UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
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 No. 0-11438
BURR-BROWN CORPORATION
(Exact Name of Registrant as Specified in its
Charter)
Delaware 86-0445468
(State of Incorporation) (IRS Employer Identification
No.)
6730 South Tucson Boulevard
Tucson, Arizona 85706
(Address of Principal Executive Offices)
(520) 746-1111
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock, $0.01 Par Value
(Title of Class)
Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to
file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of
delinquent filers pursuant to item 405 of Regulation
S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in
definitive proxy or information statements
incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock
held by non-affiliates of the Registrant based on the
closing price at February 28, 1996, was approximately
$236,935,012.
There were 16,187,374 shares of Burr-Brown
Common Stock outstanding at February 28, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders
for the fiscal year ended December 31, 1995--
Incorporated by reference into Parts I, II and IV.
Portions of the Registrant's Proxy Statement for
the Annual Meeting of Stockholders to be held on
April 26, 1996--Incorporated by reference into Part
III.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Burr-Brown Corporation (and its wholly-owned
subsidiaries and majority-owned affiliated companies,
"Burr-Brown" or the "Company") is primarily engaged
in the design, manufacture and marketing of a broad
line of proprietary, standard, high-performance,
analog and mixed signal semiconductor components used
in the processing of electronic signals. The
Company's products are used primarily in medical and
analytical instrumentation, process control systems,
laboratory instrumentation, manufacturing automation,
automatic test equipment, digital audio equipment,
communications, imaging, computer peripherals and
multimedia. The Company also offers a product line
of system components which include personal computer
data acquisition and signal processing products, data
collection systems and data entry terminals. The
Company was incorporated in Arizona in 1956 and
reincorporated in Delaware in 1983. The Company's
management and technical team has many years of
experience in the design, manufacture and world-wide
marketing of high performance analog and mixed signal
semiconductor components and in solving customer
problems in the markets served. This document
contains forward looking statements which are subject
to the risk factors set forth at the end of "Item I:
Business".
THE INDUSTRY
Integrated circuits may be divided into three
categories: analog, digital and mixed signal.
Digital circuits, which include memory devices and
microprocessors, use many repetitive circuit elements
that can each represent the two values ("1" and "0")
required by the binary number system that serves as a
basis for most computation. Analog circuits, on the
other hand, are capable of representing infinite
numbers of values with an output signal based on a
continously varying input signal. These input
signals typically represent "real world" phenomena
such as temperature, pressure, position, light, sound
and speed. Mixed signal circuits are circuits that
employ both analog and digital signal processing
techniques. Analog and mixed signal circuits are
used in most electronic systems, with major markets
for such circuits including computing,
telecommunications and data communications, test and
measurement, medical instrumentation, industrial
process control, manufacturing automation, digital
audio and automotive electronics. Typical analog
circuits include signal amplifiers, instrumentation
amplifiers, current transmitters, regulators, analog
multipliers and isolation amplifiers. Typical mixed
signal circuits include analog-to-digital and digital-
to-analog converters. Recently, the rapid growth of
the high speed and wireless communications,
multimedia and portable computing, and digital audio
markets have created important new growth
opportunities for high performance analog and mixed
signal products. Industry sources estimate that
analog and mixed signal circuits accounted for 14% of
the $128 billion market for semiconductors in 1995.
The market for, and design and production of, analog
circuits differs from that of digital circuits in
several important ways. In general, the market for
analog circuits is more diverse than for digital
circuits, with each application requiring different
operating specifications for resolution, processing
linearity, speed, power and amplitude capability. As
a result, analog circuit markets generally have
relatively smaller volume requirements per device.
The markets for analog circuits are generally
fragmented, and competition within those markets
tends to depend less upon price and more upon
performance, functionality, quality and reliability.
Analog circuits designed for specified applications
are often characterized by longer life cycles and
more stable pricing compared to typical digital
circuits. Computer-aided design and engineering
tools, which have proliferated and enhanced the
design effort for digital integrated circuits, are
less effective for analog devices. Accordingly,
analog circuit design has traditionally been highly
dependent on the skills and experience of individual
design engineers. Also, in contrast to digital
circuits, the performance of analog circuits is more
dependent on circuit design, circuit layout and the
matching of circuit elements than on advanced
capabilities in submicron manufacturing processes.
Consequently, the production of high performance
analog circuits typically requires less capital
investment than the production of highly integrated
digital circuits. Because analog circuits are found
in most electronic systems, the growth in the use of
digital systems across a broad range of applications
has in turn fueled a growth in the demand for analog
integrated circuits.
PRODUCTS
The Company operates predominantly in one segment,
the electronic component industry. The Company has
various classes of products within that one segment.
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The following table shows the approximate product
line revenues as a percentage of total Company
revenues:
PRODUCT LINE 1995 1994
1993
Analog Integrated Circuits 42.4% 43.3
% 42.5 %
Data Conversion Integrated Circuits 42.4%
37.8 % 40.6 %
Power Conversion Products 9.5% 10.3
% 5.6 %
Other 5.7% 8.6
% 11.3 %
Demand for analog circuits primarily has been driven
by the need for increased productivity manifested as
the need for lower cost, lower power, smaller size,
greater functionality and high precision products.
Semiconductor technology has provided many effective
solutions to this demand. The availability of
effective solutions has accelerated with the advent
of more advanced digital processing. This has led to
greater use of digital computers or processors to
provide massive computational power to control
processes and equipment and in general, to greater
automation and productivity in industry. Since the
early seventies, the availability of low cost digital
microprocessors and later digital signal processing,
in cost-effective single chip form, has enabled an
acceleration of the trend toward digitization of
systems. This has led to increased use of computers
as imbedded processors to measure, control, monitor
or process electronic signals nearer or adjacent to
the sensor that is detecting physical conditions.
This, in turn, has created the need for products that
enable digital computers, microprocessors and
microcontrols, and digital signal processors (DSP's)
to interact with electronic signals derived from
physical or analog phenomena. Burr-Brown designs and
manufactures the integrated circuits which perform
the analog signal conditioning and data conversion
functions critical to this interaction.
Process control sensors generate continuously varying
electronic signals, called analog or linear signals,
which represent the physical phenomenon being
measured or controlled. In many circumstances these
analog signals are relatively weak and contaminated
with a large amount of electrical noise. The
Company's signal processing components are used to
strengthen, filter, transmit and otherwise condition
the signal. The resulting signal, still in analog
form, must be converted into a digital signal before
it can be processed by a computer. The Company's
analog-to-digital circuits effect this conversion.
After the digital signal is processed by the
computer, it is often necessary to convert the
digital signal back to analog form, and the Company's
digital-to-analog circuits also accomplish this
reverse conversion. The resulting analog signal
controls the process.
The market requirements for analog signal processing
and conversion products range from high performance
industrial applications to high volume consumer
applications. The Company's product strategy has
been to concentrate on proprietary high precision,
high performance analog, data conversion and
integrated analog/digital (mixed signal) circuits.
The Company identifies significant markets in which
new or enhanced high performance products of this
type are required. The Company then attempts to
develop and supply as complete a function as is
permitted by technological and cost constraints.
The Company's signal processing and data conversion
products are generally designed into a customer's
product and usually remain a part of that product
throughout its life. The Company's experience has
been that there is generally a four-year period
before the sales level of its products fully matures,
and the sales life of the products may extend to
eight years or more. Once the Company's component
has been designed into a customer's product, the
relatively low volume, high performance
characteristics of the component significantly deter
potential competitors. As a result, the Company is
often a customer's sole source for that particular
component.
ANALOG INTEGRATED CIRCUITS
Analog linear signal processing integrated circuits
are used to process and transmit analog data signals
prior to their conversion to digital signals. The
Company's analog circuits include operational
amplifiers, power amplifiers, instrumentation
amplifiers, programmable gain amplifiers, isolation
amplifiers, current transmitters and other analog
signal processing components. These components are
used in the construction of complete data acquisition
systems, automatic test equipment, analytical
instruments, medical instruments and systems,
military equipment, industrial controls, computer
peripherals and communications equipment.
OPERATIONAL AMPLIFIERS. Operational amplifiers are
used to detect and amplify weak (low level) analog
signals and are an integral part of most measurement
and control systems. The operational amplifier is
the fundamental
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building block in analog systems design. In addition
to amplification, it can perform mathematical
functions such as integration and differentiation.
The Company's high performance operational amplifiers
are generally capable of amplifying typical analog
signals in the micro-volt range up to 100,000 times
and provide ultra-low drift, low bias current, low
noise, high bandwidth and fast settling time.
Certain models provide high voltage and high current
operation for special applications. These high
performance amplifiers are required to treat signals
generated in numerous applications, including
scramblers for satellite communications systems,
robotics vision systems and magnetic resonance and
computer-aided tomography (CAT) body scanning
systems.
OTHER AMPLIFIERS. The Company manufactures a number
of other amplifiers, including instrumentation
amplifiers, programmable gain amplifiers and
isolation amplifiers. These products perform a
variety of functions related to the amplification and
isolation of analog signals. Among other uses, these
components permit the measurement of weak signals in
the presence of unwanted "noise" and protect
sensitive instruments from the effects of transient
high-magnitude, potentially damaging voltages caused
by sources such as lightning or the switching of high
voltage equipment. These amplifiers are used in many
diverse applications ranging from temperature
measurement in industrial processes to the protection
of sensitive medical instruments and to isolate
electrical power line disturbances and faults.
OTHER SIGNAL PROCESSING AND TRANSMITTER COMPONENTS.
The Company manufactures a variety of other analog
signal processing components, including mathematical
function circuits, current transmitters and voltage-
to-frequency converters. Mathematical function
circuits are used when information sought can be
effectively derived only through its mathematical
relationship to analog signals. Current transmitters
send analog signal information from a process sensor
to measurement or control equipment in the form of a
current on the same wires that produce the power to
the transmitter and sensor. Voltage-to-frequency
converters convert process signals to a frequency,
making the signal immune to electrical noise and
permitting more efficient storage and processing of
the information.
ISOLATION PRODUCTS. The Company's Isolation Product
Division, which is operated by Burr-Brown's wholly-
owned Scottish subsidiary, focuses on the design,
development, manufacturing, and marketing of
isolation amplifiers, isolated analog digital
converters, bus transceivers and DC-to-DC converters.
These products provide galvanic isolation of input
and output signals and thereby achieve reduced
circuit noise interference and prevent harm to people
or equipment due to high voltage transients or
current leakage. The product line utilizes optical,
transformer and capacitive techniques to produce
linear transfer functions between input and output.
In certain products, isolated digital couplers are
used in lieu of opto-couplers in the galvanic
isolation of data signals. The isolation products
are used in industrial process control, communication
and in medical instrumentation.
DATA CONVERSION PRODUCTS
The Company's Data Conversion Products Division
focuses on the design, manufacturing and marketing of
integrated circuit devices used to convert analog
signals to digital form ("A/D converters") or to
convert digital signals to analog form ("D/A
converters"). This conversion is necessary in
virtually all applications in which digital computers
or processors measure and control the analog signals
from a physical, "real world" process.
GENERAL PURPOSE CONVERSION PRODUCTS. The majority of
the Company's mixed signal components revenue is
derived from moderate speed, high resolution and high
accuracy converters. These general purpose
converters are used primarily in manufacturing
process control instrumentation, electronic test
instrumentation, automatic test systems and
communications systems. For example, in a robot
controller, the position of the robot arm must be
precisely measured and manipulated. Analog signals
from the robot's position sensors are converted by an
A/D converter for computer processing and, in turn, a
D/A converter converts the digital control signal
from the computer to analog form to drive the
actuators and servo motors to position the robot arm
accurately.
HIGH SPEED CONVERSION PRODUCTS. In the early 1980's,
the Company began developing high speed, high
resolution A/D and D/A converters at speeds
substantially greater than general purpose products.
These products utilize a unique combination of
technologies and design expertise to achieve state-of-
the-art performance. High speed converters are used
in a variety of applications such as image
processing, digital oscilloscopes, ultrasound, radar
and sonar, as well as the front end of advanced
systems using digital signal processing (DSP)
technology. The Company believes that due to the
unique combination of technologies involved, the high
speed, high resolution data converter products have
limited competition.
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DIGITAL AUDIO PRODUCTS DIVISION (BURR-BROWN JAPAN).
The Company's Digital Audio Products Division, which
is operated by the Company's wholly-owned Japanese
subsidiary, focuses on the design, manufacturing and
marketing of high precision, single chip, digital-to-
analog converters and analog-to-digital converters
for the digital audio market. The Company believes
that Burr-Brown was the first company to introduce
such a product into this marketplace and is
currently one of the largest merchant market
suppliers of such devices worldwide. This product,
a pulse-code-modulated ("PCM") conversion device,
plays an essential role in digital audio systems,
such as compact disc ("CD") players, that use laser
technology to achieve improved audio reproduction
performance. The Company's component converts the
digital signals for each stereo channel into analog
form. Several generations of products of this type
have been developed and introduced for use in digital
audio systems. Involvement in the CD market also
helped the Company's early entry into the digital
audio tape ("DAT") and multimedia markets. The
Company believes that the technology developed for
its digital audio D/A converter products enables the
Company to develop products for other markets. Burr-
Brown's PCM converters have now been designed into
musical instruments, computer games, automobile sound
systems, CD-ROMs for multimedia applications and set
top box tuners for cable and satellite TV.
SYSTEM PRODUCTS
INTELLIGENT INSTRUMENTATION INC. Intelligent
Instrumentation Inc. (III), a majority owned
subsidiary, designs, manufactures and markets a broad
line of data acquisition products, including plug-in
boards, portable data acquisition systems,
microterminals and supporting software for IBM-
compatible PCs, as well as signal conditioning
accessories for such systems. These products are
applied worldwide for a wide range of industrial and
scientific applications such as inventory control,
package tracking, image pattern recognition and
electro-medical systems. A key part of the data
acquisition product line is the Visual DesignerTM
software, a graphical development environment which
enables users to design applications by connecting
functional blocks, called icons, in a flow diagram.
III also offers integrated data collection systems
that not only collect data, but format and deliver
that data to a customer's information system in real
time. Representative customers include Mercedes
Benz, Siemens, Nikon Koden, Novellus Systems and
Xerox.
POWER CONVERTIBLES CORPORATION. Power Convertibles
Corporation (PCC), a majority-owned affiliate of Burr-
Brown, manufactures DC-to-DC converters and battery
chargers used in cellular telephone applications. In
1995, PCC was responsible for about 9.5% of Burr-
Brown revenues and approximately 3% of Burr-Brown
profits. In 1996, Burr-Brown Corporation sold its
interest in PCC in order to focus resources on the
primary business of analog and mixed signal
integrated circuits.
RESEARCH & DEVELOPMENT
One of the important factors that distinguishes the
analog integrated circuit business from the digital
integrated circuit business is the importance of the
contribution of innovative individual design
engineers. Digital circuits have an exceptional
amount of repetition of circuit elements and are
highly dependent upon the ability to produce chips
with very high circuit element density to minimize
chip size and maximize speed. This type of wafer
processing of extremely small dimensions leads to the
need for state-of-the-art, comparatively costly
capital investment in wafer fabrication facilities.
Analog circuits, on the other hand, require the
ability to accurately match and place elements with
respect to one another. In addition, analog circuits
may require the ability to handle large voltages and
currents and therefore, demand relatively large
circuit element and spacing dimensions. Although
these requirements place stringent processing
requirements on an analog wafer fabrication facility,
the necessary equipment and facilities are
substantially less costly and longer lived than that
which is required for digital circuit processing.
Designers of analog circuits must take into account
complex interrelationships between the manufacturing
process, the circuit elements, the packaging process
and the customer's application, all of which may
seriously affect the circuits' performance. The
number of creative design engineers who have the
training and the experience to handle these
complexities is very limited. The Company's ability
to compete depends heavily on its continued
introduction of innovatively designed and cost
effective new products. Therefore, the Company must
continually invest in design engineering talent,
engineering tools, production processes and test
equipment.
The Company emphasizes the development of proprietary
standard and application specific products. The
Company's product strategy is to identify markets in
which the application of microelectronics technology
may be
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used to provide competitive advantage for its
customers through improved methods of precision in
measuring, monitoring and controlling physical
processes and conditions. Examples of these markets
are: robotics, factory automation, process control,
automatic test, medical instrumentation, computers,
communications and digital audio. Within these
markets, the Company selects specific applications in
which the Company's unique design and processing
technology may make an important contribution to its
customers.
The Company spent approximately $25.7 million in
1995, $21.9 million in 1994 and $19.8 million in 1993
for product and process development. This represents
an expenditure of approximately 9.6 percent, 11.3
percent and 11.7 percent of revenue in 1995, 1994 and
1993, respectively. (See "Management's Discussion
and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report to
Shareholders, incorporated by reference to Item 7 of
this report.)
PATENTS AND LICENSES
The Company owns 118 United States patents expiring
from 1996 to 2015, and has applications for 16
additional patents pending in the United States as
well as patents issued and pending in several other
countries. Although the Company pursues a policy of
maintaining a strong patent portfolio, the Company
believes that its success depends primarily upon the
experience and creative skills of its people rather
than upon the ownership of patents. As is common in
the semiconductor industry, from time to time, the
Company has been notified of claims regarding the
possible infringement of patents issued to others,
and similarly, the Company has on occasion notified
others of possible infringements of its patents.
MARKETING
Burr-Brown markets its products in all the major
markets in the industrialized world through its
direct sales force, independent sales representatives
and distributors. Approximately 35% of 1995
worldwide revenue was realized through third party
distribution.
In approximately 45 countries and the less
significant domestic markets where the Company does
not have a direct sales force, independent sales
representatives sell all of the Company's products.
The majority of the Company's sales people hold
engineering degrees and the balance have relevant
engineering experience.
The Company markets its line of component and system
products to over 25,000 customers. The largest
customer, a domestic distributor, accounted for
approximately 9 percent of sales in 1995. Burr-Brown
products are sold to original equipment
manufacturers, systems assemblers and, to a lesser
extent, manufacturing concerns which build their own
test and process control systems. The Company's
components are generally proprietary and are
frequently "designed in" to its customers' products
at the product development stage. Accordingly, the
Company is often a customer's sole source for a
particular component. Over 40 percent of the revenue
in 1995 for analog and data conversion integrated
circuits was for products introduced within the
preceding five years. Representative major customers
of the Company include Elsag Bailey, Hewlett-Packard,
Matsushita Electric, Northern Telecom, Siemens, Sony,
Toshiba, Mitsubishi, Alcatel, Nokia, Advantest, NEC,
Fujitsu, Ericsson and Hughes Network Systems Inc..
Sales outside the United States accounted for
approximately 64 percent of total revenues in 1995,
62 percent of total revenues in 1994 and 64 percent
of total revenue in 1993. (See the note labeled
"Foreign Operations, Geographic and Segment Data" in
"Notes to Consolidated Financial Statements" in the
Company's Annual Report to Shareholders, incorporated
by reference to Item 8 of this report.) To support
its international marketing organization, the Company
has established product development centers and
manufacturing facilities in Scotland and Japan. The
Company also has four product development centers at
the corporate headquarters in Tucson, Arizona.
A large percentage of international sales are
denominated in local currencies, and the Company's
foreign revenues and net income are therefore subject
to currency exchange rate fluctuations. However, the
Company borrows funds in local currencies and
purchases forward contracts to hedge its foreign
currency exposure. Some of the Company's products
are subject to export regulations and other
international trading restrictions, but the Company
has not experienced any material difficulties from
these limitations. No assurance can be given,
however, that such material difficulties will not be
experienced in the future.
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BACKLOG
Burr-Brown's products are, generally, standard items
with a relatively short delivery cycle. The
Company's backlog is usually three months or less of
sales although some portion may be scheduled for
delivery four to twelve months into the future.
Therefore, the order backlog at the end of any
specific quarter is not generally indicative of the
level of sales to be expected in succeeding quarters.
It is the policy of the Company to include in backlog
only those orders that have firm scheduled delivery
dates. The Company's backlog as of December 31,
1995, 1994 and 1993, was approximately $62.3 million,
$45.5 million and $31.4 million, respectively.
COMPETITION
Burr-Brown estimates that it is among the top four
manufacturers of high performance amplifiers and data
conversion integrated circuits. The Company's major
competitor in the high performance analog integrated
circuits market is Analog Devices Inc., believed to
be the largest supplier of these devices. Other
competitors include Linear Technology Corporation and
Maxim Integrated Products Inc.. With respect to a
small number of products, the Company also competes
with National Semiconductor Corporation, Harris
Corporation, Motorola Inc., Texas Instruments Inc.,
Cirrus Logic Inc., Signal Processing Technologies,
Datel Inc., Sipex Corporation and Unitrode
Corporation.
The Company is not aware of any significant
competition from foreign companies providing analog
integrated circuits, personal computer
instrumentation products and data collection products
for the industrial and military markets; however,
there can be no assurance that foreign competitors
will not enter these markets in the future. The
Company's PCM product line does compete with several
U.S. and foreign manufacturers of digital audio (D/A)
converters for use in digital compact disc stereo
systems, and multimedia systems, including Analog
Devices Inc., Cirrus Logic Inc., Asahi Kasei Micro,
Sony Electronics Inc., Hitachi America Limited,
Matsushita Electric Corporation of America,
Mitsubishi Corporation and Philips Semiconductors.
While some of these competitors have greater
financial and marketing resources than Burr-Brown,
none of them compete with the Company in all of its
product areas.
The Company believes that competition with respect to
component products is based primarily on design and
process innovation, product performance and
reliability, technical service, availability of a
broad range of specialized products, standard product
availability and secondarily, on price. The Company
believes that reliable performance and service are
more important than price when the Company is the
sole source of a product. Price is more of a
competitive factor when an equivalent product is
available from other sources, as in the case of
commodity products. Burr-Brown competes with this
type of product only in limited areas.
Large semiconductor manufacturers have generally
concentrated their product and marketing efforts on
high volume, relatively low priced, general purpose
components. The Company does not usually compete in
these markets. Whereas most large semiconductor
companies tend to generalize a component to achieve
the broadest high volume usage possible, Burr-Brown
follows a strategy of narrowly defining its products
for application markets demanding very high,
difficult to achieve performance. The Company
believes that its products' high performance
requirements and relatively low unit sales volumes
will continue to make it impractical for larger
semiconductor suppliers to market a broad line of
competing products.
MANUFACTURING
The Company's manufacturing technology has evolved
substantially over the past two decades. Initially,
the Company manufactured its products by assembling
purchased resistors, transistors, diodes and other
discrete components onto printed circuit boards. The
Company has since migrated to integrated circuits,
which required the development of semiconductor
manufacturing technologies in its Tucson wafer
fabrication facility. The Company can utilize its in-
house process technology, purchase wafer processing
foundry services or buy components already
incorporating the necessary technology in order to
meet customer needs. It must combine relatively
diverse technologies to produce the integrated
circuits necessary to meet the stringent performance
requirements of its customers. For example, some of
the Company's integrated circuit products combine
high precision linear integrated circuit wafer
fabrication processing with compatible laser-trimmed
thin film technology and dielectric isolation (DI)
wafer processing.
The Company offers several bipolar, CMOS and BiCMOS
processes which provide circuits for the analog, data
acquisition and PCM markets. Burr-Brown processes
have the added capability of making high quality
capacitors and trimmable resistors that enable the
Company to manufacture high precision, cost effective
products.
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In addition to the processes at the Company's Tucson
wafer fabrication facility, foundries are used for
processes not available internally. Processes
currently used include a variety of CMOS processes
ranging from 3 microns to 0.6 microns for products
such as single and dual analog-to-digital and digital-
to-analog converters, a 2 micron BiCMOS process for
PCM DAC's and ADC's, and a very high frequency
bipolar process used for products such as video
amplifiers.
The Company has integrated circuit assembly
operations in Tucson and Scotland. In addition, much
of the assembly demand is met by using contract
assembly companies located in Japan, Taiwan,
Malaysia, Korea, Thailand and the Philippines. To
achieve lower cost without compromising high
performance, the Company has expanded its monolithic
capability to complement multi-chip module assembly
in its Tucson manufacturing facility.
The Company utilizes proprietary laser trimming
techniques to produce high performance bipolar
integrated circuits and thin film resistors. This
operation uses proprietary deposition technology and
computer-controlled laser trimming techniques to
achieve the desired high precision. Depending upon
the performance requirements, integrated circuits may
be packaged as single chip products; or combined on
ceramic substrates with the Company's thin film
resistors and purchased parts, such as discrete power
devices, transformers and optical diodes to form
hybrid integrated circuits.
The Company has developed and implemented a Quality
Program focused on customer satisfaction. The
program includes annual Satisfaction Reviews with
customers to assess improvement priorities. The
Quality Program also includes Quality System
Certification (ISO9001), a comprehensive
Product/Process Reliability Monitoring Program, and
extensive Qualification Program for new products and
processes. The Company has a reputation for high
quality and highly reliable products as evidenced by
the highest satisfaction rating reported by our
customers for these factors.
To provide better service to its European and
Japanese customers, and to achieve an improved
competitive position, the Company maintains
manufacturing and product development facilities in
both areas. In Europe, a manufacturing and product
development site is located in Livingston, Scotland.
This facility designs and assembles integrated
circuits for sale in Europe and for export to other
markets. The Company's manufacturing plant in
Scotland is certified to meet the requirements of the
United Kingdom's Ministry of Defense specification
BS9000. Subsequent to receiving this certification,
the Company has qualified products to the United
Kingdom's specification BS9450. In Japan, the
Company's Atsugi Technical Center, near Tokyo,
performs product development, final product testing
and quality and reliability testing for the PCM
product line for sale in Japan and export to other
markets.
The principal raw materials used by the Company in
the manufacture of its monolithic integrated circuits
are silicon wafers, chemicals and gases used in
processing wafers, gold wire and ceramic, metal and
epoxy packages that enclose the chip and provide the
external connections for the circuit. Silicon wafers
and other raw materials may be obtained from several
suppliers. From time to time, particularly during
periods of increased industry-wide demand, silicon
wafers and other materials have been in short supply.
As is typical in the industry, the Company allows for
a significant period of lead time between order and
delivery of raw materials. In addition, the Company
sometimes enters into long term supplier-customer
relationships with key suppliers of such materials to
mitigate possible shortage problems.
Government regulations impose various controls on the
discharge of certain chemicals and gases into the
environment that have been used in semiconductor
processing. The Company believes that its
manufacturing processes conform to present
environmental regulations but there can be no
assurance that future changes in such regulations
will not result in increased costs or impede
operating performance. The Company eliminated the
use of ozone-depleting chemicals in the
manufacturing process December 1, 1995.
The Company is continuing to implement the necessary
actions for the site remediation as required under
the provisions of the Consent Decree Agreement with
the EPA. The cost for the implementation required in
1995 was approximately $106,000.
-8-
<PAGE>
HUMAN RESOURCES
At December 31, 1995, the Company employed 1,839
people worldwide, including 1,164 people in
manufacturing and assembly, 255 people in research
and development, 210 in sales and marketing and 210
in management and administration. (These numbers
include 431 employees of Power Convertibles
Corporation which was sold in the first quarter of
1996.) Many of the Company's employees are highly
skilled and the Company's continued success will
depend, in part, on its ability to attract and retain
such employees, who are generally in great demand.
At times, like other semiconductor manufacturers, the
Company has had difficulty hiring engineering
personnel. The Company has never experienced a work
stoppage, no employees are represented by labor
organizations, and the Company considers its employee
relations to be very good.
RISK FACTORS
The Company's quarterly and annual operating results
are affected by a variety of factors that could
materially and adversely affect net revenue, gross
profit and profitability, including the volume and
timing of orders, changes in product mix, market
acceptance of the Company's and its customers'
products, competitive pricing pressures, fluctuations
in foreign currency exchange rates, the timing of new
product introductions and fluctuations in
manufacturing yields. Historically, average selling
prices in the semiconductor industry have decreased
over the life of particular products. If the Company
is unable to introduce new products with higher
average selling prices or is unable to reduce
manufacturing costs to offset decreases in the prices
of its existing products, the Company's operating
results will be adversely affected. In addition, the
Company is limited in its ability to reduce costs
quickly in response to any revenue shortfalls.
The fabrication of integrated circuits is a highly
complex and precise process. Manufacturing yields
can be impacted by a variety of factors, many of
which are outside the Company's control. A large
portion of the Company's manufacturing costs are
relatively fixed and consequently, the number of
shippable die per wafer for a given product is
critical to the Company's results of operations. To
the extent the Company does not achieve acceptable
manufacturing yields or experiences product shipment
delays, its financial condition, cash flows and
results of operations would be materially and
adversely affected. To meet anticipated future
demand and to utilize a broader range of fabrication
processes, the Company intends to increase its
manufacturing capacity. However, given the
complexity and expense of designing and constructing
a significant expansion of a semiconductor
fabrication plant, during the construction of the
additions, the Company's manufacturing yields could
be materially and adversely impacted.
The Company desires to continue to expand its
operations outside of the United States and to enter
additional international markets, which will require
significant management attention and financial
resources and subject the Company further to the
risks of operating internationally. These risks
include unexpected changes in regulatory
requirements, delays resulting from difficulty in
obtaining export licenses for certain technology,
tariffs and other barriers and restrictions, and the
burdens of complying with a variety of foreign laws.
The Company is also subject to general geopolitical
risks in connection with its international
operations, such as political and economic
instability and changes in diplomatic and trade
relationships. In addition, because most of the
Company's international sales are denominated in
foreign currencies, gains and losses on the
conversion to U.S. dollars of accounts receivable and
accounts payable arising from international
operations may contribute to fluctuations in the
Company's operating results.
The Company's success depends upon its ability to
develop new analog and mixed signal products for
existing and new markets, to introduce such products
in a timely manner and to have such products gain
market acceptance. The development of new products is
highly complex, and from time to time the Company has
experienced delays in developing and introducing new
products. Successful product development and
introduction depends on a number of factors,
including proper new product definition, timely
completion of design and testing of new products,
achievement of acceptable manufacturing yields, and
market acceptance of the Company's and its customers'
products. Moreover, successful product design and
development is dependent on the Company's ability to
attract, retain and motivate qualified analog design
engineers, of which there is a limited number. There
can be no assurance that the Company will be able to
meet these challenges or adjust to changing market
conditions as quickly and cost-effectively as
necessary to compete successfully. Due to the
complexity and variety of products manufactured by
the Company, the limited number of analog circuit
designers and the limited effectiveness of computer-
aided design systems in the design of analog
circuits, there can be no assurance that the Company
will be able to successfully develop and introduce
new products on a timely basis. Although the Company
seeks to design products that have the potential to
become broadly accepted for high volume applications,
there can be no
-9-
<PAGE>
assurance that any products introduced by the Company
will achieve such market success. The Company's
failure to develop and introduce new products
successfully could materially and adversely affect
its business and operating results. The Company has
targeted new markets in which it has relatively
little experience, including the market niches for
wireless applications for the communications
industry, power management applications for the
computing industry, and CD-ROM and PC sound
applications for the digital audio industry. There
can be no assurance that the Company's products will
adequately meet the requirements of such new markets,
or that the Company's products will achieve market
acceptance.
The semiconductor industry is intensely competitive
and is characterized by price erosion, rapid
technological change, product obsolescence and
heightened international competition in many markets.
Many of the Company's competitors have substantially
greater financial, technical, marketing, distribution
and other resources, broader product lines and longer
standing relationships with customers than the
Company. In the event of a downturn in the market
for analog circuits, companies that have broader
product lines and longer standing customer
relationships may be in a stronger competitive
position than the Company. Competitors with greater
financial resources or broader product lines also may
have more resources than the Company to engage in
sustained price reductions in the Company's primary
markets to gain market share.
ITEM 2. PROPERTIES
The Company's major manufacturing and engineering
facilities and administrative offices are located in
four company-owned buildings, aggregating 220,000
square feet, on its 18 acre site in Tucson, Arizona.
The Company also leases approximately 88,800 square
feet in Tucson. Approximately 28,000 square feet of
this leased space is on short term contracts of two
years or less. The major single building lease is
for 61,000 square feet and will expire in March 1997.
The aggregate current gross rental for all Tucson
properties is approximately $552,000 per year. All
leases have options for renewal. The Company also
owns approximately 113 acres of land in Tucson which
is being held in reserve for future expansion.
In Filderstadt, Germany, the Company's sales office
occupies 30,000 square feet of space leased for a ten
year period; this lease expires in 1999. The Company
has the option to sublease and renew this lease for
three to five years. The Company's Scottish
manufacturing subsidiary leases a 32,000 square foot
building on 6.65 acres in Livingston, Scotland for a
15 year period; this lease expires in 1997. The
Company also owns approximately 20 acres of land in
Livingston, Scotland. The Company's Atsugi Technical
Center in Atsugi, Japan, is a 44,500 square foot
building which houses sales, product testing and
research and development activities; the Company has
a fifteen year lease on this facility which expires
in 2001.
ITEM 3. LEGAL PROCEEDINGS
These four proceedings are the only litigation
matters other than ordinary pending litigation:
a. Mary H. Yslava, et.al. v. Hughes Aircraft
Company, CIV91-525-TUC-JMR, U.S. District Court filed
on September 20, 1991.
b. Joe Ann Lanier, et.al. v. Hughes Aircraft
Company, CIV92-564-TUC-JMR, U.S. District Court filed
on March 7, 1994.
c. Arellano v. Hughes Aircraft Company, CIV94-718-
TUC-ROS, U.S. District Court filed on January 9,
1995.
The Company, upon stipulation and court order dated
September 23, 1995, was dismissed from these three
cases.
d. Cordova v. Hughes Aircraft Company, 294158,
Superior Court, State of Arizona, Pima County filed
on January 13, 1992, is as follows: The plaintiffs
are charging that they and their respective
properties are damaged from the release of
contaminants including Trichloroethylene (TCE) into
the ground waters and they are asking for monetary
damages. The Company spent the first year discussing
a stipulated dismissal which was not granted. The
Company has now requested the Superior Court to begin
consideration for dismissal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matters were submitted to a vote of the Company's
security holders during the quarter ended December
31, 1995.
-10-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The information required by this item appears in the
1995 Annual Report to Stockholders on page 24, which
is included as Exhibit 13 to this report, and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears in the
1995 Annual Report to Stockholders on page 28, which
is included as Exhibit 13 to this report, and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The information appearing under the caption
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 24, 25,
26 and 27 of the 1995 Annual Report to Stockholders
which is included as Exhibit 13 to this report and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data
required by this item appear in the 1995 Annual
Report to Stockholders on pages 12 through 23, which
is included as Exhibit 13 to this report and is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The information regarding Directors and certain
Executive Officers who are also Directors appearing
under the caption "Election of Directors" on pages 4
and 5 in the Registrant's Proxy Statement for the
1996 Annual Meeting of Stockholders is incorporated
herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
At December 31, 1995, there were 3 individuals
designated as executive officers by the Board of
Directors. The following sets forth certain
information with regard to the only executive officer
of Burr-Brown who is not a Director:
JOHN L. CARTER (age 61) joined the Company in August
1993 as Executive Vice President, responsible for
Components Operations and was then appointed Chief
Financial Officer in July 1994. Prior to that, Mr.
Carter served as a consultant to Burr-Brown. Before
joining the Company, he served as President and CEO
of Qualtronics, Inc.. From 1956 to 1987 he was with
IBM in various manufacturing and general management
positions, including General Manager of Tucson IBM
operations.
ITEM 11. EXECUTIVE COMPENSATION
The information, with respect to Executive
Compensation, appearing under the caption "Executive
Compensation and Other Information" on pages 7
through 10 of the Registrant's Proxy Statement for
the 1996 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information appearing under the caption
"Principal and Management Stockholders" on pages 2
and 3 of the Registrant's Proxy Statement for the
1996 Annual Meeting of Stockholders is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
None
-11-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES
AND REPORTS ON FORM 8-K
a(1) Financial Statements:
The following consolidated financial statements
are incorporated by reference under Part II, Item 8,
from the Registrant's 1995 Annual Report to
Stockholders:
PAGES OF 1995 ANNUAL
REPORT TO STOCKHOLDERS
INCORPORATED BY REFERENCE
Report of Ernst & Young LLP, Independent
Auditors
23
Consolidated Statements of Income for the years
ended
12
December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in
Stockholders' Equity
13
for the years ended December 31, 1995, 1994
and 1993
Consolidated Balance Sheets at December 31,
1995,
14
1994 and 1993
Consolidated Statements of Cash Flows for the
years ended
15
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
16-22
a(2) Financial Statement Schedules for the years
ended:
FORM 10-K
December 31, 1995, 1994 and 1993:
PAGE
Schedule II - Valuation and Qualifying Accounts
18
All other schedules are omitted because they are not
applicable or the required information is shown in
the consolidated financial statements.
-12-
<PAGE>
a(3) Exhibits
3.1 Restated Certificate of Incorporation of
the Registrant. Incorporated by reference to Exhibit
3.1 of the Registrant's 10-K filing for the period
ended December 31, 1987. Amendment to Restated
Certificate of Incorporation dated September 20,
1995, filed herein.
3.2 Restated By-laws of the Registrant dated
October 21, 1994, incorporated by reference to
Exhibit 3.2 of the Registrants 10-K filing for the
period ended December 31, 1994.
4.1 Article Four of the Certificate of
Incorporation of the Registrant. (Included in Exhibit
3.1).
4.2 Rights Agreement dated July 21, 1989,
between the Registrant and Harris Trust (assigned by
Valley National Bank of Arizona), incorporated by
reference to Exhibit 4.2 of the Registrant's 10-K
filing for the period ended December 31, 1989.
9.1 Voting Trust Agreement dated October 3,
1988, among Thomas R. Brown, Jr., individually, Sarah
M. Brown Smallhouse, Mary B. Brown and Thomas R.
Brown, Jr., as Trustee under the Last Will and
Testament of Helen Mason Brown. Incorporated by
reference to Exhibit 9.1 of the Registrant's 10-K
filing for the period ended December 31, 1988.
Amendment dated December 17, 1992, whereby John S.
Anderegg, Jr. was appointed Successor Trustee.
Incorporated by reference to Exhibit 9.1 of the
Registrant's 10-K filing for the period ended
December 31, 1993.
9.2 Voting Trust Agreement dated October 3,
1988, between Mary Buchanan Brown and Sarah M. Brown
Smallhouse as Shareholders and Sarah M. Brown
Smallhouse, Mary Buchanan Brown and David W. Richter
as Co-trustees. Incorporated by reference to Exhibit
9.2 of the Registrant's 10-K filing for the period
ended December 31, 1988. Amendment dated December
17, 1992, whereby John S. Anderegg, Jr. was appointed
Co-trustee. Incorporated by reference to Exhibit 9.2
of the Registrant's 10-K filing for the period ended
December 31, 1993.
9.3 Brown Management Limited Partnership
Agreement dated November 11, 1988, among Thomas R.
Brown, Jr., Mary B. Brown and Sarah B. Smallhouse.
Incorporated by reference to Exhibit 9.3 of the
Registrant's 10-K filing for the period ended
December 31, 1988.
10.1 Agreement dated as of May 31, 1982, between
Analog Devices, Inc. and Registrant (with certain
confidential information deleted). Incorporated by
reference to Exhibit 10.1 of the Registrant's
Statement # 2-82045 dated February 24, 1983.
10.2 Registrant's Stock Bonus Plan.
Incorporated by reference to Exhibit 10.7 of the
Registrant's 10-K filing for the period ended
December 31, 1987. Amendments thereof, dated June
27, 1989. Incorporated by reference to Exhibit 10.7
of the Registrant's 10-K filing for the period ended
December 31, 1989. Amended July 23, 1993, to name
John L. Carter as Co-trustee. Incorporated by
reference to Exhibit 10.4 of the Registrant's 10-K
filing for the period ended December 31, 1993.
Amendment to Stock Bonus Plan dated 1995, filed
herein.
10.3 Lease dated October 1, 1986, between Yugen
Kaisha Kato Shoji and Registrant. Incorporated by
reference to Exhibit 10.9 of the Registrant's 10-K
filing for the period ended December 31, 1986.
10.4 Lease dated February 28, 1985, between
Livingston Development Corporation and the Registrant
as amended. Incorporated by reference to Exhibit
10.13 of the Registrant's 10-K filing for the period
ended December 31, 1984.
10.5 Lease dated June 1, 1988, between EMBE
Leasing Agency Ltd. and Registrant. Translation only
incorporated by reference to Exhibit 10.19 of the
Registrant's 10-K filing for the period ended
December 31, 1988.
-13-
<PAGE>
10.6 Stock Option Agreement dated June 26, 1984,
between Intelligent Instrumentation, Inc. and the
Registrant, as amended. Incorporated by reference to
Exhibit 10.11 of the Registrant's 10-K filing for the
period ended December 31, 1985.
10.7 Stock Purchase Agreement dated January 10,
1985, between Dataforth Corporation and the
Registrant. Incorporated by reference to Exhibit
10.25 of the Registrant's 10-K filing for the period
ended December 31, 1986.
10.8 Patent License Agreement dated January 15,
1987, between Linear Technology Corporation and
Registrant. Incorporated by reference to Exhibit
10.26 of the Registrant's 10-K filing for the period
ended December 31, 1986.
10.9 Burr-Brown Employee Retirement Plan dated
January 1, 1988. Incorporated by reference to
Exhibit 10.27 of the Registrant's 10-K filing for the
period ended December 31, 1988. Replaced by the
restated Burr-Brown Corporation Employee Retirement
Plan which is dated as of the January 1, 1988, date
of the original plan. Incorporated by reference to
Exhibit 10.17 of the Registrant's 10-K filing for the
period ended December 31, 1994. Amendment to
Employee Retirement Plan dated January 1, 1995, filed
herein.
10.10 Consent Decree filed with the United
States District Court on March 13, 1990, between the
United States of America on behalf of the
Administrator of the United States Environmental
Protection Agency (EPA) and Burr-Brown Corporation.
Incorporated by reference to Exhibit 10.32 of the
Registrant's 10-K filing for the period ended
December 31, 1991.
10.11 Master Lease Agreement dated July 31,
1992, and amended September 23, 1992, between AT&T
Commercial Finance Corporation and Burr-Brown
Corporation. Incorporated by reference to Exhibit
10.37 of the Registrant's 10-K filing for the period
ended December 31, 1992.
10.12 Master Lease Agreement Schedules dated
July 31, 1992 and September 23, 1992, between AT&T
Commercial Finance Corporation and Burr-Brown
Corporation. Incorporated by reference to Exhibit
10.38 of the Registrant's 10-K filing for the period
ended December 31, 1992.
10.13 Purchase Agreements dated July 31,
1992, and September 23, 1992, between AT&T Commercial
Finance Corporation and Burr-Brown Corporation.
Incorporated by reference to Exhibit 10.39 of the
Registrant's 10-K filing for the period ended
December 31, 1992.
10.14 Master Equipment Lease Agreement dated
June 20, 1990, between General Electric Capital
Corporation, formerly known as Ellco Leasing
Corporation, and Burr-Brown Corporation.
Incorporated by reference to Exhibit 10.44 of the
Registrant's 10-K filing for the period ended
December 31, 1992. Amendment dated December 21,
1994. Incorporated by reference to Exhibit 10.27 of
the Registrant's 10-K filing for the period ended
December 31, 1994.
10.15 Trust Agreement for Future Investment
Trust dated October 12, 1993, between Burr-Brown
Corporation and First Interstate Bank of Arizona.
Incorporated by reference to Exhibit 10.37 of the
Registrant's 10-K filing for the period ended
December 31, 1993.
10.16 Burr-Brown Corporation's amended Stock
Incentive Plan dated February 11, 1994, which
replaces the Stock Incentive Plan dated February 11,
1993. Incorporated by reference to Exhibit 10.29 of
the Registrant's 10-K filing for the period ended
December 31, 1994.
10.17 Future Investment Trust Plan dated
July 23, 1993, replaces the Burr-Brown Corporation
Future Investment Trust dated February 24, 1987.
Incorporated by reference to Exhibit 10.39 of the
Registrant's 10-K filing for the period ended
December 31, 1993. Replaced by the Future Investment
Trust Plan dated December 20, 1994. Incorporated by
reference to Exhibit 10.30 of the Registrant's 10-K
filing for the period ended December 31, 1994.
Amendments to Future Investment Trust dated January
1, 1995, and July 1, 1995, filed herein.
-14-
<PAGE>
10.18 Cash Profit Sharing Plan dated April
21, 1995, filed herein.
10.19 Loan Agreement dated January 31, 1996,
between Burr-Brown Corporation and First Interstate
Bank of Arizona, N.A., filed herein.
11. Computation of per share earnings, filed
herein.
13. Portions of the Annual Report to
Shareholders for the year ended December 31, 1995,
are expressly incorporated by reference to the
Annual Report Form 10-K, filed herein.
21. Subsidiaries of the Registrant, filed
herein.
23.1 Consent of Ernst & Young LLP, Independent
Auditors, filed herein.
24.1 Power of Attorney, filed herein.
b. No reports of Form 8-K have been filed during
the fourth quarter of 1995.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)
of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly
authorized.
BURR-BROWN CORPORATION
Registrant
By: SYRUS P. MADAVI Date:
March 20, 1996
Syrus P. Madavi
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person
whose signature appears below constitutes and
appoints Syrus P. Madavi, his attorney-in-fact, with
the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on
Form 10-K, and to file the same, with the exhibits
thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-
fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Pursuant to the Requirements of the Securities and
Exchange Act of 1934 this report has been signed
below by the following persons on behalf of the
Registrant and in the capacities and on the dates
indicated.
NAME TITLE DATE
SYRUS P. MADAVI President and Chief
March 20, 1996
Syrus P. Madavi Executive Officer
JOHN L. CARTER Executive Vice President
March 20, 1996
John L. Carter and Chief Financial Officer
(Principal Financial and Accounting
Officer)
THOMAS R. BROWN, JR. Chairman of the Board
March 20, 1996
Thomas R. Brown, Jr.
THOMAS J. TROUP Vice Chairman of
the Board March 20, 1996
Thomas J. Troup
FRANCIS J. AGUILAR Director
March 20, 1996
Francis J. Aguilar
JOHN ANDEREGG, JR. Director
March 20, 1996
John Anderegg, Jr.
MARCELO A. GUMUCIO Director
March 20, 1996
Marcelo A. Gumucio
BOB JENKINS Director
March 20, 1996
Bob Jenkins
JAMES A. RIGGS Director
March 20, 1996
James A. Riggs
-16-
<PAGE>
<TABLE>
BURR-BROWN CORPORATION AND
SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS
(Thousands of dollars)
<CAPTION>
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
COL. A COL. B COL. C COL. D
COL. F
ADDITIONS
DEDUCTIONS
BALANCE AT CHARGED &
CURRENCY BALANCE
BEGINNING TO COSTS
TRANSLATION AT END CLASSIFICATION OF
PERIOD & EXPENSES EFFECT OF PERIOD
<S> <C> <C> <C>
<C>
1995
Deducted from Asset Account:
Product Loss Reserve $ 7,127 $ 1,974
$(2,229)(2) $ 6,872 Allowance for Doubtful Accounts
870 479 (3)(1) 1,346
$ 7,997 $ 2,453 $(2,232) $
8,218
1994
Deducted from Asset Account:
Product Loss Reserve $ 11,374 $ 1,883 $
(6,130)(2) $7,127
Allowance for Doubtful Accounts 807 183
(120)(1) 870
$ 12,181 $ 2,066 $ (6,250)
$7,997
1993
Deducted from Asset Account:
Product Loss Reserve $8,805 $5,870
$(3,301)(2) $ 11,374
Allowance for Doubtful AccountS 679 375
(247)(1) 807
$9,484 $6,245 $(3,548)
$12,181
<FN>
(1) Uncollectible accounts written off, net of
recoveries.
(2) Primarily obsolete inventory.
Note: Column E - Other is zero
-17-
<PAGE>
EXHIBIT 11
BURR-BROWN CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands, except per share data)
<CAPTION>
YEARS ENDED
DECEMBER 31, 1995 1994
1993
<S> <C> <C>
<C>
Restated (2) Restated (2)
PRIMARY:
Weighted average number of shares outstanding(1)
14,889 14,316 14,315
Net effect of dilutive stock options based on the
treasury stock
method using the average market price of Common Stock
807 182 61
Total 15,696
14,498 14,376
Net Income $29,212
$ 6,465 $ 2,817
Per Share Amount $ 1.86
$ 0.45 $ 0.20
FULLY DILUTED:
Weighted average number of shares outstanding(1)
14,889 14,316 14,315
Net effect of dilutive stock options based on the
treasury stock
method using the end of period market price of Common
Stock,
if higher than the average market price
834 383 46
Total 15,723
14,699 14,361
Net Income $29,212
$ 6,465 $ 2,817
Per Share Amount $1.86
$ 0.44 $ 0.20
<FN>
(1) Includes all shares held by the Stock Incentive
Plan.
(2) Restated to reflect a 3-for-2 stock split
effective May 1995.
</TABLE> -18-
<PAGE>
EXHIBIT 21
BURR-BROWN CORPORATION AND SUBSIDIARIES
JURISDICTION
NAME OF CORPORATION OF INCORPORATION
1. Burr-Brown International Holding Corporation
Delaware
2. Burr-Brown Limited Scotland
3. Burr-Brown Japan Limited Japan
4. Burr-Brown International Limited United
Kingdom
5. Burr-Brown International S.A. France
6. Burr-Brown International S.R.L. Italy
7. Burr-Brown International BV The Netherlands
8. Burr-Brown International GmbH Germany
9. Burr-Brown Research GesmbH Austria
10. Burr-Brown AG Switzerland
11. Burr-Brown Foreign Sales Corporation Barbados
12. Burr-Brown Europe Limited Scotland
13. Power Convertibles Corporation (fka Analog
Microsystems, Inc.) Arizona
14. PCC de Mexico, S.A. de C.V. Mexico
15. Power Convertibles Ireland, Ltd. Ireland
16. Intelligent Instrumentation, Inc. Arizona
17. Intelligent Instrumentation Japan, KK Japan
18. Intelligent Instrumentation GmbH Germany
19. Intelligent Instrumentation Limited United
Kingdom
20. Intelligent Instrumentation S.R.L. Italy
21. Intelligent Instrumentation S.A. France
22. Intelligent Instrumentation, Inc. Foreign Sales
Corporation Barbados
-19-
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000715577
<NAME> BURR-BROWN CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1993
<PERIOD-END> DEC-31-1995 DEC-31-1994 DEC-31-1993
<EXCHANGE-RATE> 1 1
1
<CASH> 42,477 9,925
13,066
<SECURITIES> 0 0 0
<RECEIVABLES> 55,173 39,642
34,822
<ALLOWANCES> 1,346 870
807
<INVENTORY> 47,852 40,092
44,036
<CURRENT-ASSETS> 196,243 92,172
95,026
<PP&E> 127,449 113,968
101,049
<DEPRECIATION> 76,075 68,072
58,622
<TOTAL-ASSETS> 252,249 143,008
142,062
<CURRENT-LIABILITIES> 66,335 46,549
45,570
<BONDS> 0 0 0
<COMMON> 165 97 97
0 0
0
0 0
0
<OTHER-SE> 178,980 87,525
79,454
<TOTAL-LIABILITY-AND-EQUITY>252,249 143,008
142,062
<SALES> 269,162 194,196
168,577
<TOTAL-REVENUES> 269,162 194,196
168,577
<CGS> 138,257 106,242
86,975
<TOTAL-COSTS> 138,257 106,242
86,975
<OTHER-EXPENSES> 90,370 77,427
73,817
<LOSS-PROVISION> 797 690 807
<INTEREST-EXPENSE> 1,131 1,725
2,338
<INCOME-PRETAX> 40,017 8,291
4,547
<INCOME-TAX> 10,805 1,826
1,730
<INCOME-CONTINUING> 29,212 6,465
2,817
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0
0
<CHANGES> 0 0 0
<NET-INCOME> 29,212 6,465
2,817
<EPS-PRIMARY> 1.86 .45 .20
<EPS-DILUTED> 1.86 .45 .20
</TABLE>
BURR-BROWN CORPORATION
1995 ANNUAL REPORT
<PAGE>
CORPORATE PROFILE
Burr-Brown Corporation designs, manufactures, and
markets a broad line of high-performance, standard
analog and mixed signal integrated circuits used in
the processing of electronic signals. Our products
are used in a wide range of markets and applications,
including industrial and process control, test and
measurement, medical and scientific instrumentation,
medical imaging, digital audio and video,
telecommunications, personal computers, and
multimedia.
Our product strategy is to design proprietary
circuits that yield maximum functional value in our
customers' applications. Many of the products,
although produced in standard configurations, are
strategically designed, specified, and tested to
position them for targeted applications such as audio
signal processing or sensor-specific signal
conditioning.
Burr-Brown's products include: operational
amplifiers, instrumentation amplifiers, programmable
gain amplifiers, isolation amplifiers, DC/DC
converters, voltage references and regulators,
voltage-to-frequency converters, optoelectronic
amplifiers, analog-to-digital converters, digital-to-
analog converters, and "application specific"
standard products. Our products are manufactured
using a variety of wafer fabrication processes that
include bipolar, complementary bipolar, BiCMOS and
CMOS with lithography requirements down to the 0.6
micron level.
We sell our products worldwide through our direct
sales force, independent sales representatives, and
third-party distributors. Burr-Brown has six direct
sales offices in the United States and international
sales subsidiaries in France, Germany, Italy, Japan,
the Netherlands, Switzerland, and the United Kingdom.
Through direct sales and distributors, our products
reach over 25,000 OEM customers worldwide. Sales are
divided evenly throughout the world, with
approximately one-third from the United States
market, one-third from Europe, and the remainder from
Japan and the South East Asian region.
Burr-Brown employs over 1,900 people worldwide with
manufacturing and technical facilities in Tucson,
Arizona; Atsugi, Japan; and Livingston, Scotland.
Located in Tucson, Arizona, corporate headquarters
also includes an integrated circuit wafer fab,
assembly and test operations. Burr-Brown was
incorporated in Arizona in 1956; stock is traded on
NASDAQ under the symbol, BBRC.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
1995 1994 1993 1992
<S> <C> <C> <C> <C>
REVENUE $269,162 $194,196 $168,577 $162,949
INCOME FROM OPERATIONS $40,535 $10,527
$7,785 $6,984
NET INCOME $29,212 $6,465 $2,817
$998
EARNINGS PER SHARE $1.86 $0.45 $0.20
$0.07
RETURN ON EQUITY 16% 7% 4% 1%
(BAR CHART GOES HERE) (BAR CHART GOES HERE)
<CAPTION> <CAPTION>
REVENUE INCOME FROM OPERATIONS
<S> <C> <S> <C>
1992 $162,949 1992 $6,984
1993 $168,577 1993 $7,785
1994 $194,196 1994 $10,527
1995 $269,162 1995 $40,535
(BAR CHART GOES HERE) (BAR CHART GOES HERE)
<CAPTION> <CAPTION>
EARNINGS PER SHARE RETURN ON EQUITY
<S> <C> <S> <C>
1992 $.07 1992 1%
1993 $.20 1993 4%
1994 $.45 1994 7%
1995 $1.86 1995 16%
</TABLE>
- -1-
<PAGE>
TO OUR SHAREHOLDERS
1995 was an excellent year financially and
operationally. Financially we achieved record levels
of bookings, revenue, and profit. Our bookings of
$290.8 million were an increase of $86.6 million or
42.4 percent over the previous year. Net revenue of
$269.2 million was 39% higher than the $194.2 million
of 1994. Net income of $29.2 million was an increase
of $22.7 million or 352% over the previous year.
Earnings per share rose 313% to $1.86 versus $.45 the
prior year. As a result, the price of our stock,
which doubled in 1994, more than doubled again in
1995. We believe the same attractive investment
potential will be available to our stockholders as we
work to further expand revenue and profits.
Concurrent with these financial results, 1995 marked
another year of excellent progress in focusing our
core competencies on introducing innovative new
products that provide practical solutions to
difficult real-world signal processing problems. In
addition, we have strengthened our relationships with
key customers and have become increasingly more
market driven.
FINANCIAL HIGHLIGHTS
As compared to a 39% growth in revenue during 1995,
we achieved an increase of 352% in net income. This
result was substantially due to our efforts to
improve gross margins and to limit growth of sales,
marketing, general and administrative (SMG&A)
expenses. Gross margin for the year, at $130.9
million, increased by $43 million or 49% over 1994.
As a percentage of revenue, annual gross margin
improved 3.3 points to 48.6%, with fourth quarter
gross margin achieving 49.4%. Our manufacturing cost
reduction efforts, coupled with higher capacity
utilization, have driven gross margin gains. SMG&A
expenses were reduced to 24% of revenue in 1995 from
29% in 1994. In absolute dollars, SMG&A expenses
were strictly constrained to grow only 16.3% in 1995
as compared to the 39% growth in revenue. As a result
of the improvement in gross margins and overhead
expenses, operating income increased to $40.5 million
or 15% of sales, up from $10.5 million or 5% of sales
for last year.
Return on equity also improved to 16% from 7%, as
stockholders' equity grew to $179.1 million in 1995
from $87.6 million in 1994. The 1995 year-end cash
position of $86.2 million was an increase of $76.3
million over year-end 1994. Cash flow from operations
was $30.9 million versus $19.9 million for the prior
year. We also raised $61.2 million through a sale of
1,750,000 shares of Common Stock on September 22,
1995. The proceeds from this sale will enable us to
expand manufacturing capacities in response to strong
market demand and provide for investment in new
technical capabilities.
MARKETS AND PRODUCTS
Our core competencies in defining, developing, and
manufacturing high performance amplifiers and data
converters are ideally suited for serving our
customers in industrial and process control, and test
and instrumentation markets. Given our traditionally
strong relationships with these customers, we have
been working closely with them to offer innovative
products that reduce costs and improve performance of
their end products.
Our commitment to these traditional markets
withstanding, we have recently begun offering
standard products that address real-time signal
processing needs for high volume, fast growth
applications in communication, personal computing,
digital audio and imaging systems. Such products
often bring together challenging requirements for
high speed, single power supply, high precision and
low power consumption, which only very few
semiconductor companies can accomplish and which
require the same core competencies acquired through
years of experience serving our traditional
markets.Our standard product strategy is further
augmented with Application Specific Standard Products
(ASSPs), which offer ideal interfaces for high volume
applications within these fast growing markets. As a
result of these efforts, we are rapidly expanding our
customer base in these new markets. For example,
communication and personal computing customers now
account for 18% of our revenue, as compared
- -2-
<PAGE>
to only 6% two years ago. As we increase our presence
in new markets, we continue to support a very
diversified customer base of over 25,000 customers,
which are spread over five key markets of industrial
and process control, test and instrumentation,
communications, personal computing and multimedia,
and digital audio and video.
ORGANIZATION
This year, we continued to enhance the operating
infrastructure, along with the technical and
managerial talent of the Company. Senior personnel
with substantial industry experience joined us in key
positions including President of Burr-Brown Japan,
Corporate Controller, and Vice President of Worldwide
Sales. We added engineering talent and reinforced
research and development momentum in all our three
product development locations _ United States,
Scotland, and Japan.
In last year's Annual Report, I referred to the
implementation of a state-of-the-art information
system that, once completed, will lead to lower cost
of SMG&A expenses and improvements in product gross
margins, and allow for more effective management on a
worldwide basis. To this end, we made very good
progress as several aspects of the capability were
brought on-line in the U.S. and we are currently
piloting these capabilities for Burr-Brown's
operations worldwide.
OUTLOOK
It is quite clear to us that usage of analog and
mixed-signal ICs will continue to grow in an
increasingly wide array of emerging fast growth
applications. Such applications range from cellular
phones and personal communications systems to
notebook and laptop computers, to battery powered
instrumentation. Our core competencies in developing
high performance analog and mixed- signal ICs ideally
position us to capitalize on these rapid growth
opportunities. Our product offerings will include
both standard linear products which will serve a wide
range of market applications and, on a selective
basis, products that target specific needs of very
high growth applications.
Financially, we plan to continue to expand gross
margins with continuing gains in manufacturing
efficiency. Further, we plan to improve operating
margins, while increasing research and development,
by limiting growth in SMG&A expenses.
We are grateful to our very talented and dedicated
employees who have made it possible to make such
excellent progress in 1995. We also appreciate the
opportunity to serve our customers and to thank them
for their confidence in Burr-Brown.
As we examine our recent results and in view of the
substantially lower price-earning multiple of our
stock than of our major competitors, we believe Burr-
Brown offers an attractive reward potential to our
stockholders. We are committed to realize this
potential. Thank you for your continued support.
Syrus P. Madavi
President and CEO
- -3-
<PAGE>
BURR-BROWN IS MARKET DRIVEN. OUR HIGH PERFORMANCE
LINEAR AND MIXED SIGNAL INTEGRATED CIRCUITS ARE USED
IN THE INDUSTRIAL AND PROCESS CONTROL, TEST AND
INSTRUMENTATION, PERSONAL COMPUTERS AND MULTIMEDIA,
DIGITAL AUDIO AND VIDEO, AND COMMUNICATIONS MARKETS.
- -4-
<PAGE>
BURR-BROWN IS MARKET DRIVEN
For a company to be successful, it must be market
driven. This means continually designing products
that not only serve its profitable core markets, but
also developing innovative products for emerging
growth markets. As a result of a successful market
driven strategy, we achieved historic levels in
sales, growth rate, and profitability in 1995. We
significantly outperformed the industry averages and
gained market share in every major product category.
To achieve this, our focus has been on our
traditional markets of Test and Instrumentation,
Industrial and Process Control, and in important
growth markets such as Digital Audio and Video,
Personal Computers and Multimedia, and
Communications.
Both Industrial and Process Control (IPC) and Test
and Instrumentation (T&I) represent long term, core
markets for us. For decades, Burr-Brown's broad range
of precision op amps and data converters has been
widely used by thousands of OEM customers in all our
major geographic markets.
We value the solid relationships we hold with these
customers and have refocused our product development
resources to meet their needs. As an example, we
introduced the ADS7833, a 12-bit triple A/D targeted
for the fast growing AC motor control market. This
development evolved from our close collaboration with
a select group of European motor control
manufacturers.
Increased new product introductions in our
operational, instrumentation, isolation, and power
amplifiers along with industrial data converter
families have helped us maintain our position as a
"preferred" supplier in these markets.
Communications has emerged as a major market force
driving analog and mixed signal circuit demand. We
have been successful in supporting both broadband and
wireless applications. Our initial success in these
markets was achieved through design-wins with our
high performance standard products_standard
configurations of operational and isolation
amplifiers and high performance data converters.
Having acquired new capabilities in 0.6 micron CMOS
processes and high speed converter designs, we
combined and channeled these capabilities into
standard and application specific products that
target many of the fastest growing segments in this
market.
In the Digital Audio market, Burr-Brown and Sony were
among the pioneering companies that achieved cost
breakthroughs in the digital processing of audio
signals thus enabling the emergence of consumer CD
players in the 1980s. Several product generations
later, our SoundPLUS series of digital-to-analog
converters (DACs) are still performance benchmarks in
digital sound quality. Our new PCM1717, an 18-bit
DAC, combines proprietary design techniques in analog
and digital signal processing on a state-of-the-art
0.6 micron CMOS process. This combination establishes
a new price/performance ratio that extends our
ability to win designs through the entire spectrum of
digital audio applications.
Since 1994, we have been aggressively designing new
products for digital video applications; these
applications are often combined with existing digital
audio opportunities. Our OPA640 family and more
recently our OPA650 family of SoundPLUS operational
amplifiers were designed with the application needs
of digital video customers in mind.
In the Personal Computer (PC) and multimedia markets,
as customers seek to upgrade their systems, our
reputation in audio technology has made our products
attractive in a number of applications such as CD-ROM
drives used in both PCs and high end video game
machines. We have also been able to adapt our voltage
regulator technology to support a family of line
terminators that facilitates computer peripheral
communication over the Small Computer System
Interface (SCSI) bus.
- -5-
<PAGE>
OUR NEW INSTRUMENTATION AMPLIFIERS AND D/A CONVERTERS
ARE 'INDUSTRY STANDARD' PRODUCTS USED IN SUCH DIVERSE
APPLICATIONS AS TRANSPORTATION SYSTEMS, MEDICAL
MONITORING SYSTEMS, COMPUTER CONTROLLED MACHINE
TOOLS, SEMICONDUCTOR TEST EQUIPMENT, INDUSTRIAL
ROBOTICS, MOTOR CONTROLS, AND PROCESS CONTROL
SYSTEMS.
- -6-
<PAGE>
INDUSTRIAL AND PROCESS CONTROL
The backbone of the world's economies is its
manufacturing industries. Built into this industrial
infrastructure is a huge range of electronic
applications that drive the market commonly described
as Industrial and Process Control. Its applications
are as diverse as locomotive engine controls on a
train in Germany to feedstock flow control in a
Mexican refinery to guiding a robot arm on an
automobile assembly line in Japan. Revving a motor,
gating a valve, positioning a robot, stopping a
train, these are typical "real world" control
applications that utilize Burr-Brown's core standard
products such as instrumentation amplifiers (IAs),
isolation amplifiers, and data converters_analog-to-
digital converters (ADCs) and digital-to-analog
converters (DACs). This year we introduced key new
products in all these areas. The INA116, a monolithic
IA with a FET-input, was selected by the editors of
EDN magazine as one of 13 "innovative semiconductor
products of 1995." Its unique low current
characteristics make it ideal for sensitive
measurements in industrial environments.
Many industrial applications need isolation of
voltages and currents across interfaces, often to
protect personnel, but just as frequently to isolate
sensitive electronics such as sensors or computers
from high currents and voltages used to position,
operate, or switch heavy equipment. The ISO213,
introduced in 1995, continues our line of proprietary
products that address this requirement. This
"isolated IA" is ideally suited for industrial
environments where protection is needed between the
process and sensitive electronic instrumentation
monitoring the process.
This important market comprised almost 30% of our
1995 sales and grew more than 20% in all major
regions. Our products are a part of major IPC systems
at industry-leading companies such as Elsag-Bailey,
Siemens, ABB, Omron, and Yokogawa. We also support
thousands of other OEM customers that manufacture
systems or subsystems for this market. Once designed
into an application in this industry, our products
are likely to remain in the product for the six to
twelve year life cycle of the equipment.
TEST AND INSTRUMENTATION
If the Industrial & Process Control market is the
backbone of the world's economies, the Test and
Instrumentation market is its nervous system. All the
real world phenomena around us need to be sensed,
measured, tracked, collected, analyzed, and
displayed. Growth in this market is accelerating as
industrial expansion, environmental issues,
semiconductor production and test, medical research,
health care, and other market drivers demand more
electronic measuring and monitoring.
This highly diversified market has three main
segments: medical, analytical, and test and
measurement, all of which find our products relevant
to their system needs. Almost a quarter of our sales
evolved from design wins in these applications_this
was an increase of nearly 30% from a year ago.
We support a significant range of medical
applications from large systems down through hand
held consumer devices. And, we are a dominant
supplier of sensor interface and data conversion
ASSPs to the world's leading manufacturers of CAT
scanning equipment such as Picker, Siemens and
Toshiba. Major system suppliers of Automatic Test
Equipment (ATE) such as Advantest, Ando, Asia
Electric, LTX and Teradyne are all significant users
of our op amp and data conversion products.
Our broad line of standard products in the small
signal amplifier, power amplifier and data conversion
areas positions us to serve a wide variety of those
applications. We recently introduced the industry's
first "dual" instrumentation amplifier_INA2128 is a
low power general purpose IA that delivers excellent
accuracy and is ideally suited for battery operated
systems. Other amplifier introductions such as the
PGA206/207 extend our product lead in programmable
gain amplifiers suited for use in test systems and
analytical and scientific instruments.
Complementary products introduced in 1995 include two
new 16-bit digital-to-analog converters, the DAC714
and the DAC715. The DAC715 with its microprocessor
interface is designed to excel in analytical
instruments, function generators, network analyzers,
ATE pin electronics, and more. And, with a price 40%
lower than competing products, it's well positioned
to capture new design-wins.
- -7-
<PAGE>
FROM THE EARLY 90S, OUR LINEAR AND DATA CONVERSION
PRODUCTS HAVE BEEN KEY COMPONENTS IN MANY WIRED AND
WIRELESS COMMUNICATION SYSTEMS. IN THE FUTURE, WE
WILL ADD APPLICATION SPECIFIC STANDARD PRODUCTS
(ASSPS), ENGINEERED IN COLLABORATION WITH KEY
CUSTOMERS, TO ENHANCE OUR PRESENCE IN COMMUNICATIONS.
- -8-
<PAGE>
COMMUNICATIONS
In the first half of this decade, the world witnessed
explosive growth in the communications market. A
remarkable convergence of market forces will continue
to drive exceptional opportunities in applications
for this market throughout the 90s and beyond.
Favorable shifts in government regulations, rapid
hardware advances, the Internet, the fusion of the PC
and the telephone, equipment portability, population
mobility, emerging economies, and many, many other
factors are stimulating a communications revolution.
Burr-Brown has leveraged its standard products into
systems with major telecommunication companies_with
products designed into switching gear for broadband
"wired" applications and base stations for "wireless"
cellular applications. We have developed significant
supplier relationships with Nokia, Ericcson, Northern
Telecom, AT&T, and NEC for example. While at 12% of
sales our overall dollar volume in this market is
still small, sales grew almost 50% in 1995. And, we
are positioned to participate in a number of high
growth applications in the future.
Within the overall robust growth in the
communications market are emerging applications that
have the potential for accelerated growth greater
than the market averages. As broadband applications
expand, using digital encoding techniques, the demand
for analog-to-digital conversion and network
interfacing chips is providing excellent
opportunities. Today HDSL hardware (High data rate
Digital Subscriber Line) as an example, supports high
data rate links from telco central office switches to
subscribers. Future high speed links will provide
subscribers with bandwidth for Internet access, video-
on-demand, and real-time interactive services. Burr-
Brown's high speed, pipelined converters and delta
sigma A/D converters along with specialized high
speed operational amplifiers are "application-
enabling" products embedded in these applications. We
have aligned our product development with recognized
industry leaders in this market such as PairGain to
maximize our future successes.
In the wireless area, our components are making an
impact on the fast growing base station applications;
and, as wireless moves to micro-cells, PCS (Personal
Communication Systems), and wireless local loop, we
expect to maintain a strong presence in these
applications as well. Capitalizing on state-of-the-
art 0.6 micron CMOS processes coupled with
proprietary analog design techniques, we have
positioned the recently introduced ADS800 family of
pipelined converters at the forefront of design
activity in this rapid growth area. Today, our
ADS7800 family is in volume production for the
current generation of these products.
Other industry segments such as special mobile radio,
satellite TV, cable modems, advanced paging, and
fiber optics are but a few of the additional market
areas where our products have captured design-wins.
The new OPA640 and OPA650 series of amplifiers use
advanced complementary bipolar processes to achieve
performance levels needed for these communications
products.
As long as voice communications exist, analog ICs
will be required. As this market expansion continues,
Burr-Brown will push its design and process
technology to stay in synch with the needs of
communication systems designers. System design
expertise, advanced CMOS processes to 0.3,
complementary BiCMOS processes, and application
specific circuit configurations are all tools we will
use to expand our penetration into this exceptional
growth market.
- -9-
<PAGE>
BURR-BROWN'S PCM DATA CONVERTERS HAVE EVOLVED FROM CD
PLAYERS TO USES IN A BROAD RANGE OF DIGITAL-AUDIO,
PERSONAL COMPUTERS, MULTIMEDIA, AND VIDEO
APPLICATIONS. OUR NEW HIGH SPEED ANALOG-TO-DIGITAL
CONVERTERS AND VIDEO AMPLIFIERS ARE SIGNAL PROCESSING
SOLUTIONS FOR APPLICATIONS IN SCANNERS, CD ROM
PLAYERS, CAMCORDERS, KEYBOARDS, AND OTHER HIGH VOLUME
COMPUTER AND CONSUMER PRODUCTS.
- -10-
<PAGE>
PC AND MULTIMEDIA
The evolution of the microcomputer continues to
produce an extraordinary array of PC and multimedia
applications. New generations of CISC and RISC
processors reduce the cost of creating quality audio
and high resolution video on PCs, workstations, or
other microprocessor-based platforms such as video
game players. Although the PC and Multimedia markets,
at 6%, are a relatively small portion of our sales;
our sales growth rate, at 150%, was signifcant. As we
continue to tap into the dynamic growth this market
offers, we will capitalize on several unique niches
that match our capabilities.
With our SoundPLUS reputation in digital audio, many
customers in these markets use "Burr-Brown's sound
quality" as a way of differentiating their products'
performance. Consequently, this series of digital-to-
analog converters has been designed into high volume
applications such as CD-ROMs, high-end game players,
optical disk drives and "add-in" multimedia sound
cards for PCs. By combining a sub-micron CMOS process
with advanced DSP techniques and advanced audio
design expertise, our new SoundPLUS products such as
the PCM1710, the PCM1715, and the PCM1717 have helped
us achieve the very competitive price/performance
levels required for these applications.
Major worldwide suppliers of CD-ROM drives such as
NEC and Mitsumi have adopted our PCM technology in
their current generation of products. And, we are
well positioned to capture designs in future product
generations as well.
By using our core competencies in operational
amplifier and regulator design to produce ASSPs for
the Small Computer Systems Interface (SCSI), we now
have a strong presence in this market. Our recently
introduced REG5608 follows the REG5601 and REG1117 in
providing bus termination for computer peripherals
complying with SCSI standards. A growing number of
hard disk drives, printers, optical disk drives,
scanners, tape drives and their associated cabling
systems with SCSI compatibility can use our
terminators.
We currently support many major suppliers of
peripherals and accessories such as HP, Conner,
Methode, IBM, Fujitisu, Samsung, as well as other
"clone" manufacturers in South East Asia.
DIGITAL AND VIDEO
Any time real-world sounds and images are digitized,
an application for analog signal processing and data
conversion is created. The rapidly declining cost of
digital signal processing continues to generate new
applications and to enhance existing ones in digital
musical instruments, laser disc players, video CD
players, compact disc players, movie, studio and home
theater systems, scanners, camcorders, photographic
imaging, copiers, professional audio systems, digital
cameras and many more.
As one of the early pioneers in digital processing of
audio signals, Burr-Brown is a "revered" name in the
audio world. Our SoundPLUS series of digital-to-
analog converters (DACs) are used in a wide variety
of consumer and professional audio equipment. The
newest member of this product group, PCM1717, was
introduced in 1995. This 18-bit DAC combines advanced
delta sigma design techniques and a 0.6 micron CMOS
process to deliver the best price/performance ratio
in the industry. Its small PC board "footprint" and
single 5 volt power supply make it ideal for many
high volume applications such as automotive sound
systems, bookshelf CD players, keyboards, MPEG audio,
MIDI, set-top-boxes and CD-Interactive and CD-Karaoke
systems. Digital Audio is one of our largest markets
and in 1995, we secured among our significant design
wins many of the marquee names in audio
products_Sony, Samsung, Yamaha, Pioneer, Roland, NEC,
Alpine, Denon, and Alesis.
Complementing our audio capabilities, we developed a
new series of SpeedPLUS operational amplifiers for
video signal processing. Using advanced complementary
bipolar processing technology, the OPA658, the
OPA2658 and the OPA4658 offer single, dual and quad
configurations in cost and space saving surface mount
packaging. These versatile high speed products are
not only used in variety of video
applications_digital cameras, copiers, scanners,
broadcast equipment and video switching, but also are
designed into many communications applications as
well. We are also developing ASSP products for
camcorders to integrate key analog signal
conditioning functions onto the same chips with high
speed A/D converters.
By maintaining a market driven strategy, we believe
we can outperform the industry averages and gain
market share again in 1996.
- -11-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
BURR-BROWN CORPORATION AND SUBSIDIARIES _In
thousands, except per share amounts
<CAPTION>
Years Ended December 31, 1995 1994
1993
<S> <C> <C> <C>
NET REVENUE $269,162 $194,196
$168,577
% increase in revenue over prior year 39% 15%
3%
COST OF GOODS SOLD 138,257 106,242
86,975
GROSS MARGIN 130,905 87,954
81,602
% of revenue 49% 45%
48%
EXPENSES:
RESEARCH AND DEVELOPMENT 25,733 21,851
19,752
% of revenue 10% 11%
12%
SALES, MARKETING, GENERAL AND ADMINISTRATIVE 64,637
55,576 54,065
% of revenue 24% 29%
32%
TOTAL OPERATING EXPENSES 90,370 77,427
73,817
% of revenue 34% 40%
44%
INCOME FROM OPERATIONS 40,535 10,527
7,785
% of revenue 15% 5%
5%
INTEREST EXPENSE 1,131
1,725 2,338
OTHER (INCOME) EXPENSE (613) 511 900
INCOME BEFORE INCOME TAXES 40,017 8,291
4,547
% of revenue 15% 4% 3%
PROVISION FOR INCOME TAXES 10,805 1,826
1,730
Effective tax rate 27% 22% 38%
NET INCOME $ 29,212 $ 6,465 $
2,817
% of revenue 11% 3% 2%
% increase in net income over prior year
352% 129% 182%
EARNINGS PER COMMON SHARE $ 1.86 $
0.45 $ 0.20
Shares used in per common share calculation
15,696 14,498 14,376
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
- -12-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY
BURR-BROWN CORPORATION AND SUBSIDIARIES_In thousands
<CAPTION>
Additional
Cumulative
Common Stock Paid-In Retained Translation
Treasury Stock Shares Amount
Capital Earnings Adjustment Shares Amount
Total
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
BALANCE AT JANUARY 1, 1993 9,656 $ 97 $
25,943 $ 50,115 $ 2,050 93 $
(762) $ 77,443
Net income 2,817
2,817
Foreign currency
translation adjustment
33 33
Stock options exercised 10 70
70
Treasury stock acquired
38 (302) (302)
Affiliate's stock activity
(510) (510)
BALANCE AT DECEMBER 31, 1993 9,666 97 26,013
52,422 2,083 131 (1,064) 79,551
Net income 6,465
6,465
Foreign currency
translation adjustment
1,421 1,421
Stock options exercised 48 387
387
Treasury stock acquired 14
(157) (157)
Affiliate's stock activity (45)
(45)
BALANCE AT DECEMBER 31, 1994 9,714 97 26,400
58,842 3,504 145 (1,221) 87,622
Net income 29,212
29,212
Foreign currency
translation adjustment
(342) (342)
Stock split at three-for-two 4,859 37 (37)
81 0
Stock options exercised 213 13 2,094
2,107
Stock offering 1,750 18 61,195
61,213
Treasury stock acquired 26
(460) (460)
Affiliate's stock activity 46 (253)
(207)
BALANCE AT DECEMBER 31, 1995 16,536 $ 165 $
89,698 $ 87,801 $ 3,162 252 $
(1,681) $179,145
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
- -13-
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
BURR-BROWN CORPORATION AND SUBSIDIARIES_In thousands
<CAPTION>
December 31, 1995 1994 1993
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $42,477 $9,925 $13,066
Short-term investments 43,738
Trade receivables 55,713 39,642 34,822
Inventories 47,852 40,092 44,036
Deferred income taxes 3,273 331 1,011
Other 3,190 2,182 2,091
TOTAL CURRENT ASSETS 196,243 92,172
95,026
LAND, BUILDINGS, AND EQUIPMENT
Land 3,393 3,396 3,378
Buildings and improvements 23,294 21,988 20,818
Equipment 100,812 88,584 76,853
127,499 113,968 101,049
Less accumulated depreciation (76,075) (68,
072) (58,622)
51,424 45,896 42,427
OTHER ASSETS 4,582 4,940 4,609
$252,249 $143
,008 $142,062
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $17,904 $16,964 $15,000
Accounts payable 17,359 12,747 9,064
Accrued expenses 8,703 7,485 9,610
Accrued employee compensation and payroll taxes 8,929 4,834
4,284
Deferred profit from distributors 6,198 1,792 1,096
Income taxes payable 6,092 1,630 3,593
Current portion of long-term debt 1,150 1,097 2,923
TOTAL CURRENT LIABILITIES 66,335 46,549 45,570
LONG-TERM DEBT 1,808 1,839 8,802
DEFERRED GAIN 2,619 4,116 5,612
DEFERRED INCOME TAXES 159 1,182 1,194
OTHER LONG-TERM LIABILITIES 2,183 1,700 1,333
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value-authorized 2,000
shares;
none issued or outstanding
Common stock, $.01 par value-authorized 40,000
shares; issued and
outstanding, including treasury shares: 1995-16,536
shares;
1994-14,571 shares; 1993-14,499 shares 165 97 97
Additional paid-in capital 89,698 26,400 26,013
Retained earnings 87,801 58,842 52,422
Equity adjustment from foreign currency translation 3,162
3,504 2,083
Treasury stock; at cost: 1995-252 shares; 1994-218 shares; 1993-197 shares
(1,681) (1,221) (1,064)
179,145 87,622 79,551
$252,249 $ 143,008 $
142,062
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
- -14-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BURR-BROWN CORPORATION AND SUBSIDIARIES_In thousands
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
NET INCOME $29,212 $6,465 $2,817
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY
OPERATING ACTIVITIES:
Depreciation and amortization 12,712 10,615 10,072
Amortization of deferred gain (1,497) (1,496) (1,497)
Provision for inventory reserves 1,974 1,883 5,870
Provision (benefit) for deferred income taxes (3,983) 707
(457)
Increase (decrease) in deferred profit from distributors 4,406
696 1,096
Other 778 608 793
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) decrease in trade receivables (17,
256) (2,484) (3,792)
(Increase) decrease in inventories (10,197) 3,179 (7,812)
(Increase) decrease in other assets (561) 130 836
Increase (decrease) in accounts payable 5,269 2,789 (129)
Increase (decrease) in accrued expenses and other liabilities
10,072 (3,169) 4,986
NET CASH PROVIDED BY OPERATING ACTIVITIES30,92919,92312,783
INVESTING ACTIVITIES
Purchases of short-term investments (43,738)
Purchases of land, buildings, and equipment (17,574) (12,055) (7,117)
Proceeds from sale of equipment 191 462 208
NET CASH USED IN INVESTING ACTIVITIES(61,121)(11,593)(6,909)
FINANCING ACTIVITIES
Proceeds from short-term and long-term borrowings 1,374 16,366 1,919
Principal payments on short-term and long-term borrowings (1,681) (27,339)
(3,949)
Proceeds (payments) for capital stock activity, net 62,653 185
(293)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 62,346 (10,788) (2,323)
Effect of exchange rate changes on cash 398 (683) 25
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS32
,552 (3,141) 3,576
Cash and cash equivalents at beginning of year 9,925 13,066 9,490
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 42,477 $9,925 $
13,066
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
- -15-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BURR-BROWN CORPORATION AND SUBSIDIARIES_In thousands,
except per share amounts
December 31, 1995
ACCOUNTING POLICIES
ORGANIZATION: Burr-Brown Corporation develops,
manufactures and markets electronic components
including precision linear, data conversion and mixed
signal integrated circuits. These products address
applications for both analog and digital signal
processing relating to communications, industrial and
process control, test and measurement, medical
instrumentation, digital audio, multimedia, imaging
and personal computer systems. Principal markets for
these products are North America (principally the
United States), Europe (Germany, the United Kingdom
and elsewhere) and Asia (principally Japan). Revenue
from these applications in these markets can be
volatile and is dependent on general economic
conditions.
USE OF ESTIMATES: The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the amounts
reported in the financial statements and accompanying
notes. Actual results could differ from those
estimates.
PRINCIPLES OF CONSOLIDATION: The consolidated
financial statements include the accounts of Burr-
Brown Corporation and its majority owned subsidiaries
(the Company), of which all but two are wholly-owned.
Investments in which ownership is at least 20% but
not over 50% are accounted for under the equity
method. Other investments are accounted for using the
cost method. All significant intercompany accounts
and transactions are eliminated.
INVENTORIES: Inventories are valued at the lower of
cost (first-in, first-out basis) or market. The
Company maintains a valuation reserve which reflects
the Company's estimate of the impact on inventories
of potential obsolescence, excess quantities, and
declines in market prices.
LAND, BUILDINGS, AND EQUIPMENT: Land, buildings, and
equipment are stated at cost. Depreciation on
buildings and equipment is computed by the straight-
line method over the estimated useful lives ranging
from three to forty years.
DEFERRED PROFIT FROM DISTRIBUTORS: A portion of the
Company's revenue is from sales made to domestic
distributors under agreements which provide for
certain price protection and limited product return
privileges. As a result, the Company defers
recognition of the gross profit on such sales until
the merchandise is sold by the distributors.
INCOME TAXES: Income taxes are determined utilizing
the liability method. This method gives consideration
to the future tax consequences associated with
temporary differences between the carrying amounts of
assets and liabilities for financial statement
purposes and the amounts used for income tax
purposes.
FOREIGN CURRENCY TRANSLATION: The financial
statements of foreign subsidiaries have been
translated in accordance with Statement of Financial
Accounting Standards (SFAS) No. 52, Foreign Currency
Translation. The gains and losses resulting from the
change in exchange rates from year to year have been
reported separately as a component of stockholders'
equity. Transaction gains and losses, which are not
significant for all years presented, are reflected in
income currently.
CONCENTRATION OF CREDIT RISK: Financial instruments
which could potentially subject the Company to
significant concentrations of credit risk consist
principally of cash equivalents, short-term
investments and trade receivables.
The Company maintains cash and cash equivalents at
various financial institutions. These financial
institutions are located throughout the world and
Company policy is designed to limit exposure to any
one institution and takes into account the relative
credit standing of these institutions. The Company's
short-term investments are primarily purchased
through one high credit quality financial
institution. These investments are a direct
obligation of the U.S. Treasury.
Credit risk with respect to trade receivables is
limited due to the large number of entities
comprising the Company's customer base and their
dispersion across many different industries.
Furthermore, management continually monitors and
adjusts allowances associated with these receivables.
STOCK ISSUED TO EMPLOYEES: Stock options are granted
to employees under the Company's Stock Incentive Plan
with an exercise price equal to the fair value of the
shares at date of grant. The Company accounts for
stock option grants in accordance with APB Opinion
No. 25, Accounting for Stock Issued to Employees,
and, accordingly, recognizes no compensation expense
for the stock option grants.
EARNINGS PER SHARE: Earnings per share is based on
the weighted average number of shares of common stock
outstanding during the year, plus incremental common
equivalent shares. The treasury stock method is used
in computing the incremental common stock equivalents
which would result from exercise of outstanding
dilutive stock options based upon the average market
value of common stock. All references to share and
per share amounts have been restated to reflect a
three-for-two stock split effective May, 1995.
RECLASSIFICATIONS: The 1994 and 1993 financial
statements have been reclassified to conform to the
1995 presentation.
- -16-
<PAGE>
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company classifies highly liquid investments with
original maturity of three months or less as cash
equivalents. Short-term investments consist of highly
liquid investments with original maturities ranging
from three months to one year.
On January 1, 1995, the Company adopted FAS 115,
Accounting for Certain Investments in Debt and Equity
Securities. There was no cumulative effect as a
result of adopting FAS 115. Cash equivalents and
short-term investments, at December 31, 1995,
classified as held-to-maturity, consisted of U.S.
Treasury and U.S. government agency securities for
which cost, $78,677, approximated market value.
Income received from cash equivalents and short-term
investments amounted to $1,160 in 1995.
INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Finished goods $16,180 $15,133 $18,108
Work-in-process 17,830 12,789 14,342
Raw materials 13,842 12,170 11,586
$47,852 $40,092 $44,036
</TABLE>
FOREIGN CURRENCY FORWARD CONTRACTS
As a result of selling its products in overseas
markets, the Company is exposed to the effect of
foreign exchange rate fluctuations on the U.S. dollar
value of its foreign currency receivables. The
Company currently nets the receivables and payables,
due from subsidiaries to the Company, creating a
natural hedge against foreign currency rate
fluctuations. Net receivables are further hedged
through the purchase of foreign currency forward
contracts. The Company marks to market both the
hedges and the underlying transactions at the end of
each reporting period. The realized and unrealized
gains and losses resulting in the changes in exchange
rates are included in income in the period in which
the changes occur. Such realized and unrealized gains
and losses are not significant for all periods
presented.
As of December 31, 1995, the Company had entered into
forward contracts to sell Japanese Yen, German Marks
and British Pounds. These foreign exchange contracts
are with a major commercial U.S. bank. Maturity dates
of the forward contracts ranged from January 12,
1996, to February 2, 1996. The outstanding contracts
at December 31, 1995, had a contract value of $7,018
and a fair value of $7,164.
NOTES PAYABLE
The Company has available short-term credit
facilities of approximately $61,950 with $17,904
outstanding at December 31, 1995. There are no
compensating balance requirements. Approximately
$41,500 of the available short-term credit facilities
are in foreign currencies and are used to support the
Company's foreign operations. Interest rates are tied
to prevailing national base rates and the weighted
average rates for 1995, 1994 and 1993 were 3.6%, 4.1%
and 5.8%, respectively. These credit facilities are
renewable annually at various dates.
- -17-
<PAGE>
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, 1995 1994 1993
<S> <C> <C> <C>
Capitalized lease arrangements - various terms and
interest rates $2,745 $2,003 $974
Secured senior note, repaid in 1994 8,545
5.00% - 6.05% yen denominated notes - repaid in 1995 653
1,729
Other 213 280 477
2,958 2,936 11,725
Less current portion 1,150 1,097 2,923
$1,808 $1,839 $8,802
</TABLE>
The Company has a $15,000 revolving line of credit.
The Company may designate a term of interest at LIBOR
+ 2% of one, two, three or six months. In addition,
the Company may borrow with interest accruing at the
bank's prime rate or a "bid rate" under this line of
credit. This facility is collateralized by certain
accounts receivable and inventories. A quarterly
commitment fee of 1/4 percent per annum is assessed
on the unused portion of the revolving credit line.
There are several liquidity, debt, net worth and debt
coverage loan covenants as well as certain capital
spending restrictions under this facility. The
Company is in compliance with these covenants and
restrictions as of December 31, 1995. There are no
compensating balance requirements. This revolving
line of credit is subject to renegotiation and
renewal on January 31, 1996.
Under the various long-term debt agreements, the
Company is obligated to pay the following principal
amounts for each of the next five years:
1996 $1,150
1997 $ 976
1998 $ 438
1999 $ 281
2000 $ 100
Interest paid on all debt amounted to $947, $1,988
and $2,759 in 1995, 1994, and 1993, respectively.
INCOME TAXES
Income before income taxes is comprised as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Domestic $31,077 $5,063 $1,093
Foreign 8,940 3,228 3,454
$40,017 $8,291 $4,547
</TABLE>
The components of the provision (benefit) for income
taxes are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
U.S. Federal $8,785 $(141) $155
Foreign 3,284 1,485 1,643
State 2,701 (186) 542
14,770 1,158 2,340
Deferred:
U.S. Federal (3,617) 118 (121)
Foreign 58 169 (108)
State (406) 381 (381)
(3,965) 668 (610)
$10,805 $1,826 $1,730
</TABLE>
- -18-
<PAGE>
Actual current tax liabilities are lower than the
amounts reflected above by the tax benefit from stock
option activity of $841 for 1995. The tax benefit
from stock option activity is recorded as a reduction
in current income taxes payable and an increase in
additional paid-in capital.
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting
purposes and the amounts used for income tax
purposes. Significant components of the Company's
deferred tax liabilities and assets at December 31,
1995, 1994, and 1993, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Depreciation $(2,331) $ (1,935) $
(2,352)
Other, net (435) (393)
Total deferred tax liabilities (2,331) (2,370) (2,745)
DEFERRED TAX ASSETS:
Inventory reserves and capitalization 2,809 2,965 5,099
Tax credit carryforwards 4,612 2,753
Sale leaseback 1,057 1,652 2,251
Intercompany transactions 1,816 3 501
Foreign loss carryforwards 520 664 469
Distributor reserves 2,583 719 440
Employee benefits reserves 1,102 531 477
Other, net 1,319 169 400
Total deferred tax assets 11,206 11,315 12,390
Valuation allowance (5,761) (9,796) (9,828)
Net deferred tax assets 5,445 1,519 2,562
Net deferred tax assets (liabilities) $ 3,114 $(851) $
(183)
</TABLE>
The valuation allowances are recorded to offset
deferred tax assets which can only be realized by
earning taxable income in future years. Management
established the valuation allowances because it
cannot be assured that such income will be earned.
A reconciliation of the U.S. federal statutory income
tax rate to the effective tax rate follows:
<TABLE>
<CAPTION> Percent of Pre
tax Income
1995 1994 1993
<S> <C> <C> <C>
U.S. Federal statutory rate 35.0% 34.0% 34.0%
Foreign taxes in excess of (less than) U.S. federal statutory rate
(0.8) 6.7 (0.3)
Foreign sales corporation (1.5)
State taxes, net of federal benefit 3.7 2.3 3.5
Research and development and minimum tax credit carryforwards
(10.2)
Domestic temporary differences not previously benefited
(18.6)
Other 0.8 (2.4) 0.8
Effective tax rate 27.0% 22.0% 38.0%
</TABLE>
Undistributed earnings of foreign subsidiaries were
$16,967 at December 31, 1995. No provision for U.S.
tax has been made on these undistributed earnings as
they are intended to be permanently reinvested.
Substantially all tax expense associated with the
receipt of such undistributed earnings would be
offset by foreign tax credits.
Certain foreign subsidiaries have net operating loss
carryforwards totaling $1,003, of which $791 can be
carried forward indefinitely with the remainder
expiring at various dates beginning in 1997. No
financial statement benefit has been recognized for
the foreign operating loss carryforwards.
Net income taxes paid amounted to $8,970, $2,968 and
$777 in 1995, 1994, and 1993, respectively.
- -19-
<PAGE>
STOCKHOLDERS' EQUITY_Share amounts in thousands
The Company adopted an Incentive Stock Plan in 1981
which was amended and restated in 1983. Under this
plan, options were granted to key employees, subject
to certain limitations to purchase an aggregate of
1,407 shares of common stock at not less than the
fair market value on the date of the grant. All
options under the plan must be exercised within ten
years from the date of the grant. This plan expired
in 1993 and no further options will be granted under
this plan. However, all options outstanding under
this plan will continue to have full force and effect
in accordance with their terms.
In 1993, the Company adopted the 1993 Stock Incentive
Plan. This plan is intended to benefit the Company by
providing an incentive to certain key employees,
directors and consultants. The aggregate number of
shares which may be issued under this plan shall not
exceed 1,620 shares, including 720 shares available
from the 1981 Plan. These shares have been adjusted
to reflect a three-for-two stock split effected in
1995. This plan is administered by a committee of the
Board of Directors. The option price per share shall
be fixed by the committee, but in no event shall the
option price per share be less than the fair market
value on the date of the grant. The committee also
determines the date on which granted options will
become exercisable, although all options under this
plan must be exercised within ten years from the date
of grant.
In December, 1995, the Company instituted a plan to
purchase up to 500 shares of the Company's common
stock in the open market. Purchase activity will be
ongoing and timed to take advantage of what the
Company considers to be a favorable price for its
stock. The acquired shares will be used to provide
shares for the employee stock option programs.
Summarized transactions under the above stock option
plans are as follows:
<TABLE>
<CAPTION>
SharesOption Price
Under OptionPer Share
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 680 $3.00- $ 10.67
Granted 127 4.67- 5.09
Exercised (15) 4.67- 4.67
Canceled (419) 3.00- 8.36
BALANCE AT DECEMBER 31, 1993 373 4.50- 10.67
Granted 771 4.33- 5.83
Exercised (72) 4.67- 5.87
Canceled (75) 4.67- 10.50
BALANCE AT DECEMBER 31, 1994 997 4.33- 10.67
Granted 300 8.50- 35.00
Exercised (215) 4.33- 10.67
Canceled (36) 4.50- 8.50
BALANCE AT DECEMBER 31, 1995 1,046 $4.33- $ 35.00
</TABLE>
Stock options for 303, 278 and 261 shares were
exercisable at December 31, 1995, 1994 and 1993,
respectively.
During 1989, the Board of Directors declared a
dividend distribution of one common stock purchase
right for each outstanding share of common stock.
The rights are exercisable only if a person or
group acquires 20% or more of the Company's common
stock or announces a tender offer which would
result in ownership by a person or group of 20% or
more of the common stock. At that time, a right
plus $0.3167 may be exchanged for one one-hundredth
share of common stock of the Company. Upon the
acquisition of 40% or more of the Company's common
stock (unless at least 80% is acquired in a cash
tender offer), the holders of rights (other than
the acquirer) will have the right to purchase
shares of the Company's common stock at half its
market value. In addition, the rights provide that
upon the merger or transfer of 50% or more of the
assets or earning power of the Company to a person
who has acquired at least 20% of the common stock,
the holders of rights will have the right to
purchase shares of the acquirer's common stock at
half its market value.
The rights are subject to mandatory redemption for
$0.0067 per right at the discretion of the
Company's Board of Directors. All rights expire on
August 9, 1999, unless extended or redeemed by the
Company and do not have dividend or voting
privileges while outstanding.
- -20-
<PAGE>
FOREIGN OPERATIONS, GEOGRAPHIC AND SEGMENT DATA
The Company operates predominately in one segment,
the electronic component industry.
The consolidated financial statements include the
accounts of wholly-owned foreign subsidiaries.
Transfers of inventories to these foreign
subsidiaries are negotiated based on market prices.
The following summary by operational area includes
both net revenue from unaffiliated customers and
transfers between geographic areas. The Far Eastern
region consists of activity primarily from Japan. The
United States operations include corporate activity
that benefits the Company as a whole.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET REVENUE:
NORTH AMERICAN OPERATIONS:
Unaffiliated customers $95,667 $73,927 $61,124
Foreign unaffiliated customers 17,250 13,858 11,353
Consolidated subsidiaries 87,721 77,290 69,451
200,638165,075 141,928
EUROPEAN OPERATIONS:
Unaffiliated customers 64,794 48,606 43,625
Consolidated subsidiaries 13,225 10,981 12,760
78,019 59,587 56,385
FAR EASTERN OPERATIONS:
Unaffiliated customers 91,451 57,805 52,475
Consolidated subsidiaries 4,037 4,160 2,919
95,488 61,965 55,394
Eliminations (104,983)(92,431)(85,130)
$269,162$194,196$168,577
INCOME (LOSS) BEFORE INCOME TAXES:
North American Operations $33,446 $5,015 $2,674
European Operations 5,428 397 1,389
Far Eastern Operations 3,402 2,820 1,879
Eliminations - primarily United States (2,259) 59 (1,395)
$40,017 $8,291 $4,547
IDENTIFIABLE ASSETS:
North American Operations $206,405$105,028 $99,765
European Operations 28,790 19,300 23,306
Far Eastern Operations 43,642 32,538 29,398
Eliminations (26,588)(13,858) (10,407)
$252,249$143,008$142,062
</TABLE>
COMMITMENTS AND CONTINGENCIES
The Company was involved in four ground water claims.
The Company filed a motion for a stipulated dismissal
on August 14, 1995, for three of these claims. The
court order dismissing Burr-Brown without prejudice
was entered in all three cases on September 23, 1995.
In the one remaining case, based on investigations to
date, management does not believe the Company
contributed to the alleged contamination and,
therefore, is of the opinion that the disposition of
this claim will not result in any material change in
the Company's financial condition, results of
operations or liquidity.
In October, 1992, the Company sold and leased back
$10,000 of production and manufacturing equipment,
utilizing the proceeds to repay existing bank debt. A
gain of $7,483 generated by the sale transaction was
deferred and is being amortized over the five-year
lease term. The Company has purchase and lease
renewal options at future fair market values under
the lease agreements. The leases are classified as
operating leases. Rentals under these leases are
$2,196 annually and are included in the future
commitments table below.
Approximate aggregate future commitments under
noncancelable operating leases, primarily for
equipment and office
facilities, are summarized as follows:
1996 $5,557
1997 $4,027
1998 $1,817
1999 $1,319
2000 $ 943
Rental expense was $5,352, $6,324 and $6,031 in 1995,
1994 and 1993, respectively.
- -21-
<PAGE>
EMPLOYEE BENEFIT PLANS
The Company has a defined contribution plan, the
Future Investment Trust (FIT). The FIT is a 401(k)
salary deferral plan and allows eligible
participating U.S. employees to defer up to 15% of
their salaries. Employee contributions are matched by
the Company at a rate of 25% of the employee's
contribution. The Company's contributions vest at 25%
per year and become fully vested to the employee
after four years of service. Additional voluntary
Company contributions may be made to FIT
participants' profit sharing accounts.
The Company has a noncontributory defined benefit
pension plan which covers all eligible U.S. employees
and generally provides benefits to retired employees
based on their length of service, age, and a
percentage of qualifying compensation during the
final years of employment. Contributions are intended
to provide not only for benefits attributed to
service to date, but also for those expected to be
earned in the future. The Company's policy is to
contribute amounts sufficient to at least meet the
Employee Retirement Income Security Act's minimum
funding requirements.
A summary of the components of net periodic pension
expense follows:
<TABLE>
<CAPTION>
1995 1994 1993
U.S.Foreign U.S.Foreign U.S.Foreign
Plans Plans Plans Plans Plans Plans
<S> <C> <C> <C> <C> <C> <C>
Defined benefit pension plans:
Service cost-benefits earned during the period $ 392 $ 321 $
492 $ 334$ 396$ 307
Interest cost on projected benefit obligation 620 189 608 166 540
141
Net amortization 1,142 4 (363) (20) (54) (75)
Return on plan assets (1,732)(49) 21 (43) (317) (17)
NET PERIODIC PENSION EXPENSE
OF DEFINED BENEFIT PLANS 422 465 758 437 565 356
DEFINED CONTRIBUTION PLAN - MATCHING FIT 626 507 432
TOTAL EMPLOYEE BENEFIT EXPENSE $ 1,048$ 465$1,265$ 437$ 997 $ 356
</TABLE>
Assumptions used in computing pension expense for the
defined benefit plans were as follows:
<TABLE>
<CAPTION>
U.S. Plans Foreign Plans
<S> <C> <C>
Weighted-average discount rates 8.5% 5.5%-7.5%
Rates of increase in compensation levels 5.0% 4.5%
Expected long-term rate of return on assets 8.5% 4.1%-7.0%
</TABLE>
The U.S. Plans' weighted-average discount rate
changed from 7.5% used in 1994 and 1993.
The following table sets forth the funded status and
amounts recognized in the consolidated balance sheets
at December 31, 1995, 1994, and 1993, for the
Company's defined benefit pension plans:
<TABLE>
<CAPTION>
1995 1994 1993
U.S.FOREIGN U.S.Foreign U.S.Foreign
PLANS PLANS Plans Plans Plans Plans
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 6,036$ 1,879$ 3,773$ 1,502$ 4,495 $ 1,092
Accumulated benefit obligation $ 7,155$ 2,225$ 4,294$ 1,863 $ 5,353
$ 1,443
Projected benefit obligation for services
rendered to date $(9,208)$(3,004)$(7,773)$(2,747)$(7,772) $(2,265)
Plans assets at fair value 9,826 1,486 7,059 1,4066,696 1,056
EXCESS (SHORTFALL) OF PLAN ASSETS OVER (UNDER)
PROJECTED BENEFIT OBLIGATION 618(1,518) (714)(1,341) (1,076)
(1,209)
Unrecognized net (loss) gain (1,500) 28(1,248) 190 (825) 433
Unrecognized prior service cost 1,333 1,550 1,787
Unrecognized net transition obligation (50) (47)
(36)
NET PENSION ASSET (LIABILITY)$ 451$(1,540)$ (412)$(1,198) $ (114) $
(812)
</TABLE>
U.S. plan assets consist of investments in equities,
bonds and cash equivalents. Foreign plan's assets
consist of securities, real estate, loans and cash
equivalents.
- -22-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Burr-Brown Corporation
We have audited the accompanying consolidated balance
sheets of Burr-Brown Corporation and Subsidiaries as
of December 31, 1995, 1994 and 1993, and the related
consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995.
These financial statements are the responsibility of
the Company's management. Our responsibility is to
express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement.
An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in
the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well
as evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for
our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated
financial position of Burr-Brown Corporation and
Subsidiaries at December 31, 1995, 1994 and 1993, and
the
consolidated results of their operations and their
cash flows for each of the three years in the period
ended
December 31, 1995, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Tucson, Arizona
January 22, 1996
SUMMARIZED QUARTERLY DATA (UNAUDITED)
The following is a summary of quarterly financial
data for 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Quarter
Ended 1995
April 1July 1Sept.
30 Dec.31
<S> <C> <C> <C> <C>
Net revenue $59,547$69,594$70,218$69,803
Gross margin 28,18633,798 34,41134,510
Net income 4,657 6,845 8,2879,423
Earnings per share . .31 .45 .54 .55
Quarter
Ended 1994
April 2July 2Oct. 1Dec.31
Net revenue $47,355$47,607$49,217$50,017
Gross margin 22,87422,810 21,17721,093
Net income 1,737 1,964 1,7041,060
Earnings per share . .12 .14 .12 .07
Quarter
Ended 1993
April 3July 3Oct. 2Dec.31
Net revenue $42,280$42,486$42,935$40,876
Gross margin 20,32420,308 20,29020,680
Net income 572 796 604 845
Earnings per share . .04 .05 .04 .06
</TABLE>
- -23-
<PAGE>
QUARTERLY MARKET AND
DIVIDEND INFORMATION
<TABLE>
<CAPTION>
1995 Close1994 Close
QuotationsQuotations
HighLow HighLow
<S> <C> <C> <C><C>
First quarter $121/8$ 75/8 $ 47/8 $ 37/8
Second quarter 271/4111/8 65/8 41/8
Third quarter 403/4251/4 71/2 51/8
Fourth quarter 363/4191/4 103/8 65/8
</TABLE>
The Company's common stock has been traded on the
National Market System under the symbol BBRC since
March 1984. As of December 31, 1995, there were
approximately 4,100 stockholders of record, which
include those listed in company records and
stockholders who hold their shares in a broker's
name. Stock prices have been restated to reflect a
three-for-two stock split effective May, 1995.
The Company has never paid any cash dividends on its
common stock. It is the present policy of the Board
of Directors to retain earnings to finance expansion
of the Company's operations, and the Company does not
expect to pay dividends in the foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
1995 was a year of unprecedented revenue growth and
profitability for the Company. Bookings totaled
$290.8 million compared to $204.2 million for the
previous year, an increase of 42%. All business units
and geographic areas participated in this growth.
Growth in the core business, analog and mixed signal
integrated circuit products, was the greatest at 53%,
bringing the total new orders for the core IC
business to $252.8 million. Benefiting greatly from
the computing and multimedia sector, Asia exhibited
the highest regional growth with a 60% increase over
1994. Bookings for majority-owned subsidiaries, Power
Convertibles Corporation and Intelligent
Instrumentation Incorporated, were relatively flat
year over year. Although 1995 was a very robust
growth year for the electronics industry as a whole
and for semiconductor companies in particular, the
Company believes its growth performance to be at the
high end of the range for the analog and mixed signal
markets in which it competes most extensively.
Total 1995 revenue of $269.2 million was 39% higher
than the $194.2 million of 1994. Revenue growth
closely tracked bookings growth on a regional and
product line basis. Penetration into third party
distribution increased substantially during the year
with approximately 35% of 1995 revenue being realized
through this channel as compared to 26% in the
previous year. To a limited extent, further revenue
growth was restricted by certain manufacturing
capacity bottlenecks, primarily in the product test
area. These have or are being aggressively addressed
and the Company believes that sufficient base
capacity exists to support increases in manufacturing
output of approximately 40% per year for the next two
years without a major capacity expansion program.
Total 1995 year end backlog, at $62 million,
increased 37% or $17 million from that of 1994 year
end.
Annual gross margin, at $130.9 million, increased by
$43 million or 49% over 1994. As a percentage of
revenue, gross margin improved 3.3 percentage points
to 48.6% from 45.3% in 1994, with fourth quarter
gross margin achieving 49.4%. Manufacturing cost
reduction efforts drove margin improvements. Higher
output levels increased capacity utilization which
resulted in increased operating leverage.
Manufacturing yields improved continuously throughout
the year. Pricing throughout all product lines
remained essentially stable. The impact of foreign
currency exchange rate changes, particularly
involving the yen, was highly favorable in the first
half of 1995 and unfavorable in the second half.
Operating expenses at $90.4 million increased over
the prior year by $13 million or 17% as compared to a
39% increase in revenue. As a percentage of revenue,
operating expenses were reduced to 34% from 40% in
1994. Sales, marketing, general and administrative
(SMG&A) expenses were reduced to 24% in 1995 from 29%
in 1994 with fourth quarter SMG&A expenses declining
to 23% of revenue. Reducing the ratio of SMG&A
expenses to revenue is an ongoing objective of the
Company. Part of the 1995 reduction was the result of
the consolidation of certain administrative
activities in Europe and more extensive use of third
party distribution in all regions. Significant
additional benefit is planned from further pursuit of
these strategies. SMG&A expense growth in all areas
was by design strictly constrained, with the most
significant increases coming from revenue driven
commission and incentive expenses.
Spending on research and development (R&D) increased
by approximately $4 million or 18% over the previous
year. As a percentage of revenue, R&D
- -24-
<PAGE>
spending decreased to 9.6% from 11.3% in 1994. The
Company is committed to increasing its investments in
this area and increasing its R&D spending ratio as an
essential means of realizing its growth
opportunities. Although it has been successful in
increasing spending, dramatic revenue growth and high
demand for scarce, qualified human resources have
combined to limit the rate at which this ratio could
be raised. During 1995, the number of new product
introductions increased substantially over the prior
year, a new technology development group was
established and several new wafer fab foundry
relationships were developed, which widened the scope
of process technology available to the Company.
Revenue growth combined with manufacturing cost
reductions and constrained expense increases resulted
in new record levels of both profit and profitability
being set for the Company in 1995. Income from
operations was $40.5 million or 15% of revenue, an
increase of 285% over 1994. Net income was $29.2
million or 11% of revenue, an increase of 352% over
1994. The effective tax rate for 1995 was 27%
compared to 22% in 1994. The 1995 tax rate was less
than the U.S. federal statutory rate of 35% mainly
due to the utilization of tax credit carryforwards
which were previously reserved. Deferred tax
valuation allowances are recorded by the Company to
offset deferred tax assets which can only be realized
by earning taxable income in future years. Management
established the valuation allowances because it
cannot be assured that such income will be earned.
The valuation allowance decreased by $4 million in
1995 due mainly to the utilization of tax credit
carryforwards. There were no changes in 1995 to the
assumptions and factors used in determining the
valuation allowance. If domestic earnings continue
strong in 1996 the deferred tax asset valuation
allowance may be significantly reduced and favorably
impact the 1996 tax rate. After 1996, it is expected
that the effective tax rate will rise to the U.S.
statutory rate.
1994 COMPARED TO 1993
Order bookings were $204.2 million in 1994 compared
to $170.3 million for the previous year, an increase
of 20%. Geographically, bookings increased over the
prior year at least 18% in all three of the Company's
major sales locales, the Americas, Europe and Asia.
1994 revenue of $194.2 million increased 15% when
compared to $168.6 million for 1993. This year showed
both the Asian and European economies recovering,
which positively impacted the Company's revenue for
the year. It is estimated that approximately 3% of
the yearly increase was due to favorable currency
translation caused by the stronger Japanese Yen.
Gross margin was 45% of revenue for 1994 compared to
48% in 1993. The decreased gross margins in the
second half of 1994 reflect, in part, the Company's
efforts to manage its inventory levels while
continuing to increase its net revenue. These
inventory management efforts reduced assembly and
test manufacture cycle times, which caused an overall
reduction in work in process and finished goods
inventories. The combined effect of these inventory
management practices allowed the Company to increase
net revenue over the remainder of 1994 while
decreasing manufacturing volumes during these
periods. As a result, the Company's fixed
manufacturing costs were allocated against a
relatively smaller amount of manufactured goods in
the third and fourth quarters of 1994, resulting in
lower gross margins during those periods.
Operating expenses in 1994 increased 5%, or $3.6
million, compared to 1993. Expenses as a percentage
of sales were 40% in 1994 compared to 44% in 1993.
This reflects the Company's continuing
accomplishments of controlling costs in relation to
revenue. While research and development expenses
decreased slightly as a percentage of revenue, it had
the largest dollar and percentage increase compared
to the prior year. The increase in research and
development reflects the emphasis management has
placed on developing new products and enhancing
existing products.
Income from operations for the year was $10.5 million
which represents a 35% increase over the year ended
1993. The effective tax rate for 1994 decreased to
22% from 38% in 1993. The decrease was attributable
to the effect of a shift in the mix of earnings among
the different taxing jurisdictions in which the
Company operates.
LIQUIDITY AND CAPITAL RESOURCES
At 1995 year end, the Company's cash, cash
equivalents and short-term investments totaled $86.2
million, an increase of $76.3 million over year end
1994. $30.9 million was generated from operations
during the year as compared to $19.9 million in the
previous year. $61.2 million was raised through a
sale of 1,750,000 shares of common stock completed in
September, 1995. Proceeds from this sale will be
- -25-
<PAGE>
used to meet the requirements of strong market demand
and other corporate purposes.
At 1995 year end, total debt was $20.9 million of
which $1.8 million was term debt. This represented a
$1 million increase over 1994. Most of this debt was
held internationally and represented an interest rate
arbitrage situation for the Company. In addition to
term debt, credit facilities of approximately $62
million with both domestic and international banks
were available to the Company of which approximately
$18 million or 29% was utilized. As of January 31,
1996, the Company renegotiated its $15 million
revolving line of credit, which now expires in 1998.
The current ratio improved from 1.98 in 1994 to 2.96
in 1995. The debt to equity ratio also improved year
over year from .23 to .12. The Company's balance
sheet was considerably strengthened during 1995 and
management now believes that it possesses more than
sufficient capital resources to meet the anticipated
requirements of the next twelve months.
Account receivable grew by 41% from $39.6 million at
the end of 1994 to $55.7 million at the end of 1995,
the direct result of revenue growth. Days sales
outstanding remained essentially constant over this
period reflecting a real improvement given the
relatively higher revenue growth in the Japanese and
European markets which typically have longer
collection cycles.
The significant increase in revenue and thus
production levels experienced during 1995 caused net
inventories to increase by $7.8 million or 19%.
Despite reductions in manufacturing cycle time, most
of this increase was in establishing appropriate work
in process levels to support the higher levels of
output required. The ratio of inventory to revenue
declined from 21% in 1994 to 18% in 1995 indicating a
more efficient use of this resource. Inventory
valuation reserves also decreased as a result of
increased demand and disposal of obsolete product.
Management believes that adequate reserves have been
provided for potentially unsalable and excess
inventories.
Capital spending totaled $17.6 million for 1995 and
was concentrated in relieving manufacturing capacity
bottlenecks in wafer fab and product test, upgrading
new product development tools and the continuation of
an enterprise-wide program to renovate the Company's
business information and execution systems. This last
initiative will allow for more efficient management
of the Company on a worldwide basis, thus supporting
the strategy of SMG&A expense reduction. Capital
investment plans for 1996 are in excess of $40
million and will fund advanced wafer fab process
development, further expansion of manufacturing
bottleneck capacity, a strategic upgrading of test
capability and further implementation of new
worldwide information systems.
The impact of inflation on the Company's financial
position and results of operations has not been
significant during the three year period ended
December 31, 1995.
On February 26, 1996, the Company announced that it
had signed an agreement to sell all of its interest
in Power Convertibles Corporation (PCC). PCC products
include battery chargers used in cellular telephone
applications and modular DC to DC converters which
are used in a great variety of applications. In 1995,
PCC was responsible for about 9.5% of the Company's
total revenues and approximately 3% of the profits.
The decision to sell PCC is consistent with a
continuing strategy to more clearly focus the
Company's efforts and resources on the opportunities
available in its core analog and mixed signal
integrated circuit business.
LITIGATION
The Company was involved in four ground water claims.
Three toxic tort cases filed in U.S. District Court
on September 20, 1991, August 7, 1992, and January 9,
1995, respectively, represented consolidations of
individual lawsuits that sought damages for
contaminating ground water which was subsequently
pumped from public wells and consumed. On September
23, 1995, a court order dismissing Burr-Brown without
prejudice was entered in all three federal cases. In
the one remaining state court case, based on
investigations to date, management does not believe
the Company contributed to the alleged contamination
and therefore is of the opinion that the disposition
of this claim will not result in any material change
in the Company's financial condition, results of
operations or liquidity.
BUSINESS OUTLOOK
In order to provide our shareholders with better
insight to our future plans, directions and
objectives, the following forward looking statements
are provided.
MARKETS: The Company will continue to emphasize the
industrial and process control and test and
instrumentation markets in which it holds a
leadership position in order to protect and enhance
market penetration. In addition, it will endeavor to
improve its market position in the relatively larger
and faster
- -26-
<PAGE>
growth communications, computing and digital audio
and digital video/imaging markets.
PRODUCTS: The Company possesses very strong core
competencies in the development, manufacture and
marketing of high performance analog and mixed signal
integrated circuits. It also maintains a strong
presence in digital audio applications. It believes
that by using these capabilities to address the
requirements of its target markets that it can
sustain substantial growth over the next five years.
To capitalize on these rapid growth opportunities,
the Company is seeking to increase its number of
product offerings and reduce the time required to
bring new products to market. Product offerings will
include both standard linear products which will
serve a wide range of market applications and, on a
selective basis, products which target specific needs
of very high growth market segments.
GROSS MARGINS: The Company plans for a continually
expanding gross margin over the next five years.
Product pricing is expected to remain stable and
continue to reflect the high value-added content of
these products. Increased volume and improved
manufacturing efficiency will continue to reduce
product costs. Some products targeting very high
volume, rapid growth applications will be
characterized by relatively lower gross margins but
will require lower levels of operating costs in
contrast to products serving more traditional
markets.
OPERATING EXPENSES: In order to support acceleration
of new product development, the Company will increase
its research and development expense both absolutely
and relative to revenue. Growth in sales, marketing
and general and administrative expenses will be
constrained to grow at a rate substantially lower
than that of revenue. The result will be continual
expansion of operating margins with sales growth
while allowing for increased research and development
investment as the primary engine of that growth.
INVESTMENTS: The Company believes the growth
opportunities inherent in this strategy will require
significant additions to manufacturing capacity and
technological capabilities over the next five years.
This will be met in the form of internal capital
investments, development of source of supply
arrangements with third party vendors as well as
timely and synergistic business acquisitions.
The foregoing plans are subject to a number of risks
and uncertainties, including the following: Factors
that could materially and adversely affect net sales,
gross profit and profitability include the volume and
timing of orders, changes in product mix, market
acceptance of the Company's and its customers'
products, competitive pricing pressures, fluctuations
in foreign currency exchange rates, the timing of new
product introductions and fluctuations in
manufacturing yields. Average selling prices
typically decrease over the life of particular
products. If the Company is unable to introduce new
products with higher average selling prices or reduce
manufacturing costs to offset decreases in the prices
of its existing products, the Company's operating
results will be adversely affected. In addition, the
Company is limited in its ability to reduce costs
quickly in response to any revenue shortfalls. To
meet anticipated future demand and to utilize a
broader range of fabrication processes, the Company
intends to increase its manufacturing capacity. Given
the complexity and expense of designing and
constructing a significant expansion of a
semiconductor fabrication plant, during the
construction of the additions, the Company's
manufacturing yields could be materially and
adversely impacted. The Company is subject to several
risks associated with its international operations,
including unexpected changes in regulatory
requirements, delays resulting from difficulty in
obtaining export licenses for certain technology,
foreign exchange fluctuations, tariffs and other
barriers and restrictions, and the burdens of
complying with a variety of foreign laws. The
semiconductor industry is intensely competitive.
Many of the Company's competitors have substantially
greater financial, technical, marketing, distribution
and other resources than the Company. In the event of
a downturn in the market for analog circuits,
companies that have broader product lines may be in a
stronger competitive position than the Company. Other
risks potentially affecting future operating results
are set forth in the Company's filings with the
Securities and Exchange Commission.
- -27-
<PAGE>
FIVE YEAR FINANCIAL SUMMARY
BURR-BROWN CORPORATION AND SUBSIDIARIES_In thousands,
except per share amounts
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net revenue $269,162$194,196
$168,577 $162,949 $178,626
Revenue by geographic area
Foreign 64% 62% 64% 61% 64%
Domestic 36% 38% 36% 39% 36%
Increase (decrease) in revenue
over prior years 39% 15% 3% (9%) 1%
Gross margin % of revenue 49% 45% 48% 47% 52%
Operating expenses % of revenue 34% 40% 44% 43% 55%
Operating income (loss) % of revenue 15% 5% 5% 4%
(3%)
Interest expense % of revenue 0% 1% 1% 2% 2%
Other income % of revenue 0% 0% 1% 1% 0%
Net income (loss) $29,212 $ 6,465 $2,817 $ 998 $
(10,681)
Per share amount(C) $1.86 $0.45 $0.20 $0.07 $(0.74)
Income tax rate 27% 22% 38% 42% 13%
Return on revenue 11% 3% 2% 1% (6%)
Return on average assets 15% 5% 2% 1% (7%)
Return on average
capital employed 19% 6% 3% 1% (8%)
Return on equity 16% 7% 4% 1%(14%)
Total capital employed $202,349$110,055
$108,495 $106,618 $134,795
% of revenue 75% 57% 64% 65% 75%
Total equity $179,145 $ 87,622 $ 79,551 $
77,443 $ 78,171
% of revenue 67% 45% 47% 48% 44%
Per share amount(C) $11.41 $ 6.04 $5.53 $5.38 $ 5.43
Long-term debt, less current portion $1,808 $ 1,839 $ 8,802
$ 11,718 $33,749
Total debt $20,862 $ 19,900 $ 26,725 $
27,100 $ 54,255
% of revenue 8% 10% 16% 17% 30%
Debt-to-equity ratio 0.12 0.23 0.34 0.35 0.69
Total assets $252,249$143,008$142,062$136,407 $158,216
% of revenue 94% 73% 84% 84% 89%
Working capital $129,908 $ 45,623 $ 49,456 $ 47,
705 $53,464
% of revenue 48% 23% 29% 29% 30%
Current ratio 2.96 1.98 2.08 2.28 2.24
Capital expenditures $17,574 $ 12,055 $ 7,117 $ 5,356
$ 11,637
Depreciation and amortization $ 12,712 $ 10,615 $ 10,072 $
11,042 $ 12,799
Land, building and
equipment, net $51,424 $ 45,896 $ 42,427 $
45,665 $ 55,188
% of revenue 19% 24% 25% 28% 31%
Average number of employees
during the year 1,926 1,825 1,547 1,566 1,740
Revenue per employee $139.75 $ 106.40 $ 108.97 $
104.05 $ 102.66
Shares used to compute earnings
(loss) per share(C) 15,696 14,498 14,376
14,390 14,390
<FN>
(A) Net loss for 1991 included a restructuring charge
of $16,273.
(B) Number of employees at year end after
restructuring: 1,649.
(C) Prior years' comparative information was restated
to reflect a three-for-two stock split effective May,
1995.
</TABLE>
- -28-
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
BURR-BROWN CORPORATION
The undersigned, being the Chairman and Secretary,
respectively, of Burr-Brown corporation, a
corporation organized and existing under the laws of
the State of Delaware, does hereby certify that:
1. The first paragraph of Article FOURTH of the
Restated Certificate of Incorporation of this
corporation is amended to read in its entirety as
follows:
"FOURTH: The Corporation shall
be authorized to issue two
classes of shares of stock to be
designated, respectively, "
Preferred Stock" and "common
stock." The total number of
shares which the Corporation
shall have authority to issue is
Forty-two Million ($42,000,000)
and the aggregate par value of
all shares of stock that are to
have a par value shall be Four
Hundred Twenty Thousand Dollars
($420,000). The total number of
shares of Preferred Stock shall
be Two Million (2,000,000) and
the par value of each share of
such class shall be One Cent
($.01). The total number of
shares of common stock shall be
Forty Million (40,000,000) and
the par value of each share of
such class shall be One Cent
($.01)."
2. Said Amendment has been duly adopted in
accordance with the provisions of Section 242 of the
Delaware General Corporation Law, by approval of the
Board of Directors of the corporation and by the
affirmative vote of the holders of at least a
majority of the outstanding shares entitled to vote.
IN WITNESS WHEREOF, Burr-Brown Corporation
has caused this CERTIFICATE OF AMENDMENT to be signed
by its Chairman and attested by it Secretary this 20
day of September 1995.
BURR-BROWN CORPORATION
By: THOMAS R. BROWN, JR.
Title: Chairman of the Board
Attest: JILL H. RICE
Title: Secretary
BURR-BROWN CORPORATION
EMPLOYEE RETIREMENT PLAN
PLAN AMENDMENT
The Burr-Brown Corporation Employee Retirement Plan,
as restated in its entirety effective January 1, 1988
(th "Plan"), is hereby amended, effective as of
January 1, 1995, as set forth below. All capitalized
terms in this Plan Amendment shall, unless
specifically defined herein, have the meanings
assigned to such terms in the Plan.
1. The following interest rate and mortality shall be
used to calculate the Present Value of each
Participant's Accrued Benefit for purposes of
determining whether such Present Value exceeds Three
Thousand Five Hundred Dollars ($3,500.00) and
calculating the amount payable upon lump sum
distribution with respect to an Accrued Benefit under
the Plan:
Interest Rate: the annual yield for thirty (30)- year
Treasury constant maturities, as reported in Federal
Reserve Statistical Release G.13 and H.15, for the
calendar month preceding the first day of the Plan
Year in which the Present Value is to be determined
or in which the lump sum distribution is to be made.
Mortality Table: the 1983 Group Annuity Martality
Table for Males.
In no event, however, shall Present Value of any
Participant's Accrued Benefit calculated on the basis
of such interest and mortality table be less than the
minimum present value required under Section 417(e)
of the Internal Revenue Code, as amended by the
Retirement Protection Act of 1994 (RPA).
2. This Plan Amendment shall be in effect for all
lump sum distributions made under the Plan on or
after January 1, 1995. Pursuant to the provisions of
Section 767 of the Retirement Protection Act of 1994,
the Present Value method of calculation prescribed by
this Plan Amendment shall not be deemed to constitute
a reduction in the Accrued Benefit of any Participant
which would otherwise be prohibited by Section
411(d)(6) of the Internal Revenue Code. Accordingly,
the Present Value of each Participant's Accrued
Benefit as determined under the Plan immediately
prior to the effective date of this Plan Amendment
shall not be preserved.
3. Except as modified in this Plan Amendment, all
terms and conditions of the Plan shall continue in
effect.
IN WITNESS WHEREOF, Burr-Brown Corporation has caised
this instrument to be executed on its behalf by its
duly authorized officer on this 23rd day of December,
1994.
BURR-BROWN CORPORATION
By: JOHN L. CARTER
John L. Carter
Executive Vice President & CFO
BURR-BROWN CORPORATION
FUTURE INVESTMENT TRUST
PLAN AMENDMENT NO. 1
The BURR-BROWN CORPORATION FUTURE INVESTMENT TRUST
(the "Plan"), as originally effective January 1, 1966
and as last restated in its entirety effective
January 1, 1987, is hereby amended, effective January
1, 1995, as follows:
1. Section 4.4 is hereby restated in its entirety to
read as follows:
4.4 Company Matching Contributions. The Company
shall make Matching Contributions to the Trustee on a
periodic basis, and those contributions shall be
allocated to the Company Matching Contributions
Account of each Participant in accordance wit the
percentage match in effect for the Employee Deferral
Contributions made by the Participants for the period
to which those Matching Contributions relate. The
amount of the Matching Contributions made by the
Company for any Plan Year on behalf of each
Participant shall be equal to twenty-five percent
(25%) of the Employee Deferral Contributions actually
made hereunder on behalf of that Participant for such
Plan Year. Company Matching Contributions may be
made on a monthly basis, but in no event shall those
contributions be made later than the last day
prescribed by law for filing the Company's federal
income tax return for such Plan Year, including
extension thereof.
2. Except as modified by this Plan Amendment, all the
terms and provisions of the Plan ( as restated
effective January 1, 1987) shall continue in full
force and effect.
IN WITNESS WHEREOF, Burr-Brown Corporation has caused
this instrument to be executed on its behalf by its
duly-authorized officer as of this 10th day of April,
1995.
BURR-BROWN CORPORATION
By:S. P. MADAVI
Syrus P. Madavi
President and Chief Executive Officer
PLAN AMENDMENT NO. 2
The Burr-Brown Corporation Future Investment Trust
(the "Plan:), as originally adopted effective January
1, 1966 and as restated in its entirety effective
January 1, 1987 and further modified by Plan
Amendment No.1, is hereby further amended effective
July 1, 1995, as follows:
1. Section 1.1 is hereby amended in its entity to
read as follows:
"Account: shall mean a Participant's Employee
Deferral Contributions Account, Company Matching
Contributions Account, Company Profit Sharing
Contributions Account, the 1986 Profit Sharing
Account, the Stock Bonus Account, the Stock Bonus
Rollover Account maintained under Section 6.3 and the
Rollover Account as described in Section 8.3. Where
more than one Account of any type has been
established for a Participant of Beneficiary,
reference to "Account" shall include each Account of
that type, except where the context clearly indicates
to the contrary.
2. Section 6.1(b) is hereby amended in its entirety
to read as follows:
(b) Investment Directives: Each Stock Bonus Account
shall remain invested in Company Stock, except to the
extent the balance credited to that Account is
transferred to a Stock Bonus Rollover Account and
reinvested in one (1) or more other investment funds
in accordance with Section 6.3.
3. There is hereby added to Article VI new Section
6.3 to read as follows:
6.3 Reinvestment of Stock Bonus Account
(a) Transfer of Rollover Account Each Participant
may elect to transfer his or her stock Bonus Account
from the separate trust in which such Account is
presently maintained under the Plan to a special
Stock Bonus Rollover Account maintained under the
same trust which his or her Employee Deferral
Contributions Account is maintained. The Participant
shall have four (4) separate opportunities to direct
such transfer. Each Participant electing to effect
such transfer must complete the requisite
notification form provided by the Plan Administrator
and file the completed form with the Plan
Administrator by the applicable due date indicated
below for each transfer opportunity. The actual
transfer to the Stock Bonus Rollover Account will be
effected on the date indicted below for the
applicable due date.
Due Date of Transfer Notice Effective
Date of Transfer
July 24, 1995 August 4,
1995
August 28, 1995 September 8,
1995
January 8, 1996 January 19,
1996
April 15, 1996 April 26,
1996
(b) Limitation on Transfer Opportunity. The maximum
number of shares of Company Stock which may be moved
to the Stock Bonus Rollover Account at any one
transfer opportunity under Section 6.4 (a) shall be
limited to the greater of: (I) 150 shares of Company
Stock of (ii) twenty-five percent (250) of the total
number of shares of Company Stock credited to his
Stock Bonus Account as of June 30, 1995,
(c) Reinvestment of stock Bonus Rollover Account.
Each Participant may elect to liquidate in whole or
in part the Company Stock held in his Stock Bonus
Rollover Account and direct the reinvestment of the
net proceeds into one or more of the other investment
funds available under Article VII. To effect such
reinvestment, the Participant must complete the
requisite form proceeded by the Plan Administrator
and file the directive with the Plan Administrator
during the applicable filing period. The initial
period available for filing such reinvestment
directives shall commence in July 17, 1995 and
continue through July 24, 1995, wit the actual
liquidation and reinvestment to be effected on or
about August 4, 1995. Subsequent filing periods will
run concurrently with the periodic election periods
in effect under Article VII for changing investment
elections. All Participant reinvestment directives
under this Section 6.3 shall be effected through the
sale in the open market of one or more shares of
Company Stock held in the Participant's Stock Bonus
Rollover Account and the reinvestment of the net
proceeds among one or more of the investment
alternatives available under Article VII in
accordance with the Participant's directives. Any
Stock Bonus Rollover Account reinvested in one or
more investment funds under Article VII shall
nevertheless be distributable, following the
Participant's Severance Date, Company stock in
accordance with the provisions of Section 6.1 (c) and
Section 11.5, to the extent the Participant requests
the distribution of that Account in shares of Company
Stock.
4. There is hereby added to Section 8.1 new clause
(g) as follows:
(g) A Stock Bonus Rollover Account shall be
established for each Participant who transfers all or
part of his Stock Bonus Account to such Rollover
Account in accordance with Section 6.3.
5. Section 9.1 is hereby amended in its entity to
read as follows:
9.1 Vesting in Employee Deferral Contribution
Account, the 1986 Profit Sharing Account, the Stock
Bonus Account, the Stock Bonus Rollover Account and
the Rollover Account. An Employee's interest in his
Employee Deferral Contributions Account, 1986 Profit
Sharing Account, Stock Bonus Account, Stock Bonus
Rollover Account and Rollover Account herein shall be
fully vested at all times.
6. Section 11.2 is hereby amended in its entirety
to read as follows:
11.2 Payment Upon Termination of Employment. Upon a
Participant's termination of Employee status, the
Participant's nonforfeitable interest in his or her
Accounts, determined in accordance with Article IX,
shall be distributed in accordance with the
provisions of this Article XI. If the Participant
should die prior to full payment of his or her
Beneficiary in accordance with section 11.1. To the
extent the nonforfeitable balance of one or more of
the Participant's Accounts (including his or her
Stock Bonus Account or Stock Bonus Rollover Account )
is invested in shares of Company Stock, the
Participant (or his or her Beneficiary) may elect to
receive the distribution of that balance on such
shares or in the cash equivalent of those shares.
7. Section 11.6 is hereby amended in its entirety
to read as follows:
11.6 Participant Payment Election Regarding Stock
Bonus Rollover Account. A Participant may elect to
receive the distribution of the nonforfeitable
balance of any Stock Bonus or Stock Bonus Rollover
Account maintained for him or her under the Plan in
shares of Company Stock, whether or not that
particular Account is at the tome actually invested
in Company Stock. However, no fractional share of
Company Stock shall be distributed, and the value of
that fractional share shall accordingly be paid in
cash. All distributions from the Stock Bonus
Accounts and the Stock Bonus Rollover Accounts shall
ve made in accordance with the provisions of the
Article VI and Section 11.5.
7. All references to stock Bonus Accounts under
Article VI and Section 11.5 shall be deemed to
include a ferefence to any Stock Bonus Rollover
Account maintained for the Participant pursuant to
the procisions of Section 6.3, to the extent that
particular Account is at the time credited wit shares
oc Company Stock.
8. Except as modified by this Amendment No. 2, all
the terms and procisions of the Plan (as modified by
Plan Administrator No. 1) shall continue in full
force and effect.
IN WITNESS WHEREOF Burr-Brown Corporation has caused
this Plan Amendment to be executed on its behalf by
its duly authorized officer as of this 21st day of
July, 1995.
BURR-BROWN CORPORATION
By: SYRUS P. MADAVI
Title: President & CEO
EXHIBIT 10.18
BURR-BROWN CORPORATION
CASH PROFIT-SHARING PLAN
PURPOSE OF THE PLAN
This Cash Profit-Sharing Plan is intended to promote
the interests of Burr-Brown Corporation, a Delaware
corporation (the "Corporation"), by providing
eligible individuals with the opportunity to
participate in a profit-sharing program which will
provide them with a meaningful incentive to
contribute to the Corporation's financial success.
DEFINITIONS
Board shall mean the Corporation's Board of
Directors.
Bonus Pool shall mean that portion of the
Corporation's Pre-Tax Profit for the fiscal year
ending within the Earn-Out Period which the Board
determines in its sole discretion to allocate to the
Plan for distribution pursuant to the provisions of
Article V.
Earn-Out Period shall mean the fourteen
(14)-month period commencing on January 1 each
calendar year and ending on the last business day of
February in the succeeding calendar year. The
initial Earn-Out Period shall begin January 1, 1995
and end February 29, 1996.
Disability shall mean the inability of the
Participant to engage in any substantial gainful
activity by reason of any medically determinable
physical or mental impairment expected to result in
death or to continue for a period of twelve (12)
consecutive months or more.
Eligible Earnings shall mean the regular
base salary paid to the Participant for the calendar
year ending within the Earn-Out Period (including
commissions), plus any pre-tax contributions made by
the Participant for such calendar year to any
Internal Revenue Code Section 401(k) salary deferral
plan or any Section 125 cafeteria benefit program now
or hereafter established by the Corporation. The
following items of compensation shall not be included
in Base Salary: (1) all shift differentials,
overtime payments, bonuses, medical leave pay, profit-
sharing distributions and other incentive-type
payments, including profit-sharing awards received
under this Plan, (ii) the matching contributions or
deferred profit-sharing contributions made by the
Corporation under the Future Investment Trust, and
(iii) any and all contributions (other than Internal
Revenue Code Section 401(k) or Section 125
contributions) made on the Participant's behalf by
the Corporation under any employee benefit or welfare
plan now or hereafter established. In no event shall
the Eligible Earnings of any Participant with
commission income exceed the maximum of the pay range
for the individual for the calendar year ending
within the Earn-Out Period.
Employee shall mean any individual in the
regular employ (including regular part-time employ)
of the Corporation and shall exclude (i) any
individual employed on a temporary basis, whether the
services of that individual are obtained through a
temporary placement agency or leasing organization or
by direct hire by the Corporation, and (ii) any
independent consultant or advisor.
Early Retirement shall mean the status of
any Employee who, at termination date of active
employment, has attained the age of sixty (60) years
with ten (10) years continuous service.
Normal Retirement shall mean the status of
any Employee who, at termination date of active
employment, has attained the age of sixty-five (65)
years with five (5) years continuous service.
Participant shall mean any Employee who
participates in the Plan in accordance with the
eligibility provisions of Article IV.
Payment Date shall mean the last day of the
Earn-Out Period and shall be the date on which the
Bonus Pool for that Earn-Out Period is to be actually
distributed.
Plan shall mean this Burr-Brown Corporation
Cash Profit-Sharing Plan, as amended from time to
time.
Plan Administrator shall mean the
Compensation Committee of the Board in its capacity
as administrator of the Plan.
Pre-Tax Profit shall mean the Corporation's
pre-tax profit for the fiscal year ending within the
Earn-Out Period, as determined on the basis of the
consolidated profits of the Corporation and its
subsidiaries for such fiscal year, calculated in
accordance with generally accepted accounting
principles, consistently applied, and confirmed by
independent audit, and without reduction or offset
for any federal, state or local income taxes payable
on such profits. Pre-Tax Profit shall, however, be
subject to the following adjustments: (i) all items
of income, gain, loss or expense for such fiscal year
determined by the Plan Administrator to be
extraordinary or unusual in nature and not incurred
or realized in the ordinary course of business shall
be excluded from the calculation of Pre-Tax Profit,
whether or not such items would otherwise be
considered to be extraordinary in accordance with the
standards established by Opinion No. 30 of the
Accounting Principles Board, and (ii) any profit or
loss arising from operations acquired or sold by the
Corporation during the course of such fiscal year
will be taken into account in the calculation of Pre-
Tax Profit only to the extent the Plan Administrator
may under the circumstances deem it appropriate in
its absolute discretion.
Profit-Sharing Award shall mean the portion
of the Bonus Pool distributable to each Participant
pursuant to the formula provisions of Article V.
III. ADMINISTRATION OF THE PLAN
A. The Board shall have complete
discretion to determine the portion (if any) of the
Pre-Tax Profit for the fiscal year to be allocated to
the Bonus Pool for the Earn-Out Period in which that
fiscal year ends. The portion so allocated may vary
for each Earn-Out Period, and the Board may determine
that no Bonus Pool is to be created for one or more
Earn-Out Periods.
B. The Compensation Committee as Plan
Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish
such rules and regulations as it may deem appropriate
for proper plan administration and to make such
determinations under, and issue such interpretations
of, the Plan as it may deem advisable. The Plan
Administrator shall be responsible for determining
the individuals eligible to share in the Bonus Pool
for each Earn-Out Period and calculating the portion
of that Bonus Pool allocable to each Participant in
accordance with the Article V formula. Decisions of
the Plan Administrator shall be final and binding on
all parties with an interest in the Plan.
IV. ELIGIBILITY
Each individual who is an Employee at the start of
the Earn-Out Period and each individual subsequently
hired by the Corporation as an Employee during such
Earn-Out Period shall qualify as a Participant for
that Plan Year. However, no Participant shall accrue
any right to share in the Bonus Pool for a particular
Earn-Out Period until the last day of that Earn-Out
Period. Accordingly, no Participant shall be
entitled to a Profit-Sharing Award for an Earn-Out
Period, unless he or she (i) continues in Employee
status through the last day of that Earn-Out Period
or (ii) terminates active Employee status during such
Earn-Out Period by reason of Early or Normal
Retirement, death or Disability. A Participant
entitled to receive a Profit-Sharing Award in
accordance with the foregoing criteria shall be
designated an Eligible Participant as of the last day
of that Earn-Out Period.
V. BONUS POOL AND INDIVIDUAL PROFIT-SHARING
AWARDS
A. The Board shall determine the amount
of the Pre-Tax Profit for the fiscal year to be
allocated to the Bonus Pool for the Earn-Out Period
in which that fiscal year ends. Such determination
may be made at any time before or after the start of
the applicable Earn-Out Period, and there shall be no
requirement that a Bonus Pool be established for one
or more particular Earn-Out Periods. Any Bonus Pool
in fact established for an Earn-Out Period shall be
allocated among the Eligible Participants in
accordance with the provisions of Section V. B below.
B. The portion of the Bonus Pool to be
allocated as a Profit-Sharing Award to each Eligible
Participant (as determined under Article IV) may be
comprised of two separate components as follows:
Fixed Award: The first component
shall be a fixed dollar amount, up to a maximum
threshold for each Eligible Participant established
by the Plan Administrator prior to the Payment Date.
Such dollar amount shall be subject to pro-ration for
Eligible Participants who do not complete fourteen
(14) months of active Employee status in the Earn-Out
Period, either because they became Participants after
the start of the Earn-Out Period Period or their
status changed to medical leave or because their
status as active Employees terminated during the Earn-
Out by reason of Early or Normal Retirement, death or
Disability. Such pro-ration shall be effected by
multiplying the fixed dollar amount by a fraction,
the numerator of which is the number of full calendar
months for which the individual was an active
Employee during the Earn-Out Period and the
denominator of which is fourteen (14).
Variable Award: To the extent any
amount remains in the Bonus Pool after the Fixed
Awards have been allocated, the balance of the Bonus
Pool shall be allocated to the Eligible Participants
in accordance with their Eligible Earnings for the
calendar year ending within the Earn-Out Period.
VI. DISTRIBUTION OF PROFIT-SHARING AWARD
Profit-Sharing Awards shall be paid to the
Participants by check in a lump-sum distribution on
the Payment Date. However, within the first one
hundred twenty (120) days after the start of any Earn-
Out Period (other than the Earn-Out Period which
began on January 1, 1995), the Plan Administrator may
in its sole discretion determine that all or a
specified portion of the Profit-Sharing Awards for
that Earn-Out Period is to be contributed on behalf
of the Eligible Participants as a deferred profit-
sharing contribution to the Burr-Brown Corporation
Future Investment Trust.
VII. PLAN DURATION AND AMENDMENT
The Plan shall become effective as of January 1,
1995. No Participant shall accrue any rights to
receive a Profit-Sharing Award for a particular Earn-
Out Period until the Payment Date for that Earn-Out
Period. Accordingly, the Board in its sole
discretion may amend or terminate the Plan at any
time prior to the Payment Date in effect for a
particular Earn-Out Period.
VIII. NON-TRANSFERABILITY
The right to receive a Profit-Sharing Award under the
Plan may not be transferred, assigned, pledged or
encumbered. Should a Participant die before receipt
of any Profit-Sharing Award to which he or she
becomes entitled under Article V, then that award
shall be paid to the Participant's designated
beneficiary under the Corporation's Future Investment
Trust. In the absence of such a designated
beneficiary, the payment shall be made to the
Participant's estate.
IX. WITHHOLDING
All Profit-Sharing Awards paid under the Plan shall
be subject to the Corporation's collection of all
applicable Federal, state and local income and
employment taxes required to be withheld therefrom.
X. NO EMPLOYMENT RIGHTS
Nothing in the Plan shall confer upon a Participant
any right to continue in Employee status for any
period of specific duration or interfere with or
otherwise restrict in any way the rights of the
Corporation or of the Participant, which rights are
hereby expressly reserved by each, to terminate the
Employee status of the Participant at any time for
any reason, with or without cause.
XI. GOVERNING LAW
The provisions of the Plan shall be governed by and
construed in accordance with the laws of the State of
Arizona without resort to that State's conflict-of-
laws rules.
IN WITNESS WHEREOF, Burr-Brown Corporation
has caused this instrument to be executed on by its
behalf by it duly-authorized officer as of the 21st
day of April, 1995.
BURR-BROWN CORPORATION
BY: SYRUS P. MADAVI
SYRUS P. MADAVI
TITLE:PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXHIBIT 10.19
LOAN AGREEMENT
by and among
BURR-BROWN CORPORATION
(the "BORROWER"),
and
FIRST INTERSTATE BANK OF ARIZONA, N.A.
(the "Bank")
January 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. RECITALS 1
SECTION 2. DEFINITIONS 1
2.1 Definitions 1
2.2 Accounting Terms 1
SECTION 3. THE REVOLVING CREDIT FACILITY 2
3.1 Revolving Loan Commitment 2
3.2 Manner of Borrowing 2
(a) Request for Advance 2
(b) Notice Irrevocable 2
3.3 Apportionment of the Revolving Credit Loan 3
3.4 Commitment Fee 3
3.5 Reduction of Revolving Credit Commitment 3
(a) Reduction 3
(b) Effect 3
3.6 The Revolving Credit Note 3
3.7Principal Payment and Prepayment
on the Revolving Credit Loan 4
(a) Mandatory Payments 4
(b) Optional Prepayments 4
3.8 Payment of Interest Under the Revolving Credit Loan 4
SECTION 4. [Intentionally omitted.] 5
SECTION 5.GENERAL PAYMENT TERMS; DESIGNATION OF APPLICABLE INTEREST RATE 5
5.1 Payments 5
5.2Designations and Conversions of the Applicable Interest Rate 5
5.3 Computations 6
5.4 Setoff 7
5.5 Increased Capital Requirements 7
5.6 Special Provisions for LIBO Rate Advances 7
(a) Inadequacy of Eurodollar Pricing 7
(b) Illegality 7
(c) Increased Costs for LIBO Rate Advances 8
5.7 Indemnity for Consequential Loss 9
<PAGE>
SECTION 6. CONDITIONS PRECEDENT 9
6.1 Conditions Precedent to Effectiveness 9
6.2 Advances 11
SECTION 7. REPRESENTATIONS AND WARRANTIES 11
7.1 Corporate Existence and Power 11
7.2Corporate and Governmental Authorization; Contravention 11
7.3 Enforceability 12
7.4 Litigation 12
7.5 Compliance with ERISA 12
7.6 Taxes 12
7.7 Subsidiaries 13
7.8 No Default 13
7.9 Use of Proceeds; Margin Stock 13
7.10 No Financing of Certain Corporate Takeovers 13
7.11 Compliance with Law 13
7.12 Financial Condition 13
7.13 No Liens 14
7.14 Material Agreements 14
7.15 Principal Office 14
7.16 Full Disclosure 14
7.17 Representations and Warranties 14
7.18 Survival of Representations, Etc. 14
SECTION 8. AFFIRMATIVE COVENANTS 15
8.1 Financial Statements, Reports and Documents 15
(a) Quarterly Statements 15
(b) Annual Statements 15
(c) Financial Projections 16
(d) SEC and Other Reports 16
(e) Compliance Certificate 16
(f) Notice of Other Events 17
(g) Other Information 17
8.2 Payment of Taxes and Other Indebtedness 17
8.3 Insurance and Maintenance of Properties 17
8.4 Corporate Existence 18
8.5 Use of Proceeds 18
8.6 Books and Records; Access 18
- -ii-
<PAGE>
8.7 Compliance with Laws 18
8.8 Authorizations and Approvals 19
8.9 Further Assurances 19
SECTION 9. NEGATIVE COVENANTS 19
9.1 Sales of Stock and Indebtedness of Subsidiaries 19
9.2 Merger and Sale of Assets 19
9.3 Limitation on Net Worth 20
9.4 Total Debt Limitation 20
9.5 Restriction on Liens 20
9.6 Debt Service Ratio 20
9.7 Lines of Business 20
9.8 Certain Transfers of Property 20
9.9 Independence of Covenants 21
SECTION 10. DEFAULTS 21
10.1 Events of Default 21
10.2 Remedies Upon Event of Default 24
SECTION 11. MISCELLANEOUS 24
11.1 Entirety 24
11.2 Notices 24
11.3 Expenses; Indemnification 25
11.4 Confidentiality 25
11.5 Amendments, Waivers, Etc. 25
11.6 Assignments and Participation; Transferees 26
11.7 Invalid Provisions 26
11.8 Headings 26
11.9 No Third Party Beneficiary 26
11.10 Multiple Counterparts 26
11.11 Governing Law 26
11.12 Arbitration 27
(a) Binding Arbitration 27
(b) Governing Rules 27
(c) No Waiver,Preservation of Remedies,
Multiple Parties 27
(d) Arbitrator Powers and Qualifications;
Awards 28
(e) Miscellaneous 28
- -iii-
<PAGE>
11.13Choice of Forum; Consent to Service of Process; Jurisdiction;
Waiver of Jury Trial 29
SCHEDULES
7.4 Litigation
7.7 List of Subsidiaries and
Significant Subsidiaries of Borrower
7.14 List of Defaults under Material
Agreements
EXHIBITS
A Form of Revolving Credit Note
B Matters to be Covered by Opinion
of Counsel to Borrower at Closing
C Permitted Liens
- -iv-
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Loan Agreement" or
"Agreement") is made and entered into as of January
31, 1996, by and among BURR-BROWN CORPORATION, a
Delaware corporation (the "Borrower") and FIRST
INTERSTATE BANK OF ARIZONA, N.A. (the "Bank").
RECITALS.
Borrower, the Bank and Bank One, Arizona,
N.A. ("Bank One") are all of the parties to a Loan
Agreement dated as of July 25, 1994, pursuant to
which First Interstate and Bank One provided Borrower
with a revolving credit facility in the aggregate
maximum principal amount of $15,000,000.00 and single-
advance term loans in the aggregate principal amount
of $8,500,000.00, which term loans had been repaid
prior to the date of this Loan Agreement (as
heretofore amended, the "Existing Loan Facility").
Borrower has applied to the Bank for a
revolving credit facility in the maximum principal
amount of $15,000,000.00, to replace the Existing
Loan Facility and to provide funds to be used for
Borrower's general corporate and working capital
purposes.
The Bank is willing to provide the
requested revolving credit facility, upon the terms
and subject to the conditions hereinafter set forth.
Accordingly, the parties agree as follows:
DEFINITIONS.
Definitions. Although terms may also be
defined elsewhere in this Agreement, capitalized
terms used herein (unless the context requires
otherwise) shall have the meanings set forth in Annex
I attached hereto and incorporated herein by this
reference and shall be equally applicable to both the
singular and the plural forms of the terms therein
defined. References to "Loan Agreement," "this
Agreement," "herein," "hereof," "hereunder," or other
like words mean this Loan Agreement as amended,
supplemented, restated or otherwise modified and in
effect from time to time.
Accounting Terms. Except as expressly
provided to the contrary herein, all accounting terms
shall be interpreted and all accounting
determinations shall be made in accordance with GAAP.
To the extent any change in GAAP affects any
computation or determination required to be made
pursuant to this Loan Agreement, such computation or
determination shall be made as if such change in GAAP
had not occurred unless Borrower and the Bank agree
in writing on an adjustment to such computation or
determination to account for such change in GAAP.
<PAGE>
THE REVOLVING CREDIT FACILITY.
Revolving Loan Commitment. Upon the terms
and subject to the conditions of this Loan Agreement,
during the period beginning on the Closing Date and
ending on the Termination Date (the "Revolving
Period"), the Bank agrees to lend to Borrower, at
such times as Borrower shall request, on a revolving
basis in one or more Advances (the aggregate Advances
made by the Bank pursuant to this subsection 3.1 and
at any time outstanding are herein referred to as the
"Revolving Credit Loan"), the amount requested by the
Borrower (the "Requested Amount") in each Request for
Advance, up to an aggregate principal amount at any
time outstanding equal to the Revolving Credit
Commitment Amount. During the Revolving Period,
within the limits of this subsection 3.1, Borrower
may borrow, repay and reborrow subject to the
following limitations: (a) no Advance shall be in an
amount less than $100,000.00 or integral multiples
thereof; and (b) the Bank shall not be obligated
under any circumstances to fund an Advance that would
cause the Revolving Credit Loan to exceed the
Revolving Credit Commitment Amount.
Manner of Borrowing.
Request for Advance. Borrower
shall give the Bank notice of each request
for an Advance (a "Request for Advance"),
and each such request shall specify the
Requested Amount, and shall also set forth
all information required to be specified in
a Notice of Interest Rate Designation.
Each Request for Advance shall be made by
an Authorized Person and may be in writing
(including telex and telecopy) or oral,
confirmed promptly in writing. Each
Request for Advance shall be received by
the Bank:
If the Applicable
Interest Rate for the Advance is
to be the Prime Rate or the LIBO
Rate--not later than 11:00 a.m.
(Phoenix, Arizona time) on the
requested date of the Advance;
and
If the Applicable
Interest Rate for the Advance is
to be the Bid Rate--not later
than 9:00 a.m. (Phoenix, Arizona
time) on the requested date of
the Advance.
Notice Irrevocable. Each Request
for Advance shall be irrevocable and
binding on Borrower upon receipt thereof by
the Bank; provided that each such Request
for Advance at the Bid Rate shall become
irrevocable and binding in the manner and
at the time that the Notice of Interest
Rate Designation with respect thereto
becomes irrevocable and binding upon
Borrower in accordance with subsection 5.2
below. Borrower shall indemnify the Bank
against any cost, loss or expense incurred
as a result of Borrower's failure to
fulfill, on or before
- -2-
<PAGE>
the date specified for an Advance in
any Request for Advance, the conditions to
such Advance set forth herein, including
any cost, loss or expense incurred by
reason of the liquidation or reemployment
of deposits or other funds acquired by the
Bank to fund such Advance when such
Advance, as a result of such failure, is
not made on the date so specified. The
Bank in any request for payment under this
subsection 3.2(b) shall provide Borrower
with a written calculation itemizing in
reasonable detail the components of such
payment.
Apportionment of the Revolving Credit Loan.
The outstanding principal amount of the Revolving
Credit Loan shall consist of, as Borrower shall from
time to time elect (subject to the terms and
conditions of this Agreement), one or more Advances
with respect to which interest shall accrue under
interest rate options determined pursuant to
subsection 5.2 below, provided that no Advance shall
be created or permitted to continue in an amount less
than $100,000.00 (the "Minimum Amount Limitation").
Commitment Fee. In addition to payments
provided for elsewhere herein, Borrower shall pay to
the Bank a commitment fee of three-eights of one
percent (0.375%) on the average daily amount of the
Revolving Credit Commitment that was unused during
the calendar quarter (or portion thereof). Such
commitment fee shall be accrued through the last day
of each calendar quarter and the Termination Date and
be due and payable quarterly on the fifteenth day of
the next succeeding calendar quarter and on the
Termination Date.
Reduction of Revolving Credit Commitment.
Reduction. Borrower shall have
the right at any time upon at least seven
days' prior written notice to the Bank to
reduce the aggregate amount of the
Revolving Credit Commitment; provided, that
the amount of each such reduction shall be
in a minimum aggregate amount of $1,000,000
or an integral aggregate multiple of
$500,000 in excess thereof, that no such
reduction shall reduce the amount of the
Revolving Credit Commitment to less than
the unpaid principal balance of the
Revolving Credit Loan.
Effect. Any reduction in the
amount of the Revolving Credit Commitment
may not be reinstated without the mutual
prior written consent of the Borrower and
the Bank.
The Revolving Credit Note. The Revolving
Credit Loan shall be evidenced by Borrower's
promissory note in the form of Exhibit A attached
hereto (together with any promissory note
subsequently executed and delivered by Borrower to
evidence the Revolving Credit Loan, a "Note") which
shall be dated the Closing Date and shall be made
payable to the order of the Bank in an amount equal
to the Revolving Credit Commitment Amount. The
- -3-
<PAGE>
aggregate amount of the Advances made by the
Bank less all repayments of principal thereof shall
be the principal amount owing and unpaid on the Note
and the Revolving Credit Loan. The principal amount
of the Revolving Credit Loan and all principal
payments and prepayments thereof may be noted by the
Bank on a schedule attached to the Note and shall be
entered by the Bank on its ledgers and computer
records; provided, that the failure of the Bank to
make such notations or entries shall not affect the
principal amount owing and unpaid on the Note. The
entries made by the Bank on its ledgers and computer
records and any notations made by the Bank on any
such schedule annexed to the Revolving Credit Note
shall be presumed to be accurate until the contrary
is established.
Principal Payment and Prepayment on the
Revolving Credit Loan. Borrower shall pay the
principal of the Revolving Credit Loan as follows:
Mandatory Payments. The entire
principal amount of each Bid Rate Advance
shall be due and payable on the last
Business Day of the Interest Period
applicable thereto. The entire unpaid
principal balance of the Revolving Credit
Loan, together with accrued but unpaid
interest thereon, shall be due and payable
on the Termination Date.
Optional Prepayments. Borrower
shall have the right to prepay the
outstanding principal balance of the
Revolving Credit Loan in whole or in part
at any time and from time to time;
provided, however, that, unless permitted
under subsection 5.6(b), Borrower may not
prepay any principal portion of any Advance
that bears interest at the LIBO Rate or the
Bid Rate on a day other than the last day
of the Interest Period applicable thereto
unless Borrower shall have given Bank
thirty (30) days prior, written notice of
Borrower's intent to do so.
Payment of Interest Under the Revolving
Credit Loan.
The principal amount of each Advance outstanding
under the Revolving Credit Loan shall bear interest
at the respective Applicable Interest Rate in effect
for such Advance from day to day until paid in full.
If the Applicable Interest Rate is the LIBO Rate or
the Bid Rate, all accrued interest shall be due and
payable on the last day of the corresponding Interest
Period unless the Interest Period is longer than
ninety (90) days with respect to the Bid Rate or six
(6) months with respect to the LIBO Rate, in which
event interest accrued through the end of each
calendar quarter shall be payable on the first
Business Day of the next calendar quarter and all
interest accrued after such calendar quarter shall be
due and payable on the last day of such Interest
Period. If the Applicable Interest Rate is the Prime
Rate, interest accrued through the end of each
calendar month shall be payable on the first Business
Day of the next calendar month. All past due
principal of, and interest on, each Revolving Credit
Loan (or any portion thereof) shall bear
- -4-
<PAGE>
interest until paid at the Default Rate. All
payments of interest on the Revolving Credit Loan
shall be made to the Bank as provided in subsection
5.1.
[Intentionally omitted.]
GENERAL PAYMENT TERMS; DESIGNATION OF
APPLICABLE INTEREST RATE.
Payments.
Except as provided in subsection
5.1(b), all payments and prepayments by the
Borrower of principal of and interest on
the Revolving Credit Loan, and all fees,
expenses and other Obligations payable to
the Bank in connection with the Revolving
Credit Loan (including without limitation
any fees payable pursuant to subsection
3.4), shall be made in Dollars in
Immediately Available Funds to the Bank not
later than 2:00 p.m. (Phoenix, Arizona
time) on the dates called for under this
Agreement, at the main office of the Bank
in Phoenix. Funds received after such hour
shall be deemed to have been received by
the Bank on the next Business Day.
Any Interest Period that would
otherwise end on a day that is not a
Business Day shall be extended to the next
succeeding Business Day, and interest shall
accrue at the Applicable Interest Rate
during such extension.
Any amount not received on or
before the date payment of such is due
shall bear interest at the Default Rate
from the date due through the date received
or deemed received.
Designations and Conversions of the
Applicable Interest Rate. Subject to the terms and
conditions set forth herein, Borrower may elect to
have any of the Prime Rate, the LIBO Rate or the Bid
Rate apply to the calculation of the interest
accruing with respect to the outstanding principal
amount of the Revolving Credit Loan or any Advance or
portion thereof, subject to the Minimum Amount
Limitation. Each interest rate duly selected by
Borrower shall be the "Applicable Interest Rate" for
the Revolving Credit Loan or any Advance or portion
thereof, as the case may be. For example, in the
case of a $200,000 Advance, the Borrower may elect to
have one Applicable Interest Rate apply to the
calculation of the interest on the entire Advance, or
have different Applicable Interest Rates apply to
$100,000 portions of the Advance.
For each such interest option designation (each
an "Interest Rate Designation"), an Authorized Person
shall give the Bank written (including by
telefacsimile) or oral notice confirmed promptly in
writing (a "Notice of Interest Rate Designation") (a)
specifying the
- -5-
<PAGE>
effective date of such Interest Rate Designation (the
"Designation Date"), (b) specifying whether the
Applicable Interest Rate is to be the Prime Rate or
the LIBO Rate or, alternatively, requesting that the
Bank quote a Bid Rate to be the Applicable Interest
Rate with respect to an Advance of the Revolving
Credit Loan, and (c) specifying the applicable
Interest Period if the Applicable Interest Rate is to
be the LIBO Rate or a Bid Rate; provided that
Borrower shall not specify the LIBO Rate or request
that the Bank quote a Bid Rate in any Notice of
Interest Rate Designation if, at the time of the
giving of said notice, any Default shall have
occurred and be continuing.
Each Notice of Interest Rate Designation
designating the Prime Rate or the LIBO Rate as the
Applicable Interest Rate shall be irrevocable and
effective upon receipt thereof by the Bank. The
interest rate specified in each such notice shall be
the Applicable Interest Rate with respect to the
Advance that is the subject matter thereof (and, if
the Applicable Interest Rate is the LIBO Rate, such
Applicable Interest Rate shall be in effect for the
Interest Period specified therein).
In the event that the Borrower requests that the
Bank quote a Bid Rate with respect to an Advance, the
following provision shall apply. After receiving a
Notice of Interest Rate Designation or a Request for
Advance requesting that the Bank quote a Bid Rate to
be the Applicable Interest Rate (a "Bid Rate
Request") in the manner provided herein, the Bank
may, but shall have no obligation to, quote Borrower
(orally or in writing) a proposed interest rate (the
"Bid Rate") by communicating such quote to the
Borrower not later than 11:00 a.m. on the date its
receipt of the Bid Rate Request (Phoenix, Arizona
time). The Bid Rate Request shall be irrevocable and
effective two (2) hours after the Bank quotes the Bid
Rate to Borrower (the "Bid Rate Acceptance Time")
unless Borrower objects to the Bid Rate, quoted in
writing (including by telefacsimile) or orally to the
Bank, prior to the Bid Rate Acceptance Time. The Bid
Rate quoted in response to each Bid Rate Request that
becomes irrevocable and effective shall be the
Applicable Interest Rate with respect to the full
amount of the Advance that is the subject matter
thereof for the Interest Period specified therein,
commencing on the Designation Date specified therein.
With respect to each Bid Rate Request that does not
become irrevocable and effective, Borrower shall
designate in writing, prior to the Bid Rate
Acceptance Time, whether the Prime Rate or the LIBO
Rate shall apply (and, if the latter, specifying the
Interest Period therefor).
If at any time Borrower shall fail to duly
designate the Applicable Interest Rate for any
Advance, then Borrower shall be deemed to have duly
designated the Prime Rate to be the Applicable
Interest Rate therefor. Notwithstanding the
foregoing, while any Default shall be continuing the
Applicable Interest Rate for the Revolving Credit
Loan shall be the Prime Rate, commencing on the first
day after the end of the respective Interest
Period(s) in effect after the date of such Default.
Computations. Commitment fees and interest
on the Note shall be computed on the basis of actual
days elapsed and a year of 360 days.
- -6-
<PAGE>
Setoff. Whenever an Event of Default shall
have occurred and be continuing, the Borrower hereby
irrevocably authorizes the Bank to set off the
Obligations against all deposits and credits of
Borrower with, and any and all claims of Borrower
against, the Bank, excluding deposits of Borrower
with the Bank which Borrower holds in escrow or in
trust for the benefit of third parties, whether or
not the Obligations, or any part thereof, shall be
then due.
Increased Capital Requirements. In the
event that, as a result of any Regulatory Change,
compliance by the Bank with any applicable law or
governmental rule, requirement, regulation, guideline
or order (whether or not having the force of law)
regarding capital adequacy has or would have the
effect of reducing the rate of return on the Bank's
capital as a consequence of or with reference to the
Revolving Credit Commitment or amounts outstanding
under the Note to a level below that which the Bank
could have achieved but for such change or compliance
(taking into consideration the policies of the Bank
with respect to capital adequacy), then from time to
time Borrower shall pay to the Bank such additional
amount or amounts as will compensate the Bank for
such reduction. The Bank shall deliver to Borrower a
written certificate which states the additional
amount(s) due and payable, showing in reasonable
detail the calculation of such amount and provide
evidence to substantiate the Bank's claim for such
amount(s).
Special Provisions for LIBO Rate Advances.
Inadequacy of Eurodollar Pricing.
If with respect to an Interest Period to
which the LIBO Rate is to apply, the Bank
determines that, by reason of circumstances
affecting the eurodollar market generally,
adequate and fair means do not exist for
ascertaining an Interbank Offered Rate, the
Bank shall forthwith give notice thereof to
Borrower, whereupon until the Bank notifies
Borrower that the circumstances giving rise
to such suspension no longer exist, (i) the
obligation of the Bank to make or maintain
any Advance for which the Applicable
Interest Rate is the LIBO Rate shall be
suspended and (ii) interest shall thereupon
accrue on the principal balance outstanding
under the Note at the Prime Rate.
Illegality. If, after the date
of this Agreement, the adoption of any
applicable law, rule or regulation, or any
change therein, or any change in the
interpretation or administration thereof by
any Governmental Authority, central bank or
comparable authority charged with the
interpretation or administration thereof,
or compliance by the Bank with any request
or directive (whether or not having the
force of law) of any such authority,
central bank or comparable authority, shall
make it unlawful or impossible for the Bank
to make, maintain or fund Eurocurrency
Liabilities (as defined in Regulation D, or
under any similar or successor regulation),
the Bank shall forthwith give notice
thereof to Borrower.
- -7-
<PAGE>
Upon receipt of such notice,
Borrower shall either (i) repay in full and
without penalty the then outstanding
principal amount of all Advances as to
which the Applicable Interest Rate is the
LIBO Rate, together with accrued interest
thereon, or (ii) elect that the Applicable
Interest Rate with respect to such Advances
shall be the Prime Rate either (a) from and
after the last day of the then current
Interest Period if the Bank may lawfully
continue to maintain and fund such Advances
at the LIBO Rate to such day or (b)
immediately if the Bank may not lawfully
continue to fund and maintain such Advances
at the LIBO Rate to such day.
Increased Costs for LIBO Rate
Advances. Upon notice from the Bank, the
Borrower shall promptly reimburse the Bank
for any increase in the Bank's costs, which
costs shall include but not be limited to
taxes (other than taxes imposed on the
overall net income of the Bank), fees,
charges, and/or reserve requirements due
to:
any law, regulation or
the interpretation thereof by any
governmental or other authority
(whether or not having the force
of law);
the application of any
existing law, regulation or the
interpretation thereof by any
governmental or other authority
(whether or not having the force
of law);
compliance by the Bank
with any request or directive
(whether or not having the force
of law) of any monetary or fiscal
agency or authority;
violations by the
Borrower of the terms of this
Loan Agreement; or
any other circumstances
relating to the interbank
eurodollar market.
The amount of such costs shall be determined solely
by the Bank based upon the assumption that the Bank
funded one hundred percent (100%) of each LIBO Rate
Advance in the London interbank eurodollar market for
that LIBO Rate Advance. In attributing the Bank's
general costs relating to its eurocurrency operations
to any transaction under this Loan Agreement, or
averaging any costs over a period of time, the Bank
may use any reasonable attribution and/or averaging
methods which it deems appropriate and practical.
- -8-
<PAGE>
Indemnity for Consequential Loss. The
Borrower shall indemnify the Bank, upon demand,
against any Consequential Loss (defined below) which
the Bank shall sustain or incur with respect to
payment of all or any portion of a LIBO Rate Advance
on any day prior to the last day of its respective
Interest Period. "Consequential Loss" shall mean an
amount computed as follows:
If the principal amount so repaid
is less than $50,000, the Consequential
Loss shall be conclusively presumed to be
one percent (1%) of the principal amount
repaid.
If the principal amount so repaid
is $50,000 or more, then Consequential Loss
shall be the difference (if a positive
amount) between (i) the interest that but
for the repayment would have accrued on the
repaid amount from (but excluding) the date
of repayment to (and including) the last
day of the respective Interest Period and
(ii) interest on the same amount for the
same period at a rate of interest per annum
equal to the LIBO Rate determined on the
Business Day prior to the date of repayment
for an Interest Period equal in length to
the Interest Period of the Advance being
repaid (whether repaid in whole or in
part).
CONDITIONS PRECEDENT.
Conditions Precedent to Effectiveness.
This Agreement shall become effective and the
obligation of the Bank to make the initial Advance of
the Revolving Credit Loan is subject to the prior
satisfaction of the conditions that each and all of
the following documents, certificates and opinions,
each in form and substance satisfactory to the Bank
and its counsel, shall have been delivered to the
Bank:
Note. The duly completed and
executed Note;
Officers' Certificate. A
certificate dated as of the Closing Date
and signed by a duly authorized officer of
Borrower, stating that (to the best
knowledge and belief of such officer, after
reasonable and due investigation and review
of matters pertinent to the subject matter
of such certificate): (i) all of the
representations and warranties contained in
Section 7 hereof and in the other Loan
Documents are true and correct as of the
date of the certificate; and (ii) no event
or condition has occurred and is continuing
which constitutes a Default or an Event of
Default;
Resolutions of Borrower.
Resolutions of Borrower approving the
execution, delivery and performance of this
Loan Agreement, the Note, the other Loan
Documents and the transactions contemplated
herein and therein, duly
- -9-
<PAGE>
adopted by Borrower's Board of
Directors and accompanied by a certificate
of the Secretary of Borrower dated the date
of this Loan Agreement and stating that
such resolutions are true and correct, have
not been altered or repealed and are in
full force and effect;
Incumbency Certificate. (A) A
signed certificate of the Secretary of
Borrower dated the date of this Loan
Agreement and certifying the name(s) of the
officer(s) of Borrower duly authorized to
sign each of the Loan Documents and the
other documents and (B) a certificate or
letter executed by the President and Chief
Executive Officer of the Borrower and dated
the date of this Loan Agreement, certifying
the names of the officers or other
employees of Borrower duly authorized to
sign notices or certificates to be
delivered pursuant to the Loan Documents by
Borrower, and which shall designate the
"Authorized Persons," together with the
true signatures of each such Authorized
Person. Unless otherwise stated thereon,
each individual named on such certificate
shall be an "Authorized Person," and the
Bank may conclusively rely on such
certificates until the Bank shall receive a
further certificate of the respective
Secretary or other writing satisfactory to
the Bank canceling or amending the prior
certificate and submitting the signatures
of the individuals named in such further
certificate;
Certificates. A recently dated
certificate of existence and good standing
(or other similar instruments) for Borrower
issued by the Secretary of State of the
State of Delaware and a recently dated
certificate of good standing for Borrower
issued by the Secretary of State of the
State of Arizona;
Charter and Bylaws. A copy of
the certificate of incorporation of
Borrower, and all amendments thereto, and a
copy of the bylaws of Borrower, and all
amendments thereto, all certified by the
Secretary of Borrower as being true,
correct and complete as of the date of this
Loan Agreement;
Legal Opinion of Borrower's
Counsel. A favorable legal opinion of
counsel to Borrower addressed to the Bank,
as to the matters set forth on Exhibit B
hereto; and
Termination of Existing Loan Facility.
The Bank shall have received evidence
satisfactory to it that the Existing Loan
Facility has been terminated (or will terminate
simultaneously with the initial Advance
hereunder) and that no amounts are outstanding
for the account of Borrower under the Existing
Loan Facility (or that all such amounts
outstanding will be paid using all or a portion
of the proceeds of the initial Advance
hereunder).
-10-
<PAGE>
Advances. The obligation of the Bank to
make each Advance (including the initial Advance) is
subject to each and all of the following additional
conditions:
the Bank shall have received a
timely and properly completed notice under
subsection 3.2(b);
there shall not have been any
Regulatory Change after the date of the
Loan Agreement which would render the
transactions contemplated hereby unlawful
or which would impose a cost on or increase
the cost to the Bank for making or
maintaining the Revolving Credit Loan or
which would reduce any amount payable to
the Bank under this Agreement or the Note;
no Default or Event of Default
shall have occurred and be continuing or
will exist upon making the requested
Advance;
all the representations and
warranties set forth in Section 7 shall be
true and correct in all material respects
as though made on and as of the applicable
borrowing date;
no Material Adverse Event shall
have occurred and no occurrence or event
which is likely to have a material adverse
effect on the rights and remedies of the
Bank shall have occurred; and
no proceeding or case under the
United States Bankruptcy Code shall have
been commenced by or against Borrower or
any Significant Subsidiary.
REPRESENTATIONS AND WARRANTIES.
To induce the Bank to enter into this Loan
Agreement and to make the Revolving Credit Loan,
Borrower represents and warrants to the Bank that:
Corporate Existence and Power. Borrower
and each Subsidiary is a corporation duly
incorporated, validly existing and in good standing
under the laws of the state or country of its
incorporation, and has all corporate power and all
material governmental licenses, authorizations,
consents and approvals required to carry on its
business as now conducted and proposed to be
conducted, to enter into each Loan Document to which
it is a party and to carry out the transactions
contemplated hereby and thereby.
Corporate and Governmental Authorization;
Contravention. The execution, delivery and
performance by Borrower of the Loan Documents
(including the issuance, delivery and payment of the
Note) are within the corporate power of Borrower,
have been duly authorized
-11-
<PAGE>
by all necessary corporate action, require no
action by or in respect of, or filing with, any
Governmental Authority and neither the execution and
delivery thereof nor the consummation of the
transactions contemplated thereby nor compliance by
Borrower with any, nor Borrower's performance of all,
of the terms and provisions of the Loan Documents
will contravene any Law applicable to Borrower or
conflict with, result in any breach of, or constitute
any default under, the corporate charter or bylaws
(both as amended to date) or conflict with, result in
any breach of, or constitute default under, or result
in the creation of a Lien under, or require one
consent of any trustee or creditor pursuant to, any
material indenture, mortgage, chattel mortgage, deed
of trust, conditional sales contract, lease, bank
loan or credit agreement to which Borrower is a party
or by which it or its assets are bound.
Enforceability. This Loan Agreement has
been duly executed and delivered by Borrower, and
this Loan Agreement and each other Loan Document
(including, without limitation, the Note) to which
Borrower is or will be a party, upon execution and
delivery thereby, will constitute the legal, valid
and binding obligations thereof, enforceable in
accordance with the respective terms of such Loan
Documents, except as limited by bankruptcy,
insolvency or other laws or equitable principles of
general application relating to the enforcement of
creditors' rights.
Litigation. There is no action, suit,
proceeding or arbitration pending, or to the
knowledge of Borrower threatened, against or
affecting Borrower or any Significant Subsidiary
before any court or arbitrator or any governmental
body, agency or official, except as disclosed by
Borrower on Schedule 7.4 hereto, and none of the
matters listed on such schedule would, if adversely
determined, have a material and adverse effect on the
Borrower's ability to perform its obligations under
the Loan Documents.
Compliance with ERISA. Borrower and each
member of the Controlled Group have fulfilled their
known obligations under the minimum funding standards
of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the
presently applicable provisions of ERISA and the
Code, and have not incurred any liability to the PBGC
or a Plan under Title IV of ERISA.
Taxes. As of the date of this Loan
Agreement, United States Federal income tax returns
of Borrower and the Subsidiaries with respect to
which such income tax returns are required to be
filed have been filed through the fiscal year ended
December 31, 1994 and audited through the fiscal year
ended December 31, 1987. Borrower and the
Subsidiaries have filed all United States Federal
income tax returns and all other material tax returns
which are required to be filed by them and have paid
all taxes and assessments payable by it which have
become due, other than those not yet delinquent. No
material tax Liens have been filed and, to Borrower's
knowledge, no material claims or assessments are
being asserted or will be asserted with respect to
any such taxes or other charges.
- -12-
<PAGE>
Subsidiaries. Borrower's Subsidiaries,
including its Significant Subsidiaries, are correctly
identified on Schedule 7.7 hereto. The consolidated
financial statements of Borrower do not reflect the
properties or operations of any business association
other than Borrower and the Subsidiaries.
No Default. No event or condition has
occurred and is continuing that constitutes a
Default.
Use of Proceeds; Margin Stock. The
proceeds of the Revolving Credit Loan will be used by
Borrower solely for the purposes specified in the
recitals of this Loan Agreement. None of such
proceeds will be used for the purpose of purchasing
or carrying any "margin stock" as defined in
Regulation U, Regulation X or Regulation G, or for
the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry a
"margin stock" or for any other purpose which might
constitute this transaction a "purpose credit" within
the meaning of such Regulation U, X or G. Borrower
is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin
stocks. Neither Borrower nor any Person acting on
behalf of Borrower has taken or will take any action
which might cause this Loan Agreement or the Notes to
violate Regulations U, X or G or any other
regulations of the Board of Governors of the federal
Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect
or as the same may hereinafter be in effect.
Borrower and the Subsidiaries own no "margin stock."
No Financing of Certain Corporate
Takeovers. No proceeds of the Revolving Credit Loan
will be used to acquire any security in any
transaction which is subject to Section 13 or 14 of
the Securities Exchange Act of 1934, including
particularly (but without limitation) Sections 13(d)
and 14(d) thereof.
Compliance with Law. Borrower and the
Subsidiaries are in substantial compliance with all
material domestic Laws that are applicable to
Borrower or any Subsidiary, or its or their
Properties. Borrower does not know, or have reason
to know, that Borrower or any Subsidiary is not in
substantial compliance with all material foreign Laws
that are applicable to Borrower or any Subsidiary, or
its or their Properties.
Financial Condition. Borrower has
delivered to the Bank copies of the consolidated
balance sheet of Borrower and the Subsidiaries as of
December 31 each of 1994, 1993 and 1992, and has
delivered to the Bank the related consolidated
statements of operations and cash flows for the
fiscal year ended on each such date, certified by
Borrower's independent certified public accountants,
and the interim consolidated balance sheet of
Borrower and the Subsidiaries as at September 30,
1995, and the related consolidated statement of
operations and cash flows for the nine-month period
then ended; all such financial statements are
complete and correct and fairly present the financial
condition of Borrower and its consolidated
Subsidiaries
-13-
<PAGE>
as of the respective dates and have been
prepared in accordance with GAAP applied on a basis
consistent with that of prior periods; and since the
date of the consolidated financial statements of
Borrower most recently delivered to the Bank
hereunder, there has been no material adverse change
in the condition (financial or otherwise), business
or operations of the Borrower or any Subsidiary
which, in accordance with GAAP, would be required to
be reflected in the consolidated financial statements
of Borrower next scheduled to be prepared. There are
no liabilities of Borrower or any Subsidiary, fixed
or contingent, which are material but are not
reflected in the financial statements or in the notes
thereto, other than liabilities arising in the
ordinary course since the date of such financial
statements.
No Liens. Except for the Permitted Liens,
all of the Property of Borrower and the Subsidiaries
is free and clear of all Liens and other adverse
claims of any nature, and such Persons have good and
marketable title to their respective Property.
Material Agreements. Except as set forth
on Schedule 7.14, neither Borrower nor, to the best
of Borrower's knowledge, any Subsidiary is in default
in any material respect under any contract, lease,
loan agreement, indenture, mortgage, security
agreement or other material agreement or obligation
to which it is a party or by which any of its
Property is bound, and no condition exists which,
with the giving of notice or the lapse of time or
both, would institute such a default.
Principal Office. The principal office,
chief executive office and principal place of
business of Borrower is at 6730 South Tucson
Boulevard, Tucson, Arizona. Borrower maintains its
principal records and books at such address.
Full Disclosure. There is no material fact
that Borrower has not disclosed to the Bank that
could have a material and adverse effect on the
properties, business, prospects or condition
(financial or otherwise) of Borrower and the
Subsidiaries, taken as a whole. Neither the
financial statements referenced in subsection 7.12
hereof, nor any certificate or statement delivered
herewith or heretofore by Borrower to the Bank in
connection with negotiations of this Agreement,
contains any untrue statement of a material fact or
omits to state any material fact necessary to keep
the statements contained herein or therein from being
misleading.
Representations and Warranties. Each
Request for Advance shall constitute, without the
necessity of containing a specific written statement,
a representation and warranty by Borrower that no
Default exists and that all representations and
warranties contained in this Section 7 are true and
correct on and as of the date the requested Advance
is to be made, except such as has been waived in
writing by the Bank.
Survival of Representations, Etc. Except
as otherwise provided herein, all agreements,
representations and warranties made herein shall
survive the execution and delivery
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of this Agreement, the making of the Advances
and the execution and delivery of the Note, provided,
however, that upon payment in full of all of
Borrower's obligations hereunder and under the other
Loan Documents (including, without limitation, all
principal, interest and any other costs and fees
payable hereunder), or upon expiration by its terms,
this Agreement and all agreements, representations
and warranties made herein shall terminate. Any
investigation at any time made by or on behalf of the
Bank shall not diminish the Bank's right to rely on
the representations and warranties by Borrower
herein.
AFFIRMATIVE COVENANTS.
So long as the Revolving Credit Commitment is in
effect and thereafter so long as any Obligation shall
remain unpaid, the Borrower covenants that, unless
the Bank shall otherwise consent in writing, it will
perform all the covenants set forth in this Section
8:
Financial Statements, Reports and
Documents. The Borrower shall deliver to the Bank
each of the following:
Quarterly Statements. As soon as
available, and in any event within
forty-five (45) days after the end of each
quarterly fiscal period (except the last)
of each fiscal year of Borrower, copies of
the consolidated balance sheet of Borrower
as of the end of such fiscal period, and
consolidated statements of income and cash
flows of Borrower for that quarterly fiscal
period and for the portion of the fiscal
year ending with such period, in each case
setting forth in comparative form the
figures for the corresponding period of the
preceding fiscal year, all in reasonable
detail and fairly stated, subject to
year-end audit and adjustments;
Annual Statements. As soon as
available and in any event within ninety
(90) days after the close of each fiscal
year of Borrower, copies of the
consolidated balance sheet of Borrower as
of the close of such fiscal year and
consolidated statements of income, retained
earnings and cash flows of Borrower for
such fiscal year, in each case setting
forth in comparative form the figures for
the preceding fiscal year, all in
reasonable detail and accompanied by an
opinion thereon (which shall not be
qualified by reason of any limitation
imposed by Borrower) of an independent
public accountant of recognized national
standing selected by Borrower to the effect
that such financial statements have been
prepared in accordance with GAAP
consistently maintained and applied (except
for changes in which such accountants
concur) and that the examination of such
accounts in connection with such financial
statements has been made in accordance with
generally accepted auditing standards and,
accordingly, includes such tests of
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<PAGE>
the accounting records and such other
auditing procedures as were considered
necessary in the circumstances;
Financial Projections. Within
forty-five (45) days after each request by
the Bank (which requests, absent the
continuance of a Default, shall not be made
more frequently than once in each period of
ninety consecutive days), and in any event
within ninety (90) days after the close of
each fiscal year of Borrower, copies of all
plans, budgets, reports, memoranda and
other documents (collectively, the
"Financial Projections") that accurately
and completely reflect, in reasonable
detail, Borrower's anticipated income, cash
flow, expenditures, retained income and
financial position for such period as the
Bank may reasonably request (it being
agreed than any request shall be deemed
reasonable with respect to any period that
does not extend beyond twenty-four (24)
months after the date of this Agreement).
SEC and Other Reports. Promptly
upon their becoming available, one copy of
each financial statement, report, notice or
proxy statement sent by Borrower to
stockholders generally, any order issued by
any Governmental Authority in any
proceeding to which Borrower is a party
that are likely to have a material and
adverse effect on the financial condition,
operations or prospects of Borrower and the
Subsidiaries taken as a whole and, if any
of the following filings are made, each
regular or periodic report, registration
statement or prospectus filed by Borrower
with any securities exchange or the
Securities and Exchange Commission or any
successor agency;
Compliance Certificate.
Simultaneously with the financial
statements referred to in subsections
8.1(a) and 8.1(b) hereof, a certificate
executed by the treasurer, chief financial
officer, chief executive officer or chief
operating officer of Borrower, stating that
a review of the activities of the Borrower
during such fiscal quarter or year has been
made under his supervision, that the
Borrower, to the best of his knowledge
after due diligence, has observed,
performed and fulfilled its obligations and
covenants contained herein and that no
Default or Event of Default has occurred
or, if any Default or Event of Default
shall have occurred, specifying the nature
and status thereof, and stating that all
financial statements of the Borrower
delivered to the Bank during the respective
period pursuant to subsection 8.1(a) and
(b) hereof are fairly stated and have been
prepared in accordance with GAAP, subject
only to normal year end audit adjustments,
and setting forth a computation in
reasonable detail as of the end of the
period covered by such statements, of
compliance with Sections 9.3, 9.4, and 9.6
hereof;
- -16-
<PAGE>
(f) Notice of Other Events.
Promptly, and in any event, within five
Business Days after their occurrence,
notice of each of the following events:
the commencement of any
action, suit, proceeding or
arbitration against the Borrower
or any of its Significant
Subsidiaries, or any material
development in any action, suit,
proceeding or arbitration pending
against the Borrower or any of
its Significant Subsidiaries, or
the commencement by any
Governmental Authority of a
formal or informal investigation
of the Borrower or any of its
Subsidiaries, or any of their
respective directors or officers,
(A) in which the aggregate
uninsured amount claimed is more
than $250,000, (B) which would,
if decided in a manner adverse to
the Borrower or any of its
Significant Subsidiaries,
constitute a Material Adverse
Event or (C) which relates to
this Loan Agreement or any other
Loan Document;
any Default or Event of
Default; and
notice of any other
Material Adverse Event; and
(g) Other Information. Such other
information concerning the business,
Properties and financial condition of the
Borrower as the Bank shall reasonably
request.
Payment of Taxes and Other Indebtedness.
Borrower shall, and shall cause each Subsidiary to,
pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all
Taxes levied or imposed upon it or upon its income,
profits or properties and (ii) all lawful claims for
labor, materials and supplies which, if unpaid, might
by law become a Lien upon its Property; provided that
neither Borrower nor any Subsidiary shall be required
to pay or discharge or cause to be paid or discharged
any such Tax whose amount, applicability or validity
is being contested in good faith by appropriate
proceedings and with respect to which adequate
reserves are being maintained (to the extent such
reserves are required by GAAP).
Insurance and Maintenance of Properties.
Borrower shall, and shall cause each Subsidiary to,
maintain workmen's compensation insurance, liability
insurance and insurance on its and its Subsidiaries'
Property and business, whether now owned or hereafter
acquired, in such manner and to such extent as is
customary in business enterprises in the same or
similar businesses, and will cause all Property used
or useful in the conduct of such businesses to be
maintained and kept in good condition, repair and
working order and supplied with all necessary
equipment and will cause to be made all necessary
repairs, renewals and replacements thereof, all as in
the judgment of the respective corporate officials
duly charged with oversight of such
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<PAGE>
matters may be necessary so that the business
carried on in connection therewith may be properly
conducted at all times; provided that nothing herein
shall prevent Borrower or any Subsidiary from
discontinuing the operation and maintenance of any of
its Property if such discontinuance is, in the
judgment of the board of directors of such
corporation, desirable in the conduct of its business
and is not disadvantageous in any material respect to
the Bank.
Corporate Existence. Subject to
subsections 9.1 and 9.2, Borrower shall, and shall
cause each Subsidiary to, do or cause to be done all
things necessary to preserve and keep in full force
and effect its corporate existence, rights and
franchises; provided that Borrower shall not be
required to preserve the corporate existence of any
of the Subsidiaries or any right or franchise if the
board of directors of Borrower shall determine that
the preservation thereof is no longer desirable in
the conduct of the business of Borrower or such
Subsidiary unless the loss thereof is disadvantageous
in any material respect to the Bank. Borrower shall
timely notify the Bank of all additions to and
changes in corporate identity of the Subsidiaries
from that identified on Schedule 7.7 hereto.
Use of Proceeds. The proceeds of the
Revolving Credit Loan shall be used for general
corporate purposes, including working capital for
Borrower and the Subsidiaries. None of such proceeds
shall be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate,
of purchasing or carrying any "margin stock," within
the meaning of Regulation U of the Board of Governors
of the Federal Reserve System. Borrower shall not
engage principally, or as one of its important
activities, in the business of extending credit for
the purpose of purchasing or carrying any such margin
stock within the meaning of such Regulation U.
Books and Records; Access. Borrower will,
and will cause each of its Subsidiaries to, permit
any Person designated by the Bank in writing, at the
Bank's expense, to visit and inspect any of the
properties, corporate books and financial records of
the Borrower and discuss its affairs and finances
with the principal officers of the Borrower and its
independent public accountants, all at such times as
the Bank may reasonably request. Borrower shall, and
shall cause each of the Subsidiaries to, maintain
complete and accurate books and records of its
transactions in accordance with good accounting and
business practices so as to permit the preparation of
financial reports in accordance with GAAP.
Compliance with Laws. Borrower shall
comply with all applicable Laws and all final,
nonappealable orders of any Governmental Authority
applicable to it or any of its Property, business
operations or transactions, a breach of which could
have a material and adverse effect on the financial
condition, operations or prospects of Borrower and
the Subsidiaries taken as a whole.
- -18-
<PAGE>
Authorizations and Approvals. Borrower
shall, and shall cause each Subsidiary to, promptly
obtain, from time to time at its own expense, all
such governmental licenses, authorizations, consents,
permits and approvals as may be required to enable it
to comply with its obligations hereunder and under
the other Loan Documents and to operate its
businesses as presently or hereafter duly conducted.
Further Assurances. The Borrower will, and
will cause each of its Subsidiaries to, take all such
further actions and execute all such further
documents and instruments as the Bank may at any time
reasonably determine in its sole discretion to be
necessary or advisable to further carry out and
consummate the transactions contemplated by the Loan
Documents and to perfect or protect the Liens of the
Bank granted under any Loan Document.
NEGATIVE COVENANTS.
So long as the Revolving Credit Commitment is in
effect and thereafter so long as any Obligation
remains unpaid, the Borrower covenants that, unless
the Bank shall otherwise consent in writing:
Sales of Stock and Indebtedness of
Subsidiaries. Except as provided in subsection 9.2,
Borrower shall not, and shall not permit any
Subsidiary to, sell or otherwise dispose of, or part
with control of, any shares of stock or Indebtedness
of any Subsidiary, except to Borrower or another
Subsidiary, and except that all shares of stock and
Indebtedness of any Subsidiary at the time owned by
or owed to Borrower and any other Subsidiary may be
sold as an entirety to any Person for a consideration
which represents fair value (as determined in good
faith by the Board of Directors of Borrower) at the
time of such sale, subject to the 7% aggregate
limitation and other provisions of subsection 9.2,
and provided that, at the time of such sale, such
Subsidiary shall not own, directly or indirectly, any
shares of stock or Indebtedness of any other
Subsidiary or of Borrower (unless all of the shares
of stock and Indebtedness of such other Subsidiary
owned, directly or indirectly, by Borrower and all
Subsidiaries are simultaneously being sold as
permitted by this subsection 9.1).
Merger and Sale of Assets. Borrower shall
not, and shall not permit any Subsidiary, to merge
with or into or consolidate with any other Person or
sell, lease or transfer or otherwise dispose of
Property that, in accumulation with Property
transferred as described in subsection 9.9 hereof
(but without duplication), constitutes more than 7%
of the Consolidated Total Assets of Borrower and the
Subsidiaries, on a cumulative basis during the period
from July 1, 1995 through the Termination Date, and
thereafter until all Obligations are paid in full, to
any Person, except that:
- -19-
<PAGE>
any Subsidiary may merge with
Borrower (provided that Borrower shall be
the continuing or surviving corporation) or
with any one or more other Subsidiaries,
any Subsidiary may sell, lease,
transfer or otherwise dispose of any of its
assets to Borrower or another Subsidiary,
any Subsidiary may be sold or all
or substantially all of its assets may
otherwise be disposed of, subject to the
conditions specified in subsection 9.1, and
Borrower may merge with any other
corporation, provided that (i) Borrower
shall be the continuing or surviving
corporation, (ii) immediately after and
giving effect to such merger, no Default or
Event of Default shall exist and Borrower
shall be in full compliance with each
covenant herein contained and (iii) on the
effective date of such merger Borrower
shall deliver to the Bank an officer's
certificate and, if reasonably requested by
the Bank, an opinion of counsel acceptable
to the Bank, each to the foregoing effect.
Limitation on Net Worth. Borrower will not
permit its Consolidated Tangible Net Worth to be less
than $140,000,00.00 plus seventy-five percent (75%)
of positive Consolidated Net Income for each fiscal
quarter commencing with the quarter ended September
30, 1995.
Total Debt Limitation. Borrower shall not
permit the ratio of Consolidated Total Liabilities to
Consolidated Tangible Net Worth, as of the last day
of any fiscal quarter, to exceed 0.60 to 1.0.
Restriction on Liens. Borrower shall not,
and shall not permit any Subsidiary to, offer a
pledge of any of its Property or any other assets to
any Person, nor create, assume or suffer to exist any
Lien of any kind on or with respect to any of its
Property or other assets, whether now owned or
hereafter acquired, except for Permitted Liens.
Debt Service Ratio. The Borrower shall not
permit the Debt Service Ratio to be less than 2.0 to
1 as of the last day of any fiscal quarter of
Borrower.
Lines of Business. Borrower shall not, and
shall not permit any Subsidiary to, directly or
indirectly, engage in any business other than those
generally similar to those in which it and its
Subsidiaries are engaged on the date hereof.
Certain Transfers of Property. Borrower
shall not transfer, directly or indirectly, any of
its Property to any Subsidiary other than in exchange
for the contemporaneous receipt of
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<PAGE>
the fair market value thereof in money or
readily marketable Property (excluding equity
securities and debt instruments) and except for
Property that, in accumulation with Property of
Borrower and the Subsidiaries sold, leased,
transferred or otherwise disposed of to any Person
(but without duplication), does not exceed 7% of the
Consolidated Total Assets of Borrower and the
Subsidiaries, on a cumulative basis during the period
from October 1, 1995 through the Termination Date,
and thereafter until all Obligations are paid in
full. With respect to such transfers of Property of
Borrower of book value in excess of $500,000.00, the
determination of the contemporaneous receipt by
Borrower of fair market value for purposes of the
exception stated in the preceding sentence shall be
made in good faith by Borrower's board of directors
and a written copy of such determination, certified
as true, complete and current by the Secretary of
Borrower, shall be delivered to the Bank prior to the
effective date of such transfer.
Independence of Covenants. All covenants
hereunder shall be given independent effect so that
if a particular action or condition is not permitted
by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within
the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if
such action is taken or condition exists.
DEFAULTS.
Events of Default. The occurrence of any
one or more of the following events or conditions
shall constitute an "Event of Default" under this
Loan Agreement:
Borrower shall fail to pay (i)
any principal or interest under the Note,
or any fees pursuant to subsection 3.4,
within three (3) Business Days after the
date on which such payment is due, or (ii)
any other payment required hereunder or
under any other Loan Document when due and
such failure to pay such other payment
shall continue for more than ten (10)
Business Days after receipt of notice of
such failure;
Borrower or any Subsidiary shall
fail to comply with any agreement,
covenant, condition, provision or term
contained in subsections 8.4, 8.9 or
Section 9 hereof;
Borrower shall fail to comply
with any other agreement, covenant,
condition, provision or term contained in
this Loan Agreement (other than those set
forth in subsection 10.1(b) hereinabove)
and such failure is not remedied within 30
days after the Bank has given Borrower
notice of the occurrence thereof;
Any representation, warranty,
certification or statement made by Borrower
in this Loan Agreement or any other Loan
Document or in any
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<PAGE>
certificate, financial statement or
other document delivered pursuant to or in
connection with any Loan Document shall be
incorrect in any material respect when
made;
Borrower or any Subsidiary
defaults (whether as primary obligor or as
guarantor or other surety) in any payment
of principal of or premium or interest on
any Indebtedness other than the Notes
beyond any period of grace provided with
respect thereto, or Borrower or any
Subsidiary fails to perform or observe any
other agreement, term or condition
contained in any agreement under which any
such obligation is created (or any other
event thereunder or under any such
agreement occurs and is continuing) and the
effect of such failure or other event is to
cause, or to permit the holder or holders
of such obligation (or a trustee on behalf
of such holder or holders) to cause, such
obligation to become due (or to be
repurchased by the Borrower or any
Subsidiary) prior to any stated maturity,
provided that the aggregate amount of all
Indebtedness or other obligations as to
which such a payment default shall occur
and be continuing or such a failure or
other event causing or permitting
acceleration (or resale to Borrower or any
Subsidiary) shall occur and be continuing
exceeds $1,000,000.00);
Borrower or any Significant
Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation,
reorganization or other relief with respect
to itself or its debts under any
bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the
appointment of a trustee, receiver,
liquidator, custodian or other similar
official of it or any substantial part of
its property, or shall consent to any such
relief or to the appointment of or taking
possession by any such official in an
involuntary case or other proceeding
commenced against it, or shall make a
general assignment for the benefit of
creditors, or shall fail generally to pay
its debts as they become due, or shall take
any corporate action to authorize any of
the foregoing;
An involuntary case or other
proceeding shall be commenced against
Borrower or any Significant Subsidiary
seeking liquidation, reorganization or
other relief with respect to it or its
debts under any bankruptcy, insolvency or
other similar law now or hereafter in
effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or
other similar official of it or any
substantial part of its property, and such
involuntary case or other proceeding shall
remain undismissed and unstayed for a
period of 60 days; or an order for relief
shall be entered against Borrower or any
Significant Subsidiary under the federal
bankruptcy laws as now or hereafter in
effect;
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<PAGE>
Borrower or any member of the
Controlled Group shall fail to pay when due
an amount or amounts aggregating in excess
of $250,000.00 which it shall have become
liable to pay to the PBGC or to a Plan
under Title IV of ERISA; or notice of
intent to terminate a Plan or Plans having
aggregate unfunded vested liabilities in
excess of $250,000.00 shall be filed under
Title IV of ERISA by the Borrower, any
member of the Controlled Group, any plan
administrator or any combination of the
foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to
terminate or to cause a trustee to be
appointed to administer any such Plan or
Plans or a proceeding shall be instituted
by a fiduciary of any such Plan or Plans
against Borrower or any member of the
Controlled Group to enforce Section 515 of
ERISA and such proceeding shall remain
undismissed and unstayed for a period of 60
days; or a condition shall exist by reason
of which the PBGC would be entitled to
obtain a decree adjudicating that any such
Plan or Plans must be terminated;
Any final judgment(s) (excluding
those the enforcement of which is suspended
pending appeal) for the payment of money in
excess of the sum of $1,000,000.00 in the
aggregate (other than any judgment covered
by insurance where coverage has been
acknowledged by the insurer) shall be
rendered against Borrower or any Subsidiary
and such judgment or judgments shall not be
satisfied or discharged at least ten (10)
days prior to the date on which any of its
assets could be lawfully sold to satisfy
such judgment;
Any levy or execution upon, or
judicial seizure of, any Property of
Borrower or any Subsidiary that has a fair
market value in excess of $1,000,000.00
that is not bonded or released within
thirty (30) days;
Any one or more of the Loan
Documents shall, except solely by any
action or inaction of the Bank, cease to be
legal, valid, binding agreements
enforceable against Borrower in accordance
with the respective terms thereof, or shall
in any way be terminated or become or be
declared ineffective or inoperative, so as
to deny the Bank the substantial benefits
contemplated by such Loan Document or Loan
Documents;
The insolvency of Borrower; or
the execution by Borrower of any assignment
for the benefit of creditors; or the
failure of Borrower to pay its debts as
they mature; or if Borrower is generally
not paying its debts as they mature;
The liquidation, termination or
dissolution of Borrower;
- -23-
<PAGE>
Borrower incurs a net loss in its
business operations in any two consecutive
fiscal quarters as reflected in the
financial statements delivered to the Bank
pursuant to Subsections 8.1(a) or 8.1(b) of
this Agreement; or
The occurrence of any event of
default under any document or instrument
given by Borrower in connection with any
other Indebtedness of Borrower to the Bank.
Remedies Upon Event of Default. If an
Event of Default shall have occurred and be
continuing, then the Bank, at its sole option, may do
any one or more of the following, all of which shall
be deemed cumulative, and not alternative remedies:
(i) declare the Revolving Credit Commitment
terminated, whereupon the Revolving Credit Commitment
shall be terminated, (ii) declare the Obligations (or
any portion thereof) to be forthwith due and payable,
whereupon the Obligations (or any such portion
thereof) shall immediately become due and payable, in
each case without presentment, demand, protest or
other notice of any kind, all of which are hereby
expressly waived, anything in this Agreement or in
any other Loan Document to the contrary
notwithstanding, (iii) declare that interest shall
accrue on the principal amount of the Obligations at
the Default Rate, whereupon interest shall so accrue
notwithstanding any contrary provision of this
Agreement, and all accrued and unpaid interest shall
be compounded with principal monthly, as of the end
of each month, and (iv) enforce its rights under any
one or more of the Loan Documents; provided, however,
that if any Event of Default specified in subsections
10.1(g) or (h) shall occur, the Revolving Credit
Commitment shall automatically terminate, the
Obligations shall automatically become due and
payable, and interest thereafter shall automatically
accrue on the principal amount of the Obligations at
the Default Rate, compounded monthly as aforesaid.
MISCELLANEOUS.
Entirety. The Loan Documents embody the
entire agreement between the parties and supersede
all prior agreements and understandings, including,
without limitation, the Existing Loan Facilities,
relating to the subject matter hereof and thereof.
Notices. Except as otherwise specifically
provided for herein, all notices and other
communications provided for herein shall be in
writing (including telefacsimile communication) and,
unless otherwise required herein or by law, shall be
teletransmitted, mailed (certified or registered
mail, return receipt requested) or delivered to the
intended recipient at the "Address for Notices"
specified below its name on the signature pages
hereof, or, as to any party, at such other address as
shall be designated by such party in a notice to the
other parties. All notices and other communications
hereunder shall be effective when transmitted by
telecopier, delivered or, in the case of a mailed
notice or notice sent by overnight courier, upon
receipt thereof as conclusively evidenced by the
signed receipt therefor, in each case given or
addressed as aforesaid
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<PAGE>
except that notices to the Bank under the
provisions of Sections 3 or 5 shall not be effective
until received by the Bank.
Expenses; Indemnification. The Borrower
agrees to pay on demand: (a) the reasonable fees and
expenses of Brown & Bain, P.A., special counsel to
the Bank, in connection with the negotiation,
preparation, approval, execution and delivery of the
Loan Documents; (b) the reasonable fees and expenses
of counsel for the Bank in connection with any
amendment, modification or waiver of any of the terms
of any Loan Document; and (c) in any applicable case
in which the Bank is the prevailing party (and if the
concept of prevailing party is not applicable, then
in every case), all reasonable costs and expenses of
the Bank (including reasonable counsel's fees) in
connection with the enforcement through legal
proceedings of this Agreement, the Note and/or any of
the other Loan Documents.
The Borrower hereby agrees to indemnify the Bank
and its directors, officers, agents and employees
from and hold each of them harmless against any and
all losses, liabilities, claims, damages or expenses
incurred by any of them arising out of or by reason
of any investigation, litigation or other proceedings
related to any use made or proposed to be made by the
Borrower of the proceeds of the Revolving Credit Loan
or the operations of the Borrower's business,
including, without limitation, the reasonable fees
and disbursements of counsel incurred in connection
with any such investigation, litigation or other
proceedings (but excluding any such losses,
liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct
of the Person to be indemnified).
Confidentiality. Any information which the
Bank receives from the Borrower shall not be
disclosed to any Person other than the Bank, if such
information is not otherwise in the public domain,
other than (a) to its independent accountants,
financial advisors or consultants and legal counsel,
(b) pursuant to statutory or regulatory requirements,
(c) pursuant to any mandatory court order or (d) to
any participant in or assignee of, or prospective
participant in or assignee of, this Agreement or any
Note. With respect to those Persons set forth in (a)
and (d) hereinabove, all such Persons shall agree to
be bound by the terms of this subsection or be under
a professional obligation to do so. The Bank agrees
to give Borrower notice of any subpoena, court or
governmental order or other legal process served upon
the Bank and involving Borrower unless such notice is
prohibited by the issuer of such process or by its
terms. The provisions of this subsection shall
survive the repayment of all Obligations hereunder
and/or the termination of this Loan Agreement.
Amendments, Waivers, Etc. Any provision of
this Agreement or any other Loan Document may be
amended or modified only by an instrument or
instruments in writing signed by the Bank and the
Borrower. No waiver of any provision of this
Agreement or any other Loan Document or consent to
any departure by the Borrower therefrom shall in any
event be effective
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<PAGE>
unless the same shall be in writing and signed
by the Bank and then such waiver or consent shall be
effective only in the specific instance and for the
purpose for which given.
Assignments and Participation; Transferees.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may
not assign its rights or obligations hereunder, under
the Note or under any other Loan Document without the
prior written consent of the Bank.
Invalid Provisions. If any provision of
any Loan Document is held to be illegal, invalid or
unenforceable under present or future laws during the
term of this Loan Agreement, such provision shall be
fully severable; such Loan Document shall be
construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of
such Loan Document; and the remaining provisions of
such Loan Document shall remain in full force and
effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its
severance from such Loan Document. Furthermore, in
lieu of each such illegal, invalid or unenforceable
provision there shall be added as part of such Loan
Document a provision mutually agreeable to Borrower
and the Bank as similar in terms to such illegal,
invalid or unenforceable provision as may be possible
and be legal, valid and enforceable.
Headings. Section and subsection headings
are for convenience of reference only and shall in no
way affect the interpretation of this Loan Agreement.
No Third Party Beneficiary. The parties do
not intend the benefits of this Loan Agreement to
inure to any third party, nor shall this Loan
Agreement be construed to make or render the Bank
liable to any materialman, supplier, contractor,
subcontractor, purchaser or lessee of any property
owned by Borrower, or for debts or claims accruing to
any such persons against Borrower. Notwithstanding
anything contained herein or in the Note, or in any
other Loan Document, or any conduct or course of
conduct by any or all of the parties hereto, before
or after signing this Loan Agreement or any of the
other Loan Documents, neither this Agreement nor any
other Loan Document shall be construed as creating
any right, claim or cause of action against the Bank,
or any of its respective officers, directors, agents
or employees, in favor of any materialman, supplier,
contractor, subcontractor, purchaser or lessee of any
property owned by Borrower, nor to any other person
or entity other than Borrower.
Multiple Counterparts. This Agreement may
be executed in any number of counterparts, all of
which taken together shall constitute one and the
same agreement.
Governing Law. This Loan Agreement has
been prepared, is being executed and delivered, and
is intended to be performed in the State of Arizona.
The substantive laws of the State of Arizona and the
applicable federal laws of the United States of
America shall govern the
-26-
<PAGE>
validity, construction, enforcement and
interpretation of this Loan Agreement and all of the
other Loan Documents without regard to Arizona
principles of conflict of laws.
Arbitration.
(a) Binding Arbitration. Upon the demand
of Borrower or the Bank, whether made before the
institution of any judicial proceeding or not more
than 60 days after service of a complaint, third
party complaint, cross-claim or counterclaim or any
answer thereto or any amendment to any of the above,
any Dispute (as defined below) shall be resolved by
binding arbitration in accordance with the terms of
this arbitration clause. A "Dispute" shall include
any action, dispute, claim, or controversy of any
kind, whether founded in contract, tort, statutory or
common law, equity, or otherwise, now existing or
hereafter occurring between the parties arising out
of, pertaining to or in connection with this
Agreement or any Loan Document. The parties
understand that by this Agreement they have decided
that the Disputes may be submitted to arbitration
rather than being decided through litigation in court
before a judge or jury and that once decided by an
arbitrator the claims involved cannot be brought,
filed or pursued in court.
(b) Governing Rules. Arbitrations
conducted pursuant to this Agreement, including
selection of arbitrators, shall be administered by
the American Arbitration Association
("Administrator") pursuant to the Commercial
Arbitration rules of the Administrator. Arbitrations
conducted pursuant to the terms hereof shall be
governed by the provisions of the Federal Arbitration
Act (Title 9 of the United States Code), and to the
extent the foregoing are inapplicable, unenforceable
or invalid, the laws of the State of Arizona.
Judgment upon any award rendered hereunder may be
entered in any court having jurisdiction; provided,
however, that nothing contained herein shall be
deemed to be a waiver by the Bank of the protections
afforded to it under 12 U.S.C. 91 or similar
governing state law. Any party who fails to submit
to binding arbitration following a lawful demand by
the opposing party shall bear all costs and expenses,
including reasonable attorney's fees, incurred by the
opposing party in compelling arbitration of any
Dispute.
(c) No Waiver, Preservation of Remedies,
Multiple Parties. No provision of, nor the exercise
of any rights under, this arbitration clause shall
limit the right of any party to (1) foreclose against
any real or personal property collateral or other
security, (2) exercise self-help remedies (including
repossession and setoff rights) or (3) obtain
provisional or ancillary remedies such as injunctive
relief, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver from a
court having jurisdiction. Such rights can be
exercised at any time except to the extent such
action is contrary to a final award or decision in
any arbitration proceeding. The institution and
maintenance of an action as described above shall not
constitute a waiver of the right of any party,
including the plaintiff, to submit the Dispute to
arbitration, nor render inapplicable the compulsory
arbitration provisions hereof. Any claim or Dispute
related
- -27-
<PAGE>
to exercise of any self-help, auxiliary or other
exercise of rights under this section (c) shall be a
Dispute hereunder.
(d) Arbitrator Powers and Qualifications;
Awards. Arbitrator(s) shall resolve all Disputes in
accordance with the applicable substantive law.
Arbitrator(s) may make an award of attorneys' fees
and expenses if permitted by law or the agreement of
the parties. All statutes of limitation applicable
to any Dispute shall apply to any proceeding in
accordance with this arbitration clause. Any
arbitrator selected to act as the only arbitrator in
a Dispute shall be required to be a practicing
attorney with not less than 10 years practice in
commercial law in the State of Arizona. With respect
to a Dispute in which the claims or amounts in
controversy do not exceed five hundred thousand
dollars ($500,000), a single arbitrator shall be
chosen and shall resolve the Dispute. In such case
the arbitrator shall have authority to render an
award up to but not to exceed five hundred thousand
dollars ($500,000) including all damages of any kind
whatsoever, costs, fees and expenses. Submission to
a single arbitrator shall be a waiver of all parties'
claims to recover more than five hundred thousand
dollars ($500,000). A Dispute involving claims or
amounts in controversy exceeding five hundred
thousand dollars ($500,000) shall be decided by a
majority vote of a panel of three arbitrators
("Arbitration Panel"). An Arbitration Panel shall be
composed of one arbitrator who would be qualified to
sit as a single arbitrator in a Dispute decided by
one arbitrator, one who has at least ten years
experience in commercial lending and one who has at
least ten years experience in the semiconductor
industry. Arbitrator(s) may, in the exercise of
their discretion, at the written request of a party
in any Dispute, (1) consolidate in a single
proceeding any multiple party claims that are
substantially identical and all claims arising out of
a single loan or series of loans including claims by
or against borrower(s) guarantors, sureties and or
owners of collateral if different from the borrower,
and (2) administer multiple arbitration claims as
class actions in accordance with Rule 23 of the
Federal Rules of Civil Procedure. The arbitrator(s)
shall be empowered to resolve any dispute regarding
the terms of this Agreement or the arbitrability of
any Dispute or any claim that all or any part
(including this provision) is void or voidable but
shall have no power to change or alter the terms of
this Agreement. The award of the arbitrator(s) shall
be in writing and shall specify the factual and
legal basis for the award.
(e) Miscellaneous. To the maximum extent
practicable, the Administrator, the arbitrator(s) and
the parties shall take any action necessary to
require that an arbitration proceeding hereunder be
concluded within 180 days of the filing of the
Dispute with the Administrator. The arbitrator(s)
shall be empowered to impose sanctions for any
party's failure to proceed within the times
established herein. Arbitration proceedings
hereunder shall be conducted in Arizona at a location
determined by the Administrator. In any such
proceeding a party shall state as a counterclaim any
claim which arises out of the transaction or
occurrence or is in any way related to the Documents
which does not require the presence of a third party
which could not be joined as a party in the
proceeding. The provisions of this arbitration
clause shall survive any termination, amendment, or
expiration of the Loan Documents and repayment
- -28-
<PAGE>
in full of sums owed to Banks by Borrower unless the
parties otherwise expressly agree in writing. Each
party agrees to keep all Disputes and arbitration
proceedings strictly confidential, except for
disclosures of information required in the ordinary
course of business of the parties or as required by
applicable law or regulation.
Choice of Forum; Consent to Service of
Process; Jurisdiction; Waiver of Jury Trial. Any
suit, action or proceeding against Borrower with
respect to this Loan Agreement, the Note, or any
judgment entered by any court in respect thereof, may
be brought in any of the courts of the State of
Arizona, County of Maricopa or Pima County, or in the
United States courts located in the State of Arizona
as the Bank in its sole discretion may elect, and
Borrower hereby submits to the nonexclusive
jurisdiction of such courts for the purpose of any
such suit, action or proceeding. Borrower hereby
irrevocably waives any objections which it may now or
hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to
this Loan Agreement, the Note or any other Loan
Document brought in any of the courts located in the
State of Arizona, County of Maricopa or Pima.
BORROWER AND THE BANK HEREBY IRREVOCABLY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTER-CLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
IN WITNESS WHEREOF, the undersigned have
executed this Agreement as of the day and year first
above written.
BURR-BROWN CORPORATION
By G. ROGER MYERS
Its Treasurer
Addresses for Notices:
BURR-BROWN CORPORATION
6730 South Tucson
Boulevard
Tucson, Arizona 85706
Telephone: (602)
746-1111
Telefacsimile: (602)
746-7752
Attention: Chief
Financial Officer
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<PAGE>
FIRST INTERSTATE BANK
OF ARIZONA, N.A.
By PAUL HORNUNG
Its Vice President
Addresses for Notices:
FIRST INTERSTATE BANK
OF ARIZONA, N.A.
Corporate Banking
Division #741
100 West Washington
Phoenix, Arizona 85003
Telephone: (602)
528-6634
Telefacsimile No: (602)
229-4409
Attention: Mr. Paul C.
Hornung
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<PAGE>
SCHEDULE 7.7
BORROWER'S SUBSIDIARIES
BURR-BROWN INTERNATIONAL HOLDING CORPORATION, Tucson,
AZ
BURR-BROWN LIMITED, Scotland
BURR-BROWN INTERNATIONAL LIMITED, United Kingdom
BURR-BROWN JAPAN, LIMITED, Japan
BURR-BROWN INTERNATIONAL, S.A., France
BURR-BROWN INTERNATIONAL, S.R.L., Italy
BURR-BROWN INTERNATIONAL, B.V., Netherlands
BURR-BROWN INTERNATIONAL, GmbH, Germany
BURR-BROWN RESEARCH, GesmbH, Austria
BURR-BROWN, A.G., Switzerland
BURR-BROWN FOREIGN SALES CORPORATION, Barbados
Intelligent Instrumentation, Inc.
Power Convertibles Corporation
<PAGE>
SCHEDULE 7.14
CONTRACTS OF BORROWER/SUBSIDIARIES
WHICH ARE IN DEFAULT
None
ANNEX I
TO
LOAN AGREEMENT
by and among
BURR-BROWN CORPORATION
(the "BORROWER")
and
FIRST INTERSTATE BANK OF ARIZONA, N.A.
(the "Bank")
The following terms, as used in the Loan
Agreement, have the meanings assigned to them in this
Annex I (which is incorporated into and constitutes a
part of the Loan Agreement for all purposes thereof):
"Advance" means a disbursement of proceeds of
the Revolving Credit Loan.
"Agreement" or "Loan Agreement" means this Loan
Agreement, as amended, supplemented, restated or
otherwise modified and in effect from time to time.
"Applicable Interest Rate" means, with respect
to any Advance, the Prime Rate, the LIBO Rate or the
Bid Rate, as from time to time selected by Borrower
and as applicable to such Advance pursuant to
subsections 3.2, 3.3 and 5.2 of the Loan Agreement.
"Authorized Person" means the officers or other
employees of Borrower from time to time duly
certified to the Bank by appropriate corporate action
as authorized to request Advances and make
designations of the Applicable Interest Rates.
"Bid Rate": See subsection 5.2.
"Bid Rate Acceptance Time": See subsection 5.2.
"Bid Rate Request": See subsection 5.2.
"Borrowing Date" means the Business Day on which
the proceeds of an Advance are disbursed to or for
the benefit of Borrower.
"Business Day" means any day other than a
Saturday, Sunday or other day on which commercial
banks in Phoenix, Arizona are required or authorized
to close.
"Capital Expenditures" means, for any specified
period, the aggregate for all gross expenditures
during such period for any assets, or for
improvements, replacements, substitutions
<PAGE>
or additions therefor or thereto, which are
capitalized on the consolidated balance sheet of the
Borrower, including the balance sheet amount of any
Capital Leases incurred during such period.
"Capital Lease" means any obligation to pay rent
and other amounts under a lease of (or other
agreement conveying the right to use) Property which
obligation is required to be classified and accounted
for as a capital lease on a balance sheet of the
lessee in accordance with GAAP, and for the purposes
hereof the amount of each obligation shall be the
capitalized amount thereof, determined in accordance
with GAAP.
"Closing Date" means the date upon which all of
the conditions precedent set forth in subsection 6.1
of the Loan Agreement have been fully satisfied and
fully-executed copies of the Loan Documents have been
delivered to and accepted by the Bank.
"Code" means the Internal Revenue Code of 1986,
as amended.
"Consequential Loss": See subsection 5.7.
"Consolidated Net Income" means, with respect to
any period, consolidated net earnings (after income
taxes) of Borrower and the Subsidiaries for such
period, determined in accordance with GAAP, but
excluding (i) any gain or loss arising from the sale
of capital assets, (ii) any gain arising from any
write-up of assets (other than the write-up of
current assets as a result of realignment of
currencies), (iii) earnings of any other Person,
substantially all of the assets of which have been
acquired by Borrower or a Subsidiary in any manner,
to the extent that such earnings were realized by
such other Person prior to the date of such
acquisition, (iv) net earnings of any Person (other
than a Subsidiary) in which Borrower or a Subsidiary
has an ownership interest, unless such earnings have
been actually received by Borrower or such Subsidiary
in the form of cash distributions, (v) any deferred
credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost
of the investment in such Subsidiary, and (vi) any
gain arising from the acquisition of any securities
of Borrower or a Subsidiary.
"Consolidated Tangible Net Worth" means, at any
date, the total stockholder's equity (including
capital stock, additional paid in capital and
retained earnings after deducting treasury stock)
which would appear on a consolidated balance sheet of
Borrower and the Subsidiaries prepared as of such
date in accordance with GAAP, less the aggregate book
value of Intangible Assets shown on such balance
sheet.
"Consolidated Total Assets" means, at any date,
all assets of Borrower and its Subsidiaries that
would appear as such on a consolidated balance sheet
of Borrower and its Subsidiaries prepared as of that
date in accordance with GAAP.
- -2-
<PAGE>
"Consolidated Total Liabilities" means, at any
date, all liabilities of Borrower and the
Subsidiaries that would appear as such on a
consolidated balance sheet of Borrower and the
Subsidiaries prepared as of that date in accordance
with GAAP.
"Controlled Group" means, severally and
collectively, the members of the group controlling,
controlled by and/or in common control of Borrower,
within the meaning of Section 4001(b) of ERISA.
"Debt Service Ratio" means the result of the
following calculation, expressed as a percentage, as
at the end of any fiscal quarter of Borrower:
the sum of Borrower's
Consolidated Net Income, interest expense,
depreciation expense, amortization of
intangibles expense, as measured over the
preceding four fiscal quarters of Borrower;
divided by
the sum of interest expense, as
measured over the preceding four fiscal
quarters of Borrower plus the current
maturities of long-term indebtedness as of
the end of the given fiscal quarter.
All calculations and amounts shall be determined in
accordance with GAAP. "Interest expense," as used
hereinabove, shall include all gross interest expense
amounts incurred by Borrower and the Subsidiaries.
"Default" means an Event of Default or an event
which, upon the giving of notice or the lapse of time
or both, would constitute an Event of Default.
"Default Rate" shall mean the rate per annum
equal to the Prime Rate plus three percent (3%) per
annum, changing in conformity with each change in the
Prime Rate.
"Designation Date": See subsection 5.2.
"Dollars" and the sign "$" each means lawful
money of the United States of America.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, together with all
rules and regulations issued pursuant thereto.
"Eurodollar Business Day" means a Business Day
on which dealings in Dollars are carried out in the
London interbank market.
"Event of Default" has the meaning specified in
Section 10.1 of the Loan Agreement.
- -3-
<PAGE>
"Existing Loan Facility": See subsection 1.1.
"GAAP" means generally accepted accounting
principles and practices consistently applied as in
effect within the United States from time to time,
which shall include the official interpretations
thereof by the Financial Accounting Standards Board,
or any successor board or organization. All
accounting terms not otherwise defined in the Loan
Agreement or another Loan Document shall have the
meaning assigned to such terms in accordance with
GAAP.
"Governmental Authority" means any government
(or any political subdivision or jurisdiction
thereof), court, bureau, agency or other governmental
authority having jurisdiction over Borrower or a
Subsidiary or any of its or their business,
operations or Properties.
"Immediately Available Funds" means funds with
good value on the day and in the city in which
payment is received.
"Indebtedness" means, with respect to any Person
at any time, without duplication, all indebtedness,
obligations and liabilities of such Person which, in
accordance with GAAP, consistently applied, should be
classified as liabilities on an unconsolidated
balance sheet of such Person, but in any event shall
include: (a) all obligations for borrowed money,
including interest or fees of any nature related to
the borrowing of money accrued but unpaid, (b) all
obligations evidenced by bonds, debentures, notes or
other similar instruments, (c) all obligations,
actual or contingent, under letters of credit, bills
of exchange or bankers acceptances, (d) all
obligations representing the deferred purchase price
of Property or services, (e) all obligations, whether
or not assumed by or with recourse to such Person,
secured by Liens upon, or payable out of the proceeds
of or production from, asset owned by such Person,
(f) all rental obligations under Capital Leases, (g)
all obligations of any partnership or joint venture
as to which such Person is or may become personally
liable, and (h) any contract, agreement or
understanding pursuant to which such Person
guarantees, or in effect guarantees, any Indebtedness
of another Person, whether directly or indirectly.
"Intangible Assets" of any Person shall mean
those assets of such Person that are (i) deferred
assets, other than prepaid insurance and prepaid
taxes; (ii) patents, copyrights, trademarks, trade
names, franchises, goodwill, experimental expenses
and other similar assets which would be classified as
intangible assets on a balance sheet of such Person,
prepared in accordance with GAAP; and (iii)
unamortized debt discount and expense.
"Interbank Offered Rate" means, with respect to
an Interest Period, the prevailing rate of interest
per annum at which deposits in immediately available
funds in Dollars are offered at approximately 11:00
a.m., London time, two (2) Eurodollar Business Days
prior to the first day of such Interest Period by
major financial institutions active in the London
interbank eurodollar market to first class banks in
the London interbank eurodollar market for delivery
on the first day
- -4-
<PAGE>
of such Interest Period, such deposits being for a
period of time equal or comparable to such Interest
Period and in an amount comparable to the principal
amount of the applicable Advance, as such prevailing
rate of interest is determined by the Bank at such
time from reasonably available sources. The Bank
shall notify Borrower of its determination of the
Interbank Offered Rate as soon as practicable
following such determination. Each determination of
the Interbank Offered Rate by the Bank, in the
absence of manifest error, shall be conclusive and
binding.
"Interest Period" means, with respect to the
LIBO Rate, a period commencing on a Designation Date
and ending, with respect to the LIBO Rate, one, two,
three or six months thereafter and, with respect to
the Bid Rate, some number of days thereafter not to
exceed thirty (30), in each case as Borrower shall
specify in the applicable Notice of Interest Rate
Designation; provided, however, that any Interest
Period which would otherwise end on a day which is
not a Business Day shall be extended to the next
succeeding Business Day, and no Interest Period shall
extend beyond the Termination Date.
"Interest Rate Designation": See subsection
5.2.
"Laws" means all ordinances, statutes, rules,
regulations, orders, injunctions, writs, or decrees
or any Governmental Authority.
"LIBO Rate," with respect to any Interest
Period, means the sum of (a) the Interbank Offered
Rate for that Interest Period plus (b) 1.25%.
"Lien" means any lien, mortgage, security
interest, charge, tax lien, pledge, encumbrance,
title retention agreement or analogous instrument,
in, of or on any of the Properties or assets, now
owned or hereafter acquired, of any Person, whether
arising by agreement or operation of law or
otherwise, and whether voluntarily or involuntarily
created.
"Loan Agreement" and "Agreement" means this Loan
Agreement, as amended, supplemented, restated or
otherwise modified and in effect from time to time.
"Loan Documents" means the Loan Agreement, the
Note (including any renewals, extensions and
refundings thereof), and all other agreements,
instruments, certificates or other documents executed
and delivered pursuant to or in connection therewith,
as the same may be supplemented, amended or otherwise
amended from time to time.
"Material Adverse Event" means any occurrence of
whatsoever nature (including, without limitation, any
adverse determination in any litigation, arbitration
or governmental investigation or proceeding) which
materially adversely affects the present or
reasonably foreseeable prospective financial
condition or operations of the Borrower or any
Significant Subsidiary or
- -5-
<PAGE>
materially impairs the ability of the Borrower to
perform its obligations under the Loan Documents.
"Minimum Amount Limitation": See subsection
3.3.
"Note": See subsection 3.6.
"Notice of Interest Rate Designation": See
subsection 5.2.
"Obligations" means all obligations of the
Borrower to the Bank now existing or hereafter
existing under any Loan Document, whether for
principal, interest, fees, expenses, indemnification
or otherwise.
"PBGC" means the Pension Benefit Guaranty
Corporation created by Section 4002(a) of ERISA, or
any Governmental Authority succeeding to the
functions thereof.
"Permitted Liens" means (a) Liens granted to the
Bank to secure any obligations of Borrower to the
Bank, (b) Liens described on Exhibit C to the Loan
Agreement, (c) Liens to secure Indebtedness of
Borrower or any Subsidiary that are taken or retained
by the seller of all of the Property subject to that
Lien to secure all or part of the purchase price
thereof, which Liens shall include, but not be
limited to, interests of such seller pursuant to
title retention agreements, conditional sale
contracts or Capital Leases, (d) Liens in any
Property existing (whether or not assumed) at the
time, after the date of the Loan Agreement, that such
Property was acquired by Borrower or any Subsidiary,
(e) pledges or deposits made to secure payment of
Workers' Compensation, unemployment insurance,
pensions or social security programs, (f)
construction Liens on new or existing facilities of
Borrower for which material or labor bonds are in
force or Liens imposed by mandatory provisions of Law
such as for materialmen's, mechanics', warehousemen's
and other similar Liens arising in the ordinary
course of business securing indebtedness whose
payment is not yet due, (g) Liens for Taxes imposed
on a Person or upon such Person's income or profits
or property, if the same are not yet due and payable
or if the same are being contested in good faith and
as to which adequate reserves have been provided by
such Person, (h) good faith deposits in connection
with tenders, leases, real estate bids or contracts
(other than contracts involving the borrowing of
money), pledges or deposits to secure public or
statutory obligations, deposits to secure (or in lieu
of) surety, stay, appeal or customs bonds and
deposits to secure the payment of taxes, assessments,
customs duties or other similar charges or deposits
or bonds to secure performance of governmental
contracts, or (i) encumbrances consisting of zoning
restrictions, easements, or other similar
restrictions on the use of real property, provided
that such do not impair the use or value of such
property for the uses intended, and none of which is
violated by existing or proposed structures or land
use.
- -6-
<PAGE>
"Person" means any individual, corporation,
partnership, limited liability company, joint
venture, association, joint stock company, trust,
unincorporated organization or government or any
agency or political subdivision thereof.
"Plan" means (a) with respect to Borrower, any
plan described in Section 4021(a) of ERISA and not
excluded pursuant to Section 4021(b) thereof, under
which Borrower or any Subsidiary has contributed, and
(b) with respect to any other Person, any employee
benefit plan or other plan established or maintained
by such Person for the benefit of such Person's
employees and to which Title IV of ERISA applies.
"Prime Rate" means the rate of interest
designated by the Bank as its "prime rate" and
publicly announced by the Bank from time to time,
which may be a rate at, above or below that at which
the Bank lends to other Persons. Each change in the
Prime Rate shall become effective without prior
notice to Borrower automatically as of the opening of
business on the date of such public announcement of a
change in the Prime Rate.
"Property" means all types of real, personal,
tangible, intangible or mixed property.
"Regulation G" means Regulation G of the Board
of Governors of the Federal Reserve System 12 C.F.R.
Part 207 or any other regulation hereafter
promulgated by said Board to replace the prior
Regulation G and having substantially the same
function, and any regulations, interpretation or
ruling thereunder.
"Regulation U" means Regulation U of the Board
of Governors of the Federal Reserve System, 12 C.F.R.
Part 221, or any other regulation hereafter
promulgated by said Board to replace the prior
Regulation U and having substantially the same
function, and any regulations, interpretations or
rulings thereunder.
"Regulation X" means Regulation X of the Board
of Governors of the Federal Reserve System, 12 C.F.R.
Part 224, or any other regulation hereafter
promulgated by said Board to replace the prior
Regulation X and having substantially the same
function, and any regulations, interpretations or
rulings thereunder.
"Regulatory Change" means any change after the
date of the Loan Agreement in United States federal,
state or foreign laws or regulations or the adoption
or making after such date of any interpretations,
directives or requests applying to a class of banks
including the Banks under any United States federal,
state or foreign Laws (whether or not having the
force of law) by any governmental or monetary
authority charged with interpretation or
administration thereof.
"Reportable Event" means, any event set forth in
Section 4043(b) of ERISA or the regulations
thereunder, a withdrawal from a Plan described in
Section 4063 of ERISA or a cessation of operations
described in Section 4062(e) of ERISA.
- -7-
<PAGE>
"Request for Advance": See subsection 3.2.
"Revolving Credit Commitment" means the
obligation of the Bank to make the Revolving Credit
Loan (or any Advance thereof) pursuant to subsection
3.1.
"Revolving Credit Commitment Amount" means
Fifteen Million Dollars ($15,000,000.00) (as the same
may be (i) reduced pursuant to subsection 3.5 or (ii)
changed as a result of an assignment pursuant to
subsection 12.6).
"Revolving Credit Loan" means the outstanding
balance of Advances made by the Bank to the Borrower
pursuant to subsection 3.1.
"Revolving Period": See subsection 3.1.
"Significant Subsidiary" means any Subsidiary
whose tangible net worth (as calculated in accordance
with GAAP) is equal to or greater than ten percent
(10%) of Consolidated Tangible Net Worth at the time
of any determination.
"Subsidiary" means any corporation of which the
Borrower owns or controls, directly or indirectly,
more than fifty percent (50%) of the outstanding
stock having by its terms ordinary voting power to
elect a majority of the Board of Directors of the
corporation.
"Taxes" means taxes, assessments, levies,
imposts, deductions, charges or withholdings or
whatsoever kind or nature, and all liabilities with
respect thereto.
"Termination Date" means the earlier of the
following: (a) the Business Day immediately
preceding the date that is the second annual
anniversary date of the Loan Agreement; or (b) the
date on which the Revolving Credit Commitment is
terminated pursuant to subsection 10.2.
Other Definitional Provisions. All terms
defined in the Loan Agreement shall have the above-
defined meanings when used in any other Loan
Document. The words "hereof," "herein," "hereunder"
and similar terms when used in the Loan Agreement
shall refer to the Loan Agreement as a whole and not
to any particular provision of the Loan Agreement.
Defined terms used in the singular shall import the
plural and vice versa. The word "including" shall
not import any limitation of the preceding general
description to or by the listed specific terms which
follow. References to "Section," "section" and
"subsection" are, unless the context otherwise
requires or otherwise specified, to sections and
subsections of the Loan Agreement.
- -8-
<PAGE>
EXHIBIT A
TO
LOAN AGREEMENT
REVOLVING CREDIT NOTE
$15,000,000.00 January , 1996
Phoenix, Arizona
FOR VALUE RECEIVED, BURR-BROWN CORPORATION, a
Delaware corporation (hereinafter called "Maker"),
hereby promises to pay to the order of First
Interstate Bank of Arizona, N.A. (the "Bank") at the
main office at 100 West Washington, Phoenix, Arizona
85003 (Attention: Corporate Banking Division, #741),
in Dollars in immediately available funds, the
principal sum of FIFTEEN MILLION DOLLARS
($15,000,000.00) or the aggregate unpaid principal
amount of all Advances (as such term and each other
capitalized term used herein are defined in the Loan
Agreement hereinafter referred to) made by the Bank
pursuant to the Loan Agreement, whichever is less,
and to pay interest in like funds from the date
hereof on the unpaid balance thereof at the rates of
interest per annum and at the times specified in the
Loan Agreement.
Principal hereof shall be payable in the amounts
and at the times set forth in the Loan Agreement.
This note is the Revolving Credit Note referred
to in that certain Loan Agreement dated of even date
herewith among Maker and the Bank (as the same may be
amended, modified or restated from time to time, the
"Loan Agreement"). All of the terms, conditions and
covenants of the Loan Agreement are expressly made a
part of this Note by reference in the same manner and
with the same effect as if set forth herein at length
and any holder of this Note is entitled to the
benefits of and remedies provided in the Loan
Agreement and any other agreements by and between
Maker and Bank. Reference is made to the Loan
Agreement for the maturity, payment, prepayment and
acceleration of the indebtedness evidenced hereby.
After maturity, including maturity upon
acceleration, all unpaid amounts of this Note shall
bear interest at that rate that is three percent (3%)
above the Prime Rate. Maker agrees to pay all
collection expenses, including reasonable attorneys'
fees and court costs, incurred in the collection or
enforcement of all or any part of this Note in which
the holder hereof is the prevailing party. In the
event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by
jury and shall be included in any judgment obtained
by the holder hereof.
<PAGE>
Failure of the holder to exercise any option
hereunder shall not constitute a waiver of the right
to exercise same in the event of any subsequent
default, or in the event of continuance of any
existing default after demand for strict performance
hereof.
This Note shall be binding upon Maker and its
successors and assigns and shall inure to the benefit
of the payee hereof, and any subsequent holders of
this Note, and their successors and assigns.
This Note shall be governed by and construed
according to the laws of the State of Arizona.
IN WITNESS WHEREOF, Maker has caused this Note
to be executed by its duly authorized corporate agent
as of the day and year first above written.
BURR-
BROWN CORPORATION,
a Delaware
corporation
By
Its
Maker's Tax
Identification
Number: 86-0445468
- -2-
<PAGE>
EXHIBIT B
TO
LOAN AGREEMENT
MATTERS TO BE COVERED BY THE LEGAL OPINION OF
BORROWER'S COUNSEL
The Borrower is a corporation duly
incorporated, validly existing and in good standing
under the laws of the State of Delaware, and has all
corporate power and all material governmental
licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
Each Subsidiary identified in Schedule 7.7
of the Loan Agreement is a corporation duly
incorporated, validly existing, and in good standing
under the laws of the jurisdiction of its
incorporation, and has all corporate power and all
material governmental licenses, authorizations,
consents and approvals to carry on its business as
now conducted.
The execution, delivery and performance by
the Borrower of the Loan Agreement, the Note and any
other Loan Documents are within Borrower's corporate
power, have been duly authorized by all necessary
corporate action, and require no action by or in
respect of, or filing with, any Governmental
Authority and neither the execution and delivery
thereof nor the consummation of the transactions
contemplated thereby nor compliance by the Borrower
with any, nor the Borrower's performance of all, of
the terms and provisions of the Loan Agreement, the
Note and any other Loan Document will contravene any
Law applicable to it or conflict with, result in any
breach of, or constitute any default under, its
certificate of incorporation or by-laws (both as
amended to date) or conflict with, result in any
breach of, or constitute default under, or result in
the creation of a Lien under, or require the consent
of any trustee or creditor pursuant to, any
indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, lease, bank loan or
credit agreement to which the Borrower is a party or
by which it or its assets are bound, known to us.
The Loan Agreement and the Note each has
been duly authorized and delivered by the Borrower,
and is the legal, valid and binding obligation of the
Borrower, enforceable against it in accordance with
its terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency or other
laws or equitable principles of general application
relating to the enforcement of creditors' rights.
To the best knowledge of such counsel after
due inquiry, there are no actions, suits or
proceedings pending or threatened in any court or
before any regulatory commission, board or other
administrative or other governmental entity against
or affecting the Borrower which could reasonably be
expected to have a material adverse effect on its
ability to enter into or perform its obligations
under the Loan Agreement or the Note or on the
condition
<PAGE>
(financial or otherwise), operations, business
or prospects of the Borrower, except those described
in the Borrower's report on Form 10-K for the fiscal
year ended December 31, 1994 or described on Schedule
7.4 to the Loan Agreement.
No consent, approval, waiver, license or
authorization or other action by or filing with any
governmental authority is required in connection with
the execution and delivery by the Borrower of any
Loan Documents to which it is a party except for
those which have already been obtained and are in
full force and effect.
The Borrower is not an "investment company"
nor a company "controlled" by an "investment
company", within the meaning of the Investment
Company Act of 1940, as amended.
- -2-
<PAGE>
EXHIBIT C
TO
LOAN AGREEMENT
PERMITTED LIENS
Financing Statements filed with the Arizona
Secretary of State as follows:
Filing Date File Number Secured
Party
08-05-88 540820 Norwest
Bank Arizona, NA1
07-11-90 628294 Ellco
Leasing Corp.
07-11-90 628295 Ellco
Leasing Corp.
[02-04-91 91019122 Orix Credit
Alliance Inc.]
09-05-91 678173 Hewlett-
Packard CO.
10-23-91 683136 Airnetics
Engineering
01-15-92 691754 Xerox Corp.
01-15-92 691755 Xerox Corp.
01-15-92 691757 Xerox Corp.
01-15-92 691758 Xerox Corp.
09-03-92 716920 AT&T
Commercial Finance
09-03-92 716921 AT&T
Commercial Finance
09-17-92 718302 AT&T
Commercial Finance2
11-08-93
764866
Siemens
Nixdorf
Printing
Sys.
(Boca
Raton, FL)
01-26-94 773287 Bell
Atlantic TriCon Leasing
(Paramus,
NJ)
02-08-94
774763
CIT/Equipme
nt
Financing,
Inc.
(Tempe, AZ)
04-25-94 783970 Amplicon,
Inc.3
12-15-94
812631
AT&T
Capital
Services
(DF
Airport, TX)
[FN]
1 Power Convertibles Corporation as debtor, Venture
of Burr-Brown Corporation
2 Any liens arising out of the AT&T Documents, as
defined in the Loan Agreement
3 Power Convertibles Corporation as debtor, Venture
of Burr-Brown Corporation
REVOLVING CREDIT NOTE
$15,000,000.00 January 31, 1996
Phoenix, Arizona
FOR VALUE RECEIVED, BURR-BROWN CORPORATION, a
Delaware corporation (hereinafter called "Maker"),
hereby promises to pay to the order of First
Interstate Bank of Arizona, N.A. (the "Bank") at the
main office at 100 West Washington, Phoenix, Arizona
85003 (Attention: Corporate Banking Division, #741),
in Dollars in immediately available funds, the
principal sum of FIFTEEN MILLION DOLLARS
($15,000,000.00) or the aggregate unpaid principal
amount of all Advances (as such term and each other
capitalized term used herein are defined in the Loan
Agreement hereinafter referred to) made by the Bank
pursuant to the Loan Agreement, whichever is less,
and to pay interest in like funds from the date
hereof on the unpaid balance thereof at the rates of
interest per annum and at the times specified in the
Loan Agreement.
Principal hereof shall be payable in the amounts
and at the times set forth in the Loan Agreement.
This note is the Revolving Credit Note referred
to in that certain Loan Agreement dated as of January
31, 1996 among Maker and the Bank (as the same may be
amended, modified or restated from time to time, the
"Loan Agreement"). All of the terms, conditions and
covenants of the Loan Agreement are expressly made a
part of this Note by reference in the same manner and
with the same effect as if set forth herein at length
and any holder of this Note is entitled to the
benefits of and remedies provided in the Loan
Agreement and any other agreements by and between
Maker and Bank. Reference is made to the Loan
Agreement for the maturity, payment, prepayment and
acceleration of the indebtedness evidenced hereby.
After maturity, including maturity upon
acceleration, all unpaid amounts of this Note shall
bear interest at that rate that is three percent (3%)
above the Prime Rate. Maker agrees to pay all
collection expenses, including reasonable attorneys'
fees and court costs, incurred in the collection or
enforcement of all or any part of this Note in which
the holder hereof is the prevailing party. In the
event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by
jury and shall be included in any judgment obtained
by the holder hereof.
Failure of the holder to exercise any option
hereunder shall not constitute a waiver of the right
to exercise same in the event of any subsequent
default, or in the event of continuance of any
existing default after demand for strict performance
hereof.
This Note shall be binding upon Maker and its
successors and assigns and shall inure to the benefit
of the payee hereof, and any subsequent holders of
this Note, and their successors and assigns.
This Note shall be governed by and construed
according to the laws of the State of Arizona.
IN WITNESS WHEREOF, Maker has caused this Note
to be executed by its duly authorized corporate agent
as of the day and year first above written.
BURR-
BROWN CORPORATION,
a Delaware
corporation
By G.ROGER MYERS
Its TREASURER
Maker's Tax
Identification
Number: 86-0445468
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this
Annual Report (Form 10-K) of Burr-Brown Corporation
of our report dated January 22, 1996, included in the
1995 Annual Report to Stockholders of Burr-Brown
Corporation.
Our audits also include the financial statement
schedule of Burr-Brown Corporation listed in Item
14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to
express an opinion based on our audits. In our
opinion, the financial statement schedule referred to
above, when considered in relation to the basic
financial statements taken as a whole, presents
fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in
the Registration Statement (Form S-8, No. 33-65866)
pertaining to the Burr-Brown Corporation Stock
Incentive Plan and in the Registration Statement
(Form S-8, No. 33-12185) pertaining to the Burr-Brown
Corporation Future Investment Trust of our report
dated January 22, 1996, with respenct to the
consolidated financial statements incorporated herein
by reference, and our report included in the
preceding paragraph with respect to the financial
statement schedule included in this Annual Report
(Form 10-K) of Burr-Brown Corporation.
Ernst & Young LLP
Tucson, Arizona
March 21, 1996
