (or provision therefor) to or
for the holders of such Senior Indebtedness.
For purposes of this Article IV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated (at least to the extent provided in this Article IV with respect
to the Notes) to the payment of all Senior Indebtedness which may at the time be
outstanding; provided that (i) the Senior Indebtedness is assumed by the new
corporation, if any, resulting from such reorganization or adjustment, and (ii)
the rights of the holders of Senior Indebtedness (other than leases which are
not assumed by the Company or by the new corporation, as the case may be) are
not, without the consent of such holders, altered by such reorganization
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or readjustment. The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article XII shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 4.2
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article XII.
Nothing in this Section 4.2 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 8.6. This Section 4.2 shall be subject to
the further provisions of Section 4.5.
Section 4.3 Subrogation of Notes. Subject to the payment in full of all
Senior Indebtedness, the rights of the holders of the Notes shall be subrogated
to the extent of the payments or distributions made to the holders of such
Senior Indebtedness pursuant to the provisions of this Article IV (equally and
ratably with the holders of all indebtedness of the Company which by its express
terms is subordinated to other indebtedness of the Company to substantially the
same extent as the Notes are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the principal of (and premium, if
any) and interest on the Notes shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
IV, and no payment over pursuant to the provisions of this Article IV, to or for
the benefit of the holders of Senior Indebtedness by holders of the Notes or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness, and the holders of the Notes, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness; and no payments or
distributions of cash, property or securities to or for the benefit of the
holders of the Notes pursuant to the subrogation provisions of this Article IV,
which would otherwise have been paid to the holders of Senior Indebtedness shall
be deemed to be a payment by the Company to or for the account of the Notes. It
is understood that the provisions of this Article IV are and are intended solely
for the purposes of defining the relative rights of the holders of the Notes, on
the one hand, and the holders of the Senior Indebtedness, on the other hand.
Nothing contained in this Article IV or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the
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Company, which is absolute and unconditional, to pay to the holders of the Notes
the principal of (and premium, if any) and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the holders of the Notes and creditors
of the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article IV of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article IV, the Trustee, subject to the provisions of Section 8.1, and
the holders of the Notes shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.
Section 4.4 Authorization by Noteholders. Each holder of a Note by his
acceptance thereof authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article IV and appoints the Trustee his attorney-in-fact for
any and all such purposes.
Section 4.5 Notice to Trustee. The Company shall give prompt written
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company which would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the provisions of this Article IV.
Notwithstanding the provisions of this Article IV or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any Senior Indebtedness or of any default or event of default with respect to
any Senior Indebtedness or of any other facts which would prohibit the making of
any payment of monies to or by the Trustee in respect of the Notes pursuant to
the provisions of this Article IV, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof at the Corporate Trust Office
of the Trustee from
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the Company (in the form of an Officers' Certificate) or a holder or holders of
Senior Indebtedness or from any trustee thereof who shall have been certified by
the Company or otherwise established to the reasonable satisfaction of the
Trustee to be such holder or trustee; and before the receipt of any such written
notice, the Trustee, subject to the provisions of Section 8.1, shall be entitled
in all respects to assume that no such facts exist; provided that if on a date
at least two (2) Business Days prior to the date upon which by the terms hereof
any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or interest on
any Note), the Trustee shall not have received with respect to such monies the
notice provided for in this Section 4.5, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date.
Notwithstanding anything to the contrary hereinbefore set forth,
nothing shall prevent (a) any payment by the Company or the Trustee to the
Noteholders of amounts in connection with a redemption of Notes if (i) notice of
such redemption has been given pursuant to Article III prior to the receipt by
the Trustee of written notice as aforesaid, and (ii) such notice of redemption
is given not earlier than sixty (60) days before the redemption date, (b) any
payment by the Company or the Trustee to the Noteholders of amounts in
connection with a repurchase of Notes if (i) notice of such repurchase has been
given pursuant to Article XVI prior to the receipt by the Trustee of written
notice as aforesaid, and (ii) such notice of repurchase is given not earlier
than thirty (30) days before the repurchase date, or (c) any payment by the
Trustee to the Noteholders of monies deposited with it pursuant to Section 13.1.
The Trustee, subject to the provisions of Section 8.1, shall be
entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness or a trustee on behalf of any such holder or holders. In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article IV, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article IV, and if such evidence is not furnished the
Trustee may defer any payment to such person pending
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judicial determination as to the right of such person to receive such payment.
Section 4.6 Trustee's Relation to Senior Indebtedness. The Trustee and
any agent of the Company or the Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article IV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
Nothing in this Article IV shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 8.6.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Notes, the Company or any other person money or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article IV or otherwise.
Section 4.7 No Impairment of Subordination. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8 Certain Conversions Deemed Payment. For the purposes of
this Article only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest on Notes or on account of the purchase or other acquisition
of Notes, and (2) the payment, issuance or delivery of cash, property or
securities (other than junior securities) upon conversion of a Note shall be
deemed to constitute payment on account of the principal of such Note. For the
purposes of this Section, the term "junior securities" means (a) shares of any
stock of any class of the Company, (b) securities of the Company which are
subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities
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to substantially the same extent as, or to a greater extent than, the Notes are
so subordinated as provided in this Article and (c) securities into which the
Notes become convertible pursuant to Article XV. Nothing contained in this
Article or elsewhere in this Indenture or in the Notes is intended to or shall
impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the Holders of the Notes, the right, which is absolute and
unconditional, of the Holder of any Note to convert such Note in accordance with
Article XV.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes. Each installment of interest on the Notes due on any semi-annual interest
payment date may be paid by mailing checks for the interest payable to or upon
the written order of the holders of Notes entitled thereto as they shall appear
on the registry books of the Company, provided that, with respect to any holder
of Notes with an aggregate principal amount equal to or in excess of $5,000,000,
at the request of such holder in writing to the Company, interest on such
holder's Notes shall be paid by wire transfer in immediately available funds.
Section 5.2 Maintenance of Office or Agency. The Company will maintain
in the Borough of Manhattan, The City of New York, an office or agency where the
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment or for conversion or redemption and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee or the office
of the Trustee in the Borough of Manhattan, The City of New York.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obliga-
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tion to maintain an office or agency in the Borough of Manhattan, The City of
New York, for such purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.
The Company hereby initially designates the Trustee as paying agent,
Note registrar and conversion agent and each of the Corporate Trust Office of
the Trustee and the office of BancBoston Trust Company of New York, an Affiliate
of the Trustee, at 55 Broadway, New York, New York 10006, as one such office or
agency of the Company for each of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11.
Section 5.3 Appointments to Fill Vacancies in Trustee's Office. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee or an Affiliate of the Trustee, or if the Trustee shall appoint
such a paying agent, 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 5.4:
(1) that it will hold all sums held by it as such
agent for the payment of the principal of and premium, if any,
or interest on the Notes (whether such sums have been paid to
it by the Company or by any other obligor on the Notes) in
trust for the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any
failure by the Company (or by any other obligor on the Notes)
to make any payment of the principal of and premium, if any,
or interest on the Notes when the same shall be due and
payable; and
(3) that at any time during the continuance of an
Event of Default, upon request of the Trustee, it will
forthwith pay to the Trustee all sums so held in trust.
The Company shall, before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with
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the paying agent a sum sufficient to pay such principal, premium, if
any, or interest, and (unless such paying agent is the Trustee) the
Company will promptly notify the Trustee of any failure to take such
action.
(b) If the Company shall act as its own paying agent, it will,
on or before each due date of the principal of, premium, if any, or
interest on the Notes, set aside, segregate and hold in trust for the
benefit of the holders of the Notes a sum sufficient to pay such
principal, premium, if any, or interest so becoming due and will notify
the Trustee of any failure to take such action and of any failure by
the Company (or any other obligor under the Notes) to make any payment
of the principal of, premium, if any, or interest on the Notes when the
same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary
notwithstanding, the Company 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 Company or any paying agent hereunder as required by this
Section 5.4, such sums to be held by the Trustee upon the trusts herein
contained and upon such payment by the Company or any paying agent to
the Trustee, the Company or such paying agent shall be released from
all further liability with respect to such sums.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in
this Section 5.4 is subject to Sections 13.3 and 13.4.
Section 5.5 Existence. Subject to Article XII, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such right or
franchise if it shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 5.6 Stay, Extension and Usury Laws. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and the Company (to the extent it
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may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
Section 5.7 Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on March 31, 1996) an Officers'
Certificate stating whether or not the signers know of any Event of Default that
occurred during such period. If they do, such Officers' Certificate shall
describe the Event of Default and its status.
Section 5.8 Further Instruments and Acts. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY
Section 6.1 Noteholders' Lists. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee, semi-annually, not more
than fifteen (15) days after each May 15 and December 15 in each year beginning
with December 15, 1995, and at such other times as the Trustee may request in
writing, within thirty (30) days after receipt by the Company of any such
request (or such lesser time as the Trustee may reasonably request in order to
enable it to timely provide any notice to be provided by it hereunder), a list
in such form as the Trustee may reasonably require of the names and addresses of
the holders of Notes as of a date not more than fifteen (15) days (or such other
date as the Trustee may reasonably request in order to so provide any such
notices) prior to the time such information is furnished, except that no such
list need be furnished so long as the Trustee is acting as Note registrar or
co-registrar.
Section 6.2 Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses
of the holders of Notes contained in the most recent list furnished to
it as provided in Section 6.1 or maintained by the Trustee in its
capacity as Notes registrar, if so acting. The Trustee may destroy any
list furnished to it as
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provided in Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Noteholders to communicate with other
holders of Notes with respect to their rights under this Indenture or
under the Notes, and the corresponding rights and duties of the
Trustee, shall be as provided by the Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any agent of either of them shall be held accountable
by reason of any disclosure of information as to names and addresses of
holders of Debentures made pursuant to the Trust Indenture Act.
Section 6.3 Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with
the year 199_, the Trustee shall transmit to holders of Notes such
reports dated as of May 15 of the year in which such reports are made
concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto.
(b) A copy of such report shall, at the time of such
transmission to holders of Notes, be filed by the Trustee with each
stock exchange upon which the Notes are listed, with the Commission and
with the Company. The Company will notify the Trustee within a
reasonable time when the Notes are listed on any stock exchange.
Section 6.4 Reports by Company. The Company shall file with the Trustee
and the Commission, and transmit to holders of Notes, such information,
documents and other reports and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; provided that any such information, documents or reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 Events 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
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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, whether or not payment is
prohibited by the provisions of Article IV:
(a) default in the payment of any installment of interest upon
any of the Notes as and when the same shall become due and payable, and
continuance of such default for a period of thirty (30) days; or
(b) default in the payment of the principal of and premium, if
any, on any of the Notes as and when the same shall become due and
payable either at maturity or in connection with any redemption, by
declaration or otherwise; or
(c) a default in the payment of the Repurchase Price in
respect of any Note on the repurchase date therefor in accordance with
the provisions of Article XVI; or
(d) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in the Notes or in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with) continued for a period of
thirty (30) days after the date on which written notice of such
failure, requiring the Company to remedy the same, shall have been
given to the Company by the Trustee, or to the Company and a
Responsible Officer of the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Notes at the time
outstanding determined in accordance with Section 9.4; or
(e) failure by the Company or any Significant Subsidiary to
make any payment at maturity, including any applicable grace period, in
respect of indebtedness, which term as used herein means obligations
(other than the Notes or non-recourse obligations) of, or guaranteed or
assumed by, the Company, or any Significant Subsidiary, for borrowed
money or evidenced by bonds, debentures, notes or other similar
instruments ("Indebtedness") in an amount in excess of $10,000,000 or
the equivalent thereof in any other currency or composite currency and
such failure shall have continued for thirty (30) days after written
notice thereof shall have been given to the Company by the Trustee or
to the Company and a Responsible Officer of the Trustee by the holders
of at least 25% in aggregate principal amount of the outstanding Notes
at the time outstanding determined in accordance with Section 9.4; or
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(f) a default by the Company or any Significant Subsidiary
with respect to any Indebtedness, which default results in the
acceleration of Indebtedness in an amount in excess of $10,000,000 or
the equivalent thereof in any other currency or composite currency
without such Indebtedness having been discharged or such acceleration
having been cured, waived, rescinded or annulled for a period of thirty
(30) days after written notice thereof shall have been given to the
Company by the Trustee or to the Company and a Responsible Officer of
the Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding Notes at the time outstanding determined in
accordance with Section 9.4; or
(g) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due; or
(h) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of ninety (90) consecutive
days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(g) or (h)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding hereunder
determined in accordance with Section 9.4, by notice in writing to the Company
(and to the Trustee if given by Noteholders), may declare the principal of and
premium, if any, on all the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(g) or (h) occurs and is continuing, the principal of all the Notes
and the interest accrued thereon shall be immediately
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due and payable. This provision, however, is subject to the conditions that if,
at any time after the principal of the Notes 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 Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all Notes and the principal of and premium, if
any, on any and all Notes which shall have become due otherwise than by
acceleration (with interest on overdue installments of interest (to the extent
that payment of such interest is enforceable under applicable law) and on such
principal and premium, if any, at the rate borne by the Notes, to the date of
such payment or deposit) and amounts due to the Trustee pursuant to Section 8.6,
and if any and all defaults under this Indenture, other than the nonpayment of
principal of and premium, if any, and accrued interest on Notes which shall have
become due by acceleration, shall have been cured or waived pursuant to Section
7.7, then and in every such case the holders of a majority in aggregate
principal amount of the Notes then outstanding, by written notice to the Company
and to the Trustee, may waive all defaults or Events of Default and rescind and
annul such declaration and its conse- quences; but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent default or Event of
Default, or shall impair any right consequent thereon. The Company shall notify
a Responsible Officer of the Trustee, promptly upon becoming aware thereof, of
any Event of Default.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been instituted.
Section 7.2 Payments of Notes on Default; Suit Therefor. The Company
covenants that (a) in case default shall be made in the payment by the Company
of any installment of interest upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty (30) days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or in connection
with any redemption or repurchase, by declaration under this Indenture or
otherwise, then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Notes, the whole amount that then
shall have become due and payable on all such Notes for principal and premium,
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if any, or interest, or both, as the case may be, with interest upon the overdue
principal and premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law) upon the overdue installments of interest
at the rate borne by the Notes; 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, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and premium, if any, and interest on the Notes to the
registered holders, whether or not the Notes are overdue.
In case the Company 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 actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In the case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Company or any other obligor on the Notes under
Title 11 of the United States Code, or any other applicable 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 Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
of the Noteholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Notes, its or their creditors, or its or their
property, and to collect and receive any monies or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of any amounts due the Trustee under Section 8.6; and any receiver, assignee or
trustee in bankruptcy or reorganization,
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liquidator, custodian or similar official is hereby authorized by each of the
Noteholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including counsel fees
incurred by it up to the date of such distribution. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or adopt on behalf of any Noteholder any plan of
reorganization or arrangement affecting the Notes or the rights of any
Noteholder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof on any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in 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 Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
Section 7.3 Application of Monies Collected by Trustee. Any monies
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
First: To the payment of all amounts due the Trustee under Section 8.6;
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Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on the Notes 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 rate borne by the Notes,
such payments to be made ratably to the persons entitled thereto; and
Third: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall have become due, by
declaration or otherwise, and be unpaid, to the payment of the whole
amount then owing and unpaid upon the Notes for principal and premium,
if any, and interest, with interest on the overdue principal and
premium, if any, and (to the extent that such interest has been
collected by the Trustee) upon overdue installments of interest at the
rate borne by the Notes; and in case such monies shall be insufficient
to pay in full the whole amounts so due and unpaid upon the Notes, then
to the payment of such principal and premium, if any, and interest
without preference or priority of principal and premium, if any, over
interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of
any Note over any other Note, ratably to the aggregate of such
principal and premium, if any, and accrued and unpaid interest.
Section 7.4 Proceedings by Noteholder. No holder of any Note shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event 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 Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding 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 sixty (60) days after its
receipt of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 7.7; it being understood and intended, and being expressly
covenanted by the taker and holder of every Note with every other taker and
holder and the Trustee, that no one or more holders of Notes shall have any
right in any manner whatever by virtue of or by availing of any provision of
this Indenture
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to affect, disturb or prejudice the rights of any other holder of Notes, 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 Notes
(except as otherwise provided herein). For the protection and enforcement of
this Section 7.4, each and every Noteholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision
of any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in his own behalf and for his own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, his rights of conversion as provided herein.
Section 7.5 Proceedings by Trustee. In case of an Event of Default 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 by
suit in equity or by action at law or by proceeding 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 7.6 Remedies Cumulative and Continuing. Except as provided in
Section 2.6, all powers and remedies given by this Article VII to the Trustee or
to the Noteholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and remedies available
to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or 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
default or any acquiescence therein; and, subject to the provisions
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of Section 7.4, every power and remedy given by this Article VII or by law to
the Trustee or to the Noteholders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority
of Noteholders. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding determined in accordance with Section 9.4 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; provided, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, and (b) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may on behalf of the holders of all of the Notes waive any past
default or Event of Default hereunder and its consequences except (i) a default
in the payment of interest or premium, if any, on, or the principal of, the
Notes, (ii) a failure by the Company to convert any Notes into Common Stock or
(iii) a default in respect of a covenant or provisions hereof which under
Article XI cannot be modified or amended without the consent of the holders of
all Notes then outstanding. Upon any such waiver the Company, the Trustee and
the holders of the Notes shall be restored to their former positions and rights
hereunder; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon. Whenever any default or
Event of Default hereunder shall have been waived as permitted by this Section
7.7, said default or Event of Default shall for all purposes of the Notes and
this Indenture be deemed to have been cured and to be not continuing; but no
such waiver shall extend to any subsequent or other default or Event of Default
or impair any right consequent thereon.
Section 7.8 Notice of Defaults. The Trustee shall, within ninety (90)
days after the occurrence of a default, mail to all Noteholders, as the names
and addresses of such holders appear upon the Note register, notice of all
defaults known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; and provided that, except in
the case of default in the payment of the principal of, or premium, if any, or
interest on any of the Notes, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Noteholders.
Section 7.9 Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Note by his acceptance
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thereof shall be deemed to have agreed, that any court may, in its discretion,
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as Trustee, the filing by any party litigant in such suit of an undertaking
to pay the costs of such suit and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; provided that the provisions of
this Section 7.9 shall not apply to any suit instituted by the Trustee, to any
suit instituted by any Noteholder, or group of Noteholders, holding in the
aggregate more than 10% in principal amount of the Notes at the time outstanding
determined in accordance with Section 9.4, or to any suit instituted by any
Noteholder for the enforcement of the payment of the principal of or premium, if
any, or interest on any Note on or after the due date expressed in such Note or
to any suit for the enforcement of the right to convert any Note in accordance
with the provisions of Article XV.
Section 7.10 Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any holder of any Note to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or any acquiescence therein. Every right and
remedy given by this Article or by law to the Trustee or to the holders of Notes
may be exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the holders of Notes, as the case may be.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default and after the curing 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
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(a) prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this
Indenture and the Trust Indenture Act, 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 and the Trust Indenture Act against the
Trustee; and
(2) in the absence of bad faith and willful
misconduct 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
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the
case of any such certificates or opinions which by any
provisions 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;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the Trustee,
unless it shall be provided that the Trustee was negligent in
ascertaining the pertinent facts;
(c) the Trustee shall not be liable to any Noteholder 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 Notes at the time outstanding
determined as provided in Section 9.4 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; and
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions
of this Section.
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 is reasonable ground for believing that the
repayment of such funds
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or adequate indemnity against such risk or liability is not reasonably assured
to it.
Section 8.2 Reliance on Documents, Opinions, Etc. Except as otherwise
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, note, coupon or other paper or
document believed by it in good faith 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 Company
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 copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(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 or omitted 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 rights or powers vested in it by this Indenture at the request,
order or direction of any of the Noteholders pursuant to the provisions
of this Indenture, unless such Noteholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby;
(e) 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, direction,
consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; provided, however, 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 from the
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Noteholders against such expenses or liability as a condition to so
proceeding; the reasonable expenses of every such examination shall be
paid by the Company or, if paid by the Trustee or any predecessor
Trustee, shall be repaid by the Company upon demand; and
(f) 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 and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed by it with due care hereunder.
Section 8.3 No Responsibility for Recitals, Etc. The recitals contained
herein and in the Notes (except in the Trustee's certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May
Own Notes. The Trustee, any paying agent, any conversion agent or Note
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 8.5 Monies to Be Held in Trust. Subject to the provisions of
Section 13.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed from time to time by the Company and the Trustee.
Section 8.6 Compensation and Expenses of Trustee. The Company covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation for all services rendered by it hereunder
in any capacity (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust), and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee 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 persons not
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regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Company also covenants to indemnify
the Trustee in any capacity under this Indenture and its agents and any
authenticating agent for, and to hold them harmless against, any loss, liability
or expense incurred without negligence, willful misconduct, recklessness or bad
faith on the part of the Trustee or such agent or authenticating agent, as the
case may be, and arising out of or in connection with the acceptance or
administration of this trust or in any other capacity hereunder, including the
costs and expenses of defending themselves against any claim of liability in the
premises. The obligations of the Company under this Section 8.6 to compensate or
indemnify the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall be secured by a lien prior to that of the Notes
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 Notes. The
obligation of the Company under this Section shall survive the satisfaction and
discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(g) or (h) occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any bankruptcy,
insolvency or similar laws.
Section 8.7 Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence, willful misconduct, recklessness
and 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
Officers' Certificate, in the absence of negligence, willful misconduct,
recklessness and bad faith on the part of the Trustee, shall be full warrant to
the Trustee for any action taken or omitted by it under the provisions of this
Indenture upon the faith thereof.
Section 8.8 Conflicting Interests of Trustee. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
Section 8.9 Eligibility of Trustee. There shall at all times be a
Trustee hereunder which shall be a person that is eligible pursuant to the Trust
Indenture Act to act as such and has
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a combined capital and surplus of at least $50,000,000. If such person publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such person shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 8.10 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written
notice of such resignation to the Company and the Company shall mail,
or cause to be mailed, notice thereof to the holders of Notes at their
addresses as they shall appear on the Note register. Upon receiving
such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument, in duplicate, executed by
order 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 sixty (60) days after the mailing of such notice
of resignation to the Noteholders, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor
trustee, or any Noteholder who has been a bona fide holder of a Note or
Notes for at least six months may, subject to the provisions of Section
7.9, 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:
(1) the Trustee shall fail to comply with Section 8.8
after written request therefor by the Company or by any
Noteholder who has been a bona fide holder of a Note or Notes
for at least six months, or
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.9 and shall fail
to resign after written request therefor by the Company or by
any such Noteholder, or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of
the Trustee or of its property shall be
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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 Company may remove the Trustee and appoint
a successor trustee by written instrument, in duplicate, executed by
order of the Board of Directors, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor
trustee, or, subject to the provisions of Section 7.9, any Noteholder
who has been a bona fide holder of a Note or Notes 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 Notes at the time outstanding may at any time remove the Trustee
and nominate a successor trustee which shall be deemed appointed as
successor trustee unless within ten (10) days after notice to the
Company of such nomination the Company objects thereto, in which case
the Trustee so removed or any Noteholder, upon the terms and conditions
and otherwise as in Section 8.10(a) provided, may petition any court of
competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this
Section 8.10 shall become effective upon acceptance of appointment by
the successor trustee as provided in Section 8.11.
Section 8.11 Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company 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 the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of Section
8.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the
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Company 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 lien upon
all property and funds held or collected by such trustee as such, except for
funds held in trust for the benefit of holders of particular Notes, to secure
any amounts then due it pursuant to the provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, the Company shall mail or cause to be mailed notice of the
succession of such trustee hereunder to the holders of Notes at their addresses
as they shall appear on the Note register. If the Company fails to mail such
notice within ten (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 Company.
Section 8.12 Succession by Merger, Etc. 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 all or substantially
all of the trust business of the Trustee, shall be the successor to the Trustee
hereunder, provided such corporation shall be qualified under the provisions of
Section 8.8 and eligible under the provisions of Section 8.9 without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or an authenticating agent appointed by such successor
trustee may authenticate such Notes either in the name of any predecessor
trustee hereunder or in the name of the successor trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
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Section 8.13 Limitation on Rights of Trustee as Creditor. If and when
the Trustee shall be or become a creditor of the Company (or any other obligor
upon the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 Action by Noteholders. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
Section 9.2 Proof of Execution by Noteholders. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or his agent or proxy shall be sufficient if made 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 Notes shall be proved by the Note register or by a certificate of the
Note registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.6.
Section 9.3 Who Are Deemed Absolute Owners. The Company, the Trustee,
any paying agent, any conversion agent and any Note registrar may deem the
person in whose name such Note shall be registered upon the Note register to be,
and may treat him as, the absolute owner of such Note (whether or not such Note
shall be overdue and notwithstanding any notation of ownership or other
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writing thereon) for the purpose of receiving payment of or on account of the
principal of, premium, if any, and interest on such Note, for conversion of such
Note and for all other purposes; and neither the Company nor the Trustee nor any
paying agent nor any conversion agent nor any Note registrar shall be affected
by any notice to the contrary. All such payments so made to any holder for the
time being, 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 monies
payable upon any such Note.
Section 9.4 Company-Owned Notes Disregarded. In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent, waiver or other
action only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described persons;
and, subject to Section 8.1, 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 Notes not listed therein are outstanding for the purpose of
any such determination.
Section 9.5 Revocation of Consents; Future Holders Bound. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note shall
be
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conclusive and binding upon such holder and upon all future holders and owners
of such Note and of any Notes issued in exchange or substitution therefor,
irrespective of whether any notation in regard thereto is made upon such Note or
any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1 Purpose of Meetings. A meeting of Noteholders may be
called at any time and from time to time pursuant to the provisions of this
Article X for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or
to consent to the waiving of any default or Event of Default hereunder
and its consequences, or to take any other action authorized to be
taken by Noteholders pursuant to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Notes under any other provision of this Indenture or under
applicable law; or
(5) to take any other action authorized by this Indenture or
under applicable law.
Section 10.2 Call of Meetings by Trustee. The Trustee may at any time
call a meeting of Noteholders to take any action specified in Section 10.1, to
be held at such time and at such place in Boston, Massachusetts, or the Borough
of Manhattan, The City of New York, as the Trustee shall determine. Notice of
every meeting of the Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting and
the establishment of any record date pursuant to Section 9.1, shall be mailed to
holders of Notes at their addresses as they shall appear on the Note register.
Such notice shall also be mailed to the Company. Such notices shall be mailed
not less than twenty (20) nor more than ninety (90) days prior to the date fixed
for the meeting.
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Any meeting of Noteholders shall be valid without notice if the holders
of all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Noteholders. In case at any
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within twenty (20) days after receipt of such request, then the Company
or such Noteholders may determine the time and the place for such meeting and
may call such meeting to take any action authorized in Section 10.1, by mailing
notice thereof as provided in Section 10.2.
Section 10.4 Qualifications for Voting. To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes. The only
persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.5 Regulations. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
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Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Note challenged
as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Notes held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Noteholders. Any meeting
of Noteholders duly called pursuant to the provisions of Section 10.2 or 10.3
may be adjourned from time to time by the holders of a majority of the aggregate
principal amount of Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
Section 10.6 Voting. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 10.2. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 No Delay of Rights by Meeting. Nothing in this Article X
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Noteholders under
any of the provisions of this Indenture or of the Notes.
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ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Noteholders.
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provision with respect to the conversion rights
of the holders of Notes pursuant to the requirements of Section 15.6;
(b) subject to Article IV, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any
property or assets;
(c) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article XII;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions as the Board of Directors and the
Trustee shall consider to be for the benefit of the holders of Notes,
and to make the occurrence, or the occurrence and continuance, of a
default in any such additional covenants, restrictions or conditions a
default or an Event of Default permitting the enforcement of all or any
of the several remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional covenant,
restriction or condition 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 default or may limit the
remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes
in coupon form (including Notes registrable as to principal only) and
to provide for exchangeability of such Notes with the Notes issued
hereunder in fully registered form and to make all appropriate changes
for such purpose;
(f) 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 which shall
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not materially adversely affect the interests of the holders of the
Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualifications of this Indenture under the Trust Indenture Act, or
under any similar federal statute hereafter enacted.
The Trustee is hereby authorized to join with the Company 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 and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any
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
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
Section 11.2 Supplemental Indentures with Consent of Noteholders. With
the consent (evidenced as provided in Article IX) of the holders of not less
than 66 2/3% in aggregate principal amount of the Notes at the time outstanding
(determined in accordance with Section 9.4), the Company, when authorized by the
resolutions of the Board of Directors, and the Trustee may from time to time and
at any time enter into an indenture or 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 any supplemental indenture or of
modifying in any manner the rights of the holders of the Notes; provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any Note, or reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof or premium, if any, thereon, or
reduce any amount payable on redemption or repurchase thereof, change the
obligation of the Company to repurchase any Note at the option of the holder
upon the happening of a Designated Event, or impair or affect the right of any
Noteholder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Notes, or impair the right to convert the Notes
into Common Stock subject to the terms set forth herein, including Section 15.6,
or modify the provisions of this Indenture with respect to the subordination of
the Notes in a manner adverse to the Noteholders,
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without the consent of the holder of each Note so affected, or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to
any such supplemental indenture, without the consent of the holders of all Notes
then outstanding.
Upon the request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Noteholders as
aforesaid, the Trustee shall join with the Company 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 is discretion, but shall not be obligated to, enter into
such supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 Effect of Supplemental Indentures. Any supplemental
indenture executed pursuant to the provisions of this Article XI shall comply
with the Trust Indenture Act, as then in effect. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article XI, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Notes 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 11.4 Notation on Notes. Notes authenticated and delivered after
the execution of any supplemental indenture pursuant to the provisions of this
Article XI may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee shall
so determine, new Notes 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, at the Company's expense, be prepared and
executed by the Company, authenticated by the Trustee (or an authenticating
agent duly appointed by the Trustee pursuant to Section 16.11) and delivered in
exchange for the Notes then outstanding, upon surrender of such Notes then
outstanding.
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Section 11.5 Evidence of Compliance of Supplemental Indenture to Be
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.1 and
8.2, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article XI.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 Company May Consolidate, Etc. on Certain Terms. Subject to
the provisions of Section 12.2, nothing contained in this Indenture or in any of
the Notes shall prevent any consolidation or merger of the Company with or into
any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance or lease (or successive sales, conveyances or leases) of all or
substantially all of the property of the Company, to any other corporation
(whether or not affiliated with the Company), authorized to acquire and operate
the same and which shall be organized under the laws of the United States of
America, any state thereof or the District of Columbia; provided, however, and
the Company hereby covenants and agrees, that upon any such consolidation,
merger, sale, conveyance or lease, the due and punctual payment of the principal
of and premium, if any, and interest on all of the Notes, according to their
tenor, and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed by the Company, shall
be expressly assumed, by supplemental indenture satisfactory in form to the
Trustee, executed and delivered to the Trustee by the corporation (if other than
the Company) formed by such consolidation, or into which the Company shall have
been merged, or by the corporation which shall have acquired or leased such
property, and such supplemental indenture shall provide for the applicable
conversion rights set forth in Section 15.6.
Section 12.2 Successor Corporation to Be Substituted. In case of any
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in
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the name of Integrated Device Technology, Inc. any or all of the Notes issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor corporation
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver,
or cause to be authenticated and delivered, any Notes which previously shall
have been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Notes which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the Notes
so issued shall in all respects have the same legal rank and benefit under this
Indenture as the Notes theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Notes had been issued at the date
of the execution hereof. In the event of any such consolidation, merger, sale,
conveyance or lease, the person named as the "Company" in the first paragraph of
this Indenture or any successor which shall thereafter have become such in the
manner prescribed in this Article XII may be dissolved, wound up and liquidated
at any time thereafter and such person shall be released from its liabilities as
obligor and maker of the Notes and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but not in substance) may be made in the
Notes thereafter to be issued as may be appropriate.
Section 12.3 Opinion of Counsel to Be Given Trustee. The Trustee,
subject to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance or lease and any such assumption complies with the provisions
of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture. When (a) the Company shall deliver
to the Trustee for cancellation all Notes theretofore authenticated (other than
any Notes which have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or (b) all the Notes not theretofore canceled or
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 or are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption, and the Company shall deposit with the
Trustee, in
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trust, funds sufficient to pay at maturity or upon redemption of all of the
Notes (other than any Notes which shall have been mutilated, destroyed, lost or
stolen and in lieu of or in substitution for which other Notes shall have been
authenticated and delivered) not theretofore canceled or delivered to the
Trustee for cancellation, including principal and premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, and if in either case the Company shall also pay or cause to be paid all
other sums payable hereunder by the Company, then this Indenture shall cease to
be of further effect (except as to (i) remaining rights of registration of
transfer, substitution and exchange and conversion of Notes, (ii) rights
hereunder of Noteholders to receive payments of principal of and premium, if
any, and interest on, the Notes and the other rights, duties and obligations of
Noteholders, as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights, obligations and immunities of
the Trustee hereunder), and the Trustee, on demand of the Company accompanied by
an Officers' Certificate and an Opinion of Counsel as required by Section 17.5
and at the cost and expense of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture; the Company,
however, hereby agreeing to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred by the Trustee and to compensate the
Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Notes.
Section 13.2 Deposited Monies to Be Held in Trust by Trustee. Subject
to Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1
shall be held in trust and applied by it to the payment, notwithstanding the
provisions of Article IV, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest and premium, if any.
Section 13.3 Paying Agent to Repay Monies Held. Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon demand of the Company, 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 monies.
Section 13.4 Return of Unclaimed Monies. Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of, premium, if any, or interest on Notes and not applied but
remaining unclaimed by the holders of Notes for two years after the date upon
which the principal of, premium, if any, or interest on such Notes, as the
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case may be, shall have become due and payable, shall be repaid to the Company
by the Trustee on demand and all liability of the Trustee shall thereupon cease
with respect to such monies; and the holder of any of the Notes shall thereafter
look only to the Company for any payment which such holder may be entitled to
collect unless an applicable abandoned property law designates another person.
Section 13.5 Reinstatement. If (i) the Trustee or the paying agent is
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application and (ii) the holders of at least 51% in
principal amount of the then outstanding Notes so request by written notice to
the Trustee, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
13.1 until such time as the Trustee or the paying agent is permitted to apply
all such money in accordance with Section 13.2; provided, however, that if the
Company makes any payment of interest on or principal of any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the holders of such Notes to receive such payment from the money held by the
Trustee or paying agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate Obligations. No
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer or director or subsidiary,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company 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; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
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ARTICLE XV
CONVERSION OF NOTES
Section 15.1 Right to Convert. Subject to and upon compliance with the
provisions of this Indenture, the holder of any Note shall have the right, at
his option, at any time after sixty (60) days following the latest date of
original issuance of the Notes and prior to the close of business on June 1,
2002 (except that, with respect to any Note or portion of a Note which shall be
called for redemption, such right shall terminate, except as provided in the
fourth paragraph of Section 15.2, at the close of business on the last Trading
Day prior to the date fixed for redemption of such Note or portion of a Note
unless the Company shall default in payment due upon redemption thereof) to
convert the principal amount of any such Note, or any portion of such principal
amount which is $1,000 or an integral multiple thereof, into that number of
fully paid and non-assessable shares of Common Stock (as such shares shall then
be constituted) obtained by dividing the principal amount of the Note or portion
thereof surrendered for conversion by the Conversion Price in effect at such
time, by surrender of the Note so to be converted in whole or in part in the
manner provided in Section 15.2; provided, however, that in the event, at any
time a Note is surrendered for conversion in whole or in part pursuant to this
Section 15.1, the Company does not have available for issuance upon such
conversion as authorized and unissued shares or in its treasury at least the
number of shares of Common Stock required to be issued pursuant thereto, then
such Note (or portion thereof as to which conversion has been requested), to the
extent that sufficient shares of Common Stock are not then available for
issuance upon conversion, shall be converted into the right to receive from the
Company, in lieu of the shares of Common Stock into which the Note would
otherwise be converted and which the Company is unable to issue, a payment equal
to the number of shares of Common Stock which the Company is unable to issue
multiplied by the average of the Closing Price (as defined in Section
15.5(g)(1)) for the Company's Common Stock during the five (5) Trading Days (as
defined in Section 15.5(g)(5)) immediately prior to the date on which such Note
(or specified portion thereof) is deemed to have been converted pursuant to this
Article, such calculations to be made by the Company. Any such payment shall,
for all purposes of this Indenture and the Note, be deemed to be a payment of
principal plus a premium equal to the total amount payable less the principal
portion of any such Note surrendered for conversion as to which such payment is
required to be made because shares of Common Stock are not then available for
issuance upon such conversion. A holder of Notes is not entitled to any rights
of a holder of Common Stock until such holder has converted his Notes to Common
Stock, and only to the extent such Notes are deemed to have been converted to
Common Stock under this Article XV. For purposes of Sections 15.5 and 15.6,
whenever a
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provision references the shares of Common Stock into which a Note (or a portion
thereof) is convertible or the shares of Common Stock issuable upon conversion
of a Note (or a portion thereof) or words of similar import, any determination
required by such provision shall be made as if the initial 60-day non-conversion
period had expired (whether or not it has in fact expired) and as if a
sufficient number of shares of Common Stock were then available for issuance
upon conversion of all outstanding Notes.
Section 15.2 Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends. In order to exercise the
conversion privilege with respect to any Note, the holder of any such Note to be
converted in whole or in part shall surrender such Note, duly endorsed, at an
office or agency maintained by the Company pursuant to Section 5.2, accompanied
by the funds, if any, required by the penultimate paragraph of this Section
15.2, and shall give written notice of conversion in the form provided on the
Notes (or such other notice which is acceptable to the Company) to the office or
agency that the holder elects to convert such Note or such portion thereof
specified in said notice. Such notice shall also state the name or names (with
address) in which the certificate or certificates for shares of Common Stock
which shall be issuable on such conversion shall be issued, and shall be
accompanied by transfer taxes, if required pursuant to Section 15.7. Each such
Note surrendered for conversion shall, unless the shares issuable on conversion
are to be issued in the same name as the registration of such Note, be duly
endorsed by, or be accompanied by instruments of transfer in form satisfactory
to the Company duly executed by, the holder or his duly authorized attorney.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, if shares issuable on conversion are to be issued in
a name other than that of the Noteholder (as if such transfer were a transfer of
the Note or Notes (or portion thereof) so converted), the Company shall issue
and shall deliver to such holder at the office or agency maintained by the
Company for such purpose pursuant to Section 5.2, a certificate or certificates
for the number of full shares of Common Stock issuable upon the conversion of
such Note or portion thereof in accordance with the provisions of this Article
and a check or cash in respect of any fractional interest in respect of a share
of Common Stock arising upon such conversion, as provided in Section 15.3 and,
if applicable, any cash payment required pursuant to the proviso to the first
sentence of Section 15.1 (which payment, if any, shall be paid no later than
five Business Days after satisfaction of the requirements for conversion set
forth above). In case any Note of a denomination greater than $1,000 shall be
surrendered for partial conversion, and subject to Section 2.3, the Company
shall execute and the Trustee shall authenticate and deliver to the holder of
the Note so surrendered,
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without charge to him, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.2 have been satisfied as to such Note (or portion thereof),
and the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the person in whose name
the certificates are to be issued as the record holder thereof for all purposes
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date through the close of business on the Trading Day next preceding such
interest payment date shall (unless such Note or portion thereof being converted
shall have been called for redemption on a date in such period) be accompanied
by payment, in funds acceptable to the Company, of an amount equal to the
interest otherwise payable on such interest payment date on the principal amount
being converted; provided, however, that no such payment need be made if there
shall exist at the time of conversion a default in the payment of interest on
the Notes. An amount equal to such payment shall be paid by the Company on such
interest payment date to the holder of such Note at the close of business on
such record date; provided, however, that if the Company shall default in the
payment of interest on such interest payment date, such amount shall be paid to
the person who made such required payment. Except as provided above in this
Section 15.2, no adjustment shall be made for interest accrued on any Note
converted or for dividends on any shares issued upon the conversion of such Note
as provided in this Article.
Section 15.3 Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares which shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered for conversion. If any fractional share of
stock otherwise would be issuable upon the conversion of any Note or Notes, the
Company shall make an adjustment therefor in cash at the current market value
thereof. The
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current market value of a share of Common Stock shall be the Closing Price on
the first Trading Day immediately preceding the day on which the Notes (or
specified portions thereof) are deemed to have been converted and such Closing
Price shall be determined as provided in Section 15.5(g).
Section 15.4 Conversion Price. The conversion price shall be as
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article XV.
Section 15.5 Adjustment of Conversion Price. The Conversion Price shall
be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make
a distribution to all holders of the outstanding Common Stock in shares
of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date (as defined in
Section 15.5(g)) fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day
following the Record Date. If any dividend or distribution of the type
described in this Section 15.5(a) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price
which would then be in effect if such dividend or distribution had not
been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within forty-five (45) days after the date fixed for
the determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price (as defined in
Section 15.5(g)) on the Record Date fixed for the determination of
stockholders entitled to receive such rights or warrants, the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect at the
opening of business on the date after such Record Date by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date plus the number
of shares which the aggregate offering price of the
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total number of shares so offered would purchase at such Current Market
Price, and of which the denominator shall be the number of shares of
Common Stock outstanding on the close of business on the Record Date
plus the total number of additional shares of Common Stock so offered
for subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the
Record Date fixed for determination of stockholders entitled to receive
such rights or warrants. To the extent that shares of Common Stock are
not delivered pursuant to such rights or warrants, upon the expiration
or termination of such rights or warrants the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been
made on the basis of delivery of only the number of shares of Common
Stock actually delivered. In the event that such rights or warrants are
not so issued, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such date fixed for
the determination of stockholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights or
warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Current Market Price, and in determining
the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights
or warrants, the value of such consideration, if other than cash, to be
determined by the Board of Directors.
(c) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions
to which Section 15.5(a) applies) or evidences of its indebtedness,
cash or other assets (including securities, but excluding any rights or
warrants referred to in Section 15.5(b) and dividends and distributions
paid exclusively in cash and excluding any capital stock, evidences
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of indebtedness, cash or assets distributed upon a merger or
consolidation to which Section 15.6 applies) (the foregoing hereinafter
in this Section 15.5(d) called the "Securities")), then, in each such
case, the Conversion Price shall be reduced so that the same shall be
equal to the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the Record Date
(as defined in Section 15.5(g)) with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price
(determined as provided in Section 15.5(g)) on such date less the fair
market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution)
on such date of the portion of the Securities so distributed applicable
to one share of Common Stock and the denominator shall be such Current
Market Price, such reduction to become effective immediately prior to
the opening of business on the day following the Record Date; provided,
however, that in the event the then fair market value (as so
determined) of the portion of the Securities so distributed applicable
to one share of Common Stock is equal to or greater than the Current
Market Price on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder shall have the
right to receive upon conversion of a Note (or any portion thereof) the
amount of Securities such holder would have received had such holder
converted such Note (or portion thereof) immediately prior to such
Record Date. In the event that such dividend or distribution is not so
paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of
this Section 15.5(d) by reference to the actual or when issued trading
market for any securities comprising all or part of such distribution,
it must in doing so consider the prices in such market over the same
period used in computing the Current Market Price pursuant to Section
15.5(g) to the extent possible.
The Company will promptly amend the Rights Agreement (in no
event later than September 30, 1995) (the "Rights Agreement Amendment")
to provide that upon conversion of any Note or portion thereof the
Noteholder will receive, in addition to the Common Stock issuable upon
such conversion, the Rights which would have attached to such shares of
Common Stock if the Rights had not become separated from the Common
Stock pursuant to the provisions of the Rights Agreement. In the event
that the Company implements any new shareholders' rights plan (a "New
Rights Agreement"), such New Rights Agreement shall provide that upon
conversion of the Notes the holders
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will receive, in addition to the Common Stock issuable upon such
conversion, such Rights (whether or not such Rights have separated from
Common Stock at the time of conversion) issuable pursuant to such New
Rights Agreement.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or
purchase shares of the Company's capital stock (either initially or
under certain circumstances), which rights or warrants, until the
occurrence of a specified event or events ("Trigger Event"): (i) are
deemed to be transferred with such shares of Common Stock; (ii) are not
exercisable; and (iii) are also issued in respect of future issuances
of Common Stock, shall not be deemed not to have been distributed for
purposes of this Section 15.5 (and no adjustment to the Conversion
Price under this Section 15.5) will be required until the occurrence of
the earliest Trigger Event. If any such rights or warrants, including
any such existing rights or warrants distributed prior to the date of
this Indenture (including the Rights), are subject to Trigger Events,
upon the satisfaction of each of which such rights or warrants shall
become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such Trigger
Event shall be deemed to be such date of issuance and record date with
respect to new rights or warrants (and a termination or expiration of
the existing rights or warrants without exercise by the holder thereof)
(so that, by way of illustration and not limitation, the dates of
issuance of any Rights shall be deemed to be the dates on which such
Rights become exercisable to purchase capital stock of the Company, and
not the date on which such Rights may be issued, or may become
evidenced by separate certificates, if such Rights are not then so
exercisable). In addition, in the event of any distribution of rights
or warrants, or any Trigger Event with respect thereto (including the
Rights), that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Price under this
Section 15.5 was made, (1) in the case of any such rights or warrants
which shall all have been redeemed or repurchased without exercise by
any holders thereof, the Conversion Price shall be readjusted upon such
final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash
distribution, equal to the par share redemption or repurchase price
received by a holder or holders of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such rights or
warrants (including the Rights) which shall have expired or been
terminated without exercise by any holders
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thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and
(b), any dividend or distribution to which this Section 15.5(d) is
applicable that also includes shares of Common Stock, or rights or
warrants to subscribe for or purchase shares of Common Stock to which
Section 15.5(b) applies (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets,
shares of capital stock, rights or warrants other than such shares of
Common Stock or rights or warrants to which Section 15.5(b) applies
(and any Conversion Price reduction required by this Section 15.5(d)
with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares
of Common Stock or such rights or warrants (and any further Conversion
Price reduction required by Sections 15.5(a) and (b) with respect to
such dividend or distribution shall then be made, except (A) the Record
Date of such dividend or distribution shall be substituted as "the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution", "Record Date fixed for such
determination" and "Record Date" within the meaning of Section 15.5(a)
and as "the date fixed for the determination of stockholders entitled
to receive such rights or warrants", "the Record Date fixed for the
determination of the stockholders entitled to receive such rights or
warrants" and "such Record Date" within the meaning of Section 15.5(b)
and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business
on the date fixed for such determination" within the meaning of Section
15.5(a).
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash
that is distributed upon a merger or consolidation to which Section
15.6 applies or as part of a distribution referred to in Section
15.5(d)) in an aggregate amount that, combined together with (1) the
aggregate amount of any other such distributions to all holders of its
Common Stock made exclusively in cash within the twelve (12) months
preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to this Section 15.5(e) has been made, and
(2) the aggregate of any cash plus the fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution) of consideration payable in respect of
any tender offer by the Company or any of its subsidiaries for all or
any portion of the Common Stock concluded within the twelve (12) months
preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to Section 15.5(f)
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has been made, exceeds 10.0% of the product of the Current Market Price
(determined as provided in Section 15.5(g)) on the Record Date with
respect to such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately
after the close of business on such date, unless the Company elects to
reserve such cash for distribution to the holders of the Notes upon the
conversion of the Notes (and shall have made adequate provision) so
that any such holder converting Notes will receive upon such
conversion, in addition to the shares of Common Stock to which such
holder is entitled, the amount of cash which such holder would have
received if such holder had, immediately prior to the Record Date for
such distribution of cash, converted its Notes into Common Stock, the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such Record Date by a
fraction (i) the numerator of which shall be equal to the Current
Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 10.0% and (y) the
number of shares of Common Stock outstanding on the Record Date and
(ii) the denominator of which shall be equal to the Current Market
Price on such date; provided, however, that in the event the portion of
the cash so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price of the Common Stock
on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Noteholder shall have the right to
receive upon conversion of a Note (or any portion thereof) the amount
of cash such holder would have received had such holder converted such
Note (or portion thereof) immediately prior to such Record Date. In the
event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such dividend or distribution had not
been declared.
(f) In case a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall expire
and such tender offer (as amended upon the expiration thereof) shall
require the payment to stockholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased Shares
(as defined below)) of an aggregate consideration having a fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) that combined
together with (1) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration
of such tender offer, of consideration payable in respect of any
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other tender offers, by the Company or any of its subsidiaries for all
or any portion of the Common Stock expiring within the twelve (12)
months preceding the expiration of such tender offer and in respect of
which no adjustment pursuant to this Section 15.5(f) has been made and
(2) the aggregate amount of any distributions to all holders of the
Company's Common Stock made exclusively in cash within twelve (12)
months preceding the expiration of such tender offer and in respect of
which no adjustment pursuant to Section 15.5(e) has been made, exceeds
10.0% of the product of the Current Market Price (determined as
provided in Section 15.5(g)) as of the last time (the "Expiration
Time") tenders could have been made pursuant to such tender offer (as
it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time,
then, and in each such case, immediately prior to the opening of
business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to close of business on the date of the Expiration
Time by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding (including any tendered shares) on the
Expiration Time multiplied by the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time and the
denominator shall be the sum of (x) the fair market value (determined
as aforesaid) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of
the tender offer) of all shares validly tendered and not withdrawn as
of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any
Purchased Shares) on the Expiration Time and the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration
Time, such reduction (if any) to become effective immediately prior to
the opening of business on the day following the Expiration Time. In
the event that the Company is obligated to purchase shares pursuant to
any such tender offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases
are rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such tender offer had
not been made. If the application of this Section 15.5(f) to any tender
offer would result in an increase in the Conversion Price, no
adjustment shall be made for such tender offer under this Section
15.5(f).
(g) For purposes of this Section 15.5, the following terms
shall have the meaning indicated:
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(1) "Closing Price" with respect to any securities on
any day shall mean the closing sale price regular way on such
day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices, regular
way, in each case on the Nasdaq National Market or New York
Stock Exchange, as applicable, or, if such security is not
listed or admitted to trading on such National Market or
Exchange, on the principal national security exchange or
quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted
to trading on any national securities exchange or quotation
system, the average of the closing bid and asked prices of
such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting
service, or if not so available, in such manner as furnished
by any New York Stock Exchange member firm selected from time
to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board
Resolution.
(2) "Current Market Price" shall mean the average of
the daily Closing Prices per share of Common Stock for the ten
(10) consecutive Trading Days immediately prior to the date in
question; provided, however, that (1) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e) or (f) occurs during such ten (10)
consecutive Trading Days, the Closing Price for each Trading
Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (2) if the "ex" date
for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 15.5(a), (b), (c), (d),
(e) or (f) occurs on or after the "ex" date for the issuance
or distribution requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the
fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, and (3) if the "ex"
date for the issuance, distribution requiring such computation
is prior to the day in question, after taking into account any
adjustment
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required pursuant to clause (1) or (2) of this proviso, the
Closing Price for each Trading Day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and
the fair market value (as determined by the Board of Directors
in a manner consistent with any determination of such value
for purposes of Section 15.5(d) or (f), whose determination
shall be conclusive and described in a Board Resolution) of
the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common
Stock as of the close of business on the day before such "ex"
date. For purposes of any computation under Section 15.5(f),
the Current Market Price of the Common Stock on any date shall
be deemed to be the average of the daily Closing Prices per
share of Common Stock for such day and the next two succeeding
Trading Days; provided, however, that if the "ex" date for any
event (other than the tender offer requiring such computation)
that requires an adjustment to the Conversion Price pursuant
to Section 15.5(a), (b), (c), (d), (e) or (f) occurs on or
after the Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in question,
the Closing Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result
of such other event. For purposes of this paragraph, the term
"ex" date, (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant
market from which the Closing Price was obtained without the
right to receive such issuance or distribution, (2) when used
with respect to any subdivision or combination of shares of
Common Stock, means the first date on which the Common Stock
trades regular way on such exchange or in such market after
the time at which such subdivision or combination becomes
effective, and (3) when used with respect to any tender or
exchange offer means the first date on which the Common Stock
trades regular way on such exchange or in such market after
the Expiration Time of such offer. Notwithstanding the
foregoing, whenever successive adjustments to the Conversion
Price are called for pursuant to this Section 15.5, such
adjustments shall be made to the Current Market Price as may
be necessary or appropriate to effectuate the intent of this
Section 15.5 and to avoid unjust or inequitable results as
determined in good faith by the Board of Directors.
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(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's length
transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable
security is listed or admitted for trading on the New York
Stock Exchange or another national security exchange, a day on
which the New York Stock Exchange or another national security
exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on
which trades may be made thereon or (z) if the applicable
security is not so listed, admitted for trading or quoted, any
day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or
obligated by law or executive order to close.
(h) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 15.5(a), (b), (c),
(d), (e) and (f), as the Board of Directors considers to be advisable
to avoid or diminish any income tax to holders of Common Stock or
rights to purchase Common stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from
time to time may reduce the Conversion Price by any amount for any
period of time if the period is at least twenty (20) days, the
reduction is irrevocable during the period and the Board of Directors
shall have made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive
and described in a Board Resolution, provided that prior to making any
such reduction, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that such reduction in the Conversion
Price would not have an adverse effect on Holders which do not elect to
convert during the effective period of the reduced Conversion Price
under applicable federal income
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tax laws. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to the holder of each Note
at his last address appearing on the Note register provided for in
Section 2.5 a notice of the reduction at least fifteen (15) days prior
to the date the reduced Conversion Price takes effect, and such notice
shall state the reduced Conversion Price and the period during which it
will be in effect.
(i) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustments which
by reason of this Section 15.5(i) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Article XV shall be made by the Company and
shall be made to the nearest cent or to the nearest one hundredth of a
share, as the case may be.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
(j) Whenever the Conversion Price is adjusted as herein
provided (other than in the case of an adjustment pursuant to the
second paragraph of Section 15.5(h) for which the notice required by
such paragraph has been provided), the Company shall promptly file with
the Trustee and any conversion agent other than the Trustee an
Officers' Certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Conversion
Price setting forth the adjusted Conversion Price and the date on which
each adjustment becomes effective and shall mail such notice of such
adjustment of the Conversion Price to the holder of each Note at his
last address appearing on the Note register provided for in Section
2.5, within twenty (20) days of the effective date of such adjustment.
Failure to deliver such notice shall not effect the legality or
validity of any such adjustment.
(k) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a Record Date for
an event, the Company may defer until the occurrence of such event (i)
issuing to the holder of any Note converted after such Record Date and
before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and
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(ii) paying to such holder any amount in cash in lieu of any fraction
pursuant to Section 15.3.
(l) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture if such supplemental indenture is then required
to so comply) providing that such Note shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Notes) immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance is not the same for each share of Common
Stock in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 15.6 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance for each non-electing share shall
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be deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. If, in the case of any such
reclassification, change, consolidation, merger, combination, sale or
conveyance, the stock or other securities and assets receivable thereupon by a
holder of shares of Common Stock includes shares of stock or other securities
and assets of a corporation other than the successor or purchasing corporation,
as the case may be, in such reclassification, change, consolidation, merger,
combination, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the holders of the Notes as the Board of Directors
shall reasonably consider necessary by reason of the foregoing.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
Section 15.7 Taxes on Shares Issued. The issue of stock certificates on
conversions of Notes shall be made without charge to the converting Noteholder
for any tax in respect of the issue thereof. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of stock in any name other than that of the holder of
any Note converted, and the Company shall not be required to issue or deliver
any such stock certificate unless and until the person or persons requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
Section 15.8 Reservation of Shares; Shares to Be Fully Paid; Listing of
Common Stock. The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Notes from time to time as such Notes are
presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of
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the shares of Common Stock issuable upon conversion of the Notes, the Company
will take all corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue shares of such
Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by the Company and free from all taxes, liens and charges with respect to the
issue thereof.
The Company covenants that if any shares of Common Stock to be provided
for the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that if at any time the Common Stock
shall be listed on the Nasdaq National Market, the New York Stock Exchange or
any other national securities exchange the Company will, if permitted by the
rules of such exchange, list and keep listed, so long as the Common Stock shall
be so listed on such market or exchange, all Common Stock issuable upon
conversion of the Notes.
Section 15.9 Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any holder of Notes to determine whether any facts exist which may require any
adjustment of the conversion price, or with respect to the nature or extent or
calculation of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Note; and the Trustee and any
other conversion agent make no representations with respect thereto. Subject to
the provisions of Section 8.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the Company
contained in this Article. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to
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the kind or amount of shares of stock or securities or property (including cash)
receivable by Noteholders upon the conversion of their Notes after any event
referred to in such Section 15.6 or to any adjustment to be made with respect
thereto, but, subject to the provisions of Section 8.1, may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, the Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such supplemental indenture)
with respect thereto.
Section 15.10 Notice to Holders Prior to Certain Actions. In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock (other than in cash out of retained
earnings); or
(b) the Company shall authorize the granting to the holders
of its Common Stock of rights or warrants to subscribe for or purchase
any share of any class or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common
Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to
which the Company is a party and for which approval of any shareholders
of the Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register, provided for in
Section 2.05 of this Indenture, as promptly as possible but in any event at
least fifteen days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect
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therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
ARTICLE XVI
REPURCHASE UPON A DESIGNATED EVENT
Section 16.1 Repurchase Right.
(a) If there shall occur a Designated Event prior to June 1,
2002, then each Noteholder shall have the right, at such holder's
option, to require the Company to repurchase all of such holder's
Notes, or any portion thereof (in principal amounts of $1,000 or
integral multiples thereof), on the repurchase date that is thirty (30)
days after the date of the Company Notice (as defined in Section 16.2
below) of such Designated Event (or, if such 30th day is not a Business
Day, the next succeeding Business Day). Such repayment shall be made at
the following prices (expressed as percentages of the principal amount)
in the event of a Designated Event occurring during the 12-month period
beginning June 1 (the "Repurchase Price"):
Year Percentage Year Percentage
---- ---------- ---- ---------
1995........ % 1999........ %
1996........ 2000........
1997........ 2001........
1998........
and 100% at June 1, 2002; provided that if such repurchase date is June
1 or December 1, then the interest payable on such date shall be paid
to the holder of record of the Note on the next preceding May 15 or
November 15, respectively. In each case, the Company shall also pay to
such holders accrued interest to the repurchase date on the redeemed
Notes.
Section 16.2 Notices; Method of Exercising Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the outstanding Notes, on or before the fifteenth
(15th) calendar day after the occurrence of a Designated Event, the
Company or, at the request of the Company, the Trustee, shall mail to
all holders a notice (the "Company Notice") of the occurrence of the
Designated Event and of the repurchase right set forth herein arising
as a
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result thereof. The Company shall also deliver a copy of such notice of
a repurchase right to the Trustee and cause a copy of such notice of a
repurchase right, or a summary of the information contained therein, to
be published in a newspaper of general circulation in The City of New
York.
(1) the repurchase date,
(2) the date by which the repurchase right must be
exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a holder
must follow to exercise a repurchase right, and
(5) the Conversion Price then in effect, the date
on which the right to convert the principal amount of the
Notes to be repurchased will terminate and the place or
places where Notes may be surrendered for conversion.
No failure of the Company to give the foregoing notices or
defect therein shall limit any holder's right to exercise a repurchase
right or affect the validity of the proceedings for the repurchase of
Notes.
If any of the foregoing provisions are inconsistent with
applicable law, such law shall govern.
(b) To exercise a repurchase right, a holder shall deliver to
the Trustee on or before the thirtieth (30th) day after the Company
Notice (i) irrevocable written notice to the Company (or a agent
designated by the Company for such purpose) of the holder's exercise of
such right, which notice shall set forth the name of the holder, the
principal amount of the Notes to be repurchased, a statement that an
election to exercise the repurchase right is being made thereby, and
(ii) the Notes with respect to which the repurchase right is being
exercised, duly endorsed for transfer to the Company. Such written
notice shall be irrevocable, and, subject to Section 16.2(c), upon the
exercise of the repurchase right in accordance with this Section
16.2(b), the holder's right to convert the Notes (or portion thereof)
as to which the repurchase right has been exercised shall terminate.
(c) If the Company fails to repurchase on the repurchase date
any Notes (or portions thereof) as to which the repurchase right has
been properly exercised, then the principal of such Notes shall, until
paid, bear interest to the extent permitted by applicable law from the
repurchase date at the rate borne by the Note and each such Note shall
be convertible
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into Common Stock in accordance with this Indenture (without giving
effect to Section 16.2(b)) until the principal of such Note shall have
been paid or duly provided for.
(d) Any Note which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the
holder thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate and deliver
to the holder of such Note without service charge, a new Note or Notes,
containing identical terms and conditions, of any authorized
denomination as requested by such holder in aggregate principal amount
equal to and in exchange for the unrepurchased portion of the principal
of the Note so surrendered.
(e) Prior to the repurchase date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting
as its own paying agent, segregate and hold in trust as provided in
Section 5.4) an amount of money sufficient to pay the Repurchase Price
of the Notes that are to be repaid on the repurchase date.
Section 16.3 Certain Definitions. For purposes of this Article XVI:
(a) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3 and 13d-5, as in effect on the date of the
original execution of this Indenture, promulgated by the Securities and
Exchange Commission pursuant to the Exchange Act;
(b) the term "person" or "group" shall include any syndicate
or group which would be deemed to be a "person" under Section 13(d)(3)
and 14(d) of the Securities Exchange Act of 1934, as amended, as in
effect on the date of the original execution of this Indenture; and
(c) the term "Continuing Director" means at any date a member
of the Company's Board of Directors (i) who was a member of such board
on June __, 1995 or (ii) who was nominated or elected by at least a
majority of the directors who were Continuing Directors at the time of
such nomination or election or whose election to the Company's Board of
Directors was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination
or election.
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(d) a "Designated Event" shall be deemed to have occurred at
such time as:
(1) an event or series of events as a result of which
(i) any person or group is or becomes the beneficial owner of
shares representing more than 50% of the combined voting power
of the then outstanding securities entitled to vote generally
in elections of directors of the Company (the "Voting Stock"),
(ii) the Company consolidates with or merges into any other
corporation, or conveys, transfers or leases all or
substantially all of its assets to any person, or any other
corporation merges into the Company, and, in the case of any
such transaction, the outstanding common stock of the Company
is changed or exchanged as a result, unless the stockholders
of the Company immediately before such transaction own,
directly or indirectly immediately following such transaction,
at least a majority of the combined voting power of the
outstanding voting securities of the corporation resulting
from such transaction in substantially the same proportion as
their ownership of the Voting Stock immediately before such
transaction, or (iii) any time Continuing Directors do not
constitute a majority of the Board of Directors of the Company
(or, if applicable, a successor corporation to the Company);
provided that a Change in Control shall not be deemed to have
occurred if either (x) the Closing Price of the Common Stock
for any five (5) Trading Days during the ten (10) Trading Days
immediately preceding the Change in Control is at least equal
to 115% of the Conversion Price in effect on the date on which
the Change of Control occurs or (y) (A) at least 90% of the
consideration (excluding cash payments for fractional shares)
in the transaction or transactions constituting the Change in
Control consists of common stock or securities convertible
into common stock that are, or upon issuance will be, traded
on a United States national securities exchange or approved
for trading on an established automated over-the-counter
trading market in the United States; and (B) after giving
effect to such transaction or transactions and for a period of
12 months thereafter the Notes have a rating of ("BB-") or
, or better (or equivalent ratings under successor rating
classifications) by Moody's Investors Service, Inc. or
Standard & Poor's Corporation (or successor rating agencies);
or
(2) the Common Stock of the Company (or other common
stock into which the Notes are then convertible) is neither
listed for trading on a United States national securities
exchange nor approved for trading on an estab-
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lished automated over-the-counter trading market in the United States.
For purposes of clause (y) of this Section 16.3(d), the
transaction or transactions which would have constituted a Designated
Event but for the provisos set forth in such clause, shall be deemed to
result in a Designated Event at such time as all of the requirements of
clause (y) are no longer satisfied.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1 Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements of the Company in this
Indenture contained shall bind its successors and assigns whether so expressed
or not.
Section 17.2 Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 17.3 Addresses for Notices, Etc. 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 Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Integrated Device Technology, Inc., 2975 Stender Way, Santa Clara,
California, 95054, Attention: Chief Financial Officer. Any notice, direction,
request or demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office of the Trustee, which office
is, at the date as of which this Indenture is dated, located at Blue Hills
Office Park, 150 Royall Street, Canton, Massachusetts 02021, Attention:
Corporate Trust Division (Integrated Device Technology, Inc. % Convertible
Subordinated Notes due 2002).
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
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Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 17.4 Governing Law. This Indenture and each Note shall be
deemed to be a contract made under the laws of New York, and for all purposes
shall be construed in accordance with the laws of New York.
Section 17.5 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, 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.
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 (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based; (3) 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 (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 17.6 Legal Holidays. In any case where the date of maturity of
interest on or principal of the Notes or the date fixed for redemption of any
Note will not be a Business Day, then payment of such interest on or principal
of the Notes 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 from and after such date.
Section 17.7 No Security Interest Created. Nothing in this Indenture or
in the Notes, expressed or implied, shall be construed
-80-
<PAGE>
to constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction.
Section 17.8 Trust Indenture Act to Control. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture which is required to be included in this
Indenture by any of Sections 310 to 317, inclusive, of the Trust Indenture Act,
such required provision shall control.
Section 17.9 Benefits of Indenture. Nothing in this Indenture or in the
Notes, expressed or implied, shall give to any person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar and their
successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 17.10 Table of Contents, Headings, Etc. The table of contents
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 17.11 Authenticating Agent. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication. Such authenticating agent shall at all times be a person
eligible to serve as trustee hereunder pursuant to Section 8.9.
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper
-81-
<PAGE>
or any further act on the part of the parties hereto or the authenticating agent
or such successor corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination to such authenticating agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor authenticating agent (which may be
the Trustee), shall give written notice of such appointment to the Company and
shall mail notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11
shall be applicable to any authenticating agent.
Section 17.12 Execution in 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.
The First National Bank of Boston hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
-82-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
INTEGRATED DEVICE TECHNOLOGY, INC.
By:
--------------------------------
Title:
-----------------------------
Attest:
- -----------------------------------
THE FIRST NATIONAL BANK OF
BOSTON, as Trustee
By:
------------------------------
Title:
----------------------------
Attest:
- ------------------------------------
-83-
<PAGE>
EXHIBIT A - FORM OF NOTE
[FORM OF FACE OF NOTE]
No. $
----------------- ------------------
INTEGRATED DEVICE TECHNOLOGY, INC.
% Convertible Subordinated Note due 2002
INTEGRATED DEVICE TECHNOLOGY, INC., a corporation duly organized and
validly existing under the laws of the State of California (herein called the
"Company"), which term includes any successor corporation under the Indenture
referred to on the reverse hereof, for value received hereby promises to pay to
, or registered assigns, the principal sum of
Dollars on June 1, 2002, and to
pay interest on said principal sum semi-annually on June 1 and December 1 of
each year, commencing December 1, 1995, at the rate per annum specified in the
title of this Note, accrued from the June 1 or December 1, as the case may be,
next preceding the date of this Note to which interest has been paid or duly
provided for, unless the date of this Note is a date to which interest has been
paid or duly provided for, in which case interest shall accrue from the date of
this Note, or unless no interest has been paid or duly provided for on this
Note, in which case interest shall accrue from June , 1995, until payment of
said principal sum has been made or duly provided for. Notwithstanding the
foregoing, if the date hereof is after any May 15 or November 15, as the case
may be, and before the following June 1 or December 1, this Note shall bear
interest from such June 1 or December 1, respectively; provided, however, that
if the Company shall default in the payment of interest due on such June 1 or
December 1, then this Note shall bear interest from the next preceding June 1 or
December 1 to which interest has been paid or duly provided for or, if no
interest has been paid or duly provided for on this Note, from June , 1995.
The interest so payable on any June 1 or December 1 will be paid to the person
in whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on the record date, which shall be the May 15 or November 15
(whether or not a Business Day) next preceding such June 1 or December 1,
respectively; provided that any such interest not punctually paid or duly
provided for shall be payable as provided in the Indenture. Payment of the
principal of and interest accrued on this Note shall be made at the office or
agency of the Company maintained for that purpose in the Borough of Manhattan,
The City of New York, or, at the option of the holder of this Note, at the
Corporate Trust Office of the Trustee, 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; provided, however, that at the option of
the Company,
<PAGE>
payment of interest may be made by check mailed to the registered address of the
person entitled thereto.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on this Note to the
prior payment in full of all Senior Indebtedness as defined in the Indenture and
provisions giving the holder of this Note the right to convert this Note into
Common Stock of the Company on the terms and subject to the limitations referred
to on the reverse hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of said State.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee or a duly authorized authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
INTEGRATED DEVICE TECHNOLOGY, INC.
Dated: By:
---------------------------------- --------------------------------
Title:
Attest:
-----------------------------------
Secretary
-2-
<PAGE>
[FORM OF CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
THE FIRST NATIONAL BANK OF BOSTON, as Trustee
By:
-------------------------------------
Authorized Signatory
[FORM OF REVERSE OF NOTE]
INTEGRATED DEVICE TECHNOLOGY, INC.
% Convertible Subordinated Note due 2002
This Note is one of a duly authorized issue of Notes of the Company,
designated as its % Convertible Subordinated Notes due 2002 (herein called
the "Notes"), limited to the aggregate principal amount of $172,500,000 all
issued or to be issued under and pursuant to an Indenture dated as of June 1,
1995 (herein called the "Indenture"), between the Company and The First National
Bank of Boston (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and accrued interest on all Notes
may be declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than 66 2/3% of the
aggregate principal amount of the Notes 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 Notes; provided, however, that no such
-3-
<PAGE>
supplemental indenture shall (i) extend the fixed maturity of any Note, or
reduce the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof or premium, if any, thereon, or reduce any amount
payable on redemption or repurchase thereof, change the obligation of the
Company to repurchase any Note upon the happening of a Designated Event, or
impair or affect the right of any Noteholder to institute suit for the payment
thereof, or make the principal thereof or interest or premium, if any, thereon
payable in any coin or currency other than that provided in the Notes, or modify
the provisions of the Indenture with respect to the subordination of the Notes
in a manner adverse to the Noteholders, or impair the right to convert the Notes
into Common Stock subject to the terms set forth in the Indenture, including
Section 15.6 thereof, without the consent of the holder of each Note so affected
or (ii) reduce the aforesaid percentage of Notes, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of all Notes then outstanding. It is also provided in the Indenture
that, prior to any declaration accelerating the maturity of the Notes, the
holders of a majority in aggregate principal amount of the Notes at the time
outstanding may on behalf of the holders of all of the Notes waive any past
default or Event of Default under the Indenture and its consequences except a
default in the payment of interest or any premium on or the principal of or any
redemption price or repurchase price of any of the Notes or a failure by the
Company to convert any Notes into Common Stock of the Company. Any such consent
or waiver by the holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney in fact for such purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at
-4-
<PAGE>
the respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a year of
twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
The Notes will not be redeemable at the option of the Company prior to
June 2, 1998. On or after such date and prior to maturity the Notes may be
redeemed at the option of the Company as a whole, or from time to time in part,
upon mailing a notice of such redemption not less than 15 nor more than 60 days
before the date fixed for redemption to the holders of Notes at their last
registered addresses, all as provided in the Indenture, at the following
redemption prices (expressed as percentages of the principal amount), together
in each case with accrued interest to the date fixed for redemption.
If redeemed during the 12-month period beginning April 1:
Year Percentage Year Percentage
---- ---------- ---- ----------
1998.................... % 2000.................... %
1999.................... 2001....................
and 100% at June 1, 2002; provided that if the date fixed for redemption is an
June 1 or December 1, then the interest payable on such date shall be paid to
the holder of record on the next preceding May 15 or November 15, respectively.
Upon the occurrence of a "Designated Event" prior to June 1, 2001, the
Notes will be repurchased on the 30th day after notice thereof at the option of
the holder. Such payment shall be made at the following repurchase prices
(expressed as percentages of the principal amount), together in each case with
accrued interest to the date fixed for redemption. In the event of a Designated
Event occurring during the 12-month period beginning June 1:
-5-
<PAGE>
Year Percentage Year Percentage
---- ---------- ---- ----------
1995................... % 1999.................... %
1996................... 2000....................
1997................... 2001....................
1998...................
and 100% at June 1, 2002; provided that if such repurchase date is June 1 or
December 1, then the interest payable on such date shall be paid to the holder
of record of the Note on the next preceding May 15 or November 15, respectively.
The Company shall mail to all holders of record of the Notes a notice of the
occurrence of a Designated Event and of the repurchase right arising as a result
thereof 15 calendar days after the occurrence of such Designated Event.
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time after 60 days following the latest date of
original issuance of the Notes and prior to the close of business on June 1,
2002, or, as to all or any portion hereof called for redemption, prior to the
close of business on the Trading Day next preceding the date fixed for
redemption or repurchase, as the case may be (unless the Company shall default
in payment due upon redemption or repurchase, as the case may be, thereof), to
convert the principal hereof or any portion of such principal which is $1,000 or
an integral multiple thereof, into that number of fully paid and non-assessable
shares of Company's Common Stock, as said shares shall be constituted at the
date of conversion, obtained by dividing the principal amount of this Note or
portion thereof to be converted by the conversion price of $ or such
conversion price as adjusted from time to time as provided in the Indenture,
upon surrender of this Note, together with a conversion notice as provided in
the Indenture and this Note, to the Company at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City of New
York, or at the option of such holder, the Corporate Trust Office of the
Trustee, and, unless the shares issuable on conversion are to be issued in the
same name as this Note, duly endorsed by, or accompanied by instruments of
transfer in form satisfactory to the Company duly executed by, the holder or by
his duly authorized attorney; provided, however, that in the event, at any time
this Note is surrendered for conversion in whole or in part, the Company does
not have available for issuance upon such conversion at least the number of
shares of authorized Common Stock required to be issued pursuant hereto, then
this Note (or portion thereof as to which conversion has been requested), to the
extent and only to the extent sufficient shares of authorized Common Stock are
not available, shall be converted into the right to receive a payment from the
Company in lieu of the shares of Common Stock into
-6-
<PAGE>
which this Note would otherwise be converted and which the Company is unable to
issue, equal to the number of shares of Common Stock which the Company is unable
to issue multiplied by the average of the Closing Price (as defined in the
Indenture) for the Company's Common Stock (determined as set forth in the
Indenture) during the five Trading Days immediately prior to the date on which
the holder of such Note (or specified portion thereof) is deemed to have been
converted pursuant to the Indenture. No adjustment in respect of interest or
dividends will be made upon any conversion; provided, however, that if this Note
shall be surrendered for conversion during the period from the close of business
on any record date for the payment of interest through the close of business on
the Trading Day next preceding the following interest payment date, this Note
(unless it or the portion being converted shall have been called for redemption
on a date in such period) must be accompanied by an amount, in funds acceptable
to the Company, equal to the interest payable on such interest payment date on
the principal amount being converted. No fractional shares will be issued upon
any conversion, but an adjustment in cash will be made, as provided in the
Indenture, in respect of any fraction of a share which would otherwise be
issuable upon the surrender of any Note or Notes for conversion.
Any Notes called for redemption, unless surrendered for conversion on
or before the close of business on the date fixed for redemption, may be deemed
to be purchased from the holder of such Notes at an amount equal to the
applicable redemption price, together with accrued interest to the date fixed
for redemption, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the holders thereof and
convert them into Common Stock of the Company and to make payment for such Notes
as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or at the option of the holder of this Note, at the Corporate Trust Office
of the Trustee, a new Note or Notes of authorized denominations for an equal
aggregate principal amount will be issued to the transferee in exchange thereof,
subject to the limitations provided in the Indenture, without charge except for
any tax or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion
-7-
<PAGE>
hereof and for all other purposes, and neither the Company nor the Trustee nor
any other authenticating agent nor any paying agent nor any other conversion
agent nor any Note registrar shall be affected by any notice to the contrary.
All payments made to or upon the order of such registered holder shall, to the
extent of the sum or sums paid, satisfy and discharge liability for monies
payable on this Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, employee, agent, officer, director
or subsidiary, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company 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.
Terms used in this Note and defined in the Indenture are used herein as
therein defined.
-8-
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the
entireties ---------------------- Custodian
(Cust)
JT TEN - as joint tenants with
---------------------- under
right of survivorship (Minor)
and not as tenants in
common
Uniform Gifts to
Minors Act
-----------------------
(State)
Additional abbreviations may also be used
though not in the above list.
-9-
<PAGE>
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Integrated Device Technology, Inc.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. Any amount required to be
paid to the undersigned on account of interest accompanies this Note.
Dated:
---------------------------------
--------------------------------
--------------------------------
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17Ad-15 if shares of Common Stock are to
be issued, or Notes to be delivered,
other than to and in the name of the
registered holder.
- ----------------------------------------
Signature Guarantee
-10-
<PAGE>
Fill in for registration of shares if to
be issued, and Notes if to be delivered,
other than to and in the name of the
registered holder:
- ----------------------------------------
(Name)
- ----------------------------------------
(Street Address)
- ----------------------------------------
(City, State and Zip Code)
Please print name and address
Principal amount to be converted
(if less than all): $
----------
--------------------------------
Social Security or Other Tax-
payer Identification Number
-11-
<PAGE>
[FORM OF OPTION TO ELECT REPURCHASE
UPON A DESIGNATED EVENT]
To: Integrated Device Technology, Inc.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Integrated Device Technology, Inc. (the
"Company") as to the occurrence of a Designated Event with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 principal amount or
an integral multiple thereof) below designated, in accordance with the terms of
the Indenture referred to in this Note, together with accrued interest to such
date, to the registered holder hereof.
Dated:
---------------------------------
--------------------------------
--------------------------------
Signature(s)
--------------------------------
Social Security or Other Tax-
payer Identification Number
Principal amount to be repaid
(if less than all): $
---------
NOTICE: The above signatures of
the holder(s) hereof must
correspond with the name as
written upon the face of the
Note in every particular without
alteration or enlargement or any
change whatever.
-12-
<PAGE>
[FORM OF ASSIGNMENT]
For value received hereby sell(s),
assign(s) and transfer(s) unto (Please insert social
security or other identifying number of assignee) the within Note, and hereby
rrevocably constitutes and appoints attorney to transfer
the said Note on the books of the Company, with full power of substitution in
the premises.
Dated:
----------------------------------
- ----------------------------------------
- ----------------------------------------
Signature(s)
Signature(s) must be guaranteed by an
eligible Guarantor Institution (banks,
stock brokers, savings and loan
associations and credit unions) with
membership in an approved signature
guarantee medallion program pursuant to
Securities and Exchange Commission Rule
17Ad-15.
- ----------------------------------------
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect payment upon
a Designed Event or the assignment must correspond with the name as written upon
the face of the Note in every particular without alteration or enlargement or
any change whatever.
-13-
EXHIBIT 5.1
May 18, 1995
Integrated Device Technology, Inc.
2975 Stender Way
Santa Clara, CA 95054
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3
sent by you for filing with the Securities and Exchange Commission ("SEC") on
May 19, 1995 (the "Registration Statement") in connection with the registration
under the Securities Act of 1933, as amended, of (a) up to $172,500,000
aggregate principal amount of your % Convertible Subordinated Notes due
2002 (the "Notes") and (b) the shares of Common Stock, $0.001 par value per
share (the "New Shares"), issuable upon conversion of the Notes. The Notes are
to be issued under an Indenture between you and the First National Bank of
Boston as trustee (the "Indenture"). The Notes are to be sold to the
underwriters named in the Registration Statement for resale to the public.
As your counsel, we have examined the proceedings taken by you in connection
with the proposed issuance and sale by you of the up to $172,500,000 aggregate
principal amount of the Notes.
It is our opinion that (a) the Notes when issued and sold by you in the
manner referred to in the Registration Statement and the Indenture, will be
legally issued and your binding obligations and (b) the New Shares issued upon
conversion of the Notes in the manner referred to in the Registration Statement,
the Notes and the Indenture will be legally issued, fully paid and
non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the Prospectus constituting a part thereof and any amendments thereto
that have been approved by us.
Very truly yours,
Fenwick & West
<TABLE>
EXHIBIT 12.1
INTEGRATED DEVICE TECHNOLOGY, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS, EXCEPT RATIOS)
<CAPTION>
FISCAL FISCAL FISCAL FISCAL FISCAL
1991 1992 1993 1994 1995
-------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Pre-tax income (loss) .............$ 836 $(34,768) $ 6,278 $50,206 $104,403
-------- ----------- --------- --------- ----------
Fixed charges:
Interest expense ................ 6,507 7,045 5,855 5,165 3,298
33% of rent expense ............. 1,370 1,267 1,090 1,151 1,098
-------- ----------- --------- --------- ----------
Total fixed charges ........... 7,877 8,312 6,945 6,316 4,396
-------- ----------- --------- --------- ----------
Earnings before taxes and fixed
charges .........................$8,713 $(26,456) $13,223 $56,522 $108,799
======== =========== ========= ========= ==========
Ratio of earnings to fixed charges 1.11x (1.83)x 1.90x 8.95x 24.75x
======== =========== ========= ========= ==========
</TABLE>
EXHIBIT 25.1
SECURITIES ACT OF 1933 FILE NO: (IF APPLICATION TO DETERMINE ELIGIBILITY
OF TRUSTEE FOR DELAYED OFFERING PURSUANT TO SECTION 305(B)(2))
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B) (2)----------
----------
THE FIRST NATIONAL BANK OF BOSTON
(Exact name of trustee as specified in its charter)
04-2472499
(I.R.S. Employee Identification No.)
100 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
GARY A. SPEISS, CASHIER AND GENERAL COUNSEL
100 FEDERAL STREET, 24TH FLOOR, BOSTON, MASSACHUSETTS 02110 (617) 434-2870
(Name, address and telephone number of agent for service)
----------
INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 94-2669985
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2975 STENDER WAY 95054
SANTA CLARA, CA (Zip Code)
(Address of principal executive offices)
% CONVERTIBLE SUBORDINATED NOTES DUE 2002
(Title of indenture securities)
==============================================================================
<PAGE>
1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
Comptroller of the Currency of the United States, Washington D.C.
Board of Governors of the Federal Reserve System, Washington, D.C.
Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR OR ANY UNDERWRITER FOR THE OBLIGOR IS AN AFFILIATE OF THE
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
None with respect to the Trustee. (See Notes on page 2)
None with respect to Bank of Boston Corporation.
3. THROUGH 15 NOT APPLICABLE.
16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY AND
QUALIFICATION.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A certified copy of the Articles of Association of the trustee is filed as
Exhibit No. 1 to statement of eligibility and qualification No. 22-9514 and
is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of the certificate of T. McLean Griffin, Cashier of the trustee, dated
February 3, 1978, as to corporate succession containing copies of the
Certificate of the Comptroller of the Currency that The Massachusetts Bank,
National Association, into which The First National Bank of Boston was merged
effective January 4, 1971, is authorized to commence the business of banking as
a national banking association, as well as a certificate as to such merger is
filed as Exhibit No. 2 to statement of eligibility and qualification No. 22-9514
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN
PARAGRAPH (1) OR (2) ABOVE.
A copy of a certificate of the Office of the Currency dated February 6,
1978 is filed as Exhibit No. 3 to statement of eligibility and qualification
No. 22-9514 and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A certified copy of the existing By-Laws of the trustee dated December 23,
1993 is filed as Exhibit No. 4 to statement of eligibility and qualification
No. 22-25754 and is incorporated herein by reference thereto.
5. THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is annexed
hereto and made a part hereof.
6. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
2
<PAGE>
A copy of the latest report of condition of the trustee published pursuant to
law or the requirements of its supervising or examining authority is annexed
hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item in this Statement of Eligibility and Qualification
which relates to matters peculiarly within the knowledge of the obligor or any
underwriter for the obligor, the trustee has relied upon information furnished
to it by the obligor and the underwriters, and the trustee disclaims
responsibility for the accuracy or completeness of such information.
The answer furnished to Item 2 of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
3
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE TRUSTEE,
THE FIRST NATIONAL BANK OF BOSTON, A NATIONAL BANKING ASSOCIATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS DULY CAUSED THIS
STATEMENT OF ELIGIBILITY AND QUALIFICATION TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE TOWN OF CANTON AND
COMMONWEALTH OF MASSACHUSETTS, ON THE 18TH DAY OF MAY, 1995.
THE FIRST NATIONAL BANK OF BOSTON, TRUSTEE
BY: DONNA L. GERMANO
-------------------------------------------
DONNA L. GERMANO
ACCOUNT MANAGER
EXHIBIT 6
CONSENT OF TRUSTEE
PURSUANT TO THE REQUIREMENTS OF SECTION 321(B) OF THE TRUST INDENTURE ACT
OF 1939 IN CONNECTION WITH THE PROPOSED ISSUE BY INTEGRATED DEVICE
TECHNOLOGY, % CONVERTIBLE SUBORDINATED NOTES DUE 2002, WE HEREBY CONSENT
THAT REPORTS OF EXAMINATIONS BY FEDERAL, STATE, TERRITORIAL, OR DISTRICT
AUTHORITIES MAY BE FURNISHED BY SUCH AUTHORITIES TO THE SECURITIES AND
EXCHANGE COMMISSION UPON REQUEST THEREFOR.
THE FIRST NATIONAL BANK OF BOSTON, TRUSTEE
BY: DONNA L. GERMANO
-------------------------------------------
DONNA L. GERMANO
ACCOUNT MANAGER
4
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION, INCLUDING DOMESTIC AND FOREIGN
SUBSIDIARIES, OF
THE FIRST NATIONAL BANK OF BOSTON
In the Commonwealth of Massachusetts, at the close of business on December
31, 1994. Published in response to call made by Comptroller of the Currency,
under Title 12, United States Code, Secton 161. Charter number 200.
Comptroller of the Currency Northeastern District.
ASSETS
<TABLE>
<CAPTION>
DOLLAR
AMOUNTS IN
THOUSANDS
-------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ...............................$ 1,862,093
Interest-bearing balances ...................................................... 1,551,280
Securities ......................................................................... 3,935,691
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in
IBF's:
Federal funds sold ............................................................. 758,937
Securities purchased under agreements to resell ................................ 0
Loans and lease financing receivables:
Loans and leases, net of unearned income ...........................$25,796,462
LESS: Allowance for loan and lease losses...............................534,630
LESS: Allocated transfer risk reserve .......................................0
Loans and leases, net of unearned income, allowance and reserve .................. 25,261,832
Assets held in trading accounts .................................................... 840,348
Premises and fixed assets (including capitalized leases) ........................... 398,475
Other real estate owned ............................................................ 48,504
Investments in unconsolidated subsidiaries and associated companies ............... 103,670
Customers' liability to this bank on acceptances outstanding ....................... 304,031
Intangible assets .................................................................. 651,394
Other assets ....................................................................... 1,170,251
-------------
TOTAL ASSETS ................................................................... $36,886,506
=============
LIABILITIES
Deposits:
In domestic offices ............................................................. $14,924,310
Noninterest-bearing .................................................$ 4,035,673
Interest-bearing .....................................................10,888,637
In foreign offices, Edge and Agreement subsidiaries, and IBF's ................... 9,998,764
Noninterest-bearing .....................................................570,582
Interest-bearing ......................................................9,428,182
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in
IBF's:
Federal funds purchased ........................................................ 2,464,904
Securities sold under agreements to repurchase ................................. 277,077
Demand notes issued to the U.S. Treasury ........................................... 364,045
Trading Liabilities ................................................................ 227,865
Other borrowed money ............................................................... 3,875,462
Mortgage indebtedness and obligations under capitalized leases ..................... 14,007
Bank's liability on acceptances executed and outstanding ........................... 305,512
Subordinated notes and debentures .................................................. 979,167
Other liabilities .................................................................. 1,022,105
TOTAL LIABILITIES ..............................................................$34,453,218
===========
Limited-life preferred stock and equity capital ................................ 0
</TABLE>
5
<PAGE>
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............$ 0
Common stock .............................................. 82,264
Surplus ................................................... 987,524
Undivided profits and capital reserves .................... 1,408,062
LESS: Net unrealized loss on marketable equity securities (39,027)
Cumulative foreign currency translation adjustments ...... (5,535)
Total equity capital ...................................... 2,433,288
------------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND
EQUITY ....................................................$36,886,506
============
I, Robert T. Jefferson, Comptroller of the above-named bank, do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
ROBERT T. JEFFERSON
FEBRUARY 13, 1995
We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declare that it has been examined by us, and
to the best of our knowledge and belief has been prepared in conformance with
the instructions and is true and correct.
CHARLES K. GIFFORD
IRA STEPANIAN
J. DONALD MONAN
DIRECTORS
FEBRUARY 13, 1995
6
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-02-1995
<PERIOD-END> APR-02-1995
<CASH> 130211
<SECURITIES> 101874
<RECEIVABLES> 75804
<ALLOWANCES> 3830
<INVENTORY> 37459
<CURRENT-ASSETS> 374974
<PP&E> 384885
<DEPRECIATION> 206105
<TOTAL-ASSETS> 561975
<CURRENT-LIABILITIES> 103279
<BONDS> 0
<COMMON> 38
0
0
<OTHER-SE> 414531
<TOTAL-LIABILITY-AND-EQUITY> 561975
<SALES> 422190
<TOTAL-REVENUES> 422190
<CGS> 179652
<TOTAL-COSTS> 179652
<OTHER-EXPENSES> 143023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3298
<INCOME-PRETAX> 104403
<INCOME-TAX> 26101
<INCOME-CONTINUING> 78302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78302
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.09
</TABLE>
