SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 0-12695
INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2669985
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2975 Stender Way, Santa Clara, California 95054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 727-6116
NONE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports); and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of outstanding shares of the registrant's Common Stock, $.001 par
value, as of January 26, 1997, was 79,593,578.
<PAGE>
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
INTEGRATED DEVICE TECHNOLOGY, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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( In thousands, except per share data)
(Unaudited)
Three months Three months
Ended Ended
December 29, December 31,
1996 1995
--------- ---------
Revenues $ 130,992 $ 188,545
Cost of revenues 83,623 80,400
Asset impairment and other 45,223
--------- ---------
Gross profit 2,146 108,145
--------- ---------
Operating expenses:
Research and development 40,528 35,142
Selling, general and administrative 21,669 23,010
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Total operating expenses 62,197 58,152
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Operating income (loss) (60,051) 49,993
Interest expense (3,612) (2,556)
Interest income and other, net 156 4,821
--------- ---------
Income (loss) before income taxes (63,507) 52,258
Provision (benefit) for income taxes (20,589) 16,723
--------- ---------
Net income (loss) $ (42,918) $ 35,535
========= =========
Net income (loss) per share:
Primary $ (0.55) $ 0.44
Fully Diluted $ (0.55) $ 0.42
Weighted average shares:
Primary 78,527 81,362
Fully Diluted 78,527 88,393
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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INTEGRATED DEVICE TECHNOLOGY, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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( In thousands, except per share data)
(Unaudited)
Nine months Nine months
Ended Ended
December 29, December 31,
1996 1995
--------- ---------
Revenues $ 394,016 $ 519,244
Cost of revenues 237,530 220,441
Asset impairment and other 45,223
--------- ---------
Gross profit 111,263 298,803
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Operating expenses:
Research and development 117,366 96,007
Selling, general and administrative 60,868 65,081
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Total operating expenses 178,234 161,088
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Operating income (loss) (66,971) 137,715
Interest expense (8,350) (7,401)
Interest income and other, net 9,077 14,778
--------- ---------
Income (loss) before income taxes (66,244) 145,092
Provision (benefit) for income taxes (21,861) 46,430
--------- ---------
Net income (loss) $ (44,383) $ 98,662
========= =========
Net income (loss) per share:
Primary $ (0.57) $ 1.21
Fully Diluted $ (0.57) $ 1.18
Weighted average shares:
Primary 78,080 81,859
Fully Diluted 78,080 87,460
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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<TABLE>
INTEGRATED DEVICE TECHNOLOGY, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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(In thousands, except share amounts)
(Unaudited)
<CAPTION>
December 29, March 31,
1996 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 107,428 $ 157,228
Short-term investments 76,872 104,046
Accounts receivable, net 75,349 85,026
Inventory 47,825 46,630
Deferred tax assets 59,346 38,712
Prepayments and other current assets 29,816 15,658
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Total current assets 396,636 447,300
Property, plant and equipment, net 433,926 415,214
Other assets 65,601 76,920
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TOTAL ASSETS $ 896,163 $ 939,434
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 62,414 $ 78,821
Accrued compensation and related expense 13,329 29,237
Deferred income on shipments to distributors 31,700 31,325
Other accrued liabilities 17,712 17,918
Current portion of long-term obligations 5,792 3,799
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Total current liabilities 130,947 161,100
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5.5% Convertible Subordinated Notes, net of issuance costs 183,007 182,558
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Long-term obligations 62,820 46,049
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Commitments and Contingencies
Stockholders' equity:
Preferred stock; $.001 par value:
10,000,000 shares authorized; no shares issued
Common stock; $.001 par value: 200,000,000
shares authorized; 79,339,293 and
77,496,833 shares issued and outstanding 79 77
Additional paid-in capital 301,241 287,064
Retained earnings 218,606 262,989
Unrealized gain on available-for-sale securities, net 89 102
Cumulative translation adjustment (626) (505)
--------- ---------
Total stockholders' equity 519,389 549,727
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 896,163 $ 939,434
========= =========
<FN>
The accompanying notes are an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
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<TABLE>
INTEGRATED DEVICE TECHNOLOGY, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(In thousands)
(Unaudited)
<CAPTION>
Nine months Nine months
Ended Ended
December 29, December 31,
1996 1995
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<S> <C> <C>
Operating activities:
Net income (loss) $ (44,383) $ 98,662
Adjustments:
Depreciation and amortization 75,317 37,765
Asset impairment and other 45,222 --
Deferred tax assets (20,634) 1,277
Changes in assets and liabilities:
Accounts receivable 9,677 (25,642)
Inventory (1,825) (9,511)
Prepaid expenses and other current assets (13,798) (7,624)
Other assets 3,571 (2,792)
Accounts payable (13,756) 57,911
Accrued compensation and related expense (15,908) 418
Deferred income on shipments to distributors 375 12,096
Income taxes payable (6,614) 6,350
Other accrued liabilities 957 789
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Net cash provided by operating activities 18,201 169,699
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Investing activities:
Purchases of property, plant and equipment (174,262) (228,352)
Proceeds from sale of property, plant and equipment 53,010 215
Purchases of short-term investments (22,037) (170,003)
Proceeds from sales of short-term investments 49,198 157,893
Purchases of equity investments (6,960) --
Proceeds from (purchases of) sales of investments
collateralizing facility lease 10,662 (57,394)
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Net cash used for investing activities (90,389) (297,641)
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Financing activities:
Issuance of common stock, net 5,670 5,179
Proceeds from issuance of convertible subordinated notes,
net of issuance costs -- 196,721
Proceeds from secured equipment financing 20,959 --
Payments on capital leases and other debt (4,241) (4,691)
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Net cash provided by financing activities 22,388 197,209
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Net increase (decrease) in cash and cash equivalents (49,800) 69,267
Cash and cash equivalents at beginning of period 157,228 130,211
--------- ---------
Cash and cash equivalents at end of period $ 107,428 $ 199,478
========= =========
Supplemental disclosures:
Interest paid $ 11,785 $ 6,935
Income taxes paid 12,459 38,535
<FN>
The accompanying notes are an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
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INTEGRATED DEVICE TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of Integrated Device Technology, Inc. (IDT or the
Company), the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial information
included therein. These financial statements should be read in
conjunction with the audited consolidated financial statements and
accompanying notes included in the Company's Annual Report on Form 10-K
for the year ended March 31, 1996. The results of operations for the
three and nine-month periods ending December 29, 1996 are not
necessarily indicative of the results to be expected for the full year.
2. Inventory consists of the following (in thousands):
December 29, 1996 March 31, 1996
----------------- --------------
Raw materials $ 5,568 $ 5,171
Work-in-process 22,252 22,538
Finished goods 20,005 18,921
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$47,825 $46,630
======= =======
3. For the first nine months of fiscal 1997 the Company recognized a
benefit for income taxes primarily reflecting the carryback of a U.S.
operating loss partially offset by taxes on the earnings of foreign
subsidiaries. Income taxes in state jurisdictions are not significant
due to available investment tax credits and research and development
credits.
4. Primary net income (loss) per common share is computed using the
weighted average number of common shares and the dilutive effects of
common stock equivalent shares outstanding during the period. Common
stock equivalent shares include shares issuable under the Company's
stock option plans. Fully diluted net income (loss) per share is
computed by adjusting the primary shares outstanding and net income
(loss) for the potential effect of the conversion of the 5.5%
Convertible Subordinated Notes (the Notes) outstanding and the
elimination of the related interest and deferred debt issue costs (net
of income taxes). When the effect of including common stock equivalents
or the conversion of the Notes on primary or fully diluted net income
(loss) per share is antidilutive, as is the case in the quarter and
nine months ended December 29, 1996, these securities are not included
in the calculation of net income (loss) per share.
5. The Company's obligations under the five-year $64 million Tax Ownership
Lease transaction for the construction of the Hillsboro, Oregon
facility are secured by a line of credit trust deed on the building.
Initially, this lease was collateralized by cash and/or investments
(restricted securities) up to 105% of the lessor's
5
<PAGE>
construction costs. During the first quarter of fiscal 1997, in
accordance with the terms of the lease, the collateral requirement was
reduced to 89.25% of the lessor's cost. Restricted securities
collateralizing this lease, included in other non-current assets, were
$57,120,000 at December 29, 1996 compared to $67,782,000 at March 31,
1996.
6. In September 1996, the Company completed two secured equipment
financing agreements which amounted to $21 million at interest rates of
8.41% and 8.48% collaterized by equipment purchased for the Oregon
fabrication facility. The borrowing arrangements fully amortize over
the 60 month terms of the notes.
In the second and third quarters of fiscal 1997, the Company also
completed several sale and leaseback transactions with various leasing
companies. The sale and leaseback transactions generated financing
proceeds of $53.0 million. Under these leasing arrangements, equipment
purchased for the Oregon fabrication facility with a net book value at
the time of the sale and leaseback transaction of $52.6 million was
sold to the leasing companies and leased back for use at the Oregon
facility under leases classified as operating leases. With respect to
the secured equipment financing and leasing arrangements, the Company
is not required to maintain compliance with any financial covenants.
7. In March 1995, the FASB issued Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-lived Assets"
(SFAS 121), which is effective for the Company's fiscal year 1997 and
future years. SFAS 121 requires that long-lived assets held and used by
the Company be reviewed for impairment whenever events or changes in
circumstances indicate that the net book value of an asset will not be
recovered through expected future cash flows (undiscounted and before
interest) from use of the asset. The amount of impairment loss is
measured as the difference between the net book value of the assets and
the estimated fair value of the related assets.
In the current quarter, the Company recorded charges related to the
impairment of certain older manufacturing assets and other adjustments
of approximately $45 million. These adjustments related primarily to
recording reserves against the carrying value of manufacturing assets,
including the Company's oldest wafer fabrication plant in Salinas,
California. As a result of significant changes in the semiconductor
industry, such as the rapid erosion of SRAM average selling prices, and
the Company's emphasis on communication-oriented products, the Company
has accelerated the use of more advanced manufacturing processes to
produce its products. The use of these more advanced processes and
available information on demand for the Company's products indicate
that the remaining cost of these selected older manufacturing assets
will not be fully recovered. The fair value of manufacturing assets was
based principally upon third party estimates of fair values.
Separately, the Company recorded charges of approximately $10 million
relating to the writedown of certain technology investments and other
miscellaneous items.
6
<PAGE>
8. The Company previously leased one facility from a shareholder and
director of the Company. The Company entered into an agreement to
acquire the facility for $8,509,000 and as payment, in the third
quarter of fiscal 1997, issued 782,445 unregistered shares of the
Company's stock at $10.875 per share.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
All references are to the Company's fiscal periods ended December 29,
1996, and December 31, 1995, unless otherwise indicated. Quarterly financial
results may not be indicative of the financial results of future periods. The
following discussion contains forward looking statements that involve a number
of risks and uncertainties. Factors that could cause actual results to differ
materially are included, but are not limited to, those identified in "Factors
Affecting Future Results". The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements which
may be made to reflect events or circumstances after the date hereof.
RESULTS OF OPERATIONS
Revenues
Revenue for the third quarter of fiscal 1997 was $131.0 million, an
increase of 9% over the immediately prior quarter of fiscal 1997 and a 31%
decrease from $188.5 million recorded for the same period one year ago. For the
nine months ended December 29, 1996, revenue was $394.0 million, a 24% decrease
from $519.2 million for the first nine months of the prior fiscal year.
Total units shipped increased approximately 15% and 5% when compared to
the second quarter of fiscal 1997 and the third quarter of fiscal 1996,
respectively. When comparing the third quarter and nine months of fiscal 1997 to
the same periods of fiscal 1996, net unit sales of the RISC microprocessor
family more than doubled and logic units sold increased. During the third
quarter of fiscal 1997, net unit sales of SRAM products increased approximately
3% when compared to the third quarter of fiscal 1996, but for the nine months
ended December 29, 1996, net unit sales of SRAM products decreased approximately
12%.
The revenue decrease in both periods was primarily attributable to
lower average selling prices for industry standard SRAM products in all
geographic regions and sales channels and, for the nine months ended December
29, 1996, fewer net SRAM units sold. Previously, through the second quarter of
fiscal 1997, SRAM average selling prices experienced market price declines of as
much as 80% over twelve months. During the third quarter of fiscal 1997, prices
of SRAM products were essentially stable; however, in the future, as described
below, market prices for these products may change. Lower average SRAM and
related module product selling prices in the first nine months of fiscal 1997
were also attributable to maturation of certain products. Microprocessor average
selling prices also declined as product mix sold in fiscal 1997 reflected a
greater proportion of embedded controller products which command lower average
selling prices in the market than standard microprocessor products. The
microprocessor product family mix sold is expected to continue to include a
greater proportion of embedded controllers. The average selling price realized
per unit for logic products also decreased.
8
<PAGE>
The semiconductor industry is highly cyclical and is subject to
significant downturns. Such downturns are characterized by diminished product
demand, production over-capacity and accelerated average selling price erosion.
The price the Company receives for its industry standard SRAM and other
products, is therefore dependent upon industry-wide demand and capacity, and
such prices have been historically subject to rapid change. Reflecting market
conditions, average selling prices realized for SRAM-related products were
favorable for the first three quarters of fiscal 1996, while orders shipped in
the first three quarters of fiscal 1997 were at significantly lower prices. New
SRAM orders continue to be at low prices, and the Company expects that these
prices will continue to adversely affect the Company's operating results.
Gross Profit
In the third quarter of fiscal 1997, the Company recorded charges of
$45.2 million which are specifically identified in the Company's Statements of
Operations as reducing gross profit. Additionally, the Company recorded $10
million in charges which relate to the write off of certain technology
investments and other miscellaneous items, which have been classified in the
Company's Statements of Operations in accordance with the nature of the charge,
including cost of revenue. The $45.2 million charge relates principally to
recording reserves against the carrying value of manufacturing assets, including
the Company's oldest wafer fabrication plant in Salinas, California, and other
items. Reserves against manufacturing assets were recorded in accordance with
Statement of Financial Accounting Standards 121 (SFAS 121) "Accounting for the
Impairment of Long Lived Assets". SFAS 121 requires that the Company analyze
whether the cash flows attributable to an asset support the value assigned to
that asset in the financial statements. Where estimated cash flow is not
sufficient to recover the net asset carrying values, a fair value approach is
taken towards reassigning a carrying value to the assets. As a result of
significant changes in the semiconductor industry, such as the rapid erosion of
SRAM average selling prices, and the Company's emphasis on
communication-oriented products, the Company has accelerated the use of more
advanced manufacturing processes to produce its products. The use of these more
advanced processes and available information on demand for the Company's
products indicate that the remaining cost of these selected older manufacturing
assets will not be fully recovered. Therefore, reserves have been recorded for
the difference between net carrying value at historical costs and estimates of
the fair market value of the assets.
Including the above charge, gross profit in the third quarter of fiscal
1997 decreased by $106 million to $2.1 million and gross margin decreased from
57.4% to 1.6%, when comparing the third quarter of fiscal 1997 to the same
quarter of the prior year. Excluding the $45.2 million charge for asset
impairment and other reserves, gross profit in the third quarter of fiscal 1997
decreased by $60.8 million to $47.4 million and gross margin decreased from
57.4% to 36.2%. Gross margin realized in the second quarter of fiscal 1997 was
31.7%. For the nine-month period ended December 29, 1996, gross profit decreased
to $111.3 million or to 28.2% of revenues, as compared to $298.8 million or
57.5%, respectively, for the comparable period of the prior year. Excluding the
$45.2 million charge for asset impairment and other reserves, for the nine-month
period, gross profit decreased to $156.5 million or to 39.7% of revenues, as
compared to $298.8
9
<PAGE>
million or 57.5% for the comparable period of the prior year. The decrease in
gross profit in the third quarter and nine-month periods of fiscal 1997 compared
to the fiscal 1996 periods was primarily attributable to the charge for asset
impairment and other reserves, and significant erosion of average selling prices
for SRAM and related module products. Additionally, the Company has recorded
adjustments for SRAM and other component inventories. The improvement in gross
margin, excluding the asset impairment and other reserves, recorded in the third
quarter of fiscal 1997, when compared to the second quarter of fiscal 1997, is
primarily attributable to sales increasing by a greater percentage than amounts
recorded as cost of revenues.
Also adversely impacting gross profit during the third quarter of
fiscal 1997 were costs, which were not fully offset by additional revenues,
associated with the new 8" wafer fabrication facility located in Hillsboro,
Oregon. During the third quarter, as this facility continued its production
ramp, both the number of wafers produced and the total manufacturing cost
incurred increased when compared to previous quarters. During the first quarter
of fiscal 1997, substantially all operating expenses associated with the new
Oregon facility were classified as process engineering research and development
expense, as production of salable die was not significant. In the second and
third quarters, costs associated with the Oregon facility negatively impacted
gross margins, as a majority of total facility operating costs were allocated to
the manufacture of products charged to cost of goods sold. The remainder of the
operating costs were charged to process engineering research and development
expense, based on activities performed. For the remaining quarter of fiscal 1997
and into fiscal 1998, the level of expense associated with the Oregon
fabrication facility is expected to increase on a quarterly basis over the
levels of expense incurred during each quarter of the first nine months of
fiscal 1997. The anticipated increased costs are associated with additional
equipment to be installed and other costs incurred which are necessary to
achieve more effective utilization of the facility. Additionally, in future
quarters the percentage of these costs recorded as cost of revenues may
increase, based upon production volumes and activities performed.
The Oregon facility provides the Company with significant additional
available production capacity, and, as a result of current market conditions,
the Company's production volumes at its wafer fabrication facilities have not
increased sufficiently to take full advantage of the additional capacity.
Further, the Company is unable to predict whether demand for industry standard
SRAM products or IDT's share of the available market will improve. Should IDT's
production volumes, especially at its fabrication facilities, remain constant or
decline and should the Company be unable to otherwise decrease costs per unit
sold, the Company's results of operations will continue to be adversely
impacted. Therefore, because pricing on industry-standard SRAM products and
market demand for production volumes may not improve and a greater percentage of
the Oregon facility's operating costs may be allocated to cost of goods sold,
based on activities performed, the Company can give no assurance of any
improvement in its gross profit in the fourth quarter of fiscal 1997.
The Company continued its efforts to shift to smaller die designs and
its most advanced wafer fabrication processes, which result in increased die per
wafer and therefore lower unit costs. However, declining average selling prices
primarily for SRAM products and the inability of the Company to take full
advantage of additional
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manufacturing capacity more than offset manufacturing efficiencies gained during
the third quarter and nine months of fiscal 1997.
Research and Development
Research and development (R&D) expenses increased in absolute spending
and as a percentage of revenues for the third quarter and the first nine months
of fiscal 1997 when compared to the same periods of fiscal 1996. R&D expenses
grew $5.4 million from $35.1 million in the quarter ended December 31, 1995 to
$40.5 million in the quarter ended December 29, 1996, and such expenses
increased as a percentage of revenues to 30.9% from 18.6%. For the nine-month
period, R&D expenses increased 22.2% to $117.4 million and as a percentage of
sales increased to 29.8% up from 18.5% for the corresponding nine-month period
of fiscal 1996.
In the third quarter of fiscal 1997, the Company wrote off to R&D
expense certain technology investments with a remaining cost of approximately $2
million. Additionally, the Company's policy is to not capitalize preoperating
costs associated with new manufacturing facilities, and significant facility
start-up and staffing expenses were incurred at the new 8" wafer fabrication
facility in Hillsboro, Oregon. In the first nine months of fiscal 1997,
operating expenditures associated with the start up of the Oregon fabrication
facility were classified as process engineering R&D expense and cost of
revenues, based upon activities performed. Aggregate process R&D expenditures
incurred during the first nine months of fiscal 1997 associated with the Oregon
fabrication facility amounted to approximately $27 million.
IDT continued development of several sub-0.5 micron CMOS process
technologies during the first nine months of fiscal 1997. Additionally, with the
goal of expanding product offerings, the Company is conducting research into
applications of high speed DRAM technology for the communications market, is
developing microprocessors for communications, embedded control and other
applications, is developing advanced SRAM architecture that significantly
improves performance of communications applications requiring frequent switches
between reads and writes, and is also developing a family of specialty memory
products for the ATM market. IDT believes that high levels of R&D investment are
required to support its strategy of providing products to its customers which
are not readily available from its competitors. However, there can be no
assurance that additional research and development investment will result in new
product offerings or that any new offerings will achieve market acceptance.
Selling, General and Administrative Expenses
Selling, general and administrative (S,G&A) expenses decreased by $1.3
million from $23.0 million in the quarter ended December 31, 1995 to $21.7
million in the quarter ended December 29, 1996, but increased as a percentage of
revenues to 16.5% from 12.2%. S,G&A expenses decreased 6.5% to $60.9 million for
the first nine months of fiscal 1997 from $65.1 million, but increased as a
percentage of revenues to 15.4% from 12.5% in the comparable period of the prior
year. A portion of S,G&A expenses, such as sales commissions, management bonuses
and employee profit sharing, vary with sales and
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Company profitability and have decreased as sales and profitability have
declined. While S,G&A expenses have decreased in terms of absolute dollars, they
have increased as a percentage of sales because of the magnitude of the sales
decrease in fiscal 1997 and the fixed nature of a portion of these costs. Also
partially offsetting declines in expenses which vary with sales and
profitability are expenses associated with initiatives to implement
enterprise-wide management information systems. The Company anticipates the
S,G&A expenses for the remainder of fiscal 1997 will remain constant as a
percentage of revenues. However, should revenues decrease or expenses increase
significantly, S,G&A as a percentage of sales may increase.
Interest expense
Interest expense increased to $3.6 million in the third quarter of
fiscal 1997 compared with $2.6 million for the same quarter a year ago. For the
nine-month period, interest expense increased to $8.4 million from $7.4 million
in the year ago period. Interest expense is primarily associated with debt sold
during the first quarter of fiscal 1996 and $21 million borrowed under secured
lending facilities entered into in the second quarter of fiscal 1997. In fiscal
1996, $201.3 million of 5.5% Convertible Subordinated Notes due in 2002 (the
"Notes") were issued, of which $15 million was subsequently retired at a
discount. Interest capitalized during this nine-month period, associated with
the Oregon fabrication facility and the Philippines assembly and test facility,
amounted to approximately $1.7 million. As the construction of both the Oregon
and Philippines facilities is complete, interest capitalization in fiscal 1997
in connection with these projects has ceased. The increase in interest expense
in the third quarter and in the first nine months of fiscal 1997 is therefore
primarily attributable to the cessation of interest capitalization and interest
on the secured lending facility. Also, with the cessation of interest
capitalization for the Oregon and Philippine projects and the addition of the
secured lending facility, the Company anticipates that for the remainder of
fiscal 1997, interest expense will increase when compared to fiscal 1996.
Interest income and other
Interest income and other, net, decreased to $0.2 million in the third
quarter and $9.1 million for the nine-month period of fiscal 1997 compared to
$4.8 million and $14.8 million for the same periods of the prior year. Interest
income decreased because of lower average cash balances as the Company has
continued to pay cash for significant capital expenditures in fiscal 1997. Also
included as other income in the third quarter of fiscal 1997 is a loss in the
amount of $2.0 million realized on the write-off of an equity investment. The
Company expects that the interest income component of interest income and other,
will decrease for the remainder of fiscal 1997 when compared to fiscal 1996
because of lower interest income associated with lower average cash balances.
Income taxes
For the first nine months of fiscal 1997, the Company recognized a
benefit for income taxes at an effective tax rate of 33%. This benefit rate
reflects carryback of the current loss for Federal purposes in the United
States. The rate differs from the U. S. statutory rate of 35% primarily because
of the timing of available loss carrybacks and due
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to earnings of foreign subsidiaries being taxed at different rates.
Historically, income taxes in state jurisdictions have not been significant due
to available investment tax credits and research and development credits. The
Company has consumed substantially all of the tax benefits associated with its
Malaysian subsidiary.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $18.2 million of funds from operations in the
first nine months of fiscal 1997, down from $169.7 million of funds from
operations during the first nine months of fiscal 1996. At December 29, 1996,
cash and cash equivalents were $107.4 million, a decrease of $49.8 million
during the first nine months of fiscal 1997. Cash provided by operating
activities primarily reflected a net loss offset by depreciation and
amortization, asset impairment and other reserves recorded and changes to
working capital. Significant changes in operating assets and liabilities
resulted from collection of accounts receivable, timing of payments for accounts
payable, accrued payroll and bonus, and an accrual of an income tax refund
receivable. Increased depreciation and amortization charges in fiscal 1997 are
associated with new facilities, improvements to existing facilities and new
equipment. The asset impairment and other reserves recorded are described above.
During the first nine months of fiscal 1997, the Company's net cash
used in investing activities was $90.4 million of which $174.3 million was used
for capital equipment and property and plant improvements. Cash proceeds from
the equipment sale and lease back arrangements in September 1996 and December
1996 amounted to $53.0 million. Cash generated from the sale of short-term
investments, net of purchases of short-term investments, was $27.2 million. In
addition, at December 29, 1996, the Company had $57.1 million of restricted
securities as collateral under a Tax Ownership Operating Lease entered into in
January 1995 related to the construction of the new 8" wafer fabrication
facility in Oregon. At March 31, 1996, the securities pledged as collateral
amounted to 105% of the lessor's construction costs, as required until the
building was completed. During the first quarter of fiscal 1997, the facility
was completed, and in accordance with the terms of the facility lease, the
collateral requirement was reduced to 89.25% of the lessor's cost to construct
the facility. Therefore, as the facility was completed during the first quarter
of fiscal 1997, the lessor released as collateral $10.7 million of restricted
securities.
In view of current capacity requirements, the Company anticipates total
fiscal 1997 capital expenditures of approximately $155.0 million, net of assets
purchased and then sold and leased back, which is a reduction of approximately
$100.0 million from the amount originally planned for the fiscal year. This
reduction in planned capital spending primarily reflects a reduction in planned
equipment additions associated with lower capacity requirements to meet current
market demand for industry standard SRAM parts. In the first nine months of
fiscal 1997, $121.3 million, net, was expended for planned capital additions.
Fiscal 1997 capital requirements are principally in connection with continued
installation of equipment in the new Oregon facility plus continued equipping of
the new Philippine plant and other capacity improvements. These expenditures are
required to achieve more effective utilization of these facilities.
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The Company's ability to invest to satisfy its capacity requirements is
in part dependent on the Company's ability to generate cash from operations.
Cash flow from operations depends significantly on the average selling prices of
the Company's products, variable cost per unit and other industry conditions
which the Company cannot predict. Future declines in selling prices for industry
standard SRAM products or other products manufactured by the Company, which
cannot be otherwise offset, will adversely impact the Company's ability to
generate funds from operations. If the Company is not able to generate
sufficient funds from operations or other sources to fund its capacity and R&D
requirements, the Company's results from operations, cash flows and financial
condition will be adversely impacted.
In September 1996, the Company completed secured equipment financing
agreements which total approximately $21.0 million for equipment purchased for
the Oregon fabrication facility. The borrowing arrangements fully amortize over
the 60 month terms of loans. Additionally, in September 1996 and December 1996,
the Company completed equipment sale and lease back arrangements with several
leasing companies. Equipment purchased by the Company for the Oregon fabrication
facility with a net book value of $52.6 million was sold to the leasing
companies and leased back for use at the Oregon facility under leases classified
as operating leases.
In May 1995, the Company completed the sale of $201.3 million of the
5.5% Convertible Subordinated Notes (the Notes), netting $196.7 million in
proceeds. The Notes are convertible into shares of common stock at $28.625 per
share. In January 1996, the Company completed the repurchase of approximately
$15.0 million of the Notes at a price of approximately $790 per bond. During the
remainder of fiscal 1997, the Company does not anticipate making additional
repurchases of debt.
In the third quarter of fiscal 1997, the Company completed the
acquisition of its Salinas wafer fabrication facility, which the Company had
been leasing from Baccarat Silicon, Inc. ("Baccarat"). Carl E. Berg, a director
of the Company, owned fifty percent of Baccarat at the time of the acquisition.
In the transaction, which was structured as a tax free reorganization, the
Company merged a newly-created, wholly-owned subsidiary into Baccarat and issued
an aggregate of 782,445 shares of the Company's common stock in exchange for all
the outstanding capital stock of Baccarat. The issuance of these shares of
common stock was not registered under the Securities Act of 1933, as amended
(the "Securities Act"), by virtue of the exemption provided by Section 4(2) of
the Securities Act.
The Company believes that existing cash and cash equivalents, cash flow
from operations and existing credit facilities will be sufficient to meet its
working capital, mandatory debt repayment and anticipated capital expenditure
requirements for the next twelve months. While the Company is reviewing all
operations with respect to cost savings opportunities and has implemented a
reduction of approximately 5% of its domestic work force and is planning other
cost containment measures, there can be no assurance 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. If the Company is
required to seek other financing sooner, the unavailability of financing on
terms satisfactory to IDT could have a material adverse effect on the Company.
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FACTORS AFFECTING FUTURE RESULTS
Except for the historical information contained in this Quarterly
Report on Form 10-Q, the matters discussed in this report are forward looking
statements. These forward looking statements concern matters that involve risks
and uncertainties, including but not limited to those set forth below, that
could cause actual results to differ materially from those projected in the
forward looking statements. In any event, the matters set forth below should be
carefully considered when evaluating the Company's business and prospects.
IDT's operating results have been, and in the future may be, subject to
fluctuations due to a wide variety of factors including the timing of or delays
in new product and process technology announcements and introductions by the
Company or its competitors, competitive pricing pressures, particularly in the
SRAM memory market, fluctuations in manufacturing yields, changes in the mix of
product 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 underutilization or expansion of production capacity, intellectual
property disputes, or other litigation. Additionally, many of the preceding
factors also impact the recoverability of the cost of manufacturing and other
assets, and as business conditions change, future writedowns or abandonment of
these assets may occur. Further, 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.
The semiconductor industry is highly cyclical. Early in fiscal 1996,
markets for some of the Company's SRAMs were characterized by excess demand
relative to supply and the resulting favorable pricing. During the later part of
fiscal 1996, a number of companies, principally foreign, shifted manufacturing
capacity to SRAMs causing rapid adjustments to supply and consequently impacting
market prices. The resulting significant downward trend in prices in an
extremely short period negatively affected SRAM gross margins, and adversely
affected the Company's operating results. Current market conditions
characterized by excess supply of SRAMs relative to demand and resultant pricing
declines may continue. Although recently some competitors have made adjustments
to the rate at which they will implement capacity expansion programs, the
Company is unable to accurately estimate the amount of worldwide production
capacity dedicated to industry standard products which it produces. A material
increase in industry-wide production capacity, shift in industry capacity toward
products competitive with the Company's products, reduced demand, or other
factors could result in a further decline in product pricing and could also
materially adversely affect the Company's operating results.
The Company has taken measures to manage costs, including deferral of
capacity expansion plans and work force reductions, but there can be no
assurance that these measures will be sufficient to return to profitability.
Where necessary to achieve more full and effective use of the facilities, the
Company continues to install new equipment at the Oregon facility and to equip
the new Philippine plant. However, the amount of capacity to
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be placed into production and future yield improvements by the Company's
competitors could dramatically increase the world-wide supply of products which
compete with the Company's products and could create further downward pressure
on pricing.
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. Furthermore, any decline in
the demand for advanced microprocessors which utilize SRAM cache memory 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. Any slowdown in the computer and related peripherals or communications
markets could also materially adversely affect the Company's operating results.
In the first nine months of fiscal 1997, the Company began producing
saleable products at the Oregon fabrication and Philippines assembly and test
facilities. Historically, the Company has utilized subcontractors for the
majority of its incremental assembly requirements, typically at higher costs
than its own Malaysian assembly and test operations. The Company expects to
continue utilizing subcontractors extensively as its Philippines assembly and
test plant ramps its production volumes. Due to production lead times and
current capacity constraints, especially in the assembly and test production
areas, any failure by the Company to adequately forecast the mix of product
demand could adversely affect the Company's sales and operating results. These
capacity expansion programs in Oregon and the Philippines face a number of
substantial risks including, but not limited to, cost overruns, equipment delays
or shortages, manufacturing start-up or process problems or difficulties in
hiring key managers and technical personnel. In addition, the Company has never
operated an eight-inch wafer fabrication facility. Accordingly, the Company
could incur unanticipated process or production problems. From time to time, the
Company 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 and installing new equipment at its facilities, including the
facilities in Oregon and the Philippines. Further, the Company's older 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 was able to obtain other production
capability.
The Company's capacity additions result in a significant increase in
fixed and operating expenses which may not be fully offset by additional
revenues for some time after operations commence. Historically, the Company has
expensed the operating expenses associated with bringing a new fabrication
facility to commercial production as R&D in the period such expenses are
incurred. However, as commercial production at a new fabrication facility
commences, the operating costs are classified as cost of revenues, and the
Company begins to recognize depreciation expense relating to the
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facility. Accordingly, as the Oregon fabrication facility now contributes to
revenues, the Company recognizes substantial operating expenses associated with
the facility as cost of revenues, which, in the second and third quarters of
fiscal 1997, has reduced gross margins. As commercial production continues in
fiscal 1997 and 1998, the Company anticipates incurring substantial additional
operating costs and depreciation expenses relating to the facility. Accordingly,
if revenue levels do not increase sufficiently to offset these additional
expense levels, or if the Company is unable to achieve gross margins from
products produced at the Oregon facility that are comparable to the Company's
current products, the Company's future results of operations will be adversely
impacted.
New products and process technology costs associated with the Oregon
wafer fabrication facility will continue to require significant research and
development expenditures. However, 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. If the Company is unable to develop new products in a
timely manner, and to sell them at gross margins comparable to the Company's
current products, the future results of operations could be adversely impacted.
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 a
timely manner or if there were significant increases in the costs of raw
materials.
The semiconductor industry is extremely capital-intensive. To remain
competitive, the Company must continue to invest in advanced manufacturing and
test equipment. In fiscal 1997, the Company expects to expend approximately $155
million in capital expenditures, net of assets sold and leased back and
anticipates significant continuing capital expenditures in the next several
years. There can be no assurance that the Company will not be required to seek
financing to satisfy its cash and capital needs or that such financing will be
available on terms satisfactory to the Company. If such financing is required
and if such financing is not available on terms satisfactory to the Company, its
operations would be materially adversely affected.
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
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portfolio of patents. The Company 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
will not be asserted in the future. The intellectual property claims that have
been made or that may be asserted against the Company could require that the
Company 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. There can be no assurance that
the Company would be able to obtain such licenses on acceptable terms or to
develop noninfringing technology. Further, the failure to renew or renegotiate
existing licenses, or significant increases in amounts payable or the inability
to obtain a license, could have a materially adverse effect on the Company.
A substantial percentage of the Company's revenues are derived from
export sales, which 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 political instability, currency
controls and fluctuations, changes in local economic conditions and import and
export controls, as well as changes in tax laws, tariffs and freight rates.
Contract pricing for raw materials used in the fabrication and assembly
processes, as well as for subcontract assembly services, can be impacted by
currency exchange rate fluctuations as such fluctuations occur.
The Company is subject to a variety of regulations related to hazardous
materials used in its manufacturing process. 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.
The Company's Common Stock and the Notes have 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, the 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' stock in particular. These factors
may adversely affect the price of the Common Stock and the Notes.
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Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
Exhibit
No. Description
- --------------------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization dated as of October 1,
1996, by and among Integrated Device Technology, Inc.,
Integrated Device Technology Salinas Corp. and Baccarat
Silicon, Inc.
2.2 Agreement of Merger dated as of October 1, 1996, by and among
Integrated Device Technology, Inc., Integrated Device
Technology Salinas Corp. and Baccarat Silicon, Inc.
10.1 Registration Rights Agreement dated as of October 1, 1996
among Integrated Device Technology, Inc. and the other parties
thereto.
11 Statement re: Computation of Earnings per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports have been filed on Form 8-K during this quarter
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEGRATED DEVICE TECHNOLOGY, INC.
Date: February 10, 1997 /s/ Leonard C. Perham
------------------------------------
Leonard C. Perham
Chief Executive Officer
Date: February 10, 1997 /s/ William D. Snyder
------------------------------------
William D. Snyder
Vice President Finance (principal
financial and accounting officer)
20
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
entered into as of this October 1, 1996 by and among Integrated Device
Technology, Inc., a Delaware corporation ("Acquirer"), Integrated Device
Technology Salinas Corp., a California corporation wholly owned by Acquirer
("Merger Sub") and Baccarat Silicon, Inc., a California corporation ("Target").
The parties intend that Merger Sub will merge with and into
Target in a triangular statutory merger (the "Merger") with Target to be the
surviving corporation of the Merger, all pursuant to the terms and conditions of
this Agreement and an Agreement of Merger substantially in the form of Exhibit A
(the "Agreement of Merger") and the applicable provisions of the laws of
California. Upon the effectiveness of the Merger, all the outstanding capital
stock of Target will be converted into capital stock of Acquirer, as provided
below. The Merger is intended to be treated as a tax-free reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended (the "Code"), by virtue of the provisions of Section
368(a)(2)(E) of the Code. The parties therefore agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Merger. Subject to the terms and conditions of this
Agreement, Merger Sub will be merged with and into Target pursuant to this
Agreement and the Agreement of Merger and in accordance with applicable
provisions of the laws of California as follows:
1.1.1 Conversion of Shares. Upon the Closing of this
Agreement (as defined herein), the outstanding shares of Target common stock
("Target Common Stock") will be converted into the right to receive seven
hundred eighty-two thousand four hundred forty-five (782,445) shares (the
"Exchange Shares") of Acquirer's unregistered common stock, $.001 par value
("Acquirer Common Stock"). Therefore, each share of Target Common Stock issued
and outstanding immediately prior to the filing of the Agreement of Merger with
the Secretary of State of California (the "Effective Time"), other than any
shares for which appraisal or dissenters rights have been or will be perfected
in compliance with applicable law, will by virtue of the Merger at the Effective
Time, and without further action on the part of any holder thereof, be converted
into the right to receive 39.12225 fully paid and nonassessable shares of
Acquirer Common Stock. Each Exchange Share to be issued in the Merger shall be
deemed to include the corresponding right (the "Acquirer Rights") to purchase
shares of Series A Junior Participating Preferred Stock, $.001 par value, of
Acquirer pursuant to the Amended and Restated Rights Agreement dated as of
February 27, 1992 (the "Acquirer Rights Agreement") between Acquirer and The
First National Bank of Boston, as Rights Agent. Prior to the Distribution Date
(as defined in the Acquirer Rights Agreement), all
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references in this Agreement and the Exhibits hereto to Exchange Shares shall be
deemed to include the Acquirer Rights corresponding thereto.
1.1.2 Adjustments for Capital Changes. If, prior to
the Merger, Acquirer or Target recapitalizes through a split-up of its
outstanding shares into a greater number, or a combination of its outstanding
shares into a lesser number, reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares of other
classes (other than through a split-up or combination of shares provided for in
the previous clause), or declares a dividend on its outstanding shares payable
in shares or securities convertible into shares or issues additional shares or
equity securities, the number of shares of Acquirer Common Stock into which the
Target shares are to be converted will be adjusted appropriately so as to
maintain the proportionate interests of the holders of the Target shares and the
holders of Acquirer shares.
1.1.3 Dissenting Shares. Holders of shares of Target
Common Stock ("Target Shareholders") who have complied with all requirements for
perfecting shareholders' rights of appraisal, as set forth in Chapter 13 of the
California Corporations Code ("California Law"), shall be entitled to their
rights under California Law with respect to such shares ("Dissenting Shares").
1.2 Fractional Shares. No fractional shares of Acquirer Common
Stock will be issued in connection with the Merger; provided, however, that the
Target Shareholders shall agree, prior to the Closing of this Agreement and
shall notify Acquirer, which Target Shareholder will receive all fractional
shares issuable to Target shareholders, which in the aggregate will not exceed
one share of Acquirer Common Stock.
1.3 Effects of the Merger. At the Effective Time: (a) the
separate existence of Merger Sub will cease and Merger Sub will be merged with
and into Target, and Target will be the surviving corporation, pursuant to the
terms of the Agreement of Merger; (b) the Articles of Incorporation and Bylaws
of Merger Sub will become the Articles of Incorporation and the Bylaws of the
surviving corporation; (c) each share of Merger Sub Common Stock outstanding
immediately prior to the Effective Time will, at the Effective Time, be
converted into one share of the Common Stock of the surviving corporation; (d)
the Board of Directors and officers of Merger Sub will become the Board of
Directors and officers of the surviving corporation; (e) each share of Target
Stock outstanding immediately prior to the Effective Time will be converted as
provided in Sections 1.1 and 1.2; and (f) the Merger will, from and after the
Effective Time, have all of the effects provided by applicable law.
1.4 Further Assurances. Merger Sub agrees that if, at any time
before or after the Effective Time, Acquirer considers or is advised that any
further deeds, assignments or assurances are reasonably necessary or desirable
to vest, perfect or confirm in Acquirer or Target title to any property or
rights of Merger Sub, Acquirer and Target and their proper officers and
directors may execute and deliver all such proper
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deeds, assignments and assurances and do all other things reasonably necessary
or desirable to vest, perfect or confirm title to such property or rights in
Acquirer or Target and otherwise to carry out the purpose of this Agreement, in
the name of Merger Sub or otherwise.
1.5 Status of Exchange Shares. Provided that the Target
Shareholders enter into the Registration Rights Agreement attached as Exhibit B
(the "Registration Rights Agreement"), immediately after the Effective Time, the
Target Shareholders shall have the right to cause the Acquirer to register the
Exchange Shares pursuant to Form S-3 according to the terms of the Registration
Rights Agreement. Acquirer shall also take any action required to be taken under
any applicable state securities or "Blue Sky" laws in connection with the
issuance of the Exchange Shares in the Merger. Target shall furnish to Acquirer
all information concerning Target and the Target Shareholders as may be
reasonably requested in connection with any action contemplated by this Section
1.5.
1.6 Hart-Scott-Rodino Filings. Acquirer and Target acknowledge
that no notices are required to be filed under the Hart-Scott-Rodino Antitrust
Improvements Act.
1.7 Tax Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code by virtue of
the provisions of Section 368(a)(2)(E) of the Code. The parties believe that the
value of the Exchange Shares to be received in the Merger is equal, in each
instance, to the value of the Target Common Stock to be surrendered in exchange
therefor. The Exchange Shares issued in the Merger will be issued solely in
exchange for the Target Common Stock, and no other transaction other than the
Merger represents, provides for or is intended to be an adjustment to the
consideration paid for the Target Common Stock. To the parties' knowledge, no
consideration that would constitute "other property" within the meaning of
Section 356 of the Code is being paid by Acquirer for the Target Common Stock in
the Merger. The parties shall not take a position on any tax returns
inconsistent with this Section 1.9. In addition, Acquirer represents now, and as
of the Closing Date (as defined herein), that it presently intends to continue
Target's historic business or use a significant portion of Target's business
assets in a business. Acquirer and Merger Sub do not have a present intent
following the Merger to cause Target to issue additional shares of its stock
that would result in Acquirer losing control of Target within the meaning of
Section 368(c) of the Code. Acquirer has no current plan or intention to
liquidate Target, to merge Target with and into another corporation (other than
Acquirer), to sell or otherwise to dispose of the stock of Target or to cause
Target to sell or otherwise to dispose of any of the assets of Target. At the
Closing, officers of each of Acquirer and Target shall execute and deliver
officers' certificates in mutually agreeable form. The provisions and
representations contained or referred to in this Section 1.9 shall survive until
the expiration of the applicable statute of limitations.
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2. REPRESENTATIONS AND WARRANTIES OF TARGET
Target hereby represents and warrants that, except as set
forth on the Target Schedule of Exceptions delivered to Acquirer herewith as
Exhibit 2.0 (which Exhibit may be updated in an immaterial manner up to the
Closing):
2.1 Organization and Good Standing. Target is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, has the corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted
and as proposed to be conducted, and is qualified as a foreign corporation in
each jurisdiction in which a failure to be so qualified could reasonably be
expected to have a material adverse effect on its present or expected operations
or financial condition.
2.2 Power, Authorization and Validity.
2.2.1 Target has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement, and
all agreements to which Target is or will be a party that are required to be
executed pursuant to this Agreement (the "Target Ancillary Agreements"). The
execution, delivery and performance of this Agreement and the Target Ancillary
Agreements have been duly and validly approved and authorized by Target's Board
of Directors.
2.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable Target to enter into, and to
perform its obligations under, this Agreement and the Target Ancillary
Agreements, except for (a) the filing of the Agreement of Merger with the
California Secretary of State and the filing of appropriate documents with the
relevant authorities of other states in which Target is qualified to do
business, if any, (b) such filings as may be required to comply with federal and
state securities laws, (c) the approval of the Target Shareholders of the
transactions contemplated hereby, and (d) such filings as may be required to
transfer or assign applicable environmental permits or other permits as may be
required by applicable laws or regulations.
2.2.3 This Agreement and the Target Ancillary
Agreements are, or when executed by Target will be, valid and binding
obligations of Target enforceable in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally, (b) rules of law governing
specific performance, injunctive relief and other equitable remedies and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities; provided, however, that the Agreement
of Merger will not be effective until filed with the California Secretary of
State.
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2.3 Capitalization. The authorized capital stock of Target
consists of one million (1,000,000) shares of Common Stock, of which twenty
thousand (20,000) shares are issued. There is no authorized Target preferred
stock and there are no outstanding options or warrants to acquire any Target
Common Stock. There are no shares of Target Common Stock reserved or authorized
for issuance pursuant to any stock option or stock purchase plan. All issued and
outstanding shares of Target Stock have been duly authorized and are validly
issued, fully paid and nonassessable, are not subject to any right of rescission
and have been offered, issued, sold and delivered by Target in compliance with
all registration or qualification requirements (or applicable exemptions
therefrom) of applicable federal and state securities laws. Carl E. and Mary Ann
Berg own beneficially and of record ten thousand (10,000) shares of Target
Common Stock, and Clyde J. Berg owns beneficially and of record ten thousand
(10,000) shares of Target Common Stock; together, Carl E. and Mary Ann Berg, on
one hand, and Clyde J. Berg, on the other hand, own all of the outstanding
shares of Target Common Stock and are the only Target Shareholders. There are no
calls, commitments, conversion privileges or preemptive or other rights or
agreements outstanding to purchase any Target Common Stock or any securities
convertible into or exchangeable for shares of Target Common Stock or obligating
Target to grant, extend or enter into any such Option, call, right, commitment,
conversion privilege or other right or agreement, and there is no liability for
dividends accrued but unpaid. There are no voting agreements, rights of first
refusal or other restrictions (other than normal restrictions on transfer under
applicable federal and state securities laws) applicable to any of Target's
outstanding securities. Target is not under any obligation to register under the
Securities Acts of 1933, as amended (the "Act"), any of its presently
outstanding securities or any securities that may be subsequently issued.
2.4 Subsidiaries. Target does not have any subsidiaries or any
interest, direct or indirect, in any corporation, partnership, joint venture or
other business entity.
2.5 No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement nor the execution and delivery of any Target
Ancillary Agreement, nor the consummation of the transactions contemplated
hereby, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of, (a) any
provision of the Articles of Incorporation or Bylaws of Target, as currently in
effect, (b) in any material respect, any material instrument or contract to
which Target or any Target Shareholder is a party or by which Target or any
Target Shareholder is bound or (c) any federal, state, local or foreign
judgment, writ, decree, order, statute, rule or regulation applicable to Target
or any Target Shareholder or their respective assets or properties. The
consummation of the Merger and the transfer, by operation of law, to Merger Sub
of all material rights, licenses, franchises, leases and agreements of Target
will not require the consent of any third party, other than the Target
Shareholders.
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2.6 Litigation. There is no action, proceeding, claim or
investigation pending against Target or any Target Shareholder before any court
or administrative agency that, if determined adversely, may reasonably be
expected to have a material adverse effect on the present or future operations
or financial condition of Target, nor, to Target's knowledge, has any such
action, proceeding, claim or investigation been threatened. There is, to
Target's knowledge, no reasonable basis for any shareholder or former
shareholder of Target, or any other person, firm, corporation or entity, to
assert a claim against Target or Acquirer based upon: (a) ownership or rights to
ownership of any shares of Target Common Stock (except for dissenter's rights
with respect to shares of Exchange Shares issuable by virtue of the Merger); (b)
any rights as a Target Shareholder, including any option or preemptive rights or
rights to notice or to vote; or (c) any rights under any agreement among Target
and its shareholders.
2.7 Taxes. As of the date hereof or by the Effective Time,
Target has or will have filed all federal, state, local and foreign tax returns
required to be filed by it, has paid or will have paid all taxes required to be
paid in respect of all periods for which returns have been filed and has no
liability for taxes. Neither Target nor any Target Shareholder is delinquent in
the payment of any tax or is delinquent in the filing of any tax returns, and no
deficiencies for any tax have been threatened, claimed, proposed or assessed
against Target. No tax return of Target has ever been audited by the Internal
Revenue Service or any state taxing agency or authority. For the purposes of
this Section, the terms "tax" and "taxes" include all federal, state, local and
foreign income, gains, franchise, excise, property, sales, use, employment,
license, payroll, occupation, recording, value added or transfer taxes,
governmental charges, fees, levies or assessments (whether payable directly or
by withholding), and, with respect to such taxes, any estimated tax, interest
and penalties or additions to tax and interest on such penalties and additions
to tax.
2.8 Target Financial Statements. Target has delivered to
Acquirer as Exhibit 2.8 Target's unaudited balance sheets for the years ended
December 31, 1993, 1994 and 1995 (the "Balance Sheet") and income statement for
the same periods (collectively, the "Financial Statements"). The Financial
Statements (a) true and correct; (b) are in accordance with the books and
records of Target and (c) fairly present the financial condition of Target at
the date therein indicated and the results of operations for the period therein
specified; provided, however, the Financial Statements do not include footnotes.
Target has no material debt, liability or obligation of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
that is not reflected or reserved against in the Financial Statements, except
for those that may have been incurred after the date of the Financial Statements
in the ordinary course of its business consistent with past practice, none of
which are material. As of the Closing Date, Target has properly distributed to
Target Shareholders all profits or other amounts which are to be distributed to
such Target Shareholders, and Target Shareholders have no claims, of any nature
against Target, including, without limitation, for any undistributed earnings or
profits of Target. As of the Closing Date, Target has no liabilities that have
not been fully paid.
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2.9 Title to and Condition of Properties. Target has good and
marketable title to all of its material assets as shown on the Balance Sheet,
including, without limitation, the real property described in Exhibit 2.9 and
all improvements thereon (the "Facility"), free and clear of all liens, charges,
restrictions or encumbrances (other than the "Permitted Exceptions" identified
in Exhibit 2.9, the lease dated June 1985 with Acquirer (the "Lease"), the
Addendum to Lease dated September, 1985 (the "Addendum") and the Lease Extension
and Extension Agreement dated September 1, 1994 with Acquirer (the "Extension")
(collectively, the "Lease Documents")). Target has no equipment leases. Target
has not received any notice of violation of any such law or regulation with
which it has not complied and which noncompliance would have a material adverse
effect on Target's business. More specifically with respect to the Facility:
(a) Target and Acquirer have exclusive possessory
rights to the Facility.
(b) To Target's knowledge, except for improvements to
the Facility made by or for Acquirer, there have been no improvements to the
Facility performed by third parties for which lien rights still exist. Target is
not a "foreign person" within the meaning of 42 U.S.C. Section 1445(f)(3).
(c) Except for the Permitted Exceptions, Target is a
not a party to or otherwise bound by any agreements or litigation imposing a
material obligation on or otherwise affecting the Facility, and the Facility is
not subject to any pending claims or governmental actions, nor to Target's
knowledge subject to any other material liabilities, other than the Permitted
Exceptions. Target is not in default of any of the contracts or agreements
referred to above. Target has entered into no brokerage commitments with third
parties concerning the Facility.
2.10 Absence of Certain Changes. Since the most recent Balance
Sheet, there has not been with respect to Target:
(a) any change in the financial condition,
properties, assets, liabilities, business or operations thereof, which change by
itself or in conjunction with all other such changes, whether or not arising in
the ordinary course of business, has had or will have a material adverse effect
on Target;
(b) any contingent liability incurred thereby as
guarantor or otherwise with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any
of the material properties owned thereby;
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(d) any material obligation or liability incurred
thereby other than obligations and liabilities incurred in the ordinary course
of business;
(e) any purchase or sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other disposition, of
any of the material properties or assets thereof other than in the ordinary
course of business;
(f) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the capital
stock thereof, any split, combination or recapitalization of the capital stock
thereof or any direct or indirect redemption, purchase or other acquisition of
the capital stock thereof;
(g) any labor dispute or claim of unfair labor
practices, any change in the compensation payable or to become payable to any of
its officers, employees or agents, or any bonus payment or arrangement made to
or with any of such officers, employees or agents;
(h) any change with respect to the management,
supervisory or other key personnel thereof; or
(i) any obligation or liability incurred thereby to
any of its officers, directors or shareholders or any loans or advances made
thereby to any of its officers, directors or stockholders except normal
compensation and expense allowances payable to officers.
2.11 Contracts and Commitments. Except for the Lease Documents
or as set forth on Exhibit 2.11, Target has no contract, obligation or
commitment, oral or written, which is material to the business of Target or
which involves a potential commitment in excess of $25,000 or any stock
redemption or purchase agreement, financing agreement, license, lease or
franchise. A copy of the Lease Documents and each agreement or document listed
on Exhibit 2.11 has been delivered to Acquirer's counsel. Target is not in
default in any material respect, and no Target Shareholder is obligated, under
the Lease Documents or any contract, obligation or commitment listed on Exhibit
2.11 or that is otherwise material to the business of Target. Neither Target nor
any Target Shareholder is a party to any contract or arrangement that has had or
could reasonably be expected to have a material adverse effect on Target's
business.
2.12 Intellectual Property. Target neither owns nor uses any
significant intellectual property rights in connection with its business as
presently conducted.
2.13 Compliance with Laws. To Target's knowledge, there are no
administrative proceedings or investigations with respect to Target pending or
threatened, that, if determined adversely to Target, would result in any
material adverse change in the operations or financial condition of Target.
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2.14 Employees, ERISA and Other Compliance.
Target has no employees or consultants. Target has no
employment contracts, consulting agreements or employee benefit plans
(including, without limitation, those as defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or arrangements of any kind
currently in effect or under which Target has any liabilities or obligations.
Target (i) has never been and is not now subject to a union organizing effort,
(ii) is not subject to any collective bargaining agreement with respect to any
of its employees, (iii) is not subject to any other contract, written or oral,
with any trade or labor union, employees' association or similar organization
and (iv) has no current labor disputes.
2.15 Corporate Documents. Target has made available to
Acquirer for examination all documents and information listed in the Target
Schedule of Exceptions or other Exhibits called for by this Agreement which has
been requested by Acquirer's legal counsel, including, without limitation, the
following: (a) copies of Target's Articles of Incorporation and Bylaws as
currently in effect; (b) its Minute Book containing all records of all
proceedings, consents, actions and meetings of the shareholders, the board of
directors and any committees thereof; (c) its stock ledger and journal
reflecting all stock issuances and transfers; and (d) all permits, orders and
consents issued by any regulatory agency with respect to Target, or any
securities of Target, and all applications for such permits, orders and
consents, which have not also or otherwise been issued to or for the benefit of
Acquirer.
2.16 No Brokers. Neither Target nor any of the Target
Shareholders is obligated for the payment of fees or expenses of any investment
banker, broker or finder in connection with the origin, negotiation or execution
of this Agreement or the Agreement of Merger or in connection with any
transaction contemplated hereby or thereby.
2.17 Disclosure. Neither this Agreement, its exhibits and
schedules, nor any of the certificates or documents to be delivered by Target to
Acquirer under this Agreement, taken together, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
2.18 Other Agreements. Except as has been previously
identified pursuant to Schedule 2.11 or, the Lease Documents, Target is not a
party or subject to any oral or written contracts. Target is not, nor, to the
knowledge of Target, is any other party thereto, in breach or default in any
material respect under the terms of any such agreement, contract, lease,
instrument, arrangement or license, which breach or default may reasonably be
expected to have a material adverse effect on Target.
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2.19 Books and Records.
2.19.1 The books, records and accounts of Target (a)
are in all material respects true, complete and correct, (b) have been
maintained in accordance with good business practices on a consistent basis, (c)
are stated in reasonable detail and accurately, in all material respects, and
fairly reflect the transactions and dispositions of the assets of Target and (d)
accurately, in all material respects, and fairly reflect the basis for the
Financial Statements.
2.19.2 Target's internal accounting controls are
sufficient to provide reasonable assurances that: (a) transactions are executed
in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with any criteria applicable to such statements and
(ii) to maintain accountability for assets; and (c) the amount recorded for
assets on the books and records of Target is compared with the existing assets
at reasonable intervals, and appropriate action is taken with respect to any
differences.
2.20 Assets and Nature of Business. Target has no assets other
than the Facility and its related Lease, Addendum and Extension and conducts no
business other than its operations with respect to the Facility, including its
obligations under the Lease, the Addendum and the Extension.
3. REPRESENTATIONS AND WARRANTIES OF ACQUIRER AND MERGER SUB
Acquirer, and as applicable, Merger Sub, hereby represent and
warrant that, except as set forth on the Acquirer Schedule of Exceptions
delivered to Target as Exhibit 3.0 (which Exhibit may be updated in an
immaterial manner up to the Closing):
3.1 Organization and Good Standing. Acquirer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted and as
proposed to be conducted.
3.2 Power, Authorization and Validity.
3.2.1 Acquirer has the right, power, legal capacity
and authority to enter into and perform its obligations under this Agreement and
all agreements to which Acquirer is or will be a party that are required to be
executed pursuant to this Agreement (the "Acquirer Ancillary Agreements"). The
execution, delivery and performance of this Agreement and the Acquirer Ancillary
Agreements have been duly and validly approved and authorized by Acquirer's
Board of Directors, and as required, Merger Sub's Board of Directors.
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3.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable Acquirer to enter into, and to
perform its obligations under, this Agreement and the Acquirer Ancillary
Agreements, except for (a) the filing of the Agreement of Merger with the
California Secretary of State and the filing of appropriate documents with the
relevant authorities of other states in which Acquirer is qualified to do
business, if any, and (b) such filings as may be required to comply with federal
and state securities laws.
3.2.3 This Agreement and the Acquirer Ancillary
Agreements are, or when executed by Acquirer will be, valid and binding
obligations of Acquirer enforceable in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally, (b) rules of law governing
specific performance, injunctive relief and other equitable remedies and (c) the
enforceability of provisions requiring indemnification in connection with the
offering, issuance or sale of securities; provided, however, that the Agreement
of Merger will not be effective until filed with the California Secretary of
State.
3.3 No Violation of Existing Agreements. Neither the execution
and delivery of this Agreement nor the execution and delivery of any Acquirer
Ancillary Agreement, nor the consummation of the transactions contemplated
hereby, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of (a) any
provision of the Certificate of Incorporation or Bylaws of Acquirer, as
currently in effect, (b) in any material respect, any material instrument or
contract to which Acquirer or any of its subsidiaries is a party or by which
Acquirer or any of its subsidiaries is bound or (c) any federal, state, local or
foreign judgment, writ, decree, order, statute, rule or regulation applicable to
Acquirer or any of its subsidiaries or its or their respective assets or
properties.
3.4 Disclosure. Acquirer has made available to Target
Shareholders an investor disclosure package consisting of Acquirer's annual
report on Form 10-K for its fiscal year ending April 2, 1995 (the "Fiscal Year
End"), all Forms 10-Q and 8-K filed by Acquirer with the SEC since the Fiscal
Year End and up to the date of this Agreement and all proxy materials
distributed to Acquirer's stockholders since the Fiscal Year End and up to the
date of this Agreement (the "Acquirer Disclosure Package"). The Acquirer
Disclosure Package, this Agreement, the exhibits and schedules hereto and any
certificates or documents to be delivered to Target pursuant to this Agreement,
when taken together, do not contain any untrue statement of a material fact
regarding Acquirer or omit to state any material fact regarding Acquirer
necessary in order to make the statements contained herein and therein, in light
of the circumstances under which such statements were made, not misleading.
3.5 Absence of Certain Changes. Since the Fiscal Year End,
there has not been any change in the financial condition, properties, assets,
liabilities, business or operations of Acquirer or any of its subsidiaries which
change by itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has
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had or will have a material adverse effect thereon, except as disclosed in the
Acquirer Disclosure Package.
3.6 No Brokers. Acquirer is not obligated for the payment of
fees or expenses of any investment banker, broker or finder in connection with
the origin, negotiation or execution of this Agreement or the Agreement of
Merger or in connection with any transaction contemplated hereby or thereby.
3.7 Litigation. There is no action, proceeding, claim or
investigation pending against Acquirer before any court or administrative agency
that if determined adversely may reasonably be expected to have a material
adverse effect on the present or future operations or financial condition of
Acquirer, nor, to its knowledge, has any such action, proceeding, claim or
investigation been threatened.
3.8 Compliance with Laws. Acquirer has complied, or prior to
the Closing Date will have complied, and is, or will be at the Closing Date, in
full compliance with all terms of the Lease, and, in all material respects, with
all applicable laws, ordinances, regulations and rules, and all orders, writs,
injunctions, awards, judgments and decrees applicable to it or to the assets,
properties and business thereof (the violation of which would have a material
adverse effect upon its business), including, without limitation: (a) all
applicable federal and state securities laws and regulations; (b) all applicable
federal, state and, to its knowledge, local laws, ordinances and regulations,
and all orders, writs, injunctions, awards, judgments and decrees, pertaining to
(i) the sale, licensing, leasing, ownership, or management of its material
owned, leased or licensed real or personal property, products and technical
data, (ii) employment and employment practices, terms and conditions of
employment and wages and hours and (iii) safety, health, fire prevention,
environmental protection, toxic waste disposal, building standards, zoning and
other similar matters; (c) the Export Administration Act and regulations
promulgated thereunder and all other laws, regulations, rules, orders, writs,
injunctions, judgments and decrees applicable to the export or re-export of
controlled commodities or technical data; and (d) the Immigration Reform and
Control Act. Acquirer has received all permits and approvals from, and has made
all filings with, third parties, including government agencies and authorities,
that are necessary in connection with its present business and the failure of
which to obtain or file would have a material adverse effect on its business. To
Acquirer's knowledge, there are no administrative proceedings or investigations
pending or threatened, that, if determined adversely to Acquirer, would result
in any material adverse change in the operations or financial condition thereof.
3.9 Merger Sub. Merger Sub hereby makes all of the same
representations and warranties as Acquirer set forth above in this Article 3,
except for Sections 3.4 and 3.5, by substituting "Merger Sub" for "Acquirer" in
the foregoing Article 3 text (and changing the reference to Delaware in Section
3.1 to California).
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3.10 Compliance with the Lease. Acquirer represents and
warrants that it has complied with all terms of the Lease and any indemnities
therein and will not hold Target responsible for any of Acquirer's acts or
omissions under the Lease.
4. TARGET PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, Target covenants and agrees as follows:
4.1 Advice of Changes. Target will promptly advise Acquirer in
writing (a) of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of Target contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect and (b) of any material adverse
change in Target's business, results of operations or financial condition.
4.2 Maintenance of Business. Target will use its best efforts
to carry on and preserve its business and its relationships with customers,
suppliers, employees and others in substantially the same manner as it has prior
to the date hereof, except as the parties may otherwise agree. If Target becomes
aware of a material deterioration in the relationship with any key customer,
supplier or employee, it will promptly bring such information to the attention
of Acquirer in writing.
4.3 Conduct of Business. Target will continue to conduct its
business and maintain its business relationships (except as provided in Section
4.2 or as otherwise contemplated by this Agreement) in the ordinary and usual
course and will not, without the prior written consent of Acquirer, or
Acquirer's counsel:
(a) borrow any money;
(b) enter into any transaction not in the ordinary
course of business;
(c) encumber or permit to be encumbered any of its
assets, except in the ordinary course of its business consistent with past
practice and to an extent which is not material;
(d) dispose of any of any material assets, except in
the ordinary course of business consistent with past practice;
(e) enter into any material lease or contract for the
purchase or sale of any property, real or personal, except in the ordinary
course of business consistent with past practice;
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(f) fail to maintain any of its material equipment or
other assets in good working condition and repair consistent with past practice,
subject only to ordinary wear and tear; (g) change accounting methods;
(h) declare, set aside or pay any cash or stock
dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any of its capital stock; provided, however, that Target may
make a distribution, at or before the Closing, to Target Shareholders of all
cash on hand at the Closing Date, net of accrued liabilities or obligations
(including those referred to in Section 4.15 hereof);
(i) amend or terminate any contract, agreement or
license to which it is a party, except those amended or terminated in the
ordinary course of business consistent with past practice and which are not
material in amount or effect;
(j) guarantee or act as a surety for any obligation,
except for the endorsement of checks and other negotiable instruments in the
ordinary course of business consistent with past practice;
(k) waive or release any material right or claim,
except in the ordinary course of business consistent with past practice;
(l) issue or sell any shares of its capital stock of
any class, or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities or other commitments
to issue shares of capital stock, or alter or modify any outstanding security;
(m) split or combine the outstanding shares of its
capital stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(n) merge, consolidate or reorganize with, or
acquire, any entity;
(o) amend its Articles of Incorporation or Bylaws;
(p) agree to any audit assessment by any tax
authority or file any federal or state income or franchise tax return unless
copies of such returns have been delivered to Acquirer for its review prior to
filing;
(q) change any insurance coverage or issue any
certificates of insurance; or
(r) agree to do any of the things described in the
preceding clauses 4.3(a) through 4.3(q).
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4.4 Shareholders Approval. Target will hold a special meeting
of its shareholders to vote and approve, or obtain approval for by written
consent in accordance with the California Corporations Code and the Bylaws of
Target (the "Shareholders Meeting"), at the earliest practicable date, this
Agreement, the Merger and related matters, which approval will be recommended by
Target's Board of Directors and management, subject to the fiduciary obligations
of its directors and officers.
4.5 Regulatory Approvals. Target will execute and file, or
join in the execution and filing of, any application or other document that may
be necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign which may be reasonably
required, or which Acquirer may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. Target will use
its best efforts to obtain all such authorizations, approvals and consents.
4.6 Necessary Consents. Target will use its best efforts to
obtain such written consents and take such other actions as may be necessary or
appropriate, in addition to those set forth in Section 4.6, to allow the
consummation of the transactions contemplated hereby and to allow Acquirer to
carry on Target's business after the Closing.
4.7 Litigation. Target will notify Acquirer in writing
promptly after learning of any material actions, suits, proceedings or
investigations by or before any court, board or governmental agency, initiated
by or against it, or known by it to be threatened against it.
4.8 No Other Negotiations. From the date hereof until the
earlier of termination of this Agreement or consummation of the Merger, Target
will not, and will not authorize or permit any officer, director, employee or
affiliate of Target, or any other person, on its behalf, directly or indirectly,
to solicit or encourage any offer from any party or, subject to the fiduciary
obligations of its directors and officers, consider any inquiries or proposals
received from any other party, participate in any negotiations regarding, or
furnish to any person any information with respect to, or otherwise cooperate
with, facilitate or encourage any effort or attempt by any person (other than
Acquirer), concerning the possible disposition of all or any substantial portion
of Target's business, assets or capital stock by merger, sale or any other
means. Target will promptly notify Acquirer orally and in writing of any such
inquiries or proposals.
4.9 Access to Information. Until the Closing, Target will
allow Acquirer and its agents reasonable access to the files, books, records and
offices of Target, including, without limitation, any and all information
relating to Target's taxes, commitments, contracts, leases, licenses and real,
personal and intangible property and financial condition.
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4.10 Satisfaction of Conditions Precedent. Target will use its
best efforts to satisfy or cause to be satisfied all the conditions precedent
which are set forth in Article 8, and Target will use its best efforts to cause
the transactions contemplated by this Agreement to be consummated.
4.11 Target Shareholders Representation Letter. To ensure that
the Merger will qualify as a "tax-free" reorganization for federal income tax
purposes and to ensure that the issuance of the Exchange Shares will be issued
pursuant to applicable state and federal securities law exceptions, Target will
cause the Target Shareholders to execute, at or before the Closing, a
representation letter substantially in the form of Exhibit 4.11, provided such
form is acceptable to Target and Acquirer counsel, stating (a) that such
shareholders have no present plan or intention to sell or otherwise dispose of
more than fifty percent of the shares of Exchange Shares received in the Merger,
(b) that such shareholders are not "foreign persons" within the meaning of 42
U.S.C. Section 1445(f)(3) and (c) making such other essential representations as
may be reasonably requested by Acquirer, its accountants or its attorneys for
the purpose of ensuring such tax treatment and securities law compliance
4.12 Blue Sky Laws. Target shall use its best efforts to
assist Acquirer to the extent necessary to comply with the securities and Blue
Sky laws of all jurisdictions which are applicable in connection with the
Merger.
4.13 Tax Free Reorganization. Target will cooperate with the
other parties and take all reasonable actions as may be necessary to ensure that
this Agreement involves a tax-free plan of reorganization and that the Merger is
consummated in accordance with the provisions of Section 368(a)(1)(A) of the
Code.
4.14 Payment of Liabilities. Except for obligations of
Acquirer under the Lease Documents, on or prior to the Closing Date, Target
shall have paid (or provided Acquirer with funds to make such payments) all
liabilities, obligations, debts, taxes or assessments of Target or related to
its assets, whether due and payable, contingent or accrued. To the extent Target
is liable for, or Acquirer has made payments to Target under the Lease Documents
attributable to, taxes, assessments, insurance, utilities or other obligations
or liabilities that have not yet become payable, Target shall as of the Closing
Date have sufficient cash to pay such amounts, prorated through the Closing
Date, when they become due.
5. ACQUIRER PRECLOSING COVENANTS
During the period from the date of this Agreement until the
Closing Date, Acquirer covenants and agrees as follows:
5.1 Advice of Changes. Acquirer will promptly advise Target in
writing (a) of any event occurring subsequent to the date of this Agreement that
would render any representation or warranty of Acquirer contained in this
Agreement, if made
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on or as of the date of such event or the Closing Date, untrue or inaccurate in
any material respect and (b) of any material adverse change in Acquirer's
business, results of operations or financial condition.
5.2 Regulatory Approvals. Acquirer will execute and file, or
join in the execution and filing, of any application or other document that may
be necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Target may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. Acquirer will
use its best efforts to obtain all such authorizations, approvals and consents.
5.3 Satisfaction of Conditions Precedent. Acquirer will use
its best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Article 7, and Acquirer will use its best
efforts to cause the transactions contemplated by this Agreement to be
consummated.
5.4 Blue Sky Laws. Acquirer shall take such steps as may be
necessary to comply with the securities and Blue Sky laws of all jurisdictions
which are applicable in connection with the Merger.
5.5 Necessary Consents. Acquirer will use its best efforts to
obtain such written consents and take such other actions as may be necessary or
appropriate, in addition to those set forth in Section 5.8, to allow the
consummation of the transactions contemplated hereby.
5.6 Litigation. Acquirer will notify Target in writing
promptly after learning of any material actions, suits, proceedings or
investigations by or before any court, board or governmental agency, initiated
by or against it, or known by it to be threatened against it, which would have a
material adverse effect on the Merger or Acquirer's business or financial
condition.
5.7 Tax Free Reorganization. Acquirer will cooperate with the
other parties and take all reasonable actions as may be necessary to ensure that
this Agreement involves a tax-free plan of reorganization and that the Merger is
consummated in accordance with the provisions of Section 368(a)(1)(A) of the
Code.
5.8 Lease Payments. Acquirer shall pay to Target immediately
prior to the Closing all amounts payable or accrued for rent or other matters as
provided in the Lease Documents.
6. CLOSING MATTERS
6.1 The Closing. Subject to termination of this Agreement as
provided in Article 9 below, the closing of the transactions contemplated by
this Agreement (the
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"Closing") will take place at the offices of Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California 94306 on November 20, 1996 at 11:00 a.m. or at
such time and date as Target and Acquirer may mutually select (the "Closing
Date"). Concurrently with the Closing, the Agreement of Merger will be filed in
the office of the California Secretary of State. The Agreement of Merger
provides that the Merger shall become effective upon such filing.
6.2 Exchange of Certificates.
6.2.1 As of the Effective Time, all shares of Target
Common Stock that are outstanding immediately prior thereto will, by virtue of
the Merger and without further action, cease to exist and will be converted into
the right to receive from Acquirer the Exchange Shares pursuant to Sections 1.1
and 1.2.
6.2.2 At the Closing, each holder of shares of Target
Stock that are not Dissenting Shares will surrender the certificate(s) for such
shares (the "Target Certificates"), duly endorsed as requested by Acquirer, to
Acquirer for cancellation. At the Closing or promptly after the Effective Time
and receipt of such Target Certificates, Acquirer will issue to each tendering
holder a certificate for the number of shares of Acquirer Common Stock to which
such holder is entitled pursuant to Section 1.1.1 hereof.
6.2.3 No dividends or distributions payable to
holders of record of Acquirer Common Stock after the Effective Time, or cash
payable in lieu of fractional shares, will be paid to the holder of any
unsurrendered Target Certificate(s) until the holder of the Target
Certificate(s) surrenders such Target Certificate(s). Subject to the effect, if
any, of applicable escheat and other laws, following surrender of any Target
Certificate, there will be delivered to the person entitled thereto, without
interest, the amount of any dividends and distributions therefor paid with
respect to Acquirer Common Stock so withheld as of any date subsequent to the
Effective Time and prior to such date of delivery.
6.2.4 All Acquirer Common Stock delivered upon the
surrender of Target Stock in accordance with the terms hereof will be deemed to
have been delivered in full satisfaction of all rights pertaining to such Target
Common Stock. There will be no further registration of transfers on the stock
transfer books of Target or its transfer agent of the Target Common Stock. If,
after the Effective Time, Target Certificates are presented for any reason, they
will be canceled and exchanged as provided in this Section 6.2.
6.2.5 Until certificates representing Target Common
Stock outstanding prior to the Merger are surrendered pursuant to Section 6.2.2
above, such certificates will be deemed, for all purposes, to evidence ownership
of the number of shares of Acquirer Common Stock into which such Target Common
Stock will have been converted.
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7. CONDITIONS TO OBLIGATIONS OF TARGET
Target's obligations hereunder are subject to the fulfillment
or satisfaction, on and as of the Closing, of each of the following conditions
(any one or more of which may be waived by Target, but only in a writing signed
by Target):
7.1 Accuracy of Representations and Warranties. The
representations and warranties of Acquirer, and, as applicable, of Merger Sub,
set forth in Article 3 shall be true and accurate in every material respect on
and as of the Closing with the same force and effect as if they had been made at
the Closing, and Target shall receive a certificate to such effect executed by
Acquirer's Chief Executive Officer and Chief Financial Officer.
7.2 Covenants. Acquirer shall have performed and complied in
all material respects with all of its covenants contained in Article 5 on or
before the Closing, and Target shall receive a certificate to such effect signed
by Acquirer's Chief Executive Officer and Chief Financial Officer.
7.3 Absence of Material Adverse Change. There shall not have
been, in the reasonable judgment of the Board of Directors of Target, any
material adverse change in the business, assets, results of operations or
financial condition of Acquirer.
7.4 Compliance with Law. There shall be no order, decree or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
7.5 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including, but not limited, to requirements under
applicable federal and state securities laws.
7.6 Documents. Target shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by Target's legal counsel for Target to consummate the
transactions contemplated hereby.
7.7 Board of Director and Shareholder Approval. The principal
terms of this Agreement and the Agreement of Merger shall have been approved by
all of Target Shareholders, and as otherwise required by applicable law and
Target's Articles of Incorporation and Bylaws, and by Target's board of
directors.
7.8 Consents. Target shall have received duly executed copies
of all material third-party consents, approvals, assignments, waivers,
authorizations or other certificates contemplated by this Agreement or the
Target Schedule of Exceptions or reasonably deemed necessary by Target's legal
counsel to provide for the continuation in
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full force and effect of any and all material contracts and leases of Target and
for Target to consummate the transactions contemplated by this Agreement or the
Target Schedule of Exceptions in form and substance reasonably satisfactory to
Target (except for those which Acquirer and Target shall have mutually agreed
need not be obtained) as contemplated by the Target Schedule of Exceptions.
7.9 Registration Rights Agreement. Acquirer shall have entered
into the Registration Rights Agreement.
7.10 No Litigation. No litigation or proceeding shall be
threatened or pending for the purpose or with the probable effect of enjoining
or preventing the consummation of any of the transactions contemplated by this
Agreement, or which could be reasonably expected to have a material adverse
effect on the present or future operations or financial condition of Acquirer.
8. CONDITIONS TO OBLIGATIONS OF ACQUIRER
The obligations of Acquirer hereunder are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Acquirer, but only in a
writing signed by Acquirer):
8.1 Accuracy of Representations and Warranties. The
representations and warranties of Target set forth in Article 2 shall be true
and accurate in every material respect on and as of the Closing with the same
force and effect as if they had been made at the Closing, and Acquirer shall
receive a certificate to such effect executed by Target's President.
8.2 Covenants. Target shall have performed and complied in all
material respects with all of its covenants contained in Article 4 on or before
the Closing, and Acquirer shall receive a certificate to such effect signed by
Target's President.
8.3 Absence of Material Adverse Change. There shall not have
been, in the reasonable judgment of the Board of Directors of Acquirer, any
material adverse change in the business, assets, results of operations or
financial condition of Target, including the condition of the Facility, unless
such material adverse change is attributable to a material degree to acts or
omissions of Acquirer.
8.4 Compliance with Law. There shall be no order, decree or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
8.5 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority
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having jurisdiction over the parties and the actions herein proposed to be
taken, including, but not limited to, requirements under applicable federal and
state securities laws.
8.6 Consents. Acquirer shall have received duly executed
copies of all material third-party consents, approvals, assignments, waivers,
authorizations or other certificates contemplated by this Agreement or the
Acquirer Schedule of Exceptions or reasonably deemed necessary by Acquirer's
legal counsel to provide for the continuation in full force and effect of any
and all material contracts and leases of Target and for Acquirer to consummate
the transactions contemplated hereby, in form and substance reasonably
satisfactory to Acquirer (except for those which Acquirer and Target shall have
mutually agreed need not be obtained) as contemplated by the Acquirer Schedule
of Exceptions.
8.7 No Litigation. No litigation or proceeding shall be
threatened or pending for the purpose or with the probable effect of enjoining
or preventing the consummation of any of the transactions contemplated by this
Agreement, or which could be reasonably expected to have a material adverse
effect on the present or future operations or financial condition of Target.
8.8 Requisite Approvals. The principal terms of this Agreement
and the Agreement of Merger shall have been approved and adopted by all of
Target Shareholders, and as otherwise required by applicable law, Target's
Articles of Incorporation and Bylaws, and Target's board of directors. Copies of
the minutes and actions of Target's Board of Directors and shareholders with
respect to this Agreement and the Agreement of Merger certified by Target's
President and Secretary, shall be provided to Acquirer at or prior to Closing.
8.9 Dissenting Shares. Each of the Target Shareholders shall
have voted in favor of the Merger and there shall be no Dissenting Shares.
8.10 Registration Rights Agreements. Target shall have entered
into the Registration Rights Agreement.
8.11 Termination of Rights. Any registration rights, rights of
refusal, co-sale rights, repurchase rights, rights to any liquidation preference
or redemption rights of any Target Shareholder, or applicable to any equity
securities of Target, shall have been terminated or waived as of the Closing.
8.12 Target Shareholders Representation Letter. The Target
Shareholders shall have delivered to Acquirer a representation letter in
accordance with Section 4.11.
8.13 Satisfactory Form of Legal and Accounting Matters. The
form, scope and substance of all legal and accounting matters contemplated
hereby, and all closing documents and other papers delivered hereunder, shall be
reasonably acceptable to Acquirer's counsel.
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<PAGE>
8.14 Policy of Title Insurance. An insurer of Acquirer's
choice shall be prepared to offer a CLTA Policy of Title Insurance on the
Facility in the amount of $8,509,090 at Acquirer's expense.
8.15 Delivery of Stock Certificates. The Target Shareholders
shall deliver at the Closing the stock certificates representing all of the
outstanding shares of Target Common Stock, which certificates shall be
accompanied by a duly executed Assignment Separate From the Certificate with
signatures guaranteed.
9. TERMINATION OF AGREEMENT
9.1 Prior to Closing.
9.1.1 This Agreement may be terminated at any time
prior to the Closing by the mutual written consent of each of the parties
hereto.
9.1.2 Unless otherwise agreed by the parties hereto,
this Agreement will be terminated if all conditions to the Closing have not been
satisfied or waived on or before December 31, 1996.
9.2 At the Closing. At the Closing, this Agreement may be
terminated:
9.2.1 By Acquirer if any of the conditions precedent
to Acquirer's obligations set forth in Article 8 above have not been fulfilled
or waived at and as of the Closing; or
9.2.2 By Target if any of the conditions precedent to
Target's obligations set forth in Article 7 above have not been fulfilled or
waived at and as of the Closing.
Any termination of this Agreement under this Section 9.2 will
be effective by the delivery of notice of the terminating party to the other
party hereto.
9.3 No Liability. Any termination of this Agreement pursuant
to this Article 9 will be without further obligation or liability upon any party
in favor of the other party hereto other than the obligations provided in
Section 10.2 and the Target Shareholders Indemnification Letter required in
Section 4.14, which will survive termination of this Agreement; provided,
however, that nothing herein will limit the obligation of Target and Acquirer to
use their best efforts to cause the Merger to be consummated, as set forth in
Sections 4.10 and 5.3 hereof, respectively.
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES;
CONTINUING COVENANTS
10.1 Survival of Representations. All representations,
warranties and covenants of Acquirer, Merger Sub and Target contained in this
Agreement will remain operative and in full force and effect, regardless of any
investigation made by or on behalf
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of the parties to this Agreement, until the earlier of the termination of this
Agreement or one year after the Closing Date. In any event, covenants, which by
their terms survive thereafter, will continue to survive in accordance with
their terms.
10.2 Indemnification by Acquirer. Subject to the limitations
set forth in this Article 10, Acquirer will indemnify and hold harmless Target
and its officers, directors, agents and employees, and each person, if any, who
controls or may control Target within the meaning of the Act (hereinafter
referred to individually as an "Indemnified Person" and collectively as
"Indemnified Persons"), from and against any and all claims, demands, actions,
causes of actions, losses, costs, damages, liabilities and expenses, including,
without limitation, reasonable legal fees, reduced by any recovery under
policies of insurance (hereinafter referred to as "Damages"):
(a) Arising out of any misrepresentation or breach
of, or default in connection with, any of the representations, warranties and
covenants given or made by Acquirer in this Agreement or any certificate,
document or instrument delivered by or on behalf of Acquirer pursuant hereto
(other than with respect to changes in the truth or accuracy of the
representations and warranties of Acquirer under this Agreement after the date
hereof if Acquirer has advised Target of such changes in an update to Exhibit
3.0 delivered prior to the Closing and Target has nonetheless proceeded with the
Closing); or
(b) Resulting from any failure of any Target
Shareholder to receive good, valid and marketable title to the issued and
outstanding Acquirer Common Stock, free and clear of all liens, claims, pledges,
options, adverse claims, assessments or charges of any nature whatsoever.
10.3 Claims Procedure. Indemnification claims pursuant to this
Article 10 must be brought within one year after the Closing Date. Upon receipt
of written notice of a claim for indemnification hereunder that does not involve
any third party, which notice specifies, in reasonable detail, the basis for the
claim and includes a calculation of the amount of the claim and a copy of all
supporting documentation, as necessary, the indemnifying party will promptly,
and in any event within thirty days after receipt of such notice, reimburse the
indemnified party for the amount of such claim, to the extent such claim is
legitimate. In the event that a third-party claim is instituted against a party
for which such party has the right to indemnification by the other party under
this Agreement, the indemnified party promptly will tender the defense of such
claim to the indemnifying party by written notice thereto, and the indemnifying
party will defend such claim at its sole cost and expense and will pay the
costs, damages and attorneys' fees awarded in any such action or arising from
such claim. The indemnifying party will have the right to select counsel (which
will be reasonably acceptable to the indemnified party) for, and control the
defense and settlement of, all such claims; provided, however, that the
indemnified party may participate in such defense at its own expense, and the
indemnifying party will not settle or compromise such claim in a manner which
may result in any liability to the indemnified party without the prior written
consent of the indemnified party. If the indemnifying party refuses to accept
the tender of
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the party entitled to indemnity hereunder or to defend timely any such claim,
the indemnified party will have the right to defend, and to control the defense
and settlement of, such claim at the indemnifying party's sole cost and expense.
11. MISCELLANEOUS
11.1 Governing Law. The internal laws of the State of
California (irrespective of its choice of law principles) will govern the
validity of this Agreement, the construction of its terms and the interpretation
and enforcement of the rights and duties of the parties hereto.
11.2 Assignment; Binding Upon Successors and Assigns. Neither
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
11.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will constitute one
and the same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
both parties reflected hereon as signatories.
11.5 Other Remedies. Except as otherwise provided herein (and
specifically subject to the limitations in Article 10 above), any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
11.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. The Agreement may be amended by the parties hereto at any
time before or after approval of the Target Shareholders, but, after such
approval, no amendment will be made which by applicable law requires the further
approval of the Target Shareholders without obtaining such further approval.
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<PAGE>
11.7 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
11.8 Expenses. Each party will bear its respective expenses
and legal fees incurred with respect to this Agreement and the transactions
contemplated hereby. Target will pay all such fees prior to the Effective Time.
11.9 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including, without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
11.10 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by registered or certified mail, postage prepaid, and will be
deemed given upon delivery, if delivered personally, or five days after deposit
in the mails, if mailed, to the following addresses:
(i) If to Acquirer or Merger Sub:
2975 Stender Way
Santa Clara, California 95054
Attention: Jack Menache, Esq.;
(ii) If to Target:
10050 Bandley Drive
Cupertino, California 95014;
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 11.10.
11.11 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys, and the
language hereof will not be construed for or against either party. A reference
to an Article, a Section or an exhibit will mean an Article or a Section in, or
exhibit to, this Agreement unless otherwise explicitly set forth. The titles and
headings herein are for reference purposes only and will not in any manner limit
the construction of this Agreement, which will be considered as a whole.
11.12 No Joint Venture. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
any of the parties hereto. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No party will
have the power to control the activities
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and operations of any other and their status is, and at all times will continue
to be, that of independent contractors with respect to each other. No party will
have any power or authority to bind or commit any other. No party will hold
itself out as having any authority or relationship in contravention of this
Section.
11.13 Further Assurances. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements, and to give such further written assurances, as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
11.14 Absence of Third-Party Beneficiary Rights. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third-party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, stockholder or shareholder, partner or any party
hereto or any other person or entity unless specifically provided otherwise
herein, and, except as so provided, all provisions hereof will be personal
solely between the parties to this Agreement.
11.15 Public Announcement. Acquirer may issue such press
releases, and make such other disclosures regarding the Merger, as it determines
are required under applicable securities laws or regulatory rules.
11.16 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto. The express terms
hereof control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first above
written.
INTEGRATED DEVICE BACCARAT SILICON, INC.
TECHNOLOGY, INC.
By: /s/ Leonard C. Perham By: /s/ Carl E. Berg
---------------------- ----------------------
Its: President and Chief Executive Officer Its: President
INTEGRATED DEVICE
TECHNOLOGY SALINAS CORP.
By: /s/ Leonard C. Perham
-------------------------
Its: President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
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EXHIBIT 2.2
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the "Agreement") is entered into as
of this October 1, 1996, by and among Integrated Device Technology, Inc., a
Delaware corporation ("Acquirer"), Integrated Device Technology Salinas Corp., a
California corporation wholly owned by Acquirer ("Merger Sub") and Baccarat
Silicon, Inc., a California corporation ("Target").
The parties intend that Merger Sub will merge with and into
Target in a triangular statutory merger (the "Merger") with Target to be the
surviving corporation of the Merger, all pursuant to the terms and conditions of
this Agreement and the Agreement and Plan of Reorganization dated October 1,
1996 (the "Plan of Reorganization") and the applicable provisions of the laws of
California. At the Effective Time (as defined below) all the outstanding capital
stock of Target will be converted into capital stock of Acquirer. The Merger is
intended to be treated as a tax-free reorganization pursuant to the provisions
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), by virtue of the provisions of Section 368(a)(2)(E) of the Code. The
parties therefore agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Merger. Subject to the terms and conditions of this
Agreement, Merger Sub will be merged with and into Target pursuant to this
Agreement and the Plan of Reorganization and in accordance with applicable
provisions of the laws of the California as follows:
1.1.1 Conversion of Shares. At the Effective Time,
the outstanding shares of Target common stock ("Target Common Stock") will be
converted into the right to receive seven hundred eighty-two thousand four
hundred forty-five (782,445) shares (the "Exchange Shares") of Acquirer's
unregistered common stock, $0.001 par value ("Acquirer Common Stock").
Therefore, each share of Target Common Stock issued and outstanding immediately
prior to the filing of this Agreement with the Secretary of State of California
(the "Effective Time"), other than any shares for which appraisal or dissenters
rights have been or will be perfected in compliance with applicable law, will by
virtue of the Merger at the Effective Time, and without further action on the
part of any holder thereof, be converted into the right to receive 39.12225
fully paid and nonassessable shares of Acquirer Common Stock. Each Exchange
Share to be issued in the Merger shall be deemed to include the corresponding
right (the "Acquirer Rights") to purchase shares of Series A Junior
Participating Preferred Stock, $.001 par value, of Acquirer pursuant to the
Amended and Restated Rights Agreement dated as of February 27, 1992 (the
"Acquirer Rights Agreement") between Acquirer and The First National Bank of
Boston, as Rights Agent. Prior to the Distribution Date (as defined in the
Acquirer Rights Agreement), all references in this Agreement to Exchange Shares
shall be deemed to include the Acquirer Rights corresponding thereto.
<PAGE>
1.1.2 Adjustments for Capital Changes. If, prior to
the Merger, Acquirer or Target recapitalizes through a split-up of its
outstanding shares into a greater number, or a combination of its outstanding
shares into a lesser number, reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of shares of other
classes (other than through a split-up or combination of shares provided for in
the previous clause), or declares a dividend on its outstanding shares payable
in shares or securities convertible into shares or issues additional shares or
equity securities, the number of shares of Acquirer Common Stock into which the
Target shares are to be converted will be adjusted appropriately so as to
maintain the proportionate interests of the holders of the Target shares and the
holders of Acquirer shares.
1.1.3 Dissenting Shares. Holders of shares of Target
Common Stock ("Target Shareholders") who have complied with all requirements for
perfecting shareholders' rights of appraisal, as set forth in Chapter 13 of the
California Corporations Code ("California Law"), shall be entitled to their
rights under California Law with respect to such shares ("Dissenting Shares").
1.2 Fractional Shares. No fractional shares of Acquirer Common
Stock will be issued in connection with the Merger; provided, however, that the
Target Shareholders shall agree, prior to the Closing of the Agreement and Plan
of Reorganization, and shall notify Acquirer which Target Shareholder will
receive all fractional shares issuable to Target shareholders, which in the
aggregate will not exceed one share of Acquirer's Common Stock.
1.3 Effects of the Merger. At the Effective Time: (a) the
separate existence of Merger Sub will cease and Merger Sub will be merged with
and into Target, and Target will be the surviving corporation, pursuant to the
terms of this Agreement; (b) the Articles of Incorporation and Bylaws of Target
will become the Articles of Incorporation and the Bylaws of the surviving
corporation; (c) each share of Merger Sub Common Stock outstanding immediately
prior to the Effective Time will, at the Effective Time, be converted into one
share of the Common Stock of the surviving corporation; (d) the Board of
Directors and officers of Merger Sub will become the Board of Directors and
officers of the surviving corporation; (e) each share of Target Stock
outstanding immediately prior to the Effective Time will be converted as
provided in Sections 1.1 and 1.2; and (f) the Merger will, from and after the
Effective Time, have all of the effects provided by applicable law.
1.4 Further Assurances. Merger Sub agrees that if, at any time
before or after the Effective Time, Acquirer considers or is advised that any
further deeds, assignments or assurances are reasonably necessary or desirable
to vest, perfect or confirm in Acquirer or Target title to any property or
rights of Merger Sub, Acquirer and Target and their proper officers and
directors may execute and deliver all such proper deeds, assignments and
assurances and do all other things reasonably necessary or desirable to vest,
perfect or confirm title to such property or rights in Acquirer or Target
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<PAGE>
and otherwise to carry out the purpose of this Agreement, in the name of Merger
Sub or otherwise.
2. PROCEDURES FOR EXCHANGE OF SHARES.
2.1 At the Effective Time, all shares of Target Common Stock
that are outstanding immediately prior thereto will, by virtue of the Merger and
without further action, cease to exist and will be converted into the right to
receive from Acquirer the Exchange Shares, subject to Section 1.2.
2.2 As soon as practicable on or after the Effective Time,
each holder of shares of Target Common Stock that are not Dissenting Shares will
surrender the certificate(s) for such shares (the "Target Certificates") duly
endorsed as requested by Acquirer, to Acquirer for cancellation. On or promptly
after the Effective Time and receipt of such Target Certificates, Acquirer will
issue to each tendering holder a certificate for the number of shares of
Acquirer Common Stock to which such holder is entitled pursuant to Section 1.1.1
hereof.
2.3 No dividends or distributions payable to holders of record
of Acquirer Common Stock after the Effective Time, or cash payable in lieu of
fractional shares, will be paid to the holder of any unsurrendered Target
Certificate(s) until the holder of the Target Certificate(s) surrenders such
Target Certificate(s). Subject to the effect, if any, of applicable escheat ant
other laws, following surrender of any Target Certificate, there will be
delivered to the person entitled thereto, without interest, the amount of any
dividends and distributions therefor paid with respect to Acquirer Common Stock
so withheld as of any date subsequent to the Effective Time and prior to such
date of delivery.
2.4 All Acquirer Common Stock delivered upon the surrender of
Target Common Stock in accordance with the terms hereof will be deemed to have
been delivered in full satisfaction of all rights pertaining to such Target
Common Stock. There will be no further registration or transfers on the stock
transfer books of Target or its transfer agent of the Target Common Stock. If,
after the Effective Time, Target Certificates are presented for any reason, they
will be canceled and exchanged as provided in this Article 2.
2.5 Until certificates representing Target Common Stock
outstanding prior to the Merger are surrendered pursuant to Section 2.2 above,
such certificates will be deemed, for all purposes, to evidence ownership of the
number of shares of Acquirer Common Stock into which such Target Common Stock
will have been converted.
3. AMENDMENTS AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a
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party of any breach hereof or default in the performance hereof will not be
deemed to constitute a waiver of any other default or any succeeding breach or
default. This Agreement may be amended by the parties hereto at any time before
or after approval of the Target Shareholders, but, after such approval, no
amendment will be made which by applicable law requires the further approval of
the Target Shareholders without obtaining such further approval.
4. TERMINATION OF AGREEMENT
4.1 Prior to Closing.
4.1.1 This Agreement may be terminated at any time
prior to the Closing (as defined in the Plan of Reorganization) by the mutual
written consent of each of the parties hereto.
4.1.2 Unless otherwise agreed by the parties hereto,
this Agreement will be terminated if all conditions to the Closing have not been
satisfied or waived on or before December 31, 1996.
4.2 At the Closing. At the Closing, this Agreement may be
terminated:
4.2.1 By Acquirer if any of the conditions precedent
to Acquirer's obligations set forth in Article 8 of the Plan of Reorganization
have not been fulfilled or waived at and as of the Closing; or
4.2.2 By Target if any of the conditions precedent to
Target's obligations set forth in Article 7 of the Plan of Reorganization have
not been fulfilled or waived at and as of the Closing.
Any termination of this Agreement under this Section 4.2 will
be effective by the delivery of notice of the terminating party to the other
party hereto.
4.3 No Liability. Any termination of this Agreement pursuant
to this Article 4 will be without further obligation or liability upon any party
in favor of the other party hereto other than the obligations provided in
Section 10.2 of the Plan of Reorganization and the Target Shareholders
Indemnification Letter required in Section 4.14 of the Plan of Reorganization,
which will survive termination of this Agreement; provided, however, that
nothing herein will limit the obligation of Target and Acquirer to use their
best efforts to cause the Merger to be consummated, as set forth in Sections
4.10 and 5.3 of the Plan of Reorganization, respectively.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
INTEGRATED DEVICE BACCARAT SILICON, INC.
TECHNOLOGY, INC.
By: /s/ Jack Menache By: /s/ Carl E. Berg
----------------------- -------------------------
Jack Menache Carl E. Berg
Its: Vice President Its: President
By: /s/ Jack Menache By: /s/ Clyde J. Berg
----------------------- -------------------------
Jack Menache Clyde J. Berg
Its: Secretary Its: Secretary
INTEGRATED DEVICE
TECHNOLOGY SALINAS CORP.
By: /s/ Jack Menache
-----------------------
Jack Menache
Its: Vice President
By: /s/ Jack Menache
-----------------------
Jack Menache
Its: Secretary
[SIGNATURE PAGE TO AGREEMENT OF MERGER]
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EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of this October 1, 1996, by and between Integrated Device
Technology, Inc., a Delaware corporation ("Acquirer"), and Carl E. and Mary Ann
Berg, on one hand, and Clyde J. Berg, on the other hand (collectively, the
"Target Shareholders"), who will receive shares of Acquirer common stock (the
"Acquirer Common Stock") in the Merger (as defined below).
WHEREAS, Integrated Device Technology Salinas Corp., a wholly
owned California subsidiary of Acquirer ("Merger Sub"), will be merged with and
into Baccarat Silicon, Inc. ("Target") pursuant to the terms of an Agreement of
Merger, dated October 1, 1996 (the "Agreement of Merger"), and the related
Agreement and Plan of Reorganization, dated October 1, 1996 (the "Plan of
Reorganization"), among Acquirer, Merger Sub and Target (the "Merger");
WHEREAS, in the Merger, the Target Shareholders will exchange
all of their shares of Target common stock for seven hundred eighty-two thousand
four hundred forty-five (782,445) shares of Acquirer Common Stock (the "Exchange
Shares");
WHEREAS, pursuant to Section 1.5 of the Plan of
Reorganization, immediately after the filing of the Agreement of Merger with the
Secretary of State of California (the "Effective Time"), the Target Shareholders
may cause Acquirer to register the Exchange Shares pursuant to a Form S-3 (as
defined below), provided that the Target Shareholders have entered into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants set forth herein, the parties agree as follows:
1. REGISTRATION RIGHTS.
1.1 Definitions. For purposes of this Article 1:
(a) Registration. The terms "register," "registered"
and "registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and the declaration or ordering of effectiveness of such
registration statement.
(b) Registrable Securities. The term "Registrable
Securities" means: (1) the Exchange Shares; and (2) any shares of Common Stock
of the Acquirer issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, all such
Exchange Shares described in clause (1) of this subsection (b); excluding in all
cases, however, any Registrable Securities sold by a person in a transaction in
which rights under this Article 1 are not assigned in accordance
<PAGE>
with this Agreement or any Registrable Securities sold to the public or sold
pursuant to Rule 144 promulgated under the Securities Act.
(c) Registrable Securities Then Outstanding. The
number of shares of "Registrable Securities then outstanding" shall mean the
number of shares of Common Stock which are Registrable Securities and (1) are
then issued and outstanding or (2) are then issuable pursuant to the exercise or
conversion of then outstanding and then exercisable options, warrants or
convertible securities.
(d) Holder. For purposes of this Article 1 and
Articles 2 and 3 hereof, the term "Holder" means any person owning of record at
least 100,000 shares of Registrable Securities that have not been sold to the
public or pursuant to Rule 144 promulgated under the Securities Act or any
assignee of record of such Registrable Securities to whom rights under this
Article 1 have been duly assigned in accordance with this Agreement. The term
"Holder" includes (i) all corporations, partnerships or other organizations that
a Holder controls through beneficial ownership in combination with members of
the Holder's immediate family of at least 50% of such corporation, partnership
or other organization and (ii) any individual who is a member of a Holder's
immediate family.
(e) Form S-3. The term "Form S-3" means such form
under the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Acquirer with the SEC.
(f) SEC. The term "SEC" or "Commission" means the
U.S. Securities and Exchange Commission.
1.2 Piggyback Registrations. The Acquirer shall notify all
Holders of Registrable Securities in writing at least fifteen (15) days prior to
filing any registration statement under the Securities Act for purposes of
effecting a public offering of Common Stock of the Acquirer (including, but not
limited to, registration statements relating to secondary offerings of
securities of the Acquirer, but excluding registration statements relating to
any registration under Section 1.3 of this Agreement or to any employee benefit
plan or a corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by such Holder shall, within five (5) days after receipt of the
above-described notice from the Acquirer, so notify the Acquirer in writing, and
in such notice shall inform the Acquirer of the number of Registrable Securities
such Holder wishes to include in such registration statement. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Acquirer, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent
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<PAGE>
registration statement or registration statements as may be filed by the
Acquirer with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If a registration statement under
which the Acquirer gives notice under this Section 1.2 is for an underwritten
offering, then the Acquirer shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder's Registrable Securities
to be included in a registration pursuant to this Section 1.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriter(s) selected for
such underwriting. Notwithstanding any other provision of this Agreement, if the
managing underwriter(s) determine(s) in good faith that marketing factors
require a limitation of the number of shares to be underwritten, then the
managing underwriter(s) may exclude shares (including Registrable Securities)
from the registration and the underwriting, and the number of shares that may be
included in the registration and the underwriting shall be allocated, first, to
the Acquirer, and second, to each of the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder;
provided, however, that the right of the underwriters to exclude shares
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that: (i) the number of Registrable
Securities included in any such registration is not reduced below twenty percent
(20%) of the shares included in the registration; and (ii) all shares that are
not Registrable Securities and are held by persons who are employees or
directors of the Acquirer (or any subsidiary of the Acquirer) shall first be
excluded from such registration and underwriting before any Registrable
Securities are so excluded. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Acquirer and the underwriter, delivered at least ten (10) business days
prior to the effective date of the registration statement. Any Registrable
Securities excluded or withdrawn from such underwriting shall be excluded and
withdrawn from the registration. For any Holder which is a partnership or
corporation, the partners, retired partners and shareholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by all entities and individuals included in such "Holder," as defined in this
sentence.
(b) Expenses. All expenses incurred in connection
with a registration pursuant to this Section 1.2 (excluding underwriters' and
brokers' discounts and commissions and any additional special counsel fees for
individual Holders), including, without limitation all federal and "Blue Sky"
registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Acquirer and reasonable fees and disbursements
of one counsel for the selling Holders shall be borne by the Acquirer.
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<PAGE>
1.3 Form S-3 Registration. In case the Acquirer shall receive
from a Holder, if a Holder holds at least 100,000 shares of Registrable
Securities, a written request or requests that the Acquirer effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by the Holder, then
the Acquirer will:
(a) Notice. Promptly give written notice of the
proposed registration and the Holder's request therefor, and any related
qualification or compliance, to all other Holders of Registrable Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Acquirer; provided, however, that the Acquirer shall not be
obligated to effect or maintain any such registration, qualification or
compliance pursuant to this Section 1.3:
(1) if Form S-3 is not available for such
offering by the Holders;
(2) if the Holders, together with the
holders of any other securities of the Acquirer entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of an amount equal to or less than
they could sell within three (3) months under Rule 144;
(3) if the Acquirer shall furnish to the
Holders a certificate signed by the President or Chief Executive Officer of the
Acquirer stating that in the good faith judgment of the Board of Directors of
the Acquirer, it would be detrimental to the Acquirer and its shareholders for
such Form S-3 Registration to be effected at such time, in which event the
Acquirer shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve month period for a period of not
more than 120 days after receipt of the request of the Holder or Holders under
this Section 2.4;
(4) in any particular jurisdiction in which
the Acquirer would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance; or
(5) if the Acquirer has effected two
registrations pursuant to this Section 1.3.
(c) Expenses. Subject to the foregoing, the Acquirer
shall file a Form S-3 registration statement covering the Registrable Securities
and other securities
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<PAGE>
so requested to be registered pursuant to this Section 1.3 as soon as
practicable after receipt of the request or requests of the Holders for such
registration. The Acquirer shall pay all expenses incurred in connection with
each registration requested pursuant to this Section 1.3, (excluding
underwriters' or brokers' discounts and commissions), including, without
limitation, all filing, registration and qualification, printers' and accounting
fees and the reasonable fees and disbursements of one counsel for the selling
Holder or Holders and counsel for the Acquirer. Each Holder participating in a
registration pursuant to this Section 1.3 shall bear such Holder's proportionate
share (based on the total number of shares sold in such registration other than
for the account of the Acquirer) of all discounts, commissions or other amounts
payable to underwriters or brokers in connection with such offering.
Notwithstanding the foregoing, the Acquirer shall not be required to pay for any
expenses of any registration proceeding begun pursuant to this Section 1.3 if
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered, unless the Holders
of a majority of the Registrable Securities then outstanding agree to forfeit
their right to demand registration pursuant to this Section 1.3 (in which case
such right shall be forfeited by all Holders of Registrable Securities);
provided, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business or prospects of
the Acquirer not known to the Holders at the time of their request for such
registration and have withdrawn their request for registration with reasonable
promptness after learning of such material adverse change, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to this Section 1.3.
1.4 Obligations of the Acquirer. Whenever required to effect
the registration of any Registrable Securities under this Agreement, the
Acquirer shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its reasonable
best efforts to cause such registration statement to become effective, and, upon
the request of the Target Shareholders, if the Target Shareholders holds any
Registrable Securities, or the Holders of a majority of the Registrable
Securities registered thereunder, keep such registration statement effective for
up to thirty (30) days, which thirty-day period shall be tolled for any period
during which any of the selling Holders is prohibited from selling Acquirer
securities either pursuant to Acquirer's policy on insider trading or as a
result of any such Holder's position with Acquirer; provided, however, that the
selling Holders cannot sell Registrable Securities pursuant to such registration
statement while the thirty-day period is tolled.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
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<PAGE>
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Use its reasonable best efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Acquirer shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Acquirer for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Acquirer, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
1.5 Furnish Information. It shall be a condition precedent to
the obligations of the Acquirer to take any action pursuant to Sections 1.2 or
1.3 that the selling Holders shall furnish to the Acquirer such information
regarding themselves, the
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<PAGE>
Registrable Securities held by them, and the intended method of disposition of
such securities as shall be required to timely effect the registration of their
Registrable Securities.
1.6 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Article 1.
1.7 Indemnification. In the event any Registrable Securities
are included in a registration statement under Sections 1.2 or 1.3:
(a) By the Acquirer. To the extent permitted by law,
the Acquirer will indemnify and hold harmless each Holder, the partners,
officers and directors of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended, (the "1934 Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the l934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue
statement of a material fact contained in such
registration statement, including any preliminary
prospectus or final prospectus contained therein or
any amendments or supplements thereto, provided by
Target;
(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 as a result of Target's action; or
(iii) any violation or alleged violation by
the Acquirer of the Securities Act, the 1934 Act, any
federal or state securities law or any rule or
regulation promulgated under the Securities Act, the
1934 Act or any federal or state securities law in
connection with the offering covered by such
registration statement as a result of actions of
Target;
and the Acquirer will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this
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<PAGE>
subsection 1.7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Acquirer (which consent shall not be unreasonably withheld),
nor shall the Acquirer be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(b) By Selling Holders. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the Acquirer, each of
its directors, each of its officers who have signed the registration statement,
each person, if any, who controls the Acquirer within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which the Acquirer or any such director,
officer, controlling person, underwriter or other such Holder, partner or
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Acquirer or any such
director, officer, controlling person, underwriter or other Holder, partner,
officer, director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
1.7(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; and provided,
further, that the total amounts payable in indemnity by a Holder under this
Section 1.7(b) in respect of any Violation shall not exceed the net proceeds
received by such Holder in the registered offering out of which such Violation
arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 1.7 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
1.7, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential conflict of
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<PAGE>
interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.7, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 1.7.
(d) Defect Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Acquirer and Holders are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus), such indemnity agreement shall not inure to the benefit of any
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(e) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (i) any Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 1.7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 1.7 provides for indemnification in such case or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 1.7; then, and in each such case, the Acquirer and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement, and the Acquirer and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case, (A) no such Holder
will be required to contribute any amount in excess of the public offering price
of all such Registrable Securities offered and sold by such Holder pursuant to
such registration statement, and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(f) Survival. The obligations of the Acquirer and
Holders under this Section 1.7 shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
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<PAGE>
(g) Limitation of Indemnification. The
indemnification provisions contained in this Section 1.7 apply only with respect
to a registration statement covering Registrable Securities and do not apply to
any other agreement or obligation of indemnity under federal or state securities
laws between Acquirer and any Target Shareholder, including, without limitation,
any indemnification agreement between Carl E. Berg and Acquirer and any
Directors' and Officers' Insurance Policy existing for the benefit of Carl E.
Berg or Acquirer.
1.8 "Market Stand-Off" Agreement. Each Holder hereby agrees
that it shall not, to the extent requested by the Acquirer or an underwriter of
securities of the Acquirer, directly or indirectly, sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase, pledge or otherwise transfer or dispose of any Registrable
Securities for up to 90 days following the effective date of a registration
statement of the Acquirer filed under the Securities Act; provided, however,
that such agreement shall not be applicable to Registrable Securities sold
pursuant to such registration statement. In order to enforce the foregoing
covenant, the Acquirer shall have the right to place restrictive legends on the
certificates representing the shares subject to this Section and to impose stop
transfer instructions with respect to the Registrable Securities and such other
shares of stock of each Holder (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period.
1.9 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission that may at any time
permit the sale of the Registrable Securities to the public without
registration, the Acquirer agrees to:
(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times;
(b) Use its reasonable best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Acquirer under the Securities Act and the 1934 Act; and
(c) So long as a Holder owns any Registrable
Securities, to furnish to the Holder forthwith upon request a written statement
by the Acquirer as to its compliance with the reporting requirements of said
Rule 144, and of the Securities Act and the 1934 Act, a copy of the most recent
annual or quarterly report of the Acquirer, and such other reports and documents
of the Acquirer as a Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
1.10 Termination of the Acquirer's Obligations. The Acquirer
shall have no obligations pursuant to Sections 1.2 and 1.3 with respect to: (i)
any request or requests for registration made by any Holder on a date more than
five (5) years after the date if this Agreement; or (ii) any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to
Sections 1.2 and 1.3 if, in the opinion of counsel to the Acquirer, all such
Registrable Securities proposed to be sold by a Holder may be sold in a
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three-month period without registration under the Securities Act pursuant to
Rule 144 under the Securities Act.
1.11 Legends. It is understood and agreed by each Holder that,
for the three-year period commencing with the Effective Time (unless and until
such securities are sold pursuant to an effective Registration Statement), the
certificates or other instruments evidencing the Registrable Securities shall
bear the following or any substantially similar legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE INVESTOR SHOULD BE AWARE THAT IT MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
The Acquirer also may issue to its transfer agent stop transfer instructions
with respect to the stock as a means of effectuating compliance with the
limitations set forth in this Section 1.11.
1.12 Other Obligations of Holders. Each Holder hereby agrees
it shall comply with Section 16(b) of the 1934 Act and Rule 10b-6 promulgated
thereunder.
2. ASSIGNMENT AND AMENDMENT.
2.1 Assignment. Notwithstanding anything herein to the
contrary:
(a) Registration Rights. The registration rights of a
Holder under Article 1 hereof may be assigned to any party who acquires shares
of Registrable Securities with a value of $500,000 or more from the Holder;
provided, however, that no party may be assigned any of the foregoing rights
unless the Acquirer is given written notice by the assigning party at the time
of such assignment stating the name and address of the assignee and identifying
the securities of the Acquirer as to which the rights in question are being
assigned; and provided, further, that any such assignee shall receive
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<PAGE>
such assigned rights subject to all the terms and conditions of this Agreement,
including, without limitation, the provisions of this Article 2.
2.2 Amendment of Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Acquirer and the Target Shareholders (and/or any of their
permitted successors or assigns). Any amendment or waiver effected in accordance
with this Section 2.2 shall be binding upon the Target Shareholders, each
Holder, each permitted successor or assignee of the Target Shareholders or such
Holder and the Acquirer.
3. GENERAL PROVISIONS.
3.1 Governing Law. The internal laws of the State of
California (irrespective of its choice of law principles) will govern the
validity of this Agreement, the construction of its terms and the interpretation
and enforcement of the rights and duties of the parties hereto.
3.2 Assignment; Binding Upon Successors and Assigns. Subject
to the provisions of Section 2.1, the provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
3.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
3.4 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
both parties reflected hereon as signatories.
3.5 Other Remedies. Except as otherwise provided herein (and
specifically subject to the limitations in Section 1.7 above), any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
3.6 Amendment and Waivers. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the
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<PAGE>
Acquirer and the Target Shareholders (and/or any of their permitted successors
or assigns). Any amendment or waiver effected in accordance with this Section
3.6 shall be binding upon the Target Shareholders, each Holder, each permitted
successor or assignee of the Target Shareholders or such Holder and the
Acquirer. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. The Agreement may be amended by the
parties hereto at any time before or after approval of the Target Shareholders,
but, after such approval, no amendment will be made which by applicable law
requires the further approval of the Target Shareholders without obtaining such
further approval.
3.7 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
3.8 Expenses. Except as provided herein, each party will bear
its respective expenses and legal fees incurred with respect to this Agreement
and the transactions contemplated hereby.
3.9 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including, without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
3.10 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by registered or certified mail, postage prepaid, and will be
deemed given upon delivery, if delivered personally, or five days after deposit
in the mails, if mailed, to the following addresses:
(i) If to Acquirer:
2975 Stender Way
Santa Clara, California 95054
Attention: Jack Menache, Esq.;
(ii) If to Target Shareholders:
10050 Bandley Drive
Cupertino, California 95014;
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 3.10.
-13-
<PAGE>
3.11 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys, and the
language hereof will not be construed for or against either party. A reference
to an Article, a Section or an exhibit will mean an Article or a Section in, or
exhibit to, this Agreement unless otherwise explicitly set forth. The titles and
headings herein are for reference purposes only and will not in any manner limit
the construction of this Agreement, which will be considered as a whole.
3.12 No Joint Venture. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
any of the parties hereto. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No party will
have the power to control the activities and operations of any other and their
status is, and at all times will continue to be, that of independent contractors
with respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
3.13 Further Assurances. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements, and to give such further written assurances, as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
3.14 Absence of Third-Party Beneficiary Rights. No provisions
of this Agreement are intended, nor will be interpreted, to provide or create
any third-party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, stockholder or shareholder, partner or any party
hereto or any other person or entity unless specifically provided otherwise
herein, and, except as so provided, all provisions hereof will be personal
solely between the parties to this Agreement.
3.15 Public Announcement. Acquirer may issue such press
releases, and make such other disclosures regarding the Merger, as it determines
are required under applicable securities laws or regulatory rules.
3.16 Entire Agreement. This Agreement, the Plan of
Reorganization and the exhibits hereto constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof.
3.17 Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock of
the Acquirer, then, upon the occurrence of any subdivision, combination or stock
dividend of such class of stock, the specific number of shares so referenced in
this Agreement shall
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<PAGE>
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class of stock by such subdivision, combination or
stock dividend.
3.18 Aggregation of Stock. All shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
INTEGRATED DEVICE TECHNOLOGY, INC. CARL E. AND MARY ANN BERG
By: /s/ Leonard C. Perham /s/ Carl E. Berg
------------------------------- --------------------------
Its: President and Chief Executive Officer Carl E. Berg
/s/ Mary Ann Berg
--------------------------
Mary Ann Berg
CLYDE J. BERG
/s/ Clyde J. Berg
--------------------------
Clyde J. Berg
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
-16-
<TABLE>
Part II. Other information, Item 6a.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
December 29, December 31, December 29, December 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares outstanding 78,527 77,264 78,080 76,892
Net effect of dilutive stock options -- 4,098 -- 4,967
-------- -------- -------- --------
Total 78,527 81,362 78,080 81,859
======== ======== ======== ========
Net income (loss) $(42,918) $ 35,535 $(44,383) $ 98,662
======== ======== ======== ========
Net income (loss) per share $ (0.55) $ 0.44 $ (0.57) $ 1.21
======== ======== ======== ========
Fully diluted:
Weighted average shares outstanding 78,527 77,264 78,080 76,892
Net effect of dilutive stock options -- 4,098 -- 4,970
Assumed conversion of
5.5% Convertible Subordinated Notes (Note 1) -- 7,031 -- 5,598
-------- -------- -------- --------
Total 78,527 88,393 78,080 87,460
======== ======== ======== ========
Net income (loss) $(42,918) $ 35,535 $(44,383) $ 98,662
Add:
Convertible subordinated notes interest
and related expenses, net of taxes (Note 1) -- 1,903 $ -- 4,399
-------- -------- -------- --------
Adjusted net income (loss) $(42,918) $ 37,438 $(44,383) $103,061
======== ======== ======== ========
Net income (loss) per share $ (0.55) $ 0.42 $ (0.57) 1.18
======== ======== ======== ========
<FN>
Note 1: The potential effect of stock options and conversion of the 5.5% Convertible Subordinated Notes
have not been included in the primary and fully diluted EPS calculation respectively, for the third
quarter and first nine months of fiscal 1997 because the stock options and Notes have an anti-dilutive
impact on the calculation.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-END> DEC-29-1996
<CASH> 107,428
<SECURITIES> 76,872
<RECEIVABLES> 82,381
<ALLOWANCES> 7,032
<INVENTORY> 47,825
<CURRENT-ASSETS> 396,636
<PP&E> 745,223
<DEPRECIATION> 311,297
<TOTAL-ASSETS> 896,163
<CURRENT-LIABILITIES> 130,947
<BONDS> 183,007
<COMMON> 79
0
0
<OTHER-SE> 519,310
<TOTAL-LIABILITY-AND-EQUITY> 896,163
<SALES> 394,016
<TOTAL-REVENUES> 394,016
<CGS> 237,530
<TOTAL-COSTS> 282,753
<OTHER-EXPENSES> 178,234
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,350
<INCOME-PRETAX> (66,244)
<INCOME-TAX> (21,861)
<INCOME-CONTINUING> (44,383)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,383)
<EPS-PRIMARY> (0.57)
<EPS-DILUTED> (0.57)
</TABLE>
