22
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, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from
to
Commission File No. 0-11438
BURR-BROWN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 86-044546 _
(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. [ X ]
The aggregate market value of the voting stock held by non-
affiliates of the Registrant based on the closing price as of
March 5, 1997 was approximately $349,222,422.
There were 15,940,297 shares of Burr-Brown Common Stock
outstanding as of March 5, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal
year ended December 31, 1996--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 25, 1997--
Incorporated by reference into Part III.
PART I
Portions of this Annual Report on form 10-K
may contain certain forward looking
statements. The achievement of the results
to which such forward looking statements
relate is subject to various risks, which
are described under "Risk Factors" at the
end of Part I of this report.
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.
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 an infinite number of values with an output signal
based on a continuously 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. ICE Corporation estimated that analog
and mixed signal circuits accounted for 15% of the $117 billion
market for semiconductors in 1996.
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 relatively 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.
The following table shows the approximate product line revenues
as a percentage of total Company revenues:
<TABLE>
<CAPTION>
PRODUCT LINE 1996 1995
1994
<S> <C> <C> <C>
Analog Integrated Circuits 47.3% 42.4 %
43.3 %
Data Conversion Integrated Circuits 45.4% 42.4
% 37.8 %
Power Conversion Products 0% 9.5 %
10.3 %
Other 7.3% 5.7 %
8.6%
</TABLE>
Demand for analog circuits primarily has been driven by the need
for increased productivity manifested as the need for lower cost,
faster, lower power, smaller size, greater functionality, and
higher 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 microcontrollers, 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 two to 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 widely used in such
applications as 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
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, or high speed operation for
special applications. These high performance amplifiers are
required to treat signals generated in numerous applications,
including communication systems, audio and video system, ATE,
robotics, imaging 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 signal amplitude to a frequency,
making the signal immune to electrical noise and permitting more
efficient storage and processing of the signed 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 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 among
others.
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.
Digital Audio and Video Products Division (Burr-Brown Japan). The
Company's Digital Audio and Video 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, analog-to-
digital converters, codecs, and video devices for the digital
audio and video market. The Company believes that Burr-Brown was
the first company to introduce such audio products 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, set top box tuners for cable, and
satellite TV, and digital versatile disks (DVD).
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), formerly a majority-owned affiliate of Burr-Brown,
manufactures DC-to-DC converters and battery chargers used in
cellular telephone applications. In March 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 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 $28.5 million in 1996, $25.7
million in 1995 and $21.9 million in 1994 for product and process
development. This represents an expenditure of approximately
12.9 percent, 9.6 percent and 11.3 percent of revenue in 1996,
1995, and 1994, 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 and international patents
expiring from 1997 to 2015, and has applications for 40
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 40% of
1996 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
1996. 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 45 percent of the revenue in 1996 for analog and
data conversion integrated circuits was for products introduced
within the preceding five years. Representative major customers
of the Company include ABB, Alcatel, Advantest, Beckman, Elsag
Bailey, Ericsson, Fanuc, Fujitsu, General Electric, Hewlett-
Packard, Hitachi, Honeywell, Hughes Network Systems Inc., Lucent,
Matura, Mitsubishi, National Instruments, NEC, Nokia, Northern
Telecom, Pairgain, Philips, Rockwell, Samsung, Siemens, Sony,
Teradyne, Toshiba, and Yamaha.
Sales outside the United States accounted for approximately 66
percent of total revenues in 1996, 64 percent of total revenues
in 1995, and 62 percent of total revenue in 1994. (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 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.
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, 1996,
1995, and 1994, was approximately $41.0 million, $62.3 million,
and $45.5 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, 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.
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 have 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 uses 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 products. 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 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, Thailand, and the Philippines. To achieve lower cost
without compromising high performance, the Company has expanded
its monolithic capability to include multi-chip module assembly
in its Tucson manufacturing facility.
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. 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 1996 was approximately $149,000.
HUMAN RESOURCES
At December 31, 1996, the Company employed 1,311 people
worldwide, including 741 people in manufacturing and assembly,
203 people in research and development, 227 in sales and
marketing and 140 in management and administration. 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 at some future point. 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 in part on its ability to obtain
patents and licenses and to preserve other intellectual property
rights covering its manufacturing processes, products, and
development and testing tools. The Company seeks patent
protection for those inventions and technologies for which it
believes such protection is suitable and is likely to provide a
competitive advantage for the Company. The process of seeking
patent protection can be long and expensive and there can be no
assurance that its current patents or any new patents that may be
issued will be of sufficient scope or strength to provide any
meaningful protection or any commercial advantage to the Company.
The Company may in the future be subject to or initiate
interference proceedings in the United States Patent and
Trademark office, which can demand significant financial and
management resources. One such claim is currently pending. (See
"Item 3 Legal Proceedings".)
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 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 1998. The aggregate current gross rental
for all Tucson properties is approximately $549,000 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 1998. 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. Also, the
Company has other various sales offices that lease space under
agreements with varying maturities.
ITEM 3. LEGAL PROCEEDINGS
These two legal proceedings are the only litigation matters other
than ordinary pending litigation:
a. On August 7, 1996, the Company was dismissed from the
following case due to insufficient evidence that ground water
beneath Burr-Brown's site commingled with the contaminated ground
water:
Cordova v. Hughes Aircraft Company, 294158, Superior Court, State
of Arizona, Pima County filed on January 13, 1992. The
plaintiffs charged that they and their respective properties were
damaged from the release of contaminants including
Trichloroethylene (TCE) into the ground waters and they sought
damages.
b. Unitrode Corporation v. Burr-Brown Corporation, 94-11393-RGS,
U.S. District Court, District of Massachusetts, filed on July 11,
1994. Unitrode alleges that Burr-Brown willfully and
deliberately infringed upon two of its Small Computer System
Interface (SCSI) terminator patents, numbers 5,272,396 and
5,338,979. Unitrode seeks injunctive relief enjoining Burr-Brown
from further infringement of the patents, compensatory damages,
treble damages, costs, and attorney's fees. The litigation was
stayed in 1996 when the U.S. Patent Office issued an office
action rejecting the validity of the Unitrode patents. The U.S.
Patent Office subsequently issued another office action in late
1996 accepting the validity of certain claims within the Unitrode
patents and the stay was thereafter lifted, with a trial date set
for April 7, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for vote to the Company's security
holders during the quarter ended December 31, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
At December 31, 1996, 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:
J. Scott Blouin - Chief Financial Officer
Mr. Blouin is responsible for all aspects of worldwide financial
management for the Company, including Accounting, Treasury, and
Tax. He joined Burr-Brown in 1995 as Corporate Controller and
was promoted to CFO in 1996. Prior to that, he was employed for
17 years at Analog Devices where he held a series of increasingly
more senior positions in financial management. Mr. Blouin holds
a BS from the University of New Hampshire and an MBA from Wake
Forest University.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information required by this item appears in the 1996 Annual
Report to Stockholders on page 26, 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 1996 Annual
Report to Stockholders on page 30, 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 26, 27, 28, and 29 of the 1996 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 1996 Annual Report to Stockholders on pages 13
through 25, 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 1997 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information, with respect to Executive Compensation,
appearing under the caption "Executive Compensation and Other
Information" on pages 6 through 9 of the Registrant's Proxy
Statement for the 1997 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 through 4 of the Registrant's
Proxy Statement for the 1997 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
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 1996 Annual Report to Stockholders:
PAGES OF 1996 ANNUAL
REPORT TO STOCKHOLDERS
INCORPORATED BY REFERENCE
Report of Ernst & Young LLP, Independent Auditors 25
Consolidated Statements of Income for the years ended
13
December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity
14
for the years ended December 31, 1996, 1995 and 1994
Consolidated Balance Sheets at December 31, 1996, 15
1995 and 1994
Consolidated Statements of Cash Flows for the years ended
16
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements 17-
24
a(2) Financial Statement Schedules for the years ended Form 10-K
December 31, 1996, 1995 and 1994:
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.
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 May 15, 1996, 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 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 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. Amendment to Registrant's Stock
Bonus Plan, naming Syrus P. Madavi as Co-trustee, dated
August 18, 1996, 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.
10.6Stock 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.
10.8Patent 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.
10.9Burr-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 July 18, 1996, filed
herein.
10.10Consent 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.
10.11Master 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.
10.12Master 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.
10.13Purchase 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.
10.14Master Equipment Lease Agreement dated June 20, 1990
between General Electric Capital Corporation, fka 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.
10.15Trust 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.
10.16Burr-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. Amendments to Stock
Incentive Plan dated February 16, 1996, filed herein.
10.17Future 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 July
18, 1996, filed herein.
10.18Burr Brown's Cash Profit Sharing Plan dated April 21,
1995 incorporated by reference to Exhibit 10.18 of the
Registrant's 10-K filing for the period ended December 31,
1995.
10.19 Loan Agreement dated January 31, 1996, between Burr-
Brown Corporation and First Interstate Bank of Arizona,
N.A., incorporated by reference to Exhibit 10.19 of the
Registrant's 10-K filing for the period ended December 31,
1995. Amendments to Loan Agreement dated November 15,
1996, file herein.
11.Computation of per share earnings, filed herein.
13.Portions of the Annual Report to Shareholders for the
year ended December 31, 1996 are expressly incorporated by
reference to the Annual Report Form 10-K, filed herein.
21.Subsidiaries of the Registrant, filed herein.
23.Consent of Ernst & Young LLP, Independent Auditors,
filed herein.
24.Power of Attorney, filed herein.
27.Financial Data Schedule, filed herein.
b. No reports of Form 8-K have been filed during the fourth
quarter of 1996.
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 28,
1997
Syrus P. Madavi
President and Chief Executive Officer
J. SCOTT BLOUIN Date: March 28,
1997 J. Scott Blouin
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Syrus P. Madavi or J.
Scott Blouin, 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 28, 1997
Syrus P. Madavi Executive Officer
J. SCOTT BLOUIN Chief Financial
Officer March 28, 1997
J. Scott Blouin
THOMAS R. BROWN, Jr. Chairman of the Board March 28, 1997
Thomas R. Brown, Jr.
THOMAS J. TROUP Vice Chairman of the BoardMarch 28, 1997
Thomas J. Troup
FRANCIS J. AGUILAR DirectorMarch 28, 1997
Francis J. Aguilar
JOHN S. ANDEREGG, Jr. DirectorMarch 28, 1997
John S. Anderegg, Jr.
MARCELO A. GUMUCIO DirectorMarch 28, 1997
Marcelo A. Gumucio
<TABLE>
<CAPTION>
BURR-BROWN CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Thousands of dollars)
Years Ended December 31, 1996, 1995, And 1994
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
1996
Deducted from Asset Account:
<S> <C> <C> <C> <C>
Product Loss Reserve $ 6,872 $ 379 $ (900) (2) $ 6,351
Allowance for Doubtful Accounts 1,346 45 (310)
(1) _ 1,081
$ 8,218 $ 424 $(1,210) $ 7,432
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
</TABLE>
[FN]
(1)Uncollectible accounts written off, net of recoveries.
(2)Primarily obsolete inventory.
Note: Column E - Other is zero
EXHIBIT 11
BURR-BROWN CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
<S> <C> <C>
<C>
PRIMARY:
Weighted average number of shares outstanding(1)16,00214,88914,3
16
Net effect of dilutive stock options based
on the treasury stock method using the
average market price of Common Stock 669 807
182
Total 16,671 15,696 14,
498
Net Income $ 29,684$ 29,212 $ 6,4
65
Per Share Amount $ 1.78 $ 1.86 $ 0.45
FULLY DILUTED:
Weighted average number of shares outstanding(1)16,00214,889 14,
316
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 756
834 383
Total 16,758 15,723 14,
699
Net Income $ 29,684$ 29,212 $ 6,4
65
Per Share Amount $ 1.77 $ 1.86 $ 0.
44
</TABLE>
[FN]
(1) Includes all shares held by the Stock Incentive Plan.
EXHIBIT 21
BURR-BROWN CORPORATION AND SUBSIDIARIES
JURISDICTION
NAME OF CORPORATION OF
INCORPORATION
1. Burr-Brown International Holding Corporation Delaware
2. Burr-Brown Europe Limited United Kingdom
3. Burr-Brown Japan Limited Japan
4. Burr-Brown International S.A. France
5. Burr-Brown International S.R.L. Italy
6. Burr-Brown International BV The Netherlands
7. Burr-Brown International GmbH Germany
8. Burr-Brown AG Switzerland
9. Burr-Brown Foreign Sales Corporation Barbados
10.Intelligent Instrumentation, Inc. Arizona
11.Intelligent Instrumentation Japan, KK Japan
12.Intelligent Instrumentation GmbH Germany
13.Intelligent Instrumentation S.R.L. Italy
14.Intelligent Instrumentation S.A. France
15.Intelligent Instrumentation, Inc. Foreign Sales Corporation
Barbados
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
Exhibit 27 - Financial Data Schedule
<CAPTION>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1996 DEC-31-1995 DEC-31-1994
<EXCHANGE-RATE> 1 1 1
<CASH> 38,433 42,477 9,925
<SECURITIES> 0 0 0
<RECEIVABLES> 39,546 55,173 39,642
<ALLOWANCES> 1,081 1,346 870
<INVENTORY> 49,570 47,852 40,092
<CURRENT-ASSETS> 153,528 196,243 92,172
<PP&E> 151,497 127,449 113,968
<DEPRECIATION> 83,967 76,075 68,072
<TOTAL-ASSETS> 261,588 252,249 143,008
<CURRENT-LIABILITIES> 55,614 66,335 46,549
<BONDS> 0 0 0
<COMMON> 166 165 97
0 0 0
0 0 0
<OTHER-SE> 199,240 178,980 87,525
<TOTAL-LIABILITY-AND-EQUITY> 261,588 252,249 143,008
<SALES> 219,997 269,162 194,196
<TOTAL-REVENUES> 219,997 269,162 194,196
<CGS> 109,228 138,257 106,242
<TOTAL-COSTS> 109,228 138,257 106,242
<OTHER-EXPENSES> 80,654 90,370 77,427
<LOSS-PROVISION> 45 797 690
<INTEREST-EXPENSE> 700 1,131 1,725
<INCOME-PRETAX> 39,844 40,017 8,291
<INCOME-TAX> 10,160 10,805 1,826
<INCOME-CONTINUING> 29,684 29,212 6,465
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 29,684 29,212 6,465
<EPS-PRIMARY> 1.78 1.86 .45
<EPS-DILUTED> 1.77 1.86 .44
</TABLE>
Exhibit 13 - Annual Report
Financial Highlights
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Revenue $219,997 $269,162 $194,196 $168,577 $162,949
Income $30,115 $40,535 $10,527 $7,785 $6,984
From
Operatio
ns
Net $29,684 $29,212 $6,465 $2,817 $998
Income
Earnings $1.78 $1.86 $0.45 $0.20 $0.07
Per
Share
Return 15% 16% 7% 4% 1%
On
Equity
</TABLE>
During 1996, Burr-Brown focused its resources on accomplishing
two major objectives: First, to achieve the optimum financial
results possible in 1996; second to position the Company so it
could realize maximum growth in 1997 and beyond. Financially, the
Company delivered results which in many ways met or exceeded
those of 1995 during which we achieved 352% growth in net
earnings. As to positioning the Company for growth, we were very
successful in improving, expanding and strengthening our
capabilities in new product develop-ment, new process
technologies, manufacturing, sales and marketing, and overall
worldwide infrastructure. Moreover, during the year we further
solidified our relationships with key customers by forming
partnerships with them to develop our next generation products.
Financial Highlights: Net profit for 1996 was $29.7 million or
13.5% of sales, up from $29.2 million or 10.9% of sales in 1995.
During the year, we divested our ownership in a subsidiary, Power
Convertibles Corporation (PCC), for $10.1 million and realized a
net gain of $5.3 million. This business, which offered battery
chargers and discrete DC/DC converters, was not synergistic with
our core business of analog and mixed signal integrated circuits.
The divestiture will enable us to more intensely focus on our
core business.
Exclusive of this one time gain, 1996 was the second most
profitable year in Burr-Brown's history. Despite an 18% (11% when
excluding PCC) decline in revenue, we achieved a net income of
$24.3 million on revenue of $220 million. Profit margin at 11.1%
of sales was improved slightly over 10.9% in 1995. We were able
to achieve these results by creating greater efficiencies in our
manufacturing operations, and managing operating expenses very
closely. Consequently, our gross margins actually improved from
48.6% in 1995 to 50.4% in 1996. Moreover, the total operating
expense level was reduced by $9.7 million, or 11%, from the 1995
level. More specifically, compared to 1995, sales, marketing,
general and administrative (SMG&A) expenses were reduced by $12.4
million, or 19%; while research and development grew $2.7
million, or 11%, in order to accelerate the momentum in new
product development. Our overall plan is to restrict the growth
rate in SMG&A expenses to a fraction of the growth rate in sales,
while maintaining our investments in R&D within a range of 13-15%
of sales.
The Balance Sheet remains very sound. Despite a $10 million stock
re-purchase, and a $32 million investment in capital assets;
cash, cash equivalents, and investments increased by $3.2 million
to $89.4 million. Further, stockholders' equity increased by
$20.3 million, or in excess of 11%.
Positioning for Growth: The most crucial aspect of Burr-Brown
position-ing itself for growth has been to build significant
momentum in developing innovative new products. To this end, our
new product strategy has focused on developing Standard Linear
ICs (SLICs), which, even though highly proprietary, are used by a
broad customer base across many markets. We have also
concentrated on developing Application Specific Standard Products
(ASSPs), which are unique to high growth applications and used by
a targeted customer base. During 1996, the Company was highly
successful in introducing a record number of 65 new products;
nearly double the previous record. Moreover, due to the increased
level of innovation and cost effectiveness of these products,
they have been very well received by our customers and will
result in significant revenue in 1997 and beyond. To further
accelerate this momentum, we have made substantial additional
investments in advanced fabrication equipment to develop new
proprietary semiconductor processes. These new process
technologies are expected to have a very positive impact on the
next generation of products and are designed to enable Burr-Brown
to offer cost effective, innovative products for emerging fast
growth applications.
To achieve higher manufacturing efficiencies and expand our
capacity, we have invested in capital equipment for fabrication,
wafer probe, packaging and testing. In the fabrication area, we
have upgraded existing equipment as well as installed new
machines to eliminate bottlenecks and to increase wafer yields.
In a similar manner, we have modernized and expanded capacities
in wafer probe, assembly and testing. Consequently, our overall
product yield improved by over 10% in 1996. Moreover, we now have
sufficient capacity to support three consecutive years of 40%
growth per year without a major capacity expansion program. This
is indicative of our operating leverage potential and ability to
expand gross margins with revenue growth.
During the year, we continued to realign our sales and marketing
organization to better focus on key opportunities and emerging
growth markets. Through expanded use of third party distribution
in the U.S. and Europe, we can now better serve our diversified
customer base of some 25,000 customers; at the same time, we have
focused our direct sales force on key and corporate accounts.
This has resulted in closer collaboration on new product
development and more effective management of large opportunities.
This strategy has and will continue to drive market penetration
and thus revenue growth. Another step to improve the
effectiveness of our sales and marketing has been to establish a
regional service center in Europe to consolidate all
administrative, finance, and logistic functions for our sales
subsidiaries in the UK, Germany, France, Italy, Holland and
Switzerland. These initiatives, along with others, will enable us
to better address many fast growing segments of our served
markets.
In our Annual Report last year, I referred to the implemen-tation
of a suite of information systems which will integrate together
all worldwide functions relating to sales and marketing, finance,
materials management, product distribution, production planning,
and manufacturing. I am pleased to further report that we have
made very significant progress in completing the implementation
in the U.S. and Europe. Our plans for 1997 are to enhance this
capability in Europe and initiate implementation in Japan and
Southeast Asia. We believe this capability will continue to
reduce the overall SMG&A expenses and at the same time offer the
Company a robust infrastructure which can support us for many
years of growth.
Outlook: As 1997 begins, we are very confident that our core
competencies in developing, manufacturing and marketing analog
and mixed signal ICs can provide sustained growth for the next
decade. We are particularly pleased with the progress we are
making in the fast growth markets of communications and personal
computing. At the same time, our traditional markets of
industrial and process control, test and instrumentation, and
digital audio and video offer us very solid profitable growth in
many existing and emerging applications.
We expect our new product development will continue to gather
momentum, and our effort to increase manufacturing efficiencies
and to manage overhead costs, will provide us with opportunities
to expand revenue and margins during 1997.
We are grateful to the employees of Burr-Brown who have made all
this progress possible and to our customers who have given us the
opportunity to serve them. Finally, we thank you, our
shareholders, for your support and we remain committed to
optimizing your investment in Burr-Brown.
Syrus P. Madavi
President and CEO
Markets & Customers
As 1997 begins, Burr-Brown is well positioned for growth. The
Company continues to build on its forty years experience in the
design, commercial-ization, and production of high performance
analog and mixed signal integrated circuits (ICs). Analog ICs
deal with continuous "real-world" signals for physical quantities
such as voltage, current, pressure, and temperature. The
worldwide market for analog and mixed signal ICs is estimated at
$18 billion, 15% of total semiconductor sales.1 The technology
trends driving the growth of digital ICs, increased use of
microprocessors, portability, lower power consumption, and higher
speed require- ments are also driving demand for high performance
analog and mixed signal ICs. The total analog and mixed signal IC
market is estimated to increase 15-20% annually through the year
2000.1 Higher performance analog ICs are becoming increasingly
more prevalent in such rapidly growing product areas as
communications and computers. As a result, high performance
analog and mixed signal products will realize annual growth rates
in the 20-30% range, significantly greater than the overall
analog market. Burr-Brown's primary focus is this high
performance segment of the market.
The uses for analog and mixed signal ICs are varied and many. The
market is broadly segmented into industrial and process control,
test and instrumentation, communications, computer, military and
consumer applications. Burr-Brown participates most fully in the
industrial and process control and the test and instrumentation
segments. These applications continue to have high performance
requirements. In addressing these markets, the Company has
successfully acquired a premier reputation for delivering cost-
effective solutions to difficult signal processing problems. Over
half of 1996 revenue was derived from these segments. The Company
continues to build on its leadership position in these markets,
in order to protect and enhance market share. In addition, the
core capabilities developed in these traditional markets are
successfully used to penetrate the larger and faster growing
communications, personal computing, and digital audio and video
markets. The Company has established a strong position in high-
end digital audio and video products within the consumer segment.
An increasing proportion of revenue is derived from the
communications sector in broadband and wireless applications.
Multimedia and power management products are increasing our
participation in the PC arena. By pursuing a strategy which
allows it to leverage core competencies across a variety of
markets with similar needs, the Company has been able to
accelerate revenue growth and enhance return on valuable
technical resources.
Industrial and Process Control: This market provided
approximately 30% of revenue in 1996 and the Company's
opportunity within it is growing at 15-20% per year. A primary
industrial use of analog and mixed signal circuitry involves
acquiring and conditioning real-world signals from sensors and
then converting them into digital format for processing. The
process is then reversed to provide control inputs back into the
system. Burr-Brown's signal conditioning and data conversion
products address all aspects of this cycle. Given the universal
nature of this need, these products are present in a vast array
of applications such as motor control, robotics, factory
automation, process control, and industrial imaging. Burr-Brown
customers include the most prominent names in industrial control
equipment such as Rockwell, Siemens, Elsag Bailey, Omron, and
Toshiba as well as thousands of other producers of systems and
subsystems for this market. Increased demand is being driven by
the proliferation of microprocessors and microcontrollers, which
facilitate distributed control in systems, and the need for
greater accuracy and lower power. Burr-Brown's broad product line
and extensive market experience position it well to outperform in
this market.
Test and Instrumentation:
Measurement systems deal with real-world "analog" phenomena that
need to be sensed, measured, tracked, collected, analyzed, and
displayed. The highly diversified market involved in performing
these functions has three segments of prime interest to the
Company: medical, analytical, and automatic test equipment (ATE).
In 1996, about 25% of the Company's revenue came from this
sector. Detection and resolution of low level and noisy signals
are required in these applications, thus making analog and mixed
signal ICs critical to these markets. Burr-Brown is a major
supplier of sensor interface and data conversion solutions to
leading manufacturers of CAT scan equipment such as Siemens and
Toshiba. It maintains a strong position in the semiconductor ATE
market through major producers like Advantest and Teradyne.
Instrument suppliers such as Hewlett-Packard, National
Instruments, Tektronics, and Yokogawa Electric are also key
customers. As with industrial and process control, the
requirements of the test and instrumentation market are
synergistic across our entire product line with all applications
making extensive use of data conversion and signal conditioning
ICs. Increased portability of instruments and the need for more
precise measurement are driving requirements for lower power,
higher speed, smaller size, and multi-channel performance. These
developments favor Burr-Brown's high performance product line and
its well established position in this market.
Communications: The communications revolution represents an
explosive growth opportunity for all semiconductor companies. The
Company has specifically targeted wireless base stations and
wired broadband applications_two of the fastest growing sectors
of the communications market. Burr-Brown sales to this market
have more than doubled in the last two years and now account for
about 15% of revenue. These applications have great demand for
high speed data converters and operational amplifiers as well as
more highly integrated, application specific, mixed signal
solutions. Significant relationships have been established with
Nokia, Northern Telecom, Lucent, and NEC for basestation
applications. We will broaden participation as wireless
communication expands to micro-cells, personal communications
systems (PCS), and wireless local loops. Our wired broadband
efforts have been focused on Digital Subscriber Line (xDSL)
technology which allows for expanded data transmission rates over
the existing telephone infrastructure. Working in partnership
with such recognized industry leaders as PairGain Technologies,
AdTran, and ECI Telecom, we have developed a family of
application specific standard products (ASSPs) optimized for High
data-rate Digital Subscriber Lines (HDSL) providing key mixed
signal technology at a highly competitive price. As measured by
installed lines, the market for this equipment is expected to
maintain a compound annual growth rate in excess of 40% per year
through the end of the decade (see HDSL Line Forecast chart). As
communications technology evolves to the transmission rates
necessary to support high speed Internet access, video on demand,
and real-time interactive services, and becomes a larger
component of Burr-Brown's product portfolio, these inherently
higher growth rates are expected to favorably impact the
Company's overall performance.
Digital Audio and Video: Burr-Brown has long maintained a leading
position in the merchant market for digital-to-analog converters
(DACs) used in audio applications. Recently, product offerings
have been expanded to include analog-to-digital converters (ADCs)
and codecs. Through its SoundPLUS line, it offers the broadest
selection of CD-quality digital audio products and the best
performance-to-price ratio in the industry. The customer base,
comprised of premier producers of audio products, includes Sony,
Samsung, Yamaha, Pioneer, Roland, NEC, Alpine, Denon, and Alesis.
Digital audio and video products now generate about 20% of the
Company's revenue. Building on extensive knowledge of customers
and their applications, the product line has been broadened in a
number of important dimensions. Targeted applications have moved
beyond professional and con-sumer audio into the rapidly growing
markets for CD-ROM, video CD, DVD, and T.V. set-top boxes.
Building on its applications knowledge in consumer products, the
Company has brought its high speed signal processing to bear and
introduced a family of high speed, ADCs for this market.
Significant design-ins have been achieved in camcorder
applications with several major producers, marking entry into the
complementary video imaging market. Other target applications for
this technology include copiers, flat-bed scanners, digital
cameras, and set-top boxes. Geographically, increased pene-
tration into the substantial consumer products industry in China,
Korea, Hong Kong, & Taiwan makes Asia the fastest growing region
served by the Company. All of these actions not only contribute
to Burr-Brown's overall growth rate, but also greatly improve the
stability and profitability of this important segment of the
business. It is Burr-Brown's strategic plan to evolve into a
broad-line supplier of digital audio & video IC components.
Computer and Multimedia: Although the computer market currently
accounts for only 6% of total Burr-Brown revenue, it is one of
our fastest growing segments. It is the largest market served by
the Company and consequently represents one of its best
opportunities. Increased portability and expanded multimedia
functionality are two important drivers to growth of analog &
mixed signal ICs in personal computers. The Company has been able
to leverage its digital audio expertise to address multimedia app-
lications which require CD-quality sound. Our audio products are
designed into high volume applications such as CD-ROMs, high-end
game players, optical disk drives, and add-in multimedia cards
for PCs. In the area of power management, the Company has
introduced a family of regulators that provide precise power
supply management for computer peripherals. It is the Company's
objective to further develop power op amps, DC/DC converters,
regulator circuits, and ASSPs with integrated functionality, all
targeting applications in this segment.
Products & Technology
As 1997 begins, Burr-Brown is well positioned to increase its
competitive advantage through its performance in new product
development. The increasing level of research and development
investment over the last several years demonstrates the Company's
commitment to this area. Results have been convincing. In 1996, a
record 65 new products were introduced; nearly double the
previous record. Among these products are a number of highly
innovative ASSPs. A further 100 new products are now in
development. The focus has been on developing highly innovative
and versatile core designs to be used as building blocks for
standard product extensions. Elements of these standard products
can be then integrated to produce ASSPs when a business
opportunity warrants. To further support the new product effort,
significant investments have been made in computer-aided design
(CAD), process development tools, and state-of-the-art test
equipment. Product strategy is to leverage core competencies to
expand participation into the higher growth, larger volume
opportunities afforded by market areas relatively new to the
Company.
In addition to design expertise, access to a diversified
portfolio of semiconductor processes also presents an important
advantage. A single process is not sufficient to optimally
address the great variety of analog applications. The broader the
process capability, the more likely the Company can optimize
design trade-offs to produce the most competitive IC. Sixty
percent of the Company's wafer requirements are met internally
from a rich selection of proprietary Bipolar processes. Through
foundry relationships and development partnerships, Burr-Brown
has access to a contractually assured source of supply of BiCMOS,
Complementary Bipolar (CB), and sub-micron CMOS wafers. In
addition, several highly proprietary semiconductor processes are
being developed internally. The Company's process technology
development strategy is to continue to meet the majority of its
specialized analog process needs internally while relying on
external sources for standard sub-micron CMOS wafers. This
significantly reduces capital requirements, resulting in lower
manufacturing costs, higher product margins, and greater return
on investment.
The linear circuit product line includes operational amplifiers,
instrumentation amplifiers, programmable gain amplifiers, and
other signal conditioning components. Linear circuits provide
over a third of total revenue. This line is being expanded to
better address rapidly increasing requirements for low power,
small size, single power supply, and lower cost. A number of
Company "firsts" were added to the op amp line during 1996_the
first single supply family (OPA234), first micro-power family
(OPA237), first micro-sized op amp (OPA237 in an SOT-23 package),
and first op amp optimized for audio applications (OPA134).
Product offerings within our broad and price-competitive
instrumentation amp (INA) line also includes a number of world's
"firsts". Among these are the world's first micro-power
difference amp (INA132), the first dual instrumentation amp
(INA2128), and, at 3 femtoamps, the lowest bias current
instrumentation amp (INA116).
Burr-Brown's power products include amplifiers, regulators, and
DC/DC converters. The need for more efficient power management
and reduced board space is driving demand for these products.
Regulator and power management ICs are essential elements of
portable systems such as laptop computers. Among 1996 additions
to this line was the DCP01, the world's first isolated DC/DC
converter in a standard IC package with demonstrated
semiconductor reliability.
Increased requirements for speed and precision in a wide range of
applications are driving demand for data conversion products.
Data conversion products include analog-to-digital converters
(ADCs) and digital-to-analog converters (DACs). These products
encompass many areas of high performance, high speed conversion
and audio products. Data conversion products accounted for more
than half of new products introduced in 1996, including the
ADS1210 which set a new price-to-resolution industry standard for
a 24-bit ADC. New audio product offerings reflect more complete
functional capability and higher value-added options with the
inclusion of audio Phase Locked Loop (PLL) DACs (PCM1726) and
audio codecs (PCM3000/3001). This entire product area clearly
represents an opportunity for accelerated growth.
ASSPs represent the synthesis of all of the Company's core
competencies fused together by knowledge of customer
applications. By their nature, they require close collaboration
with the customer early in the design cycle. This provides both
competitive advantage and unique access to further opportunities.
ASSPs by design have a clearly defined customer base, large
revenue potential, faster time to peak sales, and strategic
focus. ASSPs are currently being sold into motor control, medical
imaging, digital audio and video, power management, and broadband
communications applications. In 1996, both the AFE1100 family of
products for HDSL and the DRV1100 for ADSL were introduced. The
first of a line of imaging products was brought to market in the
ADS932, optimized for interfacing with charged couple device
(CCD) applications such as camcorders. Early reception has been
very encouraging and all of these products are expected to
contribute significantly to near-term revenue.
We are confident our products and technology are well-aligned to
the markets we serve, and that we possess the capabilities and
resources necessary to take full advantage of the opportunities
presented by these markets.
Organization & Infrastructure
As 1997 begins, Burr-Brown is well positioned to increase
profitability. Financially, the last two years have been the most
successful in the Company's history. Improvements within Burr-
Brown's infrastructure have made a substantial contribution to
this success.
Organization: A new management team and technical personnel with
broad experience from some of the best companies in the industry
have joined the Company during the last several years. Those new
to Burr-Brown have meshed well with the very talented workforce
already existing at the Company to create an organization much
stronger and highly unified in purpose. A new management control
system coordinates individual goals and objectives throughout the
organization and is structured to motivate people to maximize
overall Company performance. Through quarterly company-wide
meetings, the management team continuously communicates strategy,
competitive position, and annual/quarterly goals and results to
keep the Company on a cohesive path to success. As the results of
the past two years indicate, the manage- ment process at Burr-
Brown is highly focused on improvement.
Quality: In a recent annual survey, customers judged Burr-Brown's
overall quality as "high", giving us superior marks relative to
our competitors in respon-siveness to problems and in providing
technical assistance. Overall customer satisfaction has risen
over last year. Product reliability, as measured by FITs
(Failures In Time, failures per billion device hours of
operation), has been improved by a factor of two in the past
three years. The Company continues to maintain the ISO9001
certification it earned in 1994 and has successfully passed
several comprehensive quality audits by major new OEM customers.
By most significant measures, the quality of the Company and its
products is continuously improving.
Sales and Distribution: Great changes have occurred in the way
the Company goes to market. The use of third party distribution
has been greatly expanded such that 40% of revenue is received
through this channel. In 1996, Anthem Electronics was added as a
U.S. distributor, Digi-Key as a major catalog distributor, and
several new regional distributors were appointed in Europe and
Asia. The use of distribution has provided broader access to
customers. Through technical training and close collaboration,
our large base of some 25,000 customers is being better served.
At the same time, our substantial direct technical sales
resources are able to focus more fully on the select group of key
accounts so vital to our growth.
Information Systems: Burr-Brown is a worldwide company which is
becoming increasingly more complex. Sales, marketing, design,
development, and manufacturing activities now occur in a number
of locations in North America, Europe, and Asia. In order to
assure the Company continues to be managed efficiently and
effectively as it grows, significant investments have been made
to revitalize its business information systems. In 1996, the
first phase of a project to install the SAP suite of business
applications was completed in the U.S. Europe will be completed
by mid-1997 followed by Asia in early 1998. When completed, all
worldwide financial, logistics, material management, and
production planning activities will be accomplished using this
system. The Consilium Workstream Manufacturing Execution System
(MES) was installed in the Tucson wafer fab facility and will be
fully deployed throughout the factory during 1997. In addition,
an Oracle-based worldwide data warehouse became fully operational
in 1996. These systems are designed to unify the Company, reduce
administrative costs, and provide our people with the tools
necessary to effectively do their jobs today and provide for
future growth without significant increases in overhead expense.
Operating Costs: Burr-Brown's financial operating model calls for
improved gross margins and reduced sales, marketing, general and
administrative (SMG&A) expenses in order to improve profitability
while allowing for increased investment in research and
development (R&D) to fuel growth. Over the past several years,
considerable progress has been made toward these objectives. The
Company has and will continue to make significant capital
investments in order to further this trend. The deployment of
advanced wafer fabrication equipment has improved yield, reduced
manufacturing cycle time, and increased direct labor
productivity. Standardization of automatic test equipment has
increased yields and throughput, reduced support requirements,
and overall operating costs. Labor-intensive assembly and test
operations continue to migrate from higher cost U.S., Japanese,
and European facilities to more cost-effective Southeast Asian
locations. Our plan is for growth in SMG&A expenses to be
constrained to a rate lower than revenue growth and for expanded
use of third party distribution to further reduce internal
selling expenses. The installation of common worldwide business
information systems will allow for consolidation and reduction of
administrative costs. European administration and logistics
functions are being consolidated at a Regional Service Center
(RSC) at our Livingston, Scotland location. When complete in
1998, all of the Company's administration and logistics functions
will be performed in three RSCs worldwide. In all aspects of
cost, considerable operating leverage will be realized with
continued growth.
Consolidated Statements of Income
Burr-Brown Corporation and Subsidiaries_In thousands, except per
share amounts
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Net revenue $219,9 $269,1 $194,1
97 62 96
Cost of goods sold 109,22 138,25 106,24
8 7 2
Gross margin 110,76 130,90 87,954
9 5
% of revenue 50% 49% 45%
Expenses:
Research and development 28,452 25,733 21,851
% of revenue 13% 10% 11%
Sales, marketing, general, 52,202 64,637 55,576
and administrative
% of revenue 24% 24% 29%
Total operating expenses 80,654 90,370 77,427
% of revenue 37% 34% 40%
Income from operations 30,115 40,535 10,527
% of revenue 14% 15% 5%
Interest expense 700 1,131 1,725
Gain from sale of subsidiary (7,180
)
Other (income) expense (3,249 (613) 511
)
Income before income taxes 39,844 40,017 8,291
% of revenue 18% 15% 4%
Provision for income taxes 10,160 10,805 1,826
Effective tax rate 25% 27% 22%
Net income $29,68 $29,21 $6,465
4 2
% of revenue 13% 11% 3%
Earnings per common share 1.78 $1.86 $0.45
Shares used in per common 16,671 15,696 14,498
share calculation
</TABLE>
[FN]
See Notes to Consolidated Financial Statements.
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Burr-Brown Corporation and Subsidiaries_In thousands
Common Additio Treasury
Stock nal Stock
Shar Amoun Paid- Retain Cumulat Share Amount Total
es t In ed ive s
Capi Earnin Transla
tal gs tion
Adjustm
ent
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
at
January 9,666 $97 $26,0 $52,422 $2,08 131 $(1,06 $79,551
1,1994 13 3 4)
Net 6,465 6,465
income
Foreign
currency
translat
ion 1,421 1,421
adjustme
nt
Stock
options
exercise 48 387 387
d
Treasury
stock
acquired 14 (157) (157)
Affiliat (45) (45)
e's
stock
activity
Balance
at
December 9,714 97 26,40 58,842 3,504 145 (1,221 87,622
31,1994 0 )
Net 29,212 29,212
income
Foreign
currency
translat
ion (342) (342)
adjustme
nt
Stock
split at 4,859 37 (37) 81 0
three-
for-two
Stock
options
exercise 213 13 2,094 2,107
d
Stock
offering 1,750 18 61,19 61,213
5
Treasury
stock
acquired 26 (460) (460)
Affiliat
e's 46 (253) (207)
stock
activity
Balance
at
December 16,536 165 89,69 87,801 3,162 252 (1,681 179,145
31, 1995 8 )
Net 29,684 29,684
income
Foreign
currency
translat
ion (281) (281)
adjustme
nt
Stock
options
exercise 78 1 628 629
d
Treasury
stock
acquired 492 (9,753 (9,753)
)
Affiliat
e's (18) (18)
stock
activity
Balance
at
December 16,614 $16 $90,3 $117,46 $2,881 744 $(11,4 $199,40
31, 1996 6 26 7 34) 6
</TABLE>
[FN]
See Notes to Consolidated Financial Statements.
Consolidated Balance Sheets
Burr-Brown Corporation and Subsidiaries_In thousands
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $38,433 $42,477 $9,925
Short-term investments 14,407 43,738
Trade receivables 39,546 55,713 39,642
Inventories 49,570 47,852 40,092
Deferred income taxes 6,705 3,273 331
Other 4,867 3,190 2,182
Total Current Assets 153,528 196,243 92,172
Long-Term Investments 36,537
Land, Buildings, and Equipment
Land 3,427 3,393 3,396
Buildings and improvements 25,344 23,294 21,988
Equipment 122,726 100,812 88,584
151,497 127,499 113,968
Less accumulated depreciation (83,967 (76,075 (68,072
) ) )
67,530 51,424 45,896
Other Assets 3,993 4,582 4,940
$261,58 $252,24 $143,00
8 9 8
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $14,533 $17,904 $16,964
Accounts payable 17,641 17,359 12,747
Accrued expenses 3,568 8,703 7,485
Accrued employee compensation and 8,194 8,929 4,834
payroll taxes
Deferred profit from distributors 7,462 6,198 1,792
Income taxes payable 3,129 6,092 1,630
Current portion of long-term debt 1,087 1,150 1,097
Total Current Liabilities 55,614 66,335 46,549
Long-Term Debt 1,830 1,808 1,839
Deferred Gain 1,122 2,619 4,116
Deferred Income Taxes 1,709 159 1,182
Other Long-Term Liabilities 1,907 2,183 1,700
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $.01 par
value-authorized 2,000 shares:
none issued or outstanding
Common stock, $.01 par
value-authorized 80,000 shares;
issued and outstanding, including
treasury shares:
1996-16,614 shares,1995-16,536
shares,
1994-14,571 shares 166 165 97
Additional paid-in capital 90,326 89,698 26,400
Retained earnings 117,467 87,801 58,842
Equity adjustment from foreign 2,881 3,162 3,504
currency translation
Treasury stock, at cost:
1996-744 shares, 1995-252 shares,
1994-218 shares (11,434 (1,681) (1,221)
)
199,406 179,145 87,622
$261,58 $252,24 $143,00
8 9 8
</TABLE>
[FN]
See Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows
Burr-Brown Corporation and Subsidiaries_In thousands
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Operating Activities
Net Income $29,684 $29,212 $6,465
Adjustments to Reconcile Net Income to
Net Cash Provided by
Operating Activities:
Depreciation and amortization 13,272 12,712 10,615
Amortization of deferred gain (1,497) (1,497) (1,496)
Provision for inventory reserves 379 1,974 1,883
Provision for (benefit from) deferred (1,908) (3,983) 707
income taxes
Increase in deferred profit from 1,264 4,406 696
distributors
Gain from sale of subsidiary (7,180)
Other (129) 778 608
Changes in Operating Assets and
Liabilities:
(Increase) decrease in trade 10,969 (17,256 (2,484)
receivables )
(Increase) decrease in inventories (5,861) (10,197 3,179
)
(Increase) decrease in other assets (2,400) (561) 130
Increase (decrease) in accounts payable 2,341 5,269 2,789
Increase (decrease) in accrued expenses (7,921) 10,072 (3,169)
and other liabilities
Net Cash Provided by Operating 31,013 30,929 19,923
Activities
Investing Activities
Purchases of investments (50,944 (43,738
) )
Maturities of investments 43,738
Purchases of land, buildings, and (31,919 (17,574 (12,055
equipment ) ) )
Proceeds from sale of equipment 415 191 462
Proceeds from sale of subsidiary 12,804
Net Cash Used In Investing Activities (25,906 (61,121 (11,593
) ) )
Financing Activities
Proceeds from short-term and long-term 770 1,374 16,366
borrowings
Payments on short-term and long-term (1,160) (1,681) (27,339
borrowings )
(Payments for) proceeds from capital (9,142) 62,653 185
stock activity, net
Net Cash (Used In) Provided by (9,532) 62,346 (10,788
Financing Activities )
Effect of exchange rate changes on cash 381 398 (683)
& cash equivalents
(Decrease) Increase in Cash and Cash (4,044) 32,552 (3,141)
Equivalents
Cash and cash equivalents at beginning 42,477 9,925 13,066
of year
Cash and Cash Equivalents at End of $38,433 $42,477 $9,925
Year
</TABLE>
[FN]
See Notes to Consolidated Financial Statements.
Notes to Consolidated Financial Statements
Burr-Brown Corporation and Subsidiaries_In thousands, except per
share amounts
December 31, 1996
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 one
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.
Revenue Recognition: 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. All other sales are recognized when the product is
shipped.
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
currently reflected in income.
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, long-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 at any one institution and takes into account the
relative credit standing of these institutions. The Company's
short-term and long-term investments are purchased through high
credit quality financial institutions. The cost of these
investments approximates their fair value for all years
presented.
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.
Cash Equivalents and Investments
The Company's investments are classified based on their original
maturity dates. Cash equivalents consist of investments that have
maturities of three months or less when purchased. Short-term
investments have maturities ranging from three to twelve months,
and long-term investments have maturities that extend beyond one
year. At December 31, 1996, the Company had no investments
maturing after August, 1998.
Cash equivalents and investments at December 31, 1996, classified
as available for sale and at December 31, 1995, classified as
held to maturity and all of which approximated market value
consisted of:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
U.S. Treasury and $21,963 $78,67
GovernmentAgency Securities 7
Municipal Bonds 25,979
Mutual Funds investing in 27,869
various debt securities
$75,811 $78,67
7
</TABLE>
Income received from cash equivalents and investments was $3,740,
$1,160, and $425 in 1996, 1995, and 1994; respectively. The
Company did not sell any investments classified as available for
sale in 1996.
Inventories
Inventories consist of the following:
December 31, 1996 1995 1994
Finished goods $18,383 $16,180 $15,133
Work-in- 20,227 17,830 12,789
process
Raw materials 10,960 13,842 12,170
$49,570 $47,852 $40,092
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 insignificant for all periods
presented.
The Company maintains relationships with several major U.S. and
foreign banks and arranges foreign currency hedging products with
such banks. As of December 31, 1996, such hedging products
consisted entirely of forward contracts with a major U.S. bank to
sell Japanese Yen, German Marks, British Pounds and Italian Lira.
Such forward contracts had maturity dates from January 10, 1997
to April 11, 1997. As of December 31, 1996, outstanding forward
contracts had a value of $6,304 and a fair market value of
$6,337.
Notes Payable
The Company has available short-term credit facilities of
approximately $48,477 with $14,533 outstanding as of December
31, 1996. There are no compensating balance requirements.
Approximately $39,400 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 1996, 1995, and 1994 were 3.3%, 3.6%, and 4.1%; respectively.
These credit facilities are renewable annually at various dates.
Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
<S> <C> <C> <C>
Capitalized lease arrangements_various $2,81 $2,74 $2,00
terms and interest rates 2 5 3
Other 105 213 933
2,917 2,958 2,936
Less current portion 1,087 1,150 1,097
$1,83 $1,80 $1,83
0 8 9
</TABLE>
The Company has a $10,000 revolving line of credit with a major
U.S. bank. The Company can borrow at LIBOR + 1.25%, the bank's
Prime rate or the bank's "bid rate." The Company may select terms
of 30, 60, 90 and 120 days for LIBOR borrowings. The revolving
line of credit carries an annual commitment fee of 1/4% on the
unused portion of the commitment. The loan agreement has debt,
net worth and debt coverage convenants. As of December 31, 1996,
the Company is in compliance with all covenants and conditions
contained in the loan agreement. The loan agreement does not
require compensating balances. The Company's revolving line of
credit terminates as of May 1, 1998, but the bank may extend such
date after its annual review.
Under the various long-term debt agreements consisting primarily
of capital lease obligations, the Company is obligated to pay the
following principal amounts for each of the next five years:
1997 $1,087
1998 $717
1999 $573
2000 $447
2001 $93
Interest paid on all debt amounted to $566, $947, and $1,988 in
1996, 1995, and 1994; respectively.
Income Taxes
Income before income taxes is comprised as follows:
Years Ended December 1996 1995 1994
31,
Domestic $36,46 $31,07 $5,063
8 7
Foreign 3,376 8,940 3,228
$39,84 $40,01 $8,291
4 7
The components of the provision (benefit) for income taxes are as
follows:
Years Ended December 1996 1995 1994
31,
Current:
U.S. Federal $8,183 $8,785 $(141)
State 1,577 2,701 (186)
Foreign 2,282 3,284 1,485
12,042 14,770 1,158
Deferred:
U.S. Federal (1,983 (3,617 118
) )
State 145 (406) 381
Foreign (44) 58 169
(1,882 (3,965 668
) )
$10,16 $10,80 $1,826
0 5
Actual current tax liabilities are lower than the amounts
reflected above by the tax benefit from stock option activity of
$155 and $841 in 1996 and 1995, respectively. 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 are as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
<S> <C> <C> <C>
Deferred tax
liabilities:
Depreciation $(1,910) $(2,331 $(1,935)
)
Other, net (435)
Total deferred tax (1,910) (2,331) (2,370)
liabilities
Deferred tax assets:
Inventory reserves and 2,471 2,809 2,965
capitalization
Tax credit 1,300 4,612
carryforwards
Sale leaseback 456 1,057 1,652
Intercompany 1,247 1,816 3
transactions
Foreign loss 637 520 664
carryforwards
Distributor reserves 3,030 2,583 719
Employee benefits 592 1,102 531
reserves
Other, net 781 1,319 169
Total deferred tax 10,514 11,206 11,315
assets
Valuation allowance (3,608) (5,761) (9,796)
Net deferred tax assets 6,906 5,445 1,519
Net deferred tax assets $4,996 $3,114 $(851)
(liabilities)
</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 could not be assured that such income would be earned.
A reconciliation of the U.S. Federal statutory income tax rate to
the effective tax rate follows:
Percent of Pretax Income
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
U.S. Federal statutory rate 35.0% 35.0% 34.0%
State taxes, net of federal benefit 2.8 3.7 2.3
Foreign taxes in excess of (less than) 0.3 (0.8) 6.7
U.S. Federal statutory rate
Foreign sales corporation (2.5) (1.5)
Research and development credit (0.8)
Tax exempt investment income (0.7)
Research and development and minimum tax (10.2
credit carryforwards )
Domestic temporary differences not (9.4) (18.6)
previously benefited
Other 0.8 0.8 (2.4)
Effective tax rate 25.5% 27.0% 22.0%
</TABLE>
Undistributed earnings of foreign subsidiaries were $12,226 at
December 31, 1996. 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 $1,279, of which $607 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 $12,987, $8,970, and $2,968 in
1996, 1995, and 1994; respectively.
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 2,117 shares, including 717 shares available
from the 1981 Plan. 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.
As of December, 1996, the Company had a plan in place to purchase
up to 1,000 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.
Pro forma information regarding net income and earnings per share
is required by SFAS No. 123, Accounting for Stock-Based
Compensation, and has been determined as if the Company had
accounted for its employee stock options under the fair value
method of that Statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option
pricing model with the following assumptions for 1996 and 1995,
respectively: risk-free interest rates ranging from 5.00% to
5.34% and from 5.30% to 6.12%; dividend yields of 0.0%;
volatility factor of the expected market price of the Company's
common stock of .508; and an expected life of an option of 7
years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
SFAS No. 123 requires the Company to present pro forma
disclosures for options granted in 1995 and thereafter. Because
prior years' awards were not included in these disclosures, they
would not be indicative of future amounts.
For purposes of pro forma disclosures, the estimated fair value
of the options was amortized to expense over the options' vesting
period. The Company's pro forma information follows:
Years Ended 1996 1995
December 31,
Net Income
As reported $29,684 $29,212
Pro forma $29,202 $29,042
Primary earnings
per share
As reported $1.78 $1.86
Pro forma $1.75 $1.85
A summary of the Company's stock option activity, and related
information follows:
<TABLE>
<CAPTION>
Shares Option Weighted-
Under Price Per Average
Option Share Exercise
Price
<S> <C> <C> <C>
Balance at January 1, 373 $4.50 -
1994 $10.67
Granted 771 4.33 - 5.83
Exercised (72) 4.67 - 5.87
Canceled (75) 4.67 -
10.50
Balance at December 31, 997 4.33 - $5.19
1994 10.67
Granted 300 8.50 - 13.20
35.00
Exercised (215) 4.33 - 6.03
10.67
Canceled (36) 4.50 - 8.50 6.33
Balance at December 31, 1,046 4.33 - 7.27
1995 35.00
Granted 337 17.00 - 18.88
23.75
Exercised (78) 4.33 - 6.34
16.00
Canceled (121) 4.33 - 10.58
33.00
Balance at December 31, 1,184 $4.50 - $10.29
1996 $35.00
</TABLE>
The weighted-average fair value of options granted during 1996
and 1995 was $11.02 and $7.02, respectively. The weighted-average
remaining contractual life for options outstanding as of December
31, 1996, was 7.9 years.
Stock options for 424, 303, and 278 shares were exercisable at
December 31, 1996, 1995, and 1994, respectively. The weighted
average exercise price for exercisable options was $6.19 and
$5.67 at December 31, 1996 and 1995, 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.
On March 4, 1997, the Company's Board of Directors announced a
three-for-two stock split effected in the form of a stock
distribution. One additional share of common stock will be
distributed for every two shares of common stock outstanding to
stockholders of record on March 18, 1997.
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 Operations consist of activity
primarily from Japan. The United States operations include
corporate activity that benefits the Company as a whole.
<TABLE>
<CAPTION>
Years Ended December 1996 1995 1994
31,
<S> <C> <C> <C>
Net Revenue:
North American
Operations:
Unaffiliated customers $75,757 $95,667 $73,927
Foreign unaffiliated 5,376 17,250 13,858
customers
Consolidated 83,044 87,721 77,290
subsidiaries
164,177 200,638 165,075
European Operations:
Unaffiliated customers 55,679 64,794 48,606
Consolidated 12,165 13,225 10,981
subsidiaries
67,844 78,019 59,587
Far Eastern Operations:
Unaffiliated customers 83,185 91,451 57,805
Consolidated 3,632 4,037 4,160
subsidiaries
86,817 95,488 61,965
Eliminations (98,841) (104,983) (92,431
)
$219,997 $269,162 $194,19
6
Income (Loss) Before
Income Taxes:
North American $45,920 $33,446 $5,015
Operations
European Operations 1,074 5,428 397
Far Eastern Operations 2,271 3,402 2,820
Eliminations - (9,421) (2,259) 59
primarily United States
$39,844 $40,017 $8,291
Identifiable Assets:
North American $226,444 $206,405 $105,02
Operations 8
European Operations 25,075 28,790 19,300
Far Eastern Operations 32,541 43,642 32,538
Eliminations (22,472) (26,588) (13,858
)
$261,588 $252,249 $143,00
8
</TABLE>
Commitments and Contingencies
The Company was involved in one ground water claim at December
31, 1995. On August 7, 1996, the Company was dismissed from this
claim due to insufficient evidence that the ground water beneath
Burr-Brown's site commingled with the contaminated water.
As is typical in the semiconductor industry, the Company has been
sued for patent infringement by a competitor. The Company
believes the competitor's claim is not supportable and is
vigorously contesting the suit. In addition, the claimed
infringement relates to products that account for an immaterial
level of the Company's net revenue. The case is still in its
early stages and patent litigation is inherently uncertain.
Therefore, there can be no assurances as to the ultimate outcome
of the case. However, management is of the opinion that the
disposition of this suit will not result in any material change
in the Company's financial condition, results of operations, or
cash flows.
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
transactions was deferred and is being amortized over the five-
year lease terms. Under the terms and conditions of such leases
the Company may purchase the equipment at fair market value or
return the equipment to the lessor. The leases are classified as
operating leases. Rents under these leases are $2,196 annually
and the table below includes future rents due under such leases.
Approximate aggregate future commitments under noncancelable
operating leases, primarily for equipment and office facilities,
are summarized as follows:
1997 $4,047
1998 $1,707
1999 $1,123
2000 $887
2001 $592
Rental expense was $4,932, $5,352, and $6,324 in 1996, 1995, and
1994; respectively.
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>
1996 1996 1995 1995 1994 1994
U.S. Foreig U.S. Foreig U.S. Foreign
n n
<S> <C <C> <C> <C> <C> <C>
Years Ended Plans Plans Plans Plans Plans Plans
December 31,
Defined benefit
pension plans:
Service cost-
benefits earned $478 $351 $392 $321 $492 $334
during the period
Interest cost on
projected benefit 665 155 620 189 608 166
obligation
Net amortization 770 11 1,142 4 (363) (20)
Return on plan (1,505 (33) (1,732 (49) 21 (43)
assets ) )
Net periodic
pension expense of 408 484 422 465 758 437
defined benefit
plans
Defined
contribution plan - 747 626 507
Matching FIT
Total employee
benefit expense $1,155 $484 $1,048 $465 $1,26 $437
5
</TABLE>
Assumptions used in computing pension expense for the defined
benefit plans were as follows:
<TABLE>
<CAPTION>
Years Ended 1996 1996 1995 1995 1994 1994
December 31,
U.S. Foreign U.S. Foreign U.S. Foreign
Plan Plans Plan Plans Plans Plans
s s
<S> <C> <C> <C> <C> <C> <C>
Weighted-average
discount rate 7.75 2.5%- 8.5% 5.5%- 7.5% 5.5%-
% 7.0% 7.5% 7.0%
Rates of increase
in compensation 4.5% 3.0% 5.0% 4.5% 5.0% 4.5%
levels
Expected long-term
rate of return on 9.5% 3.7%- 8.5% 4.1%- 8.5% 5.5%-
assets 7.0% 7.0% 7.0%
</TABLE>
The following table sets forth the funded status and amounts
recognized in the consolidated balance sheets at December 31,
1996, 1995, and 1994; for the Company's defined benefit pension
plans:
<TABLE>
<CAPTION>
December 31, 1996 1996 1995 1995 1994 1994
U.S. Foreig U.S. Foreign U.S. Foreig
n n
Plans Plans Plans Plans Plans Plans
Actuarial present value of benefit
obligations:
<S> <C> <C> <C> <C> <C> <C>
Vested benefit $6,148 $2,083 $6,036 $1,879 $3,773 $1,502
obligation
Accumulated $7,351 $2,684 $7,155 $2,225 $4,294 $1,863
benefit
obligation
Projected
benefit $(9,439 $ $(9,208 $(3,004 $(7,773 $(2,74
obligation for ) (3,376 ) ) ) 7)
services )
rendered to date
Plans assets at 12,049 1,474 9,826 1,486 7,059 1,406
fair value
Excess
(shortfall) of
plan assets over 2,610 (1,902 618 (1,518) (714) (1,341
(under) ) )
projected
benefit
obligation
Unrecognized net (2,634) 330 (1,500) 28 (1,248) 190
loss (gain)
Unrecognized
prior service 1,094 1,333 1,550
cost
Unrecognized net
transition 171 (50) (47)
obligation
Net pension $ 1,070 $ $451 $(1,540 $ $(1,19
asset (1,401 ) (412) 8)
(liability) )
</TABLE>
U.S. plan assets consist of investments in equities, bonds, and
cash equivalents. Foreign plans' assets consist of securities,
real estate, loans, and cash equivalents.
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, 1996,
1995, and 1994, 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, 1996. 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, 1996, 1995, and 1994, and the consolidated results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
Tucson, Arizona
January 22, 1997
Summarized Quarterly Data (Unaudited)
The following is a summary of quarterly financial data for 1996,
1995, and 1994:
<TABLE>
<CAPTION>
Quarter Ended 1996
March 30 June 29 Sept. Dec. 31
28
<S> <C> <C> <C> <C>
Net revenue $61,174 $58,181 $50,109 $50,533
Gross margin 30,677 29,754 25,092 25,246
Net income 11,598 6,607 5,700 5,779
Earnings per .69 .40 .35 .35
share
Quarter Ended 1995
April 1 July 1 Sept. 30 Dec. 31
Net revenue $59,547 $69,594 $70,218 $69,803
Gross margin 28,186 33,798 34,411 34,510
Net income 4,657 6,845 8,287 9,423
Earnings per .31 .45 .54 .55
share
Quarter Ended 1994
April 2 July 2 Oct. 1 Dec. 31
Net revenue $47,355 $47,607 $49,217 $50,017
Gross margin 22,874 22,810 21,177 21,093
Net income 1,737 1,964 1,704 1,060
Earnings per .12 .14 .12 .07
share
</TABLE>
Quarterly Market & Dividend Information
<TABLE>
<CAPTION>
1996 1996 1995 1995
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $29 7/8 $15 3/4 $12 1/8 $7 5/8
Second Quarter 24 1/2 15 1/4 27 1/4 11 1/8
Third Quarter 21 1/4 15 1/4 40 3/4 25 1/4
Fourth Quarter 27 1/2 19 1/2 36 3/4 19 1/4
</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,
1996, there were approximately 5,500 stockholders of record,
which include those listed in company records and stockholders
who hold their shares in a broker's name.
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
1996 Compared to 1995
Net income for 1996 was the highest in the Company's history.
Annual revenue was second only to the prior year despite the
first industry contraction since 1985 and the divestiture of
Power Convertibles Corporation (PCC) in the first quarter of the
year. In addition, substantial gains were realized across a broad
front in the Company's operations.
For the year ended December 31, 1996, revenue was $220 million
compared to revenue of $269.2 million in 1995. When excluding
revenue of PCC, a subsidiary divested in the first quarter of
1996, revenues from ongoing operations were 10.6% lower than
1995. This decline was the result of industry conditions which
prevailed for most of the year. The magnitude of this decline was
consistent with that reported for the industry as a whole for
1996. Customer inventories and supply in the distribution channel
remained high throughout the year, due largely to very strong
1995 demand and shortened lead times. Revenue declined in the
third quarter and remained stable for the remainder of the year.
A recovery appears to be starting as fourth quarter new order
bookings exceeded revenue for the first time all year.
The Company's core analog and mixed signal integrated circuit
(IC) products accounted for 91% of total revenue, up from 85%
last year. Much of this increase was the result of the PCC
divestiture and represented further progress in the strategy to
become a pure analog IC company. Over 50% of sales were derived
from the markets for industrial process control and test and
instrumentation equipment. The Company maintains a very strong
position in these markets by virtue of long standing
relationships with customers and the high performance
applications requirements in terms of precision, speed, and cost.
Sales into these markets exhibited the most stability year-to-
year, the result of a very broad customer, product, and
application base. 20% of sales were into digital audio and video
applications. Given the high consumer product content, sales into
this market were most affected by industry conditions. Further,
as a high proportion of these sales were to Japanese customers,
the significant devaluation of the Yen as compared to 1995 had
some adverse impact on dollar revenues. The telecommunications
market was the source of 15% of sales and represents an area of
significant growth opportunity for the Company. The overall
growth rate of this market is among the highest addressed by Burr-
Brown, and requirements are particularly well suited to the
Company's core competency of high performance analog and mixed
signal ICs. Revenue from this sector was relatively even with the
prior year but increased as a percent of total sales. Sales into
the personal computer and multimedia market, which accounted for
only 6% of revenue, declined from 1995 levels, again due to
overall semiconductor market conditions. The remainder of the
Company's sales were realized from a broad range of sources
including military applications and were, in total, roughly
consistent with prior year levels.
Geographically, all regions, with the notable exception of
Southeast Asia (SEA), contributed to the overall revenue decline.
The U.S. sales decline included only a slight decrease in the
domestic third-party distribution channel. Japan sales declined
as a result of conditions in the consumer audio market and
devaluation of the Yen. The European sales decline was reflective
of overall business conditions in that region. SEA sales grew
year over year as the Company increased its penetration in the
developing, faster growing markets within the People's Republic
of China and the Four Tigers countries.
1996 gross margin as a percent of sales improved to 50.4% from
48.6% in 1995. Some of this improvement was due to the
divestiture of PCC, a relatively low gross margin business unit.
As is characteristic for analog ICs, exclusive of currency
impacts, like product pricing remained stable, and product mix
was somewhat more favorable. More significantly, manufacturing
cost reductions and gains in efficiency contributed to gross
margin expansion despite lower revenue levels. Product yield
increased by over 10%, and manufacturing headcount was reduced by
21%, exclusive of the PCC divestiture. Much of this improvement
was driven by capital investment in factory automation. The first
phase of a new manufacturing execution system was completed with
installation in the Tucson wafer fabrication facility occurring
at mid-year. Progress was made in the standardization of test
systems employed in final test operations. The benefits of this
strategy include both an overall lower cost of ownership, due to
the reduction of support costs required, and improved yields.
Throughput yields have also benefited from process equipment
upgrades in the Tucson wafer fab. An excess of industry capacity
resulted in favorable pricing on externally sourced wafers and
assembly services. Further gross margin expansion was precluded
by the loss of operating leverage due to lower sales volume. With
the expansion of several discrete manufacturing bottlenecks,
sufficient internal capacity and contractual source of supply
arrangements are in place to support nearly three times the
current revenue level without a major wafer fab addition.
Total operating expenses were reduced by $9.7 million or 10.8%.
Research and Development (R&D) spending was increased by $2.7
million or 10.6%. Sales, Marketing, and General, and
Administrative (SMG&A) spending was reduced by $12.4 million or
19.2% as compared to 1995. This reflects continued progress of
the strategy to increase R&D investments as the primary driver of
revenue growth while reducing SMG&A expenses in order to expand
profit margins.
As a percent of revenue, R&D investments increased to 12.9% in
1996 from 9.6% last year. This increase was consistent with the
conviction that effective R&D spending is the critical success
factor in revenue growth and increased market penetration. This
increased spending has been in the form of expanding the design
and technical staff, acquiring improved development tools, and in
the development of proprietary, next generation analog wafer fab
processes. The benefits of increased R&D investment have already
become apparent in the introduction of 65 new products during
1996, nearly twice the previous record. Among these products are
a number of highly innovative application specific standard
products (ASSPs) which target the large and rapidly growing
telecommunication and computer and multimedia markets. Several of
these products have already resulted in volume orders and should
begin to contribute significantly to revenue in 1997. The
Company's near term operating model for R&D spending is in the
range of 13-15% of revenue.
1996 SMG&A expenses of $52.2 million were 23.7% of revenue as
compared to 24.0% of revenue in 1995, despite an overall decline
in revenue. SMG&A expenses decreased by $12.4 million or 19.2% of
revenue as compared to an overall revenue decline of 18.3%.
Throughout 1996, opportunities to reduce cost in this area were
aggressively pursued. SMG&A headcount declined by 8% from 1995
levels, exclusive of the effect of the PCC sale. Critical to the
further progress of this effort is expanded use of third party
distribution and the consolidation and increased efficiency of
administrative functions. Although the primary reason for
increased use of external distributors is revenue growth through
expanded market coverage, it also allows for significant
reductions in worldwide selling costs. During 1996, this channel
accounted for 40% of worldwide revenue, up from 35% last year. A
new worldwide management information system is the enabling
technology which will drive increased administrative efficiency.
Implementation of this system in the Company's domestic
operations was completed during 1996, and a regional service
center was established in Europe to consolidate all
administrative and logistic functions for that region. Reducing
SMG&A spending as a percent of sales is an ongoing objective, and
a model of 20% of sales has been set to be achieved over the next
several years.
Despite lower revenue, operating profit was $30.1 million or
13.7% of revenue, second only to 1995 in the Company's recent
history both in terms of absolute amount and as a percent of
sales. A pre-tax gain of $7.2 million was realized from the sale
of PCC and included in other income. Net interest income on
invested funds was the primary source of the remaining $2.5
million of other income.
The effective tax rate for 1996 was 25.5% compared to 27% in
1995. Several discrete events contributed to this tax rate
reduction, including the reinstatement of the federal R&D tax
credit, a tax benefit from an investment previously written off
for book purposes, and increased use of tax advantaged
instruments for invested cash. The 1996 tax rate was less than
the U.S. federal statutory rate of 35% due mainly to the
reduction in deferred tax asset valuation allowances against net
deductible temporary book to tax differences. Deferred tax
valuation allowances were recorded by the Company to offset
deferred tax assets which could only be realized by earning
taxable income in future years. Management established the
valuation allowances because it could not be assured that such
income would be earned. There were no changes in 1996 to the
assumptions and methodology used in determining the valuation
allowances.
Net income for the year was $29.7 million or 13.5% of sales as
compared to $29.2 million or 10.9% of revenue in 1995. Excluding
the effect of the one time gain from the sale of PCC of $5.3
million, net income for the year was $24.3 million or 11.1% of
revenue, a level slightly higher than the profitability of the
prior year. Earnings per share (EPS) was $1.78 for the year as
compared to $1.86 for the prior year, a decline of 4.3% on a 6.2%
increase in the number of shares used. Excluding the effect of
the one-time gain on the PCC sale, EPS of $1.46 is lower only
than 1995 in Company history.
1995 Compared to 1994
1995 was a year of unprecedented revenue growth and profitability
for the Company.
Total 1995 revenue of $269.2 million was 39% higher than the
$194.2 million of 1994. All business units and geographic areas
participated in this growth. Growth in the core business, analog
and mixed signal integrated circuits, was the greatest at 42%
bringing revenue for the core analog and mixed signal component
business to $228.1 million or 85% of total. Benefiting greatly
from the computer and multimedia sector, Asia exhibited the
highest regional growth with a 42.9% increase over 1994.
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.
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. 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. 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 R&D increased by approximately $4 million or 18% over
the previous year. As a percentage of revenue, R&D spending
decreased to 9.6% from 11.3% in 1994. 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 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% due mainly to
the utilization of tax credit carry forwards which were
previously reserved. The valuation allowances 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 methodology used in determining the valuation allowances.
Liquidity and Capital Resources
At 1996 year end; the Company's cash, cash equivalents, and
investments totaled $89.4 million; an increase of $3.2 million
over year end 1995. The net cash generated from operations and
from the sale of a subsidiary was mainly used in the investment
of capital equipment and repurchasing the Company's stock.
At 1996 year end, total debt was $17.5 million of which $2.9
million was term debt. This represented a $3.4 million decrease
in total debt over 1995. 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 $48.5 million with both domestic and
international banks were available to the Company, of which
approximately $14.5 million or 30% was utilized. The current
ratio declined to 2.76 in 1996 from 2.96 in 1995. The decline was
mainly due to the classification of $36.5 million of investments
as long-term in 1996. The longer term investments were purchased
to take advantage of higher rates of return. On a consistent
basis, the current ratio would be 3.42 in 1996 compared to 2.96
in 1995. The debt to equity ratio improved year over year from
.12 to .09. The Company's balance sheet continues to be strong
and management believes that it possesses more than sufficient
capital resources to meet the anticipated requirements of the
next twelve months.
Accounts receivable declined by 29% from $55.7 million at the end
of 1995 to $39.5 million at the end of 1996 as a result of lower
revenue. Days sales outstanding increased period to period due to
a higher international component of receivables.
Excluding the PCC inventory change, inventories increased in
preparation for growth in 1997. Inventory valuation reserves
remained relatively flat. Management believes that adequate
reserves have been provided for potentially unsalable and excess
inventories.
Capital spending totaled $31.9 million for 1996 which is an
increase of 81.6% from the prior year. About half of this total
was for wafer fabrication equipment required for the development
and production of a next generation, proprietary process for high
performance analog circuits. Other expenditures were concentrated
in the standardization of product test equipment and the
continuation of an enterprise-wide program to replace the
Company's business information 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 1997 are in excess of $24 million
and will fund the continued modernization of test, design, and
manufacturing machinery as well as further implementation of new
worldwide information systems.
International markets constitute a majority of the Company's
revenue. The resulting transactions have exchange rate
fluctuation risk associated with them. To reduce the cash
exchange rate risk the Company purchases forward currency
contracts to hedge its foreign currency net accounts receivable
due from international subsidiaries. The forward contracts are in
three primary currencies: Japanese Yen, British Pounds and German
Marks. Exchange rate fluctuations can also affect the Company's
reported revenue as the international subsidiaries' sales are
primarily in foreign currencies but reported in the consolidated
financial statements in U.S. dollars using weighted average
exchange rates.
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, 1996.
In the first quarter of 1996, the Company sold all of its
interest in 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 was
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
At the end of 1995, the Company was involved in one ground water
toxic tort lawsuit. On August 7, 1996, the Company was dismissed
from this lawsuit without prejudice due to the absence of
evidence that the ground water beneath the Company's site
commingled with other contaminated ground water.
In the semiconductor industry, it is not uncommon for companies
to prosecute and defend against intellectual property related
claims such as those involving patents, proprietary information,
and trade secret information. Currently, the Company is involved
in one such matter, a patent infringement lawsuit filed against
the Company by Unitrode Corporation, in the U.S. District Court,
State of Massachusetts, and involving certain Small Computer
System Interface (SCSI) terminator devices. The Company is
vigorously contesting the lawsuit and believes that the claim is
not supportable. However, the case is still in its early stages,
and patent litigation is inherently uncertain. Therefore, there
can be no assurances as to the ultimate outcome of the case.
Regardless of the outcome of the litigation, the SCSI terminator
devices that are at issue in the lawsuit constituted an
immaterial portion of the Company's annual revenue and cessation
of sales of these devices would not result in any material change
in the Company's financial position, results of operations or
cash flows.
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. The Company expects to hold a steady market
position in the digital audio market. In addition, it will
endeavor to improve its market position in the relatively larger
and faster growth communications, computing, 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, 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. The Company is also seeking to design products for a wide
customer base. 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 Margin: The Company's plans call 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. Accordingly, the Company's
ability to increase revenues will depend in part upon its ability
to increase unit sales volumes of existing products and to
introduce and sell new 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 R&D expense.
Growth in SMG&A expenses will be constrained to a rate
substantially lower than that of revenue growth. The goal is
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 and 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 revenue, gross margin, 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.
Five Year Financial Summary
Burr-Brown Corporation and Subsidiaries_In thousands, except per
share amounts
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net revenue $219,99 $269,16 $194,19 $168,57 $162,9
7 2 6 7 49
Revenue by
geographic area:
Foreign 66% 64% 62% 64% 61%
Domestic 34% 36% 38% 36% 39%
Increase (decrease)
in revenue over (18%) 39% 15% 3% (9%)
prior years
Gross margin % of 50% 49% 45% 48% 47%
revenue
Operating expenses
% of revenue 37% 34% 40% 44% 43%
Operating income % 14% 15% 5% 5% 4%
of revenue
Interest expense % 0% 0% 1% 1% 2%
of revenue
Other income % of 5% 0% 0% 1% 1%
revenue
Net income $29,684 $29,212 $6,465 $2,817 $998
Per share amount $1.78 $1.86 $0.45 $0.20 $0.07
Income tax rate 25% 27% 22% 38% 42%
Return on revenue 13% 11% 3% 2% 1%
Return on average 12% 15% 5% 2% 1%
assets
Return on average
capital employed 14% 19% 6% 3% 1%
Return on equity 15% 16% 7% 4% 1%
Total capital $220,26 $202,34 $110,05 $108,49 $106,6
employed 0 9 5 5 18
% of revenue 100% 75% 57% 64% 65%
Total equity $199,40 $179,14 $87,622 $79,551 $77,44
6 5 3
% of revenue 91% 67% 45% 47% 48%
Per share amount $11.96 $11.41 $6.04 $5.53 $5.38
Long-term debt,
less current $1,830 $1,808 $1,839 $8,802 $11,71
portion 8
Total debt $17,450 $20,862 $19,900 $26,725 $27,10
0
% of revenue 8% 8% 10% 16% 17%
Debt-to-equity 0.09 0.12 0.23 0.34 0.35
ratio
Total assets $261,58 $252,24 $143,00 $142,06 $136,4
8 9 8 2 07
% of revenue 119% 94% 73% 84% 84%
Working capital $97,914 $129,90 $45,623 $49,456 $47,
8 705
% of revenue 45% 48% 23% 29% 29%
Current ratio 2.76 2.96 1.98 2.08 2.28
Capital $31,919 $17,574 $12,055 $7,117 $5,356
expenditures
Depreciation and $13,272 $12,712 $10,615 $10,072 $11,04
amortization 2
Land, building and
equipment, net $67,530 $51,424 $45,896 $42,427 $45,66
5
% of revenue 31% 19% 24% 25% 28%
Average number of
employees during 1,540 1,926 1,825 1,547 1,566
the year
Revenue per $142.86 $139.75 $106.40 $108.97 $104.0
employee 5
Shares used to
compute earnings 16,671 15,696 14,498 14,376 14,390
per share
</TABLE>
Exhibit 3.1 - Restated Certificate of Incorporation
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT OF
RESTATED ARTICLES 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 Eighty-Two Million (82,000,000) and
the aggregate par value of all shares of stock that are to
have a par value shall be Eight Hundred Twenty Thousand
Dollars ($820,000). The total number of shares of Preferred
Stock shall be Two Million (2,000,000) and the par value of
each share of such class shall be One Cent ($.01). The
total number of shares of Common Stock shall be Eighty
Million (80,000,000) 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 its Secretary this 15th day of May, 1996.
BURR-BROWN CORPORATION
By: THOMAS R. BROWN, JR.
Thomas R. Brown, Jr.
Attest:
JILL H. RICE
Jill H. Rice, Secretary
Exhibit 10.2 - Amendment to Stock Bonus Plan
AMENDMENT
TO
BURR-BROWN CORPORATION
STOCK BONUS PLAN AND TRUST
Effective January 1, 1974, Burr-Brown Corporation adopted
the Burr-Brown Corporation Stock Bonus Plan and Trust (the
"Plan") for the benefit of its eligible employees. The Plan has
subsequently been restated and amended for time to time.
W I T N E S S E T H:
WHEREAS, the employer has reserved the right to amend said
Plan in whole or in part; and
WHEREAS, on August 18, 1996, employer amended the Stock
Bonus Plan to replace Mr. John L. Carter as Co-Trustee with Mr.
Syrus P. Madavi.
WHEREAS, John L. Carter has resigned as Co-Trustee of said
Plan and employer desires to amend the Plan pursuant to the power
reserved to them by section 1.24 of the Plan.
NOW, THERFORE, the Plan is amended as follows:
1. John L. Carter is hereby deleted as a Co-Trustee of
such Plan and Syrus P. Madavi is hereby substituted in
his place and stead, and the name Syrus P. Madavi is
hereby substituted for the name of John L. Carter in
each place that it appears in said Plan.
IN WITNESS WHEREOF, the parties enter into this Amendment to
be effective on the 18th day of August, 1996.
Dated: August 18, 1996
Thomas R. Brown, Jr.
Co-Trustee
Exhibit 10.9 - Amendment to Employee Retirement Plan
BURR-BROWN CORPORATION
EMPLOYEE RETIREMENT PLAN
PLAN AMENDMENT 1
The Burr-Brown Corporation Employee Retirement Plan, as
restated in its entirety effective January 1, 1996 (the "Plan"), is
hereby amended, effective as of January 1, 1996, 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. Section 2(1) shall be amended to read as follows:
"Continuous Service"--The service of the Employee
measured in years and completed calendar months, whether or not
consecutive, based on the period of elapsed time method in
accordance with the applicable Treasury regulations. For purposes
of determining Continuous Service, periods of employment as an
Employee of an Affiliate (while such Affiliate is an Affiliate)
shall be deemed to be employment with the Employer. For purposes
of determining vesting under Article V, Continuous Service shall
include periods of employment with an Affiliate at locations
outside the Untied States. The Continuous Service of each Employee
shall begin on the date that Employee first renders an Hour of
Service and shall continue through his most recent Termination
Date, but there shall not be included any Continuous Break in
Service which falls within that period. In addition, the Employee
may lose credit for one or more periods of Continuous Service in
accordance with the break-in-service rules of ARTICLE III of this
Plan.
2. Article V shall be amended by the addition of the
following new Section 5.16A which shall read as follows:
5.16A Nonvoluntary Early Retirement Program.
Effective September 26, 1996, Participants who have been informed
by the Company that their employment has been terminated as the
result of the reduction in force that occurred September 24, 1996
through October 2, 1996, who have attained age 55 by September 26,
1996 and have ten (10) years of Credited Service shall be deemed to
have terminated after their Early Retirement Date as provided in
Section 4.2. Such Participants shall deemed to have twenty (20)
years of Credited Service and shall be eligible to receive a normal
retirement benefit without the reduction for early commencement of
payments as provided in section 5.2. Average Monthly Earnings, as
defined in Section 2.1(g) shall, for purposes of this Section, be
the amount as described in Section 2.1(g) or the Participant's
annual base salary for the 1996 calendar year, whichever is
greater.
3. Except as modified by this Plan Amendment, all the
terms and conditions of the Plan shall continue in effect.
IN WITNESS WHEREOF, Burr-Brown Corporation has caused
this instrument to be executed on its behalf by its duly authorized
officer on this 18th day of July, 1996.
BURR-BROWN CORPORATION
By: Syrus P. Madavi
Title: President & CEO
Exhibit 10.16 - Amendment to Stock Incentive Plan
BURR-BROWN CORPORATION
1993 STOCK INCENTIVE PLAN
(As Amended and Restated through February 16, 1996)
PREAMBLE
The BURR-BROWN CORPORATION previously adopted the Burr-
Brown Research Corporation Incentive Stock Plan of 1981 that
was amended and restated in 1983. That plan shall be referred
to as the "Original Plan." The Burr-Brown Corporation 1993
Stock Incentive Plan ("Plan") shall serve as the successor to
the Original Plan and will become effective as provided in
Section 7 of this Article One. On February 11, 1994, the Plan
was amended and restated to (i) impose a limitation on the
maximum number of shares for which any one participant in the
Plan may be granted Stock Options and direct Stock issuances
over the remaining term of the Plan and (ii) establish an
Automatic Option Grant Program for the non-employee members of
the Board.
ARTICLE ONE
GENERAL
1. Definitions. As used herein, the following terms have
the meanings hereinafter set forth unless the context clearly
indicates to the contrary:
1.1 "Board" shall mean the Board of Directors of the
Company.
1.2 "Change in Control" shall mean a change in
ownership or control of the Company effected through
either of the following transactions:
1.2.1 any person or related group of persons
(other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common
control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made
directly to the Company's stockholders which the Board
does not recommend such stockholders to accept; or
1.2.2 there is a change in the composition of
the Board over a period of twenty-four (24) consecutive
months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of
one or more proxy contests for the election of Board
members, to be comprised of individuals who either
(A) have been Board members continuously since the
beginning of such period or (B) have been elected or
nominated for election as Board members during such period
by at least a majority of the Board members described in
clause (A) who were still in office at the time such
election or nomination was approved by the Board.
1.3 "Code" shall mean the Internal Revenue Code of
1986.
1.4 "Committee" shall mean the committee of two (2)
or more non-employee Board members appointed by the Board
to administer the Plan.
1.5 "Company" shall mean Burr-Brown Corporation, a
Delaware corporation.
1.6 "Corporate Transaction" shall mean any of the
following stockholder-approved transactions to which the
Company is a party:
1.6.1 a merger, consolidation or other
reorganization in which the Company is not the surviving
entity, except for a transaction the principal purpose of
which is to change the state in which the Company is
incorporated,
1.6.2 the sale, transfer or other disposition
of all or substantially all of the assets of the Company
in complete liquidation or dissolution of the Company, or
1.6.3 any reverse merger in which the Company
is the surviving entity but in which securities possessing
more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are
transferred to a person or persons different from those
who held such securities immediately prior to such merger.
1.7 "Fair Market Value" shall mean the closing
selling price per share of Stock on the date in question,
as reported by the National Association of Securities
Dealers on the Nasdaq National Market. If there is no
such reported price on the date in question, then the Fair
Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
1.8 "Hostile Take-Over" shall mean a change in
ownership of the Company effected through the following
transaction:
1.8.1 any person or related group of persons
(other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common
control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made
directly to the Company's stockholders which the Board
does not recommend such stockholders to accept, and
1.8.2 more than fifty percent (50%) of the
securities so acquired in such tender or exchange offer
are accepted from holders other than the officers and
directors of the Company subject to the short-swing profit
restrictions of Section 16 of the 1934 Act.
1.9 "Option" shall mean an option to purchase Stock
granted pursuant to the provisions of the Discretionary
Option Grant or Automatic Option Grant Program.
1.10 "Optionee" shall mean any person to whom an
Option is granted pursuant to the Discretionary Option
Grant or Automatic Option Grant Program.
1.11 "Original Plan" shall mean the Burr-Brown
Research Corporation Incentive Stock Plan of 1981, as
amended and restated in 1983.
1.12 "Participant" shall mean an employee or
consultant to whom Stock is issued pursuant to the
provisions of the Stock Issuance Program.
1.13 "Plan" shall mean the Burr-Brown Corporation
1993 Stock Incentive Plan.
1.14 "Service" shall mean the performance of
services on a periodic basis to the Company (or any
Subsidiary corporation) in the capacity of an employee, a
non-employee member of the board of directors or an
independent consultant or advisor, except to the extent
otherwise specifically provided in the applicable Option
or Stock issuance agreement executed pursuant to the
provisions of the Plan.
1.15 "Stock" shall mean the Common Stock of the
Company.
1.16 "Subsidiary" or "Subsidiaries" shall mean any
corporation, the majority of the outstanding capital stock
of which is owned, directly or indirectly, by the Company.
1.17 "Take-Over Price" shall mean the greater of (a)
the Fair Market Value per share of Stock subject to an
outstanding Option on the date that Option is surrendered
to the Company in connection with a Hostile Take-Over or
(b) the highest reported price per share of such Stock
paid by the tender offeror in effecting such Hostile Take-
Over. However, if the surrendered Option is an incentive
stock option under Federal tax laws, the Take-Over Price
shall not exceed the clause (a) price per share.
2.0 Purpose. This Plan is intended to benefit the
Company by providing an incentive to and encouraging Stock
ownership by key employees (including officers), non-employee
members of the Board and consultants of the Company and its
Subsidiaries; by providing such key employees, non-employee
Board members and consultants the opportunity to acquire a
proprietary interest or to increase their proprietary interest
in the Company's success; and by encouraging such individuals
to remain in the Service of the Company or its Subsidiaries.
3.0 Structure of the Plan.
3.1 Stock Programs. The Plan shall be divided into three
(3) separate components:
- The Discretionary Option Grant Program, under
which eligible individuals may, at the discretion of the
Committee, be granted Options to purchase shares of Stock
in accordance with the provisions of Article Two.
- The Stock Issuance Program, under which eligible
individuals may be issued shares of Stock directly,
through the immediate purchase of such shares at a price
not less than eighty-five percent (85%) of their Fair
Market Value at the time of issuance, as a bonus tied to
the performance of services or the Company's attainment of
financial objectives, without any cash payment required of
the recipient.
- The Automatic Option Grant Program, under which
each non-employee Board member shall automatically receive
a special Option grant to purchase shares of Stock in
accordance with the provisions of Article Four.
3.2 General Provisions. Unless the context clearly
indicates otherwise, the provisions of Articles One and Five
shall apply to the Discretionary Option Grant, Stock Issuance
and Automatic Option Grant Programs and shall accordingly
govern the interests of all individuals under the Plan.
4.0 Administration.
4.1 The Discretionary Option Grant and Stock Issuance
Programs under the Plan shall be administered by the Committee.
The Committee shall initially have the same membership as the
Board's Compensation Committee. No member of the Committee
shall be, at the time of exercise of discretion in
administering this Plan or within one (1) year prior thereto, a
person eligible for participation in the Plan or any other plan
of the Company or any of its Subsidiaries entitling the
participants therein to acquire Stock, Stock options or Stock
appreciation rights of the Company or any of its Subsidiaries,
other than pursuant to the Automatic Option Grant Program.
Members of the Committee shall serve for such term as the Board
may determine and shall be subject to removal by the Board at
any time. The Committee shall have full authority, subject to
the express provisions of the Plan, to administer the
Discretionary Option Grant and Stock Issuance Programs,
including authority to interpret and construe any provision of
such programs and to adopt such rules and regulations as it may
deem necessary or appropriate. Decisions of the Committee
shall be final and binding on all parties who have an interest
in the Discretionary Option Grant or Stock Issuance Program or
any outstanding Option grant or Stock issuance hereunder. No
member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the
Discretionary Option Grant or Stock Issuance Program or any
Option grant or Stock issuance under it.
5.0 Option Grants and Stock Issuances.
5.1 The persons eligible to participate in the
Discretionary Option Grant Program under Article Two and
the Stock Issuance Program under Article Three are as
follows:
- officers and other key employees of the
Company (or its parent or subsidiary corporations, whether
now existing or subsequently established) who render
services which contribute to the management, growth and
financial success of the Company (or such parent or
subsidiary corporations); and
- those consultants or other independent
contractors who provide valuable services to the Company
(or its parent or subsidiary corporations).
Non-employee Board members shall not be eligible to
participate in the Discretionary Option Grant or Stock Issuance
Program or in any other stock option, stock purchase, stock
bonus, or other stock plan of the Company (or its parent or
subsidiary corporations) other than the Automatic Option Grant
Program under Article Four.5.3 The Committee shall have full
authority to determine, (i) with respect to the Option grants
made under the Discretionary Option Grant Program, which
eligible individuals are to receive Option grants, the number
of shares to be covered by each such grant, the status of the
granted Option as either an incentive stock option meeting the
requirements of Code Sections 421 and 422 ("Incentive Option")
or a nonstatutory option not intended to meet such requirements
("Nonstatutory Option"), the time or times at which each
granted Option is to become exercisable and the maximum term
for which the Option may remain outstanding; and (ii) with
respect to Stock issuances under the Stock Issuance Program,
which eligible individuals are to be selected for
participation, the number of shares to be issued to each
selected individual, the vesting schedule (if any) to be
applicable to the issued shares and the consideration to be
paid for such shares.
6.0 Stock.
6.1 Stock Available. The Stock to be issued under this
Plan may be either authorized but unissued shares or shares
issued and thereafter reacquired by the Company. The aggregate
number of shares of Stock which may be issued pursuant to this
Plan shall not exceed at any time 2,116,959 shares,* subject to
adjustment from time to time as provided in paragraph 6.3
below. Such authorized share reserve is comprised of (i) the
number of shares which remained available for issuance under
the Original Plan as of the Effective Date, including the
shares of Stock subject to the outstanding options under the
Original Plan incorporated into this Plan and any other shares
which would have been available for future option grant under
the Original Plan (estimated to be 716,959 shares* in the
aggregate), plus (ii) an additional increase of 900,000 shares*
of Stock previously authorized by the Board and approved by the
Company's stockholders prior to the Plan Effective Date, and
(iii) a further increase of 500,000 shares* of Stock authorized
by the Board on February 16, 1996 subject to stockholder
approval at 1996 Annual Meeting. All issuances of Stock under
the Plan, including any shares of Stock issued upon the
exercise of options incorporated into the Plan from the
Original Plan, shall reduce on a one-for-one basis the number
of shares of Stock available for subsequent issuance under the
Plan. Should any Option or any portion thereof be terminated
or canceled for any reason without being exercised or
surrendered in accordance with Section 4 of Article Two or
Section 3 of Article Four, the shares subject to the portion of
the Option not so exercised or surrendered shall be available
for subsequent Option grants or Stock issuances under this
Plan. Shares subject to an Option or portion thereof
surrendered in accordance with Section 4 of Article Two shall
not be available for subsequent Option grants or Stock
issuances under the Plan. If the Option price for any Options
granted under the Plan is paid with shares of Stock or if any
shares of Stock otherwise issuable under the Plan are withheld
by the Company in satisfaction of the income and employment tax
liability incurred in connection with any Optionee's or
Participant's acquisition of Stock hereunder, then the number
of shares of Stock available for subsequent issuance shall be
reduced by the gross number of shares for which the Option is
exercised or in which the Participant vests, and not by the net
number of shares actually issued to the Optionee or the
Participant.
6.2 In no event may the aggregate number of shares of
Stock for which any one individual participating in the Plan
may be granted Options and direct Stock issuances exceed
900,000 shares* in the aggregate over the term of the Plan.
For purposes of such limitation, no Option grants or direct
Stock issuances made prior to January 1, 1994 shall be taken
into account.
6.3 Corporate Reorganization. In the event that any
change is made to the securities issuable under the Plan
(whether by reason of merger, consolidation, reorganization,
recapitalization, Stock dividend, Stock split, combination of
shares, exchange of shares or other change in capitalization)
then, subject to the provisions of Section 2 of Article Two,
Section 2 of Article Three and Section 3 of Article Four, the
Committee may make appropriate adjustments in the maximum
number and/or kind of securities issuable under the Plan, the
maximum number and/or kind of securities for which Option
grants and direct Stock issuances may be made to any one
participant in the aggregate after December 31, 1993 and the
number and/or kind of securities for which automatic Option
grants are to be subsequently made per non-employee Board
member under the Automatic Option Grant Program in order to
reflect the effect of such change upon the Company's capital
structure, and may make appropriate adjustments to the number
and/or kind of securities and Option price of the securities
subject to each outstanding Option to prevent the dilution of
benefits thereunder. The adjustments determined by the
Committee shall be final, binding and conclusive.
6.4 Excess Grants and Issuances. Options to purchase
shares of Stock may be granted and shares of Stock may be
issued under the Plan which are in both instances in excess of
the number of shares then available for issuance under the
Plan, provided any excess shares actually issued under the Plan
are held in escrow until the Company's stockholders approve an
amendment sufficiently increasing the number of shares of Stock
available for issuance under the Plan. If such stockholder
approval is not obtained within twelve (12) months after the
date the initial excess issuances are made, whether as Option
grants or direct Stock issuances, then (I) any unexercised
Options representing such excess shall terminate and cease to
be exercisable and (II) the Company shall promptly refund to
the Optionees and Participants the Option or purchase price
paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow,
and such shares shall thereupon be automatically cancelled and
cease to be outstanding.
6.5 Restrictions. Shares issued under the Discretionary
Option Grant or Stock Issuance Program may be subject to such
restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee.
7.0 Effective Date and Term of Plan.
7.1 Effective Date. The Discretionary Option Grant and
Stock Issuance Programs under the Plan were adopted by the
Board on February 11, 1994, and the date of such adoption
accordingly constitutes the Effective Date for those two
programs and the Plan. The Automatic Option Grant Program
under the Plan was adopted by the Board on February 11, 1994
and became effective upon approval by the stockholders at the
1994 Annual Meeting held on April 22, 1994. The date of such
stockholder approval accordingly constitutes the Effective Date
of the Automatic Option Grant Program.
7.2 Amendment. The Plan was amended and restated by
the Board, effective February 16, 1996 (the "February 1996
Restatement") to increase the maximum number of shares of
Common Stock authorized for issuance over the term of the Plan
by an additional 500,000 shares to 2,116,959 shares.* However,
no options or shares granted on the basis of the 500,000-share
increase to the Plan authorized by the February 1996
Restatement shall become exercisable in whole or in part unless
and until the February 1996 Restatement is approved by the
Corporation's stockholders. Should such stockholder approval
not be obtained at the 1996 Annual Meeting, any options granted
on the basis of the 500,000-share increase to the Plan
authorized by the February 1996 Restatement shall terminate
without ever becoming exercisable for any of the option shares,
and no further option grants shall be made on the basis of the
February 1996 Restatement. However, the Plan shall continue in
full force and effect in accordance with the terms and
provisions in effect under the Plan immediately prior to the
February 1996 Restatement, and option grants and stock
issuances may continue to be made under those programs until
the existing share reserve under the Plan is issued. All
option grants made under the Plan prior to the February 1996
Restatement shall remain outstanding in accordance with the
terms and conditions of the respective instruments evidencing
those options, and nothing in the February 1996 Restatement
shall be deemed to modify or in any way affect those
outstanding options.
7.3 Term of Plan. Unless sooner terminated in accordance
with Section 2 of Article Two, Section 2 of Article Three,
Section 3 of Article Four or by the Board, the Plan shall
terminate on the earlier of:
(1) the tenth (10th) anniversary of the Effective
Date of the Plan; or
(2) the date on which all shares available for
issuance under the Plan shall have been issued or their
availability cancelled pursuant to the surrender of
Options granted hereunder.
If the date of termination is determined under (i)
above, then Options and unvested Stock issuances outstanding on
such date shall continue to have force and effect in accordance
with the provisions of the instruments evidencing such Options
and Stock issuances.
___________________________
* This number reflects the 3-for-2 split of the Stock
effected in May, 1995.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
1.0 Terms and Conditions of Options. Options granted
pursuant to this Discretionary Option Grant Program shall be
authorized by the Committee and may be either Incentive Options
or Nonstatutory Options. The granted Options shall be
evidenced by instruments in such form and including such terms
and conditions as the Committee shall from time to time
approve; provided, however, that each such instrument shall
comply with the following terms and conditions:
1.1 Option Price.
1.1.1 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 of a share of the optioned
Stock on the date of the Option grant.
1.1.2 Subject to the provisions of Section 1 of
Article Five, the Option price shall become immediately due and
payable upon exercise of the Option and shall be payable in one
of the alternative forms specified below:
1.1.2.1 Full payment in United States dollars
in cash or cash equivalents;
1.1.2.2 Full payment in shares of Stock valued
at Fair Market Value on the date the Option is exercised and
held for the requisite period necessary to avoid a charge to
the Company's earnings for financial reporting purposes;
1.1.2.3 A combination of shares of Stock valued
at Fair Market Value on the date the Option is exercised and
held for the requisite period necessary to avoid a charge to
the Company's earnings for financial reporting purposes, and
cash or cash equivalents, equal in the aggregate to the Option
price;
1.1.2.4 Full payment through a broker-dealer
sale and remittance procedure pursuant to which the Optionee
(I) shall provide irrevocable written instructions to a
designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to
cover the aggregate Option price payable for the purchased
shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Company in
connection with such purchase and (II) shall provide written
directives to the Company to deliver the certificates for the
purchased shares directly to such brokerage firm in order to
complete the sale transaction; or
1.1.2.5 Such other lawful consideration as the
Committee shall determine.
1.2 Manner of Exercise of Options. Each Option granted
under the Discretionary Option Grant Program shall be
exercisable at such time or times and during such period as
shall be determined by the Committee and set forth in the
instrument evidencing such Option. However, no Option may be
exercised after the expiration of ten (10) years from the date
such Option is granted. During the lifetime of the Optionee,
the Option, together with any related Stock appreciation right,
shall be exercisable only by the Optionee and shall not be
assignable or transferable by the Optionee other than a
transfer of the Option by will or by the laws of descent and
distribution following the Optionee's death. Options may be
exercised by written notice to the Company in such terms as the
Committee shall specify.
1.3 Stockholder Rights. An Option holder shall have none
of the rights of a stockholder with respect to any shares
issuable under the Plan until such individual shall have been
issued a stock certificate for the shares.
1. Dollar Limitation. The aggregate Fair Market Value
(determined as of the respective date or dates of grant) of the
Stock for which one or more Options granted to any employee
after December 31, 1986 under this Plan (or any other option
plan of the Company or its parent or Subsidiary corporations)
may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the employee holds two (2) or more
such Options which become exercisable for the first time in the
same calendar year, the foregoing limitation on the
exercisability of such Options as incentive stock options under
the Federal tax laws shall be applied on the basis of the order
in which such Options are granted. Should the number of shares
of Stock for which any Incentive Option first becomes
exercisable in any calendar year exceed the applicable One
Hundred Thousand Dollar ($100,000) limitation, then the Option
may nevertheless be exercised in that calendar year for the
excess number of shares as a nonstatutory option under the
Federal tax laws.
1.5 Termination of Service.
1.5.1 Except to the extent otherwise provided in
paragraph 1.5.4 below, the following provisions shall govern
the exercise period applicable to any outstanding Options under
this Discretionary Option Grant Program held by the Optionee at
the time of cessation of Service or death.
- Should the Optionee cease to remain in
Service for any reason other than death or permanent
disability, then the period during which each outstanding
Option held by such Optionee is to remain exercisable
shall be limited to the three (3)-month period following
the date of such cessation of Service. However, the
Committee shall have the discretion to provide for a
longer post-Service exercise period (not to exceed the
expiration date of the maximum Option term) in the event
the Optionee ceases Service by reason of retirement at or
after attainment of age sixty-five (65).
- In the event such Service terminates by
reason of permanent disability (as defined in Code Section
22(e)(3)) or should the Optionee die while holding one or
more outstanding Options, then the period during which
each such Option is to remain exercisable shall be limited
to the twelve (12)-month period following the date of the
Optionee's cessation of Service or death. During the
limited exercise period following the Optionee's death,
the Option may be exercised by the personal representative
of the Optionee's estate or by the person or persons to
whom the Option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and
distribution.
- Under no circumstances, however, shall any
such Option be exercisable after the specified expiration
date of the Option term.
1.5.2 During the post-Service exercise period, the
Option may not be exercised for more than the number of shares
of Stock in which the Optionee is vested at the time of
cessation of Service. Upon the expiration of such post-Service
exercise period or (if earlier) upon the expiration of the
Option term, the Option shall terminate and cease to be
outstanding for any vested shares for which the Option has not
been exercised. However, each Option shall immediately
terminate and cease to be outstanding, at the time of the
Optionee's cessation of Service, with respect to any optioned
shares for which such Option is not otherwise at that time
exercisable or in which the Optionee is not otherwise at that
time vested.
1.5.3 Should (i) the Optionee's Service be
terminated for misconduct (including, but not limited to, any
act of dishonesty, willful misconduct, fraud or embezzlement)
or (ii) the Optionee make any unauthorized use or disclosure of
confidential information or trade secrets of the Company or its
Subsidiaries, then in any such event all outstanding Options
held by the Optionee under this Discretionary Option Grant
Program shall terminate immediately and cease to be
outstanding.
1.5.4 The Committee shall have full power and
authority to extend the period of time for which the Option is
to remain exercisable following the Optionee's cessation of
Service or death from the limited post-Service exercise period
specified in the instrument evidencing such grant to such
greater period of time as the Committee shall deem appropriate
under the circumstances. In no event, however, shall such
Option be exercisable after the specified expiration date of
the Option term.
1.5.5 The Committee shall have complete discretion,
exercisable either at the time the Option is granted or at any
time the Option remains outstanding, to permit one or more
Options granted under this Discretionary Option Grant Program
to be exercised not only for the number of shares for which
each such Option is exercisable at the time of the Optionee's
cessation of Service but also for one or more subsequent
installments of purchasable shares for which the Option would
otherwise have become exercisable had such cessation of Service
not occurred.
2.0 Corporate Transactions/Changes in Control.
2.1 Option Acceleration. Each Option which is
outstanding under this Discretionary Option Grant Program at
the time of a Corporate Transaction shall automatically
accelerate so that each such Option shall, immediately prior to
the specified effective date for such Corporate Transaction,
become fully exercisable with respect to the total number of
shares of Stock at the time subject to such Option and may be
exercised for all or any portion of such shares. However, an
outstanding Option under this Discretionary Option Grant
Program shall not so accelerate if and to the extent: (i) such
Option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation or parent thereof or
to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent
thereof, (ii) such Option is to be replaced with a cash
incentive program of the successor corporation which preserves
the option spread existing at the time of the Corporate
Transaction and provides for subsequent payout in accordance
with the same vesting schedule applicable to such Option, or
(iii) the acceleration of such Option is subject to other
limitations imposed by the Committee at the time of the Option
grant. The determination of option comparability under clause
(i) above shall be made by the Committee and its determination
shall be final, binding and conclusive. The Committee shall
also have full power and authority to grant Options under the
Plan which are to automatically accelerate in whole or in part
upon the termination of the Optionee's Service following a
Corporate Transaction, whether or not those Options are
otherwise to be assumed or replaced in connection with the
consummation of such Corporate Transaction.
2.2 Termination of Options. Immediately following the
consummation of the Corporate Transaction, all outstanding
Options under this Discretionary Option Grant Program shall
terminate and cease to be outstanding, except to the extent
assumed by the successor corporation or its parent company.
2.3 Option Adjustments. Each outstanding Option under
this Discretionary Option Grant Program which is assumed in
connection with the Corporate Transaction or is otherwise to
continue in effect shall be appropriately adjusted, immediately
after such Corporate Transaction, to apply and pertain to the
number and kind of securities which would have been issued to
the Option holder, in consummation of such Corporate
Transaction, had such person exercised the Option immediately
prior to such Corporate Transaction. Appropriate adjustments
shall also be made to the Option price payable per share,
provided the aggregate Option price payable for such securities
shall remain the same. In addition, the class and kind of
securities available for issuance under the Plan on both an
aggregate and per participant basis following the consummation
of the Corporate Transaction shall be appropriately adjusted.
2.4 Change in Control. The Committee shall have the
discretionary authority, exercisable either in advance of any
actually-anticipated Change in Control or at the time of an
actual Change in Control, to provide for the automatic
acceleration of outstanding Options under this Discretionary
Option Grant Program upon the occurrence of the Change in
Control. The Committee shall also have full power and
authority to condition any such Option acceleration upon the
subsequent termination of the Optionee's Service within a
specified period following the Change in Control.
2.5 Option Continuation. Any Options accelerated in
connection with the Change in Control shall remain fully
exercisable until the expiration or sooner termination of the
Option term or the surrender of such Option in accordance with
Section 4 of this Article Two.
2.6 ISO Limitation. The exercisability as incentive
stock options under the Federal tax laws of any Options
accelerated under this Section 2 in connection with a Corporate
Transaction or Change in Control shall remain subject to the
dollar limitation of paragraph 1.4 of this Article Two.
2.7 Right to Modify Corporate Structure. The grant of
Options under this Plan shall in no way effect the right of the
Company to adjust, reclassify, reorganize, or otherwise change
its capital or business structure or to merge, consolidate,
dissolve, liquidate, sell or transfer all or any part of its
business or assets.
3.0 Cancellation and New Grant of Options. The Committee
shall have the authority to effect, at any time and from time
to time, with the consent of the affected Option holders, the
cancellation of any or all outstanding Options under this
Discretionary Option Grant Program and to grant in substitution
therefor new Options under the Plan covering the same or
different number and kind of shares of Stock but having an
Option price per share not less than the Fair Market Value of
the optioned Stock on the new grant date.
4.0 Surrender of Options for Cash or Stock.
4.1 Surrender Right. One or more Optionees may be
granted the right, exercisable upon such terms and conditions
as the Committee may establish, to surrender all or part of an
unexercised Option under this Discretionary Option Grant
Program in exchange for a distribution from the Company in an
amount equal to the excess of (i) the Fair Market Value (on the
Option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered Option (or
surrendered portion thereof) over (ii) the aggregate Option
price payable for such vested shares.
4.2 Approval. No such Option surrender shall be effective
unless it is approved by the Committee. If the surrender is so
approved, then the distribution to which the Optionee shall
accordingly become entitled under this Section 4 may be made in
shares of Stock valued at Fair Market Value on the Option
surrender date, in cash or partly in shares and partly in cash,
as the Committee shall in its sole discretion deem appropriate.
4.3 Limited Rights. One or more officers of the Company
subject to the short-swing profit restrictions of the Federal
securities laws may, in the Committee's sole discretion, be
granted limited stock appreciation rights in tandem with their
outstanding Options under this Discretionary Option Grant
Program. Upon the occurrence of a Hostile Take-Over, each such
officer holding one or more Options with such a limited stock
appreciation right in effect for at least six (6) months shall
have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Take-Over) to surrender each such
Option to the Company, to the extent the Option is at the time
exercisable for vested shares of Stock. In return for the
surrendered Option, the officer shall be entitled to a cash
distribution from the Company in an amount equal to the excess
of (i) the Take-Over Price of the shares of Stock which are at
the time vested under each surrendered Option (or surrendered
portion) over (ii) the aggregate Option price payable for such
vested shares. Such cash distribution shall be paid within
five (5) days following the Option surrender date. Neither the
approval of the Committee nor the consent of the Board shall be
required in connection with such Option surrender and cash
distribution. The balance of the Option (if any) shall
continue in full force and effect in accordance with the
instrument evidencing such grant.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
1.0 Terms and Conditions of Direct Stock Issuances.
Stock may be issued under this Stock Issuance Program, either
through direct and immediate purchases without any intervening
Option grants or as unvested shares issued upon the exercise of
immediately exercisable Options granted under Article Two. The
issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the following terms
and conditions:
1.1 Consideration.
1.1.1 Stock drawn from the Company's authorized but
unissued shares of Stock ("Newly Issued Shares") shall be
issued for one or more of the following items of consideration
which the Committee may deem appropriate in each individual
instance:
(i) cash or cash equivalents (such as a
personal check or bank draft) paid the Company;
(ii) a promissory note payable to the Company's
order in one or more installments, which may be subject to
cancellation in whole or in part upon terms and conditions
established by the Committee; or
(iii) past services rendered to the Company
or any Subsidiary.
1.1.2 Newly Issued Shares must be issued for
consideration with a value not less than one-hundred percent
(100%) of the Fair Market Value of such shares at the time of
issuance.
1.1.3 Shares of Stock reacquired by the Company and
held as treasury shares ("Treasury Shares") may be issued for
such consideration (including one or more of the items of
consideration specified in paragraph 1.1.1. of this Article
Three) as the Committee may deem appropriate. Treasury Shares
may, in lieu of any cash consideration, be issued subject to
such vesting requirements tied to the Participant's period of
future Service or the Company's attainment of specified
performance objectives as the Committee may establish at the
time of issuance.
1.2 Vesting Provisions.
(i) The issued Stock may, in the absolute discretion
of the Committee, be fully and immediately vested upon issuance
or may vest in one or more installments over the Participant's
period of Service. The elements of the vesting schedule
applicable to any unvested shares of Stock, namely:
(ii) the Service period to be completed by the
Participant or the performance objectives to be achieved
by the Company,
(iii) the number of installments in which the
shares are to vest,
(iv) the interval or intervals (if any) which are to
lapse between installments, and
(v) the effect which death, disability or other
event designated by the Committee is to have upon the
vesting schedule,
shall be determined by the Committee and incorporated into the
Issuance Agreement executed by the Company and the Participant
at the time such unvested shares are issued.
1.3 Stockholder Rights. The Participant shall have full
stockholder rights with respect to any shares of Stock issued
to him or her under this Stock Issuance Program, whether or not
his or her interest in those shares is vested. Accordingly,
the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. Any
new, additional or different shares of Stock or other property
(including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with
respect to his or her unvested shares by reason of any Stock
dividend, Stock split, reclassification of Stock or other
similar change in the Company's capital structure or by reason
of any Corporate Transaction shall be issued, subject to
(i) the same vesting requirements applicable to his or her
unvested shares and (ii) such escrow arrangements as the
Committee shall deem appropriate.
1..4 Termination of Service.
1.4.1 Should the Participant cease to remain in
Service while holding one or more unvested shares of Stock,
then those shares shall be immediately surrendered to the
Company for cancellation, and the Participant shall have no
further stockholder rights with respect to those shares. To
the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money promissory note),
the Company shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel
the unpaid principal balance of any outstanding purchase-money
note of the Participant attributable to such surrendered
shares. The surrendered shares may, at the Committee's
discretion, be retained by the Company as Treasury Shares or
may be retired to authorized but unissued share status.
1.4.2 The Committee may in its discretion elect to
waive the surrender and cancellation of one or more unvested
shares of Stock (or other assets attributable thereto) which
would otherwise occur upon the non-completion of the vesting
schedule applicable to such shares. Such waiver shall result
in the immediate vesting of the Participant's interest in the
shares of Stock as to which the waiver applies. Such waiver
may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-
attainment of the applicable performance objectives.
2.0 Corporate Transactions/Changes in Control.
2.1 All unvested shares of Stock outstanding under this
Stock Issuance Program shall immediately vest in full upon the
occurrence of a Corporate Transaction, except to the extent the
Committee imposes limitations in the Issuance Agreement which
preclude such accelerated vesting in whole or in part.
2.2 The Committee shall have the discretionary authority,
exercisable either in advance of any actually-anticipated
Change in Control or at the time of an actual Change in
Control, to provide for the immediate and automatic vesting of
one or more unvested shares of Stock outstanding under this
Stock Issuance Program at the time of such Change in Control.
The Committee shall also have full power and authority to
condition any such accelerated vesting upon the subsequent
termination of the Participant's Service within a specified
period following the Change in Control.
3.0 Transfer Restrictions/Share Escrow.
3.1 Unvested shares may, in the Committee's discretion,
be held in escrow by the Company until the Participant's
interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates
evidencing such unvested shares.
3.2 The Participant shall have no right to transfer any
unvested shares of Stock issued to him or her under this Stock
Issuance Program. For purposes of this restriction, the term
"transfer" shall include (without limitation) any sale, pledge,
assignment, encumbrance, gift or other disposition of such
shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be
cancelled, and neither the Participant nor the proposed
transferee shall have any rights with respect to those shares.
However, the Participant shall have the right to make a gift of
unvested shares acquired under this Stock Issuance Program to
his or her spouse or issue, including adopted children, or to a
trust established for such spouse or issue, provided the donee
of such shares delivers to the Company a written agreement to
be bound by all the provisions of the Plan and the Issuance
Agreement applicable to the gifted shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
1.0 Eligibility.
1.1 Eligible Optionees. The individuals eligible to
receive automatic Option grants pursuant to the provisions of
this Article Four shall be limited to (i) those individuals who
are serving as non-employee Board members on the date of the
1994 Annual Stockholders Meeting and (ii) those individuals who
are first elected or appointed as non-employee Board members on
or after the date of such Annual Meeting, whether through
appointment by the Board or election by the Company's
stockholders. Any non-employee Board member eligible to
participate in the Automatic Option Grant Program pursuant to
the foregoing criteria shall be designated an Eligible Director
for purposes of this Article Four.
1.2 Limitation. Except for the Option grants to be made
pursuant to the provisions of this Automatic Option Grant
Program, non-employee Board members shall not be eligible to
receive any additional Option grants or Stock issuances under
this Plan or any other stock plan of the Company (or its parent
or subsidiaries).
2.0 Terms and Conditions of Automatic Option Grants.
2.1 Grant Dates. Option grants shall be made under this
Article Four on the dates specified below:
2.1.1 Each individual who is serving as an Eligible
Director on the date of the 1994 Annual Stockholders Meeting
will automatically be granted, on such date, a Nonstatutory
Option to purchase 15,000* shares of Stock upon the terms and
conditions of this Article Four.
2.1.2 Each individual who first becomes an Eligible
Director on or after the date of the 1994 Annual Meeting,
whether through election by the Company's stockholders or
appointment by the Board, shall automatically be granted, at
the time of such initial election or appointment, a
Nonstatutory Option to purchase 15,000* shares of Stock upon
the terms and conditions of this Article Four.
2.2 The number of shares for which the automatic Option
grants are to be made to Eligible Directors shall be subject to
periodic adjustment pursuant to the applicable provisions of
paragraph 6.3 of Article One.
2.3 Option Price. The Option price per share of Stock of
each automatic Option grant made under this Article Four shall
be equal to one hundred percent (100%) of the Fair Market Value
per share of Stock on the automatic grant date.
2.4 Option Term. Each automatic Option grant under this
Article Four shall have a maximum term of ten (10) years
measured from the automatic grant date.
2.5 Exercisability/Vesting. Each automatic Option grant
shall be immediately exercisable for any or all of the optioned
shares. However, any shares purchased under the Option shall
be subject to repurchase by the Company, at the Option price
paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares in accordance with the
schedule below:
2.5.1 Each automatic Option grant shall vest, and the
Company's repurchase right shall lapse, in a series of five (5)
equal and successive annual installments over the Optionee's
period of continued Service as a Board member, with the first
such installment to vest upon Optionee's completion of one (1)
year of Board service measured from the automatic grant date.
2.5.2 Vesting of the optioned shares shall be
subject to acceleration as provided in paragraph 2.8.3 and
Section 3 of this Article Four. In no event shall any
additional optioned shares vest after the Optionee's cessation
of Board service, except as otherwise specifically provided
pursuant to paragraph 2.8.3 of this Article Four.
2.6 Payment. The Option price shall be payable in one of
the alternative forms specified in paragraph 1.1.2 of Article
Two. To the extent the Option is exercised for any unvested
shares, the Optionee must execute and deliver to the Company a
Stock issuance agreement for those unvested shares which
provides the Company with the right to repurchase, at the
Option price paid per share, any unvested shares held by the
Optionee at the time of cessation of Board service and which
precludes the sale, transfer or other disposition of any shares
purchased under the Option, to the extent those shares are
subject to the Company's repurchase right.
2.7 Non-Transferability. During the lifetime of the
Optionee, the automatic Option grant, together with the limited
Stock appreciation right pertaining to such Option, shall be
exercisable only by the Optionee and shall not be assignable or
transferable other than a transfer of the Option effected by
will or by the laws of descent and distribution following the
Optionee's death.
2.8 Termination of Board Service.
2.8.1 Should the Optionee cease service as a Board
member for any reason other than death or permanent disability,
while holding any automatic Option grant under this Article
Four, then such individual shall have a six (6)-month period
following the date of such cessation of Board service in which
to exercise that Option for any or all of the optioned shares
in which the Optionee is vested at the time of such cessation
of Board service. However, the Option shall immediately
terminate and cease to remain outstanding, at the time of such
cessation of Board service, with respect to any optioned shares
in which the Optionee is not otherwise at that time vested
under that Option.
2.8.2 Should the Optionee die within six (6) months
after cessation of Board service, then any automatic Option
grant held by the Optionee at the time of death may
subsequently be exercised, for any or all of the optioned
shares in which the Optionee is vested at the time of his or
her cessation of Board service (less any optioned shares
subsequently purchased by the Optionee prior to death), by the
personal representative of the Optionee's estate or by the
person or persons to whom the Option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent
and distribution. The right to exercise each such Option shall
lapse upon the expiration of the twelve (12)-month period
measured from the date of the Optionee's death.
2.8.3 Should the Optionee die or become permanently
disabled (as defined in Code Section 22(e)(3)) while serving as
a Board member, then the shares of Stock at the time subject to
any automatic Option grant held by the Optionee shall
immediately vest in full (and the Company's repurchase right
with respect to such shares shall terminate), and the Optionee
(or the representative of the Optionee's estate or the person
or persons to whom the Option is transferred upon the
Optionee's death) shall have a twelve (12)-month period
following the date of the Optionee's cessation of Board service
in which to exercise such Option for any or all of those vested
shares of Stock.
2.8.4 In no event shall any automatic Option grant
under this Article Four remain exercisable after the expiration
date of the ten (10)-year Option term. Upon the expiration of
the applicable post-Service exercise period under paragraphs
2.8.1 through 2.8.3 above or (if earlier) upon the expiration
of the ten (10)-year Option term, the automatic Option grant
shall terminate and cease to remain outstanding for any
optioned shares in which the Optionee was vested at the time of
his or her cessation of Board Service but for which such Option
was not otherwise exercised.
2.9 Stockholder Rights. The holder of an automatic
Option grant under this Article Four shall have none of the
rights of a stockholder with respect to any shares subject to
that Option until such individual shall have exercised the
Option and paid the Option price for the purchased shares.
2.10 Remaining Terms. The remaining terms and conditions
of each automatic Option grant shall be as set forth in the
form Automatic Stock Option Agreement attached as Exhibit A to
the Plan.
3.0 Corporate Transactions/Changes in Control/Hostile
Take-Overs.
3.1 In the event of any Corporate Transaction, the shares
of Stock at the time subject to each outstanding Option under
this Article Four but not otherwise vested shall automatically
vest in full, and the Company's repurchase right with respect
to those shares shall terminate, so that each such Option
shall, immediately prior to the specified effective date for
the Corporate Transaction, become fully exercisable for all of
the shares of Stock at the time subject to that Option and may
be exercised for all or any portion of such shares as fully
vested shares of Stock. Immediately following the consummation
of the Corporate Transaction, all automatic Option grants under
this Article Four shall terminate and cease to remain
outstanding.
3.2 In connection with any Change in Control, the shares
of Stock at the time subject to each outstanding Option under
this Article Four but not otherwise vested shall automatically
vest in full, and the Company's repurchase right with respect
to those shares shall terminate, so that each such Option
shall, immediately prior to the occurrence of such Change in
Control, become fully exercisable for all of the shares of
Stock at the time subject to that Option and may be exercised
for all or any portion of such shares as fully vested shares of
Stock. Each such Option shall remain so exercisable until the
expiration or sooner termination of the Option term.
3.3 Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to
surrender to the Company any Option held by him or her under
this Article Four for a period of at least six (6) months. The
Optionee shall in return be entitled to a cash distribution
from the Company in an amount equal to the excess of (i) the
Take-Over Price of the shares of Stock at the time subject to
the surrendered Option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the
aggregate Option price payable for such shares. Such cash
distribution shall be paid within five (5) days following the
surrender of the Option to the Company. Neither the approval
of the Committee nor the consent of the Board shall be required
in connection with such Option surrender and cash distribution.
The shares of Stock subject to each Option surrendered in
connection with the Hostile Take-Over shall not be available
for subsequent issuance under the Plan.
3.4 The automatic Option grants outstanding under this
Article Four shall in no way affect the right of the Company to
adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business
or assets.
4.0 Amendment of the Automatic Grant Provisions.
The provisions of this Automatic Option Grant
Program, together with the automatic Option grants outstanding
under this Article Four, may not be amended at intervals more
frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax
laws and regulations.
ARTICLE FIVE
MISCELLANEOUS
1.0 Installment Payments, Loans and Guarantees of Loans.
1.1 The Committee may, in its discretion, assist any
Optionee or Participant (other than an Optionee or Participant
who is a non-employee member of the Board) in the exercise of
one or more Options granted to such Optionee or the purchase of
one or more shares of Stock issued to such Participant under
the Plan, including the satisfaction of any Federal, state and
local income and employment tax obligations arising therefrom,
by (i) authorizing the extension of a loan from the Company to
such Optionee or Participant, (ii) permitting the Optionee or
Participant to pay the Option price or purchase price for the
purchased Stock in installments over a period of years or
(iii) authorizing a guarantee by the Company of a third-party
loan to the Optionee or Participant. The terms of any loan,
installment method of payment or guarantee (including the
interest rate and terms of repayment) shall be upon such terms
as the Committee specifies in the applicable Option or Issuance
Agreement or otherwise deems appropriate under the
circumstances. Loans, installment payments and guarantees may
be granted with or without security or collateral. However,
the maximum credit available to the Optionee or Participant may
not exceed the Option or purchase price of the acquired shares
(less the par value of such shares) plus any Federal, state and
local income and employment tax liability incurred by the
Optionee or Participant in connection with the acquisition of
such shares.
1.2 The Committee may, in its absolute discretion,
determine that one or more loans extended under this financial
assistance program shall be subject to forgiveness by the
Company in whole or in part upon such terms and conditions as
the Committee may deem appropriate.
2.0 Amendment of the Plan. The Board shall have complete
and exclusive power and authority to amend or modify the Plan,
and the Committee may amend or modify the terms of any
outstanding Options or unvested Stock issuances under the Plan
in any or all aspects whatsoever not inconsistent with the
terms of the Plan. However, (i) no such amendment or
modification shall adversely affect rights and obligations with
respect to Options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to
Stock issued under the Plan prior to such action, unless the
Optionee or Participant consents to such amendment, and (ii)
any amendment made to the Automatic Option Grant Program (or
any Options outstanding thereunder) shall be in compliance with
the limitation of Section 4 of Article Four. In addition, the
Board shall not, without the approval of the Company's
stockholders, amend the Plan to:
(i) materially increase the maximum number
of shares issuable under the Plan or the number of shares
for which Options may be granted to Eligible Directors
under the Automatic Option Grant Program or the maximum
number of shares for which any one individual
participating in the Plan may be granted Options and
direct Stock issuances in the aggregate after December 31,
1993, except for permissible adjustments under paragraph
6.3 of Article One;
(ii) materially increase the benefits
accruing to individuals who participate in the Plan; or
(iii) materially modify the eligibility
requirements for the grant of Options or the issuance of
Stock under the Plan.
3.0 Use of Proceeds. Any cash proceeds received by
the Company from the sale of shares pursuant to Option grants
or direct Stock issuances under the Plan shall be used for
general corporate business.
4.0 Withholding.
4.1 The Company's obligation to deliver shares of
Stock upon the exercise of Options for such shares or upon the
direct issuance or vesting of such shares under the Plan shall
be subject to the satisfaction of all applicable Federal, state
and local income and employment tax withholding requirements.
4.2 The Committee may, in its discretion and in
accordance with the provisions of this Section 4 and such
supplemental rules as the Committee may from time to time adopt
(including applicable safe-harbor provisions of SEC Rule 16b-
3), provide any or all holders of Nonstatutory Options (other
than the automatic Option grants made pursuant to Article Four
of the Plan) or unvested shares under the Stock Issuance
Program with the right to use shares of Stock in satisfaction
of all or part of the Federal, state and local income and
employment tax liabilities incurred by such holders in
connection with the exercise of their Options or the vesting of
their shares (the "Taxes"). Such right may be provided to any
such holder in either or both of the following formats:
4.2.1 Stock Withholding. The holder of the
Nonstatutory Option or unvested shares may be provided with the
election to have the Company withhold, from the shares of Stock
otherwise issuable upon the exercise of such Nonstatutory
Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of
the applicable Taxes (not to exceed one hundred percent (100%))
designated by the holder.
4.2.2 Stock Delivery. The Committee may, in
its discretion, provide the holder of the Nonstatutory Option
or the unvested shares with the election to deliver to the
Company, at the time the Nonstatutory Option is exercised or
the shares vest, one or more shares of Stock already held by
such individual with an aggregate Fair Market Value equal to
the percentage of the Taxes incurred in connection with such
Option exercise or share vesting (not to exceed one hundred
percent (100%)) designated by the holder.
5.0 Regulatory Approvals. The implementation of the
Plan, the granting of any Option hereunder and the issuance of
Stock upon the exercise or surrender of any such Option or as a
direct issuance under the Plan shall be subject to the
Company's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the
Options granted under it and the Stock issued pursuant to it.
6.0 No Employment Rights. Nothing in the Plan shall
confer upon the Optionee or the Participant any right to
continue in the Service of the Company (or any Subsidiary
employing or retaining such Optionee or Participant) for any
period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any such
Subsidiary) or of the Optionee or the Participant, which rights
are hereby expressly reserved by each, to terminate the Service
of the Optionee or Participant at any time for any reason
whatsoever, with or without cause.
7.0 Certain Outstanding Options.
7.1 Each Option granted under the Company's Original Plan
or the 1980 Burr-Brown Research Corporation Executive Stock
Plan which was outstanding on the Effective Date of this Plan
was incorporated into this Plan and treated as an outstanding
Option under this Plan, but each such Option continues to be
governed solely by the terms and conditions of the instrument
evidencing such grant, and nothing in this Plan shall be deemed
to affect or otherwise modify the rights or obligations of the
holders of such Options with respect to their acquisition of
shares of Stock thereunder.
7.2 One or more provisions of this Plan, including the
Option/vesting acceleration provisions applicable in the event
of a Corporate Transaction or Change in Control or the limited
surrender rights exercisable in the event of a Hostile Take-
Over, may, in the Committee's discretion, be extended to one or
more Options which were outstanding under the Company's
Original Plan or the 1980 Burr-Brown Research Corporation
Executive Stock Plan on the Effective Date of this Plan but
which do not otherwise provide for such benefits.
IN WITNESS WHEREOF, the February 16, 1996 Restatement
of the BURR-BROWN CORPORATION 1993 STOCK INCENTIVE PLAN is
hereby declared effective and is executed as of May 22, 1996 on
behalf of the Company by its hereunto duly authorized officer.
BURR-BROWN CORPORATION
By: SYRUS P. MADAVI
Syrus P. Madavi
Title: President & CEO
Exhibit 10.17 - Amendment to Future Investment Trust
BURR-BROWN CORPORATION
FUTURE INVESTMENT TRUST
Originally Effective January 1, 1966
Most Recent Restatement Effective January 1, 1987
This document also contains changes requested by the IRS
in their letters dated April 15th and May 29th of 1996, as part
of the determination letter process.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 2
1.1 "Account" 2
1.2 "Accrued Benefit" 2
1.3 "Accumulated Profits" 2
1.4 "Act" 2
1.5 "Affiliated Company" 2
1.6 "Beneficiary" 2
1.7 "Board" 2
1.8 "Code" 3
1.9 "Committee" 3
1.10 "Company" 3
1.11 "Company Matching Contributions" 3
1.12 "Company Matching Contributions Account" 3
1.13 "Company Profit Sharing Contributions" 3
1.14 "Company Profit Sharing Contributions Account" 3
1.15 "Company Stock" 3
1.16 "Compensation" 3
1.17 "Current Profits" 4
1.18 "Direct Rollover" 4
1.19 "Distributee" 4
1.20 "Effective Date" 5
1.21 "Eligibility Computation Period" 5
1.22 "Eligible Earnings" 5
1.23 "Eligible Employee" 6
1.24 "Eligible Retirement Plan" 6
1.25 "Eligible Rollover Distribution" 7
1.26 "Employee" 7
1.27 "Employee Deferral Contributions" 7
1.28 "Employee Deferral Contributions Account" 7
1.29 "Financial Hardship" 7
1.30 "Five Percent (5%) Owner" 7
1.31 "Hour of Service" 8
1.32 "Investment Manager" 8
1.33 "1986 Profit Sharing Account" 9
1.34 "Normal Retirement Age" 9
1.35 "Normal Retirement Date" 9
1.36 "Participant" 9
1.37 "Period of Severance" 9
1.38 "Plan" 9
1.39 "Plan Administrator" 9
1.40 "Plan Year" 9
1.41 "Rollover Account" 9
1.42 "Rollover Contribution" 9
1.43 "Service" 9
1.44 "Severance Date" 9
1.45 "Spouse" 9
1.46 "Stock Bonus Account" 10
1.47 "Top Paid Group" 10
1.48 "Total Disability" 10
1.49 "Total Distribution" 10
1.50 "Trust Agreement" 10
1.51 "Trustee" 10
1.52 "Valuation Date" 11
1.53 "Variable Income Investment Sub-Account" 11
1.54 "Vesting Service" 11
1.55 Additional Terms 12
ARTICLE II SERVICE DEFINITIONS 13
2.1 Hour of Service 13
2.2 Service 13
2.3 Severance Date 14
2.4 Period of Severance 15
2.5 Vesting Service 15
ARTICLE III EMPLOYEES ENTITLED TO PARTICIPATE 17
3.1 Eligibility to Participate 17
3.2Election to Participate in Employee Deferral Contributions
Portion of Plan 17
3.3 Leased Employees 17
3.4 Effect of Rehiring 18
ARTICLE IV CONTRIBUTIONS 19
4.1 Employee Deferral Contributions 19
4.2 Changes in Contribution Rates 19
4.3 Suspension of Contributions 19
4.4 Company Matching Contributions 19
4.5 Profit Sharing Contributions 20
4.6 Rollover Contributions 20
4.7General Limitations on Company and Employee Deferral
Contributions 20
4.8 Special Definitions 20
4.9 Limitation on Annual Addition 23
4.10 Remedial Action 23
4.11 Reallocation of Forfeitures 24
4.12 Time Period for Payment of Company Contributions 24
ARTICLE V SPECIAL RULES GOVERNING EMPLOYEE DEFERRAL
CONTRIBUTIONS AND COMPANY MATCHING CONTRIBUTIONS 26
5.1Limitations on Employee Deferral Contributions of Highly
Compensated Employees 26
5.2 Excess Contributions. 27
5.3Limitations on Allocation of Matching Contributions to
Accounts of Highly Compensated Employees 29
5.4 Aggregate Limitations 32
5.5 Remedial Action 33
5.6 Limitations on Employee Deferral Contributions 34
ARTICLE VI SPECIAL PROVISIONS FOR STOCK BONUS ACCOUNTS 36
6.1 Special Requirements for Stock Bonus Accounts 36
6.2 Put Option Requirements 37
6.3 Reinvestment of Stock Bonus Account 37
ARTICLE VII INVESTMENT FUNDS AND INVESTMENT OF CONTRIBUTIONS 39
7.1 Investment Funds 39
7.2 Investment Elections 39
7.3 Changes in Investment Elections 39
7.4 Transfers Between Funds 39
7.5 Restrictions on Insiders 39
ARTICLE VIII INDIVIDUAL ACCOUNTS 41
8.1 Accounts for Participants 41
8.2 Valuation of Accounts 41
8.3 Rollover Accounts 42
ARTICLE IX VESTING 43
9.1Vesting in the Employee Deferral Contributions Account, the
1986 Profit Sharing Account, the Stock Bonus Account and
the Rollover Account 43
9.2Vesting in Company Matching Contributions Account and the
Company Profit Sharing Contributions Account 43
9.3Determination of Vested Interest in the Company Profit
Sharing Contributions Account and Company Matching
Contributions Account in the Event of a Severance Date 43
9.4 Restoration of Forfeiture 44
9.5 Amendments to Vesting Schedule 44
ARTICLE X WITHDRAWALS DURING EMPLOYMENT 45
10.1 In-Service Withdrawals 45
10.2 Withdrawal Rules 45
10.3 Withdrawal of Company Matching Contributions 46
ARTICLE XI DISTRIBUTION UPON TERMINATION OF EMPLOYMENT 47
11.1 Death 47
11.2 Payments Upon Termination of Employment 47
11.3 Forfeiture of Non-vested Benefits 47
11.4 Timing of Distributions. 48
11.5Forms and Timing of Distributions from Stock Bonus Account 49
11.6Participant Payment Election Regarding Stock Bonus Transfer
Account 50
11.7 Unclaimed Amounts; Notices 51
11.8 Direct Rollovers 51
ARTICLE XII LOANS 52
12.1 Loan Applications 52
12.2 Loan Terms 52
12.3 Offset Rights 53
12.4 Liquidation of Account 54
12.5 Earmarked Investment 54
ARTICLE XIII FIDUCIARY 55
13.1 Plan Administrator 55
13.2 Named Fiduciary 55
13.3 Employment of Advisors 55
13.4 Multiple Fiduciary Capacities 55
13.5 Indemnification 55
ARTICLE XIV ADMINISTRATION 56
14.1 The Committee 56
14.2 Powers and Duties of the Committee 56
14.3 Delegation of Responsibility by the Committee 57
14.4 Investment Direction by Plan Administrator 57
14.5 The Investment Manager 57
14.6 Appointment of a Trustee 58
14.7 Funding Policy 58
14.8 Compensation of Investment Manager and Trustees 58
14.9 Facility of Benefit Payment 58
14.10 Claims and Appeals 59
ARTICLE XV RIGHTS OF PARTICIPANTS 61
15.1 Limitations on Rights of Participants 61
15.2Prohibition Against Assignment or Alienation of Benefits 61
ARTICLE XVI AMENDMENT OF THE PLAN 62
16.1 Amendment of the Plan 62
ARTICLE XVII TERMINATION OF THE PLAN 63
17.1 Termination of the Plan 63
17.2 Effect of Discontinuance 63
17.3 Effect of Termination 63
17.4 Plan Transfers or Mergers 64
17.5 Corporate Changes 64
17.6 Determination of Partial Termination 64
ARTICLE XVIII TOP-HEAVY PLAN PROVISIONS 65
18.1 Definitions 65
18.2 Top-Heavy Status 68
18.3 General Rules 68
18.4 Vesting Provisions 68
18.5 Minimum Contribution Provisions 69
18.6 Coordination of Plans 70
18.7 Limitation of Contributions 70
ARTICLE XIX QUALIFIED DOMESTIC RELATIONS ORDERS 71
19.1 Definitions 71
19.2 Notification 72
19.3 Procedures 72
19.4 Payment 72
ARTICLE XX MISCELLANEOUS PROVISIONS 74
20.1 Plan Interpretation 74
20.2 Consents by Board and Committees 74
20.3 Return of Contributions 74
20.4 Plan Expenses 75
20.5 Applicable Law 75
20.6 Headings 75
ADDENDUM SPECIAL TERMINATION PROVISIONS 76
BURR-BROWN CORPORATION
FUTURE INVESTMENT TRUST
INTRODUCTION
Effective as of January 1, 1966, the Burr-Brown
Corporation Future Investment Trust (the "Plan") was implemented
by the BURR-BROWN CORPORATION (the "Company") to provide
retirement benefits to United States based Employees. Effective
as of January 1, 1987, the Plan was amended and restated in its
entirety to incorporate the changes in applicable federal law.
The Plan was amended on several occasions thereafter. This
Restatement of the Plan, effective as of January 1, 1987 except
as otherwise noted, is intended to bring the Plan into compliance
with current laws, including The Tax Reform Act of 1986, The
Omnibus Budget Reconciliation Act of 1987, the Technical and
Miscellaneous Revenue Act of 1988, the Omnibus Budget
Reconciliation Act of 1989, the Unemployment Compensation
Amendments of 1992 and the Omnibus Budget Reconciliation Act of
1993.
The primary purpose of the Plan as hereby amended and
restated is to enable participating employees of the Company to
accumulate retirement savings on a pre-tax basis and to
accumulate capital for their future economic security.
Consequently, participating employees may from time to time
receive a profit sharing contribution, if the Company determines
there to be sufficient profitability, will be able to defer
compensation under the Plan pursuant to Section 401(k) of the
Internal Revenue Code and will receive a matching contribution
out of Company profits. The allocations from profit sharing
contributions, the employee pre-tax contributions and matching
contributions will be invested as participating employees direct
within the scope of the investments available under the Plan.
The Plan will also continue to hold the Company stock which was
previously held in the Burr-Brown Corporation Stock Bonus Plan
and was transferred to the Plan when the Stock Bonus Plan merged
into this Plan effective as of July 1, 1989.
This document also contains changes requested by the
IRS in April and May of 1996, as part of the determination letter
process.
The Plan, as hereby amended and restated, is intended
to constitute a qualified profit sharing plan which meets the
requirements of Sections 401(a), 401(k) and 501(a) of the
Internal Revenue Code.
ARTICLE I
DEFINITIONS
Definitions. When used in this Plan, the following
terms shall have the meanings set forth below unless a different
meaning is plainly required by the context:
I.1 "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
Transfer Account maintained under Section 6.3 and the Rollover
Account as described in Section 8.3 All references to Stock
Bonus Accounts under Article VI and Section 11.5 shall be deemed
to include a reference to any Stock Bonus Transfer Account
maintained for the Participant pursuant to the provisions of
Section 6.3, to the extent that particular Account is at the time
credited with shares of Company Stock. Where more than one
Account of any type has been established for a Participant or
Beneficiary, reference to "Account" shall include each Account of
that type, except where the context clearly indicates to the
contrary.
I.2 "Accrued Benefit" shall mean the balance in a
Participant's Accounts.
I.3 "Accumulated Profits" shall mean the retained
earnings of the Company as reported on its audited financial
statements.
I.4 "Act" shall mean the Employee Retirement Income
Security Act of 1974, as may be amended from time to time.
I.5 "Affiliated Company" shall mean (a) the Company,
(b) any other corporation which is a member of a controlled group
of corporations which includes the Company, as determined in
accordance with the ownership rules of Section 1563 of the Code,
without regard, however, to subsection (a)(4) or (e)(3)(C) of
such Section 1563, (c) any other employer entity which is under
common control with the Company, as determined in accordance with
Regulations issued under Section 414(c) of the Code, (d) any
affiliated service group, as determined under Section 414(m) of
the Code, or (e) any other entity required to be aggregated with
the Company pursuant to Regulations issued under Section 414(o)
of the Code. For purposes of the limitation on benefits set
forth in Article IV, the determination of whether a corporation
is an Affiliated Company will be made only after substituting the
phrase "more than fifty percent (50%)" for the phrase "at least
eighty percent (80%)" each place the latter phrase appears in
Section 1563(a)(1) of the Code.
I.6 "Beneficiary" shall mean any individual, trust or
other recipient named by a Participant to receive benefits
payable hereunder upon his death. In the case of a Participant
who has a Spouse, such Spouse must be the Participant's
Beneficiary hereunder, except as may otherwise be provided in
Section 11.1.
I.7 "Board" shall mean the board of directors of Burr-
Brown Corporation.
I.8 "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
I.9 "Committee" shall mean the committee appointed by
the Board pursuant to Section 14.1 which shall have such duties
and responsibilities as are specifically allocated to it under
Article XIV.
I.10 "Company" shall mean Burr-Brown Corporation, and
each successor in interest to the Company resulting from merger,
consolidation, or transfer of substantially all of its assets
which shall by appropriate action adopt the Plan.
I.11 "Company Matching Contributions" shall mean the
Company contributions described in Section 4.4.
I.12 "Company Matching Contributions Account" shall
mean the record of money and assets derived from the Company
Matching Contributions as described in Section 4.4 and held by
the Trustee for the benefit of a Participant or Beneficiary
pursuant to the provisions of the Plan.
I.13 "Company Profit Sharing Contributions" shall mean
the Company contributions described in Section 4.5.
I.14 "Company Profit Sharing Contributions Account"
shall mean the record of money and assets derived from Company
Profit Sharing Contributions described in Section 4.5 and held by
the Trustee for the benefit of a Participant or Beneficiary
pursuant to the provisions of the Plan.
I.15 "Company Stock" shall mean common stock issued by
Burr-Brown Corporation, as described in Section 6.1.
I.16 "Compensation" shall mean: (1) all current
compensation, wages and earnings paid to a Participant during the
Plan Year, whether in cash or property, for services performed
while an Employee, but only to the extent such compensation,
wages and earnings constitute wages within the meaning of Section
3401(a) of the Code which are reportable on Form W-2 or other
compensation for which the Participant must be furnished a
written statement under Section 6041(d) or 6051(a)(3) of the
Code, plus (2) any Employee Deferral Contributions made on the
Participant's behalf under this Plan, and (3) any other elective
pre-tax contributions made on the Participant's behalf pursuant
to salary deferral or reduction arrangements maintained by one or
more Affiliated Companies under Sections 125, 401(k), 408(k) and
403(b) of the Code. Not more than Two Hundred Thousand Dollars
($200,000.00) of Compensation shall be taken into account per
Employee for any Plan Year beginning after December 31, 1988 and
before January 1, 1994, subject to cost-of-living adjustments
authorized from time to time by the Secretary. In addition to
any other applicable limitations set forth in the Plan and
notwithstanding any other provisions of the Plan to the contrary,
for Plan Years beginning on or after January 1, 1994, the annual
dollar amount of Compensation taken into account under the Plan
per Employee shall not exceed One Hundred Fifty Thousand Dollars
($150,000.00), as adjusted from time to time for increases in the
cost-of-living in accordance with Section 401(a)(17)(B) of the
Code. The cost-of-living adjustment in effect for a calendar
year shall apply to any period (not exceeding twelve (12) months)
over which Compensation is to be determined (the "determination
period") beginning in such calendar year. Should the
determination period consist of less than twelve (12) months,
then the annual Compensation limit shall be multiplied by a
fraction, the numerator of which is the number of months in the
determination period and the denominator of which is twelve (12).
For Plan Years beginning on or after January 1, 1994, any
reference in the Plan to the limitation under Section 401(a)(17)
of the Code shall mean the annual Compensation limit set forth
above.
Compensation shall be relevant for certain designated
purposes under the Plan. Included among such purposes are:
(1) the identification of Highly Compensated Employees and
(2) the determination of whether the Employee Deferral
Contributions, Company Matching Contributions and Company Profit
Sharing Contributions under the Plan discriminate in favor of
such Highly Compensated Employees. The following additional
rules shall be applicable in determining Compensation for these
subparagraphs (1) and (2) specified purposes:
(a) Each Highly Compensated Employee who is
either a Five Percent (5%) Owner or among the ten (10) highest-
paid individuals on the basis of his own Compensation shall,
together with his spouse, any lineal ascendant or descendant of
such Employee and the spouses of such lineal ascendants or
descendants, be treated as a single Employee under the Plan, and
the Compensation of such single Employee shall be deemed to
include the Compensation of such Highly Compensated Employee and
his spouse, any lineal ascendant or descendant of such Employee
and the spouses of lineal ascendants or descendants.
(b) In applying the annual Compensation limit
above, any Highly Compensated Employee who is either a Five
Percent (5%) Owner or among the ten (10) highest-paid individuals
on the basis of his own Compensation shall, together with his
spouse and any lineal descendants who have not attained age
nineteen (19) by the close of the Plan Year in question, be
treated as a single Employee under the Plan.
I.17 "Current Profits" shall mean the consolidated pre-
tax profit reported on the Company's audited income statement for
its current fiscal year, determined in accordance with generally
accepted accounting principles and methods consistently applied,
prior to any reduction for Company Matching Contributions under
Section 4.4 and Company Profit Sharing Contributions under
Section 4.5.
I.18 "Direct Rollover" shall mean a payment by the Plan
to the Eligible Retirement Plan specified by the Distributee.
I.19 "Distributee" shall mean an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse
or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the
Code, are Distributees with regard to the interest of the spouse
or former spouse.
I.20 "Effective Date" shall mean January 1, 1987,
except as otherwise provided herein.
I.21 "Eligibility Computation Period" shall mean the
twelve (12) consecutive month period beginning on the first date
on which the Employee is credited with an Hour of Service and on
each succeeding anniversary thereof.
I.22 "Eligible Earnings" shall mean (1) all payments
made to any Eligible Employee for services rendered to the
Company, including bonuses, overtime pay, commissions, (2) the
Employee Deferral Contributions made on behalf of such Eligible
Employee for the Plan Year, (3) any elective pre-tax
contributions made on such Eligible Employee's behalf during the
Plan Year pursuant to salary deferral or reduction arrangements
maintained by an Affiliated Company under Section 125 or 408(k)
of the Code, and (4) any special bonus or incentive-type
payments. In no event, however, shall more than Two Hundred
Thousand Dollars ($200,000.00) of Eligible Earnings be taken into
account per Employee for any Plan Year beginning after December
31, 1988 and before January 1, 1994, or One Hundred Fifty
Thousand Dollars ($150,000.00) for Plan Years beginning on or
after January 1, 1994, as adjusted from time to time for
increases in the cost-of-living in accordance with Section
401(a)(17) of the Code.
Eligible Earnings shall not include (1) any
remuneration paid to the Employee prior to such Employee's
commencement of participation in this Plan, (2) any salary
continuation payments made to an individual no longer in active
Employee status, when such individual is not expected to resume
active Employee status following the end of the salary
continuation period, (3) any remuneration paid in the form of
reimbursed moving and relocation expenses or home mortgage
differential payments or any income reportable by reason of
automobile allowances provided by one or more Affiliated
Companies, (4) any income realized upon exercise of non-qualified
stock options or upon disqualifying dispositions of stock
acquired under incentive stock options, (5) any income recognized
by the Employee under Section 79 of the Code by reason of group-
term life insurance coverage in excess of Fifty Thousand Dollars
($50,000.00), or (6) any Affiliated Company contributions (other
than the elective pre-tax contributions described in the
preceding paragraph) made to any pension, profit sharing, stock
bonus, group insurance or other employee welfare plan now or
hereafter adopted.
The following additional rules shall be applicable
in determining an individual's Eligible Earnings under the Plan:
(a) Each Highly Compensated Employee who is either a
Five Percent (5%) Owner or among the ten (10) highest-paid
individuals on the basis of Compensation (as determined under
Section 1.17) shall, together with his spouse and any lineal
descendants who have not attained age nineteen (19) by the close
of the Plan Year in question, be treated as a single Employee
unit under the Plan, and the Eligible Earnings of such single
Employee unit shall be deemed to include the Eligible Earnings of
such Highly Compensated Employee and his spouse and lineal
descendants who have not attained age nineteen (19) by the close
of such Plan Year.
(b) Not more than Two Hundred Thousand Dollars
($200,000.00) of Eligible Earnings shall be taken into account
per Employee for any Plan Year beginning after December 31, 1988
and before January 1, 1994, subject to cost-of-living adjustments
authorized from time to time by the Secretary. In addition to
any other applicable limitations set forth in the Plan and
notwithstanding any other provisions of the Plan to the contrary,
for Plan Years beginning on or after January 1, 1994, the annual
dollar amount of Eligible Earnings taken into account under the
Plan per Employee shall not exceed the limitation under Section
401(a)(17) of the Code.
(c) The Eligible Earnings determined for any single
Employee unit pursuant to subparagraphs (a) and (b) above shall
be applied in the calculation of (i) the aggregate amount of
Employee Deferral Contributions (expressed as a percentage of
such Eligible Earnings) which the members of such Employee unit
may elect to be made on their behalf under the Plan and (ii) the
aggregate amount of Company Matching Contributions and Company
Profit Sharing Contributions which are to be allocated to such
members in accordance with Sections 4.4 and 4.5. The aggregate
amount so calculated for each subparagraph (i) and (ii) item
shall be allocated among the members of the Employee unit in
proportion to their share of the Eligible Earnings taken into
account for that unit. Each member's share of such Eligible
Earnings shall be in direct proportion to the dollar amount of
his individual Eligible Earnings prior to imposition of the
subparagraph (b) limitation above.
I.23 "Eligible Employee" shall mean each and every
Employee of the Company. However, there shall be excluded from
the class of Eligible Employees for all purposes under the Plan:
(a) any Employee whose terms and conditions of
employment are established under a collective bargaining
agreement pursuant to which retirement benefits have been the
subject of good-faith bargaining;
(b) any Employee who is a non-resident alien with
no earned income (within the meaning of Section 911(b) of the
Code) from the Company which constitutes income from sources
within the United States (within the meaning of Section 861(a)(3)
of the Code);
(c) any Employee who has separated from active
employment with the Company by reason of Total Disability.
I.24 "Eligible Retirement Plan" shall mean an
individual retirement account described in Section 408(a) of the
Code, or a qualified trust described in Section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover
Distribution to a surviving spouse, an Eligible Retirement Plan
is an individual retirement account or individual retirement
annuity.
I.25 "Eligible Rollover Distribution" shall mean any
distribution of all or any portion of the balance to the credit
of the Distributee, except that an Eligible Rollover Distribution
does not include: any distribution that is one of a series of
substantially equal periodic payment (not less frequently than
annually) made for the life expectancy of the Distributee or the
joint life expectancies of the Distributee and Distributee's
Beneficiary or for a specified period of ten (10) years or more;
any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income.
I.26 "Employee" shall mean (a) any person who is
employed by an Affiliated Company to render personal services and
whose earnings constitute wages under Section 3121(a) of the
Code, and (b) any individual who performs services for an
Affiliated Company if such individual is required to be treated
as a Leased Employee under Section 3.3.
I.27 "Employee Deferral Contributions" shall mean the
employee-directed Company contribution described in Section 4.1.
I.28 "Employee Deferral Contributions Account" shall
mean the record of money and assets derived from Employee
Deferral Contributions as described in Section 4.1 and held by
the Trustee for the benefit of a Participant or Beneficiary
pursuant to the provisions of the Plan.
I.29 "Financial Hardship" shall mean an immediate and
heavy financial need of a Participant as set forth in Section
10.2(d).
I.30 "Five Percent (5%) Owner" shall mean:
(a) If the Affiliated Company is a corporation, any
person who owns (or is considered as owning within the meaning of
Section 318 of the Code) more than five percent (5%) of the
outstanding stock of that corporation or stock possessing more
than five percent (5%) of the total combined voting power of all
stock of that corporation, or
(b) If the Affiliated Company is not a corporation,
any person who owns more than five percent (5%) of the capital or
profits interest in that entity.
For purposes of applying Section 318 of the Code to year; or
(d) was at any time an officer of an Affiliated
Company and received Compensation greater than fifty percent
(50%) of the limitation amount in effect under Section
415(b)(1)(A) of the Code for such Plan Year.
For purposes of determining which Employees are "Highly
Compensated Employees," an Employee who was not described in
subparagraphs (b), (c) or (d) during the look-back year shall not
be a Highly Compensated Employee for the determination year under
subparagraphs (b), (c) or (d) unless such Employee is also among
the one hundred (100) Employees who have earned the highest
Compensation with an Affiliated Company during such determination
year. Notwithstanding the foregoing, an individual who was a
Highly Compensated Employee for a look-back year due to the
foregoing definition shall remain a Highly Compensated Employee
for the determination year. For purposes of this definition,
individuals who are nonresident aliens and who receive no earned
income (as defined in Section 911(d) of the Code) from the
Company constituting income from sources within the United States
(as defined in Section 861(a)(3) of the Code) shall not be
considered as Employees.
In no event shall the number of officers to be treated
as "Highly Compensated Employees" under paragraph (c) above
exceed fifty (50) Employees (or if less, the greater of three (3)
Employees or ten percent (10%) of all Employees).
Notwithstanding the foregoing, if no officer of the Company has
Compensation sufficient to be treated as "Highly Compensated
Employee," the highest paid officer of the Company for such Plan
Year shall be treated as a "Highly Compensated Employee." For
purposes of applying the ten percent (10%) limit, Employees
excluded under Subsection 1.50(d) below shall be disregarded.
A "Highly Compensated Former Employee" shall mean any
Employee who separated (or was deemed to have separated) from
service prior to the determination year, performs no service for
the Employer or any Affiliated Company during the determination
year, and was a Highly Compensated Active Employee for either the
separation year or any determination year ending on or after the
Employee's fifty-fifth (55th) birthday.
For purposes of this paragraph, the determination year
shall be the Plan Year. The look-back year shall be the twelve
(12)-month period immediately preceding the determination year.
Alternatively, the Employer may, by written instrument, elect to
use the calendar year coincidental with the current Plan Year as
the look-back year in accordance with the provisions of Income
Tax Regulation section 1.414(q)-1T, Q&A-14(b).
Family members of Highly Compensated Employees who
qualify as Highly Compensated Employees during either the
determination year or look-back year due to being Five Percent
(5%) Owners or who are one of the top ten (10) Highly Compensated
Employees ranked on the basis of Compensation shall, along with
such Highly Compensated Employee, be treated as a single Highly
Compensated Employee, and their Compensation and amounts
contributed on their behalf shall be aggregated. For this
purpose, a "family member" of a Highly Compensated Employee shall
include a spouse, a lineal ascendant or descendant, or a spouse
of such lineal ascendant or descendant of the Highly Compensated
Employee.
I.31 "Hour of Service" shall have the meaning assigned
to such term in Section 2.1.
I.32 "Investment Manager" shall mean a person or
persons who is an investment adviser registered under the
Investment Advisers Act of 1940, a bank as defined in such Act or
an insurance company qualified to manage, acquire or dispose of
any Plan assets under the laws of more than one state.
I.33 "1986 Profit Sharing Account" shall mean the
Account established for Participants who participated in the Plan
prior to 1987.
I.34 "Normal Retirement Age" shall mean the time at
which a Participant attains age 65.
I.35 "Normal Retirement Date" shall mean the first day
of the month coincident with or next following the date in which
the Employee attains Normal Retirement Age.
I.36 "Participant" shall mean each Eligible Employee
who participates in the Plan pursuant to Section 3.1.
I.37 "Period of Severance" shall have the meaning
assigned to it in Section 2.4.
I.38 "Plan" shall mean the Amended and Restated Burr-
Brown Corporation Future Investment Trust, as set forth in this
instrument, and as the same may be amended from time to time.
I.39 "Plan Administrator" shall mean the Company.
I.40 "Plan Year" shall be the period commencing on each
December 31st and ending on December 30th of the following year;
provided, however, there will be a short Plan Year consisting of
a single day, December 31, 1993, and thereafter, commencing
January 1, 1994, it shall be the period commencing on each
January 1st and ending on the following December 31st. The Plan
Year will be the limitation year for purposes of Section 415 of
the Code.
I.41 "Rollover Account" shall mean the record of money
and assets derived from a Rollover Contribution and held in the
Fund for the benefit of an Employee, Participant or Beneficiary
pursuant to the provisions of the Plan.
I.42 "Rollover Contribution" shall mean funds which
represent (a) all or a portion of the assets credited to such
Employee's account under any other defined contribution plan
satisfying the applicable qualification requirements of Section
401(a) of the Code, whether such assets are held by a trustee,
insurance company, custodian or otherwise, or (b) the assets of
any individual retirement account established as a rollover
account under Section 402(a)(5) of the Code for a qualified plan
distribution previously made to such person and credited solely
with amounts eligible for rollover to this Plan in accordance
with Section 408(d)(3)(ii) of the Code.
I.43 "Service" shall have the meaning assigned to it in
Section 2.2.
I.44 "Severance Date" shall have the meaning assigned
to it in Section 2.3.
I.45 "Spouse" shall mean a Participant's wife or
husband who was lawfully married to the Participant immediately
prior to the Participant's date of death. Notwithstanding the
foregoing, a former spouse shall be treated as a Spouse to the
extent provided under a qualified domestic relations order as
described in Section 414(p) of the Code.
I.46 "Stock Bonus Account" shall mean the Account
originally maintained for a Participant, under the Company's
Stock Bonus Plan and transferred to this Plan as of July 1, 1989.
I.47 "Top Paid Group" shall mean all Employees who are
in the top twenty percent (20%) of the Employees of an Affiliated
Company when ranked on the basis of Compensation paid during the
Plan Year. The following Employees may be excluded for purposes
of determining the total number of Employees to be included in
the Top Paid Group:
(a) Employees who have not completed six (6) months of
service;
(b) Employees who normally work less than seventeen
and one-half (17 2) hours per week;
(c) Employees who normally work during not
more than six (6) months a year; and
(d) Employees who have not attained the age of twenty-
one (21) years.
I.48 "Total Disability" shall mean a physical or mental
condition which, in the judgment of the Committee based upon
competent medical evidence satisfactory to the Committee, totally
and permanently prevents the Participant from engaging in any
substantial gainful employment with the Company, provided such
Total Disability (a) did not arise while engaged in or as a
result of having engaged in a felonious or criminal act or
enterprise, or (b) did not result from service in the Armed
Forces of the United States of America or of any state thereof
under circumstances entitling the Participant to a veteran's
disability pension. In determining whether a Participant is
wholly or permanently prevented from engaging in any substantial
gainful employment with the Company, there shall be excepted from
consideration work performed pursuant to a medically recommended
plan for rehabilitation. The Committee will consider a
Participant to have a Total Disability if he incurs the permanent
loss or loss of use of a member or function of the body.
I.49 "Total Distribution" shall mean a distribution to
a Participant or a Participant's beneficiary, within one (1)
taxable year of such recipient, of the entire balance to the
credit of the Participant's Stock Bonus Account under the Plan.
I.50 "Trust Agreement" shall mean the trust agreement
or agreements executed in connection with this Plan to provide
for the administration and investment of the Fund. The Trust
Agreement shall constitute a part of the Plan.
I.51 "Trustee" shall mean the trustee or trustees
appointed under the Trust Agreement.
I.52 "Valuation Date" shall mean March 31, June 30,
September 30 or December 31 of each Plan Year and such other date
or dates as may be designated by the Committee for the valuation
of Accounts of Participants. Interim valuations shall not be used
in a manner which is discriminatory.
I.53 "Variable Income Investment Sub-Account" shall
mean a sub-account which invests in a separate investment fund
under which the value of the deposits to such account will vary
(decrease or increase) to reflect investment income and market
value changes. Any one or any combination of the following types
of securities may be available:
(a) Common stocks,
(b) Bonds, and
(c) Cash and cash equivalents.
I.54 "Vesting Service" shall have the meaning assigned
to it in Section 2.5.
I.55 Additional Terms. The following terms shall have
the meanings assigned to them in the specific sections of the
Plan indicated:
Term Section
"Actual Deferral Percentage" 5.1(a)(1)
"Annual Additions" 4.8(a)
"Contribution Percentage" 5.3(a)(1)
"Defined Benefit Plan Fraction" 4.8(b)
"Defined Contribution Plan Fraction" 4.8(c)
"Determination Date" 18.1(a)
"Excess Aggregate Contributions" 5.2(a)(2)
"Excess Amount" 4.8(d)
"Excess Combined Contributions" 5.5(b)
"Excess Contributions" 5.1(a)(2)
"Highest Average Remuneration" 4.8(e)
"Key Employee" 18.1(b)
"Leased Employee" 3.3
"Limitation Year" 4.8(f)
"Maximum Permissible Amount" 4.8(g)
"Non-Key Employees" 18.1(c)
"Permissive Aggregation Group" 18.1(d)
"Projected Annual Benefit" 4.8(h)
"Remuneration" 4.8(i),
18.1(f)
"Required Aggregation Group" 18.1(e)
"Top-Heavy Contribution" 18.1(g), 18.3
"Top-Heavy Valuation Date" 18.1(i)
"Top-Heavy Ratio" 18.1(h)
ARTICLE II
SERVICE DEFINITIONS
II.1 Hour of Service. The term "Hour of Service" shall
mean: (a) an hour for which an Employee is paid or entitled to
payment by an Affiliated Company for the performance of duties,
(b) an hour for which an Employee is paid or entitled to payment
by an Affiliated Company for a period during which no duties are
performed (whether or not the employment relationship has
terminated) on account of vacation, holiday, illness, incapacity
(including Total Disability), layoff, jury duty, military duty or
leave of absence, and (c) an hour (to the extent not already
credited under subparagraph (a) or (b) above) for which back pay
for the Employee is awarded or agreed to by an Affiliated
Company, irrespective of mitigation of damages. However, any
hour for which an Employee is directly or indirectly paid under a
plan maintained by an Affiliated Company solely to comply with
applicable worker's compensation, unemployment compensation or
disability insurance laws or solely to reimburse the Employee for
medical or medically-related expenses incurred by the Employee
shall not be counted as an Hour of Service.
II.2 Service. The term "Service" shall mean the
Participant's period or periods of employment with the Company or
any other Affiliated Company. Each such period shall begin with
the date on which the Employee first renders one (1) Hour of
Service for the Company or an Affiliated Company and end with the
first Severance Date thereafter which marks the start of a Period
of Severance of twelve (12) consecutive months or more. Any
Period of Severance of less than twelve (12) consecutive months
shall be included within the Participant's period of Service.
Accordingly, the overall Service of the Participant shall be
comprised of the period of employment (whether or not continuous)
commencing on the date on which he first renders one (1) Hour of
Service for the Company or an Affiliated Company and ending with
his final Severance Date, but there shall be excluded from
Service any intervening Period of Severance of twelve (12)
consecutive months or more. In addition, the following special
rules shall be applicable to the determination of the
Participant's overall period of Service:
(a) If any pension or profit-sharing plan maintained
by a corporation, partnership, proprietorship or other business
entity which becomes a participating Company or is merged into,
consolidated with, or all or a substantial part of the assets of
which are acquired by, any participating Company is deemed under
Section 414(a)(1) of the Code and the applicable Regulations to
be a "predecessor plan" to this Plan, then Service shall include,
for each participant in such predecessor plan, all periods of
employment rendered by such person prior to the acquisition or
affiliation which are required to be taken into account for
eligibility and vesting purposes under the predecessor plan.
(b) To the extent subparagraph (a) is not otherwise
applicable, Service shall include, for each employee of a
corporation, partnership, proprietorship or other business entity
which is merged into, consolidated with, or all or a substantial
part of the assets of which are acquired by, any participating
Company, such periods of employment rendered by such person to
the predecessor employer prior to the acquisition or affiliation
as the Committee shall deem appropriate; provided such
determination shall not discriminate in favor of Highly
Compensated Employees.
(c) The Participant's overall period of Service shall
be divided into one (1) or more months of Service on the basis
that each thirty (30) days of Service (whether or not completed
consecutively) equals one (1) full month of Service, and for
every twelve (12) months of Service (as so calculated) rendered
by the Participant, he shall be credited with one (1) full year
of Service.
II.3 Severance Date.
(a) The term "Severance Date" shall mean the earlier
of (1) the date on which the Employee quits, dies, retires or is
discharged, or (2) the date which is twelve (12) months after the
commencement date of any other absence from employment with the
Company or an Affiliated Company; provided, however, that
layoffs, approved leaves of absence and Maternity and Paternity
Leaves shall be governed by the specific provisions of
subparagraphs (b), (c) and (d).
(b) An Employee who is absent from active employment
by reason of a leave of absence approved by the Affiliated
Company employing him shall not incur a Severance Date during the
period of the leave, provided such Employee returns to active
employment with the Affiliated Company within thirty (30) days
after the expiration date of the period for which such leave of
absence is authorized or (if applicable) prior to the expiration
date of any longer period of time for which the reemployment
rights of the Employee are protected by law. Leaves of absence
may be approved, in accordance with a uniform and non-discrimina
tory policy, for reasons of health, governmental service,
military duty or other purpose. Except as otherwise provided in
Section 2.2(a), should the Employee fail to return to active
employment with an Affiliated Company within the applicable time
period following the termination of the leave, then such Employee
shall (unless such failure is occasioned by reason of retirement,
death or Total Disability) be deemed to have incurred a Severance
Date as of the earliest of (1) the date which is twelve (12)
months after the commencement of such leave of absence, (2) the
date on which the authorized period of such leave expires, or
(3) the date on which the Employee quits or is discharged. If
the Employee fails to return to active employment within the
applicable time period by reason of his death, Total Disability
or retirement, then such Employee shall be deemed to have
incurred a Severance Date as of the date of his death, Total
Disability or retirement.
(c) An Employee who remains absent from active
employment by reason of a Maternity or Paternity Leave (as
defined below) shall be deemed to incur a Severance Date upon the
earlier of (1) the date which is twenty-four (24) months after
the commencement of the Maternity or Paternity Leave, or (2) the
date on which the Employee quits, dies or retires; provided,
however, that solely for purposes of calculating Vesting Service
under Section 9.3, only the first twelve (12) months of such
Maternity or Paternity Leave shall be taken into account as
Service and the next twelve (12) months of such Maternity or
Paternity Leave shall be considered neither a period of Service
nor a Period of Severance. In the event the Maternity or
Paternity Leave also constitutes an approved leave of absence
under Section 2.3(b), then the provisions of Section 2.3(b), to
the extent they provide more favorable Service credits to the
Employee than the corresponding provisions of this
Section 2.3(c), shall be controlling.
For purposes of this Section 2.3(c), a Maternity or
Paternity Leave is any absence of the Employee, whether or not
approved under Section 2.3(b), which is directly attributable to
and caused by any one of the following:
(1) such Employee's pregnancy,
(2) the birth of a child of such Employee,
(3) the placement of a child with such Employee
in connection with the Employee's adoption of such child, or
(4) the care of such child for a period beginning
with such birth or placement.
The Committee may, as a condition to the Employee's
qualification for the special benefits provided under this
Section 2.3(c), require the Employee to provide written
confirmation and other substantiation as follows:
(i) on or before the commencement of the
leave, that the absence will qualify as a Maternity or Paternity
Leave in accordance with the criteria specified in subparagraphs
(1) through (4) above, and
(ii) on or before the completion of the
leave, the number of days for which the Maternity or Paternity
Leave was in fact incurred for one or more of the causes
specified in subparagraphs (1) through (4) above.
(d) An Employee who is absent from active employment
by reason of a temporary layoff shall not incur a Severance Date
during the period of such layoff, provided such Employee returns
to active employment with an Affiliated Company within thirty
(30) days after the date the Employee is recalled to employment.
If the Employee fails to return to active employment prior to the
expiration of such thirty (30) day period or if the Employee is
not recalled to employment within twelve (12) months after the
commencement date of the layoff, then such Employee shall be
deemed to have incurred a Severance Date as of the earliest of
(1) the date which is twelve (12) months after the commencement
date of the layoff, (2) the date of the recall, or (3) the date
the Employee quits, dies, retires or is discharged.
II.4 Period of Severance. The term "Period of
Severance" shall mean the period commencing with the Employee's
Severance Date and ending with the date on which such Employee
next performs one (1) Hour of Service.
II.5 Vesting Service. The term "Vesting Service" shall
mean the Employee's overall period of Service measured from the
date he first completes one (1) Hour of Service under Section 2.1
(including Service rendered prior to the Effective Date) and
ending with his final Severance Date; provided, however, that
there shall not be included within such Vesting Service any
Period(s) of Severance of twelve (12) consecutive months or more.
The Employee's period of Vesting Service shall be divided into
one (1) or more months of Vesting Service on the basis that each
thirty (30) days of Vesting Service (whether or not completed
consecutively) equals one (1) full month of Vesting Service, and
for each twelve (12) months of Vesting Service (as so calculated)
rendered by the Employee, he shall be credited with one year of
Vesting Service. However, all Vesting Service credited under the
Plan shall be subject to the rules set forth in this Article II,
Section 3.4 and Section 9.4.
ARTICLE III
EMPLOYEES ENTITLED TO PARTICIPATE
III.1 Eligibility to Participate. Each Eligible
Employee who is a Participant in the Plan as of December 31,
1992 will continue to be a Participant in the Plan as of January
1, 1993. Each other Eligible Employee in the employ of a
Participating Company on or after January 1, 1993 shall be
eligible to become a Participant coincident with the date he
completes an Hour of Service.
III.2 Election to Participate in Employee
Deferral Contributions Portion of Plan. An Eligible Employee
may become a Participant pursuant to Section 3.1 for purposes
of Sections 4.1 and 4.4 once he has executed and delivered to
the Committee an election form prescribed by the Company:
(a) specifying his chosen rate of Employee Deferral
Contributions, (b) authorizing the Company to reduce his
Eligible Earnings by the amount of such contributions,
(c) making investment elections as described in Article VII,
and (d) designating one or more Beneficiaries under the Plan.
No Employee shall become a Participant in the Plan for purposes
of Sections 4.1 and 4.4 of the Plan until he has completed all
of the above requirements.
III.3 Leased Employees. Any Leased Employee shall
be treated as an Employee (but not an Eligible Employee) of the
Affiliated Company which is the recipient of his services.
However, any contributions or benefits provided by the leasing
organization, to the extent attributable to services performed
for the Affiliated Company, shall be treated as provided by such
recipient Affiliated Company.
For purposes of this Section 3.3, "Leased Employee"
shall mean any person (other than an actual Employee of an
Affiliated Company) who has, pursuant to any agreement between
the recipient Affiliated Company and any other person (the
"leasing organization"), performed services for the recipient
Affiliated Company (or the recipient Affiliated Company and any
related entity determined in accordance with Section 414(n)(6) of
the Code) on a substantially full-time basis for a period of at
least one (1) year, and such services are of a type historically
performed by employees in the business field of the recipient
Affiliated Company (or such related entity). Upon completion of
such year of service, the Leased Employee shall be treated as an
Employee (but not as an Eligible Employee) for all purposes of
the Plan, and his period of Service shall include the entire
period for which the Leased Employee has performed services for
the recipient Affiliated Company.
In no event, however, shall a Leased Employee be
treated as an Employee if (a) such Leased Employee is covered by
a money purchase pension plan providing (1) a non-integrated
employer contribution rate of at least ten percent (10%) of
Compensation, (2) immediate participation, and (3) full and
immediate vesting; and (b) the total number of Leased Employees
does not constitute more than twenty percent (20%) of the non-
Highly Compensated work force.
III.4 Effect of Rehiring. Should an Employee incur
a Severance Date and thereafter return to Service, the following
special rules shall be in effect for determining the date which
the Employee is first eligible to participate in the Plan
following his return:
(a) Should such Employee incur a Period of Severance
of sixty (60) months or more prior to his completion of at least
twelve (12) months of Service, then such Employee shall, upon
resumption of Service, be treated as a new Employee for
eligibility and vesting purposes (as described in Article II and
Section 9.4), and he shall be eligible to participate in the Plan
coincident with the date that he next renders an Hour of Service.
(b) Should such Employee incur a Period of Severance
of twelve (12) consecutive months or more but less than sixty
(60) months, then such Employee shall retain his prior Service
credits for eligibility and vesting purposes (as described in
Article II and Section 9.4), but the applicable date for purposes
of accruing future Service credits upon his resumption of Service
shall be adjusted to the first day following such Period of
Severance on which the Employee next renders an Hour of Service.
Such Employee shall be eligible to participate in the Plan
coincident with the date that he next renders an Hour of Service.
ARTICLE IV
CONTRIBUTIONS
IV.1 Employee Deferral Contributions. The Company
intends to continue the Plan indefinitely and to contribute to
the Fund hereunder each Plan Year pursuant to the provisions of
this Article IV. Subject to the special rules set forth in this
Article IV, each Participant may designate any Employee Deferral
Contributions rate by which his Eligible Earnings are to be
reduced from one percent (1%) to ten percent (10%) (fifteen
percent (15%) for Participants who are not Highly Compensated
Employees), in increments of whole percentage points (subject to
Section 5.6). The Employee Deferral Contributions shall be
determined by multiplying the Participant's Eligible Earnings
earned during a payroll period by his designated Employee
Deferral Contributions rate. The rate designated by the
Participant shall remain in force until the Participant changes
or suspends such rate pursuant to Section 4.2 or 4.3. Employee
Deferral Contributions may not be made with respect to Eligible
Earnings which are currently available on or before the date the
Participant designates such reduction. Contributions under this
Section 4.1 shall be made by means of Eligible Earnings
reductions and the amounts so deducted shall be paid as soon as
administratively feasible to the Fund by the Company and shall be
credited to the Employee Deferral Contributions Accounts of
Participants. Effective January 1, 1993, a Participant may not
designate any back pay award as an Employee Deferral
Contribution.
IV.2 Changes in Contribution Rates. A Participant's
Employee Deferral Contributions rate will remain in effect,
notwithstanding any change in Eligible Earnings, until the
Participant elects to change such rate. A Participant may elect
to change his Employee Deferral Contributions rate four (4) times
during any Plan Year. The change in Employee Deferral
Contributions rate will be effective as soon as administratively
practicable after a written election is received by the
Committee. No change can be made in an Employee Deferral
Contributions rate unless and until a prior change has been in
effect for at least thirty (30) days.
IV.3 Suspension of Contributions. A Participant may
elect to suspend all contributions to the Plan as of any payroll
date, if no less than thirty (30) business days prior to such
payroll date, the Committee has received written notice of his
suspension of contributions. A Participant who has suspended his
contributions may not resume making contributions until the first
payroll period beginning at least three (3) months after the date
of suspension. Once eligible to resume contributions, a
Participant may resume contributions as soon as administratively
feasible following the date the Participant delivers his written
election to resume contributions to the Committee following the
suspension period.
IV.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
with the percentage match in effect for the Employee Deferral
Contributions made by the Participant 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.
IV.5 Profit Sharing Contributions. The Board may in
its sole discretion make an additional Company Profit Sharing
Contribution for any Plan Year out of its Accumulated Profits.
In the event the Company shall make a Company Profit Sharing
Contribution to the Trust, such contribution shall be allocated
as of the year-end Valuation Date for that Plan Year among the
Company Profit Sharing Accounts of each Participant who is an
Eligible Employee as of such Valuation Date, in the same
proportion that such Participant's Eligible Earnings for the Plan
Year bears to the total Eligible Earnings of all eligible
Participants for such Plan Year. Such contribution may be made
in cash, securities and/or property, at the discretion of the
Company.
IV.6 Rollover Contributions. Upon the Company's
request, the Committee may permit an Employee to contribute to
the Plan a Rollover Contribution, provided the Committee is
satisfied that the amount to be rolled over to the Plan
constitutes a Rollover Contribution under federal tax law and as
permitted under Section 8.3. The Employee's request shall set
forth the amount of cash to be contributed as the Rollover
Contribution and such contribution shall be credited to the
Employee's Rollover Account in accordance with Article VIII.
IV.7 General Limitations on Company and Employee
Deferral Contributions. In no event shall the amount of the
Employee Deferral Contributions, Company Profit Sharing
Contributions and Company Matching Contributions made to this
Plan for any Plan Year exceed the lesser of:
(a) The maximum amount allowable as a deduction in
computing the Company's taxable income for that Plan Year for
federal income tax purposes under Section 404 of the Code.
(b) The aggregate amount of the Employee Deferral
Contributions, Company Profit Sharing Contributions and Company
Matching Contributions that may be allocated to Accounts of
Participants under the provisions of Articles IV and V.
IV.8 Special Definitions.
(a) "Annual Additions" shall mean the sum of the
following amounts credited to a Participant's Accounts for the
Limitation Year:
(1) Employee Deferral Contributions;
(2) Company Matching Contributions;
(3) Company Profit Sharing Contributions;
and
(4) Forfeitures, if any.
For this purpose, any excess amount applied under Section 4.10 in
the Limitation Year to reduce Company contributions will be
considered Annual Additions for such Limitation Year, but any
Rollover Contributions contributed to the Plan shall not be
considered.
Affiliated Company contributions and any forfeitures
allocated to the Participant's accounts under any other defined
contribution plans to which one or more Affiliated Companies
contribute are treated as Annual Additions. Amounts allocated to
an individual medical account as defined in Section 415(l)(2) of
the Code, which is part of a defined benefit plan maintained by
the Affiliated Company are treated as Annual Additions to a
defined contribution plan. Also, amounts derived from
contributions paid or accrued after December 31, 1985, in taxable
years ending after such date, that are attributable to post-
retirement medical benefits allocated to the separate account of
the Participant as a Key Employee (as defined in Section 18.1(b))
under a welfare benefit fund (as defined in Section 419(e) of the
Code), maintained by the Affiliated Company, are treated as
Annual Additions to a defined contribution plan. Finally, the
amount of any after-tax contributions made by the Participant to
any other defined contribution plan of the Affiliated Companies
for the Limitation Year shall be treated as an Annual Addition.
(b) "Defined Benefit Plan Fraction" shall mean for any
Plan Year a fraction the numerator of which is the projected
annual benefit of the Participant (determined as of the close of
the Limitation Year), under all defined benefit plans (whether or
not terminated) maintained by the Affiliated Companies, and the
denominator of which is the lesser of (i) the product of the
maximum benefit allowable under Section 415(b) of the Code for
such Limitation Year times 1.25, or (ii) the product of 1.4 times
the maximum amount of Remuneration which may be taken into
account under Section 415(b)(1)(B) of the Code with respect to
such Limitation Year.
(c) "Defined Contribution Plan Fraction" shall mean
for any Limitation Year a fraction the numerator of which is the
sum of the Annual Additions to the Participant's accounts under
this Plan and all other defined contribution plans (whether or
not terminated) maintained by the Affiliated Companies in such
Limitation Year and for all prior Limitation Years, and the
Annual Additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, maintained by the Company,
and the denominator of which is the lesser of (i) the product of
the maximum amount of Annual Additions which could have been made
under Section 415(c) of the Code for such Limitation Year and for
each prior year of service with the Company (regardless of
whether a defined contribution plan as defined in Section 414(i)
of the Code was in existence during those years) times 1.25, or
(ii) the product of 1.4 times the sum of the maximum amount of
Remuneration which may be taken into account under Section
415(c)(1)(B) of the Code for such Participant for such Limitation
Year and for each prior year of service with the Company.
(d) "Excess Amount" shall mean the excess of the
Participant's Annual Additions for the Limitation Year over the
Maximum Permissible Amount.
(e) "Highest Average Remuneration" shall mean the
average Remuneration for the three (3) consecutive calendar years
during which a Participant was an active participant in a plan
which produces the highest average.
(f) "Limitation Year" shall mean with respect to the
Company, the Plan Year. The Company may elect to change to a
different twelve (12) month period, change in the Limitation Year
shall be a change to a twelve (12) month period commencing with
any day within the then current Limitation Year.
(g) "Maximum Permissible Amount" shall mean the lesser
of (1) Thirty Thousand Dollars ($30,000) or, if greater, one-
fourth of the dollar limitation under Section 415(b)(1)(A) of the
Code (as adjusted for each Limitation Year commencing after
December 31, 1988, to take into account any cost-of-living
increase adjustment for that Limitation Year allowable pursuant
to the applicable Treasury regulations or rulings under Section
415(d) of the Code; any such adjustment shall be effective only
as of January 1 of the Limitation Year ending within the
respective calendar year for which the cost-of-living increase
adjustment is announced, or (2) twenty-five percent (25%) of the
Participant's Remuneration for the Limitation Year, provided,
however, the limitation under subparagraph (i) shall not apply to
any contribution for medical benefits (within the meaning of
Section 419A(f)(2) of the Code) after separation from service
which is treated as an Annual Addition. If a short Limitation
Year is created because of an amendment changing the Limitation
Year to a different twelve (12) consecutive month period, the
Maximum Permissible Amount shall not exceed Thirty Thousand
Dollars ($30,000) multiplied by the following fraction:
Number of months in the short limitation year
12
(h) "Projected Annual Benefit" shall mean the annual
retirement benefit (adjusted to an actuarially equivalent
straight light annuity if such benefit is expressed in a form
other than a straight life annuity or qualified joint and
survivor annuity) to which the Participant would be entitled
under the terms of the defined benefit plan of the Affiliated
Company, assuming:
(1) the Participant will continue employment
until normal retirement age under that plan (or current age, if
later), and
(2) the Participant's Remuneration for the
current Limitation Year and all other relevant factors used to
determine benefits under that plan will remain constant for all
future Limitation Years.
(i) "Remuneration" shall mean the Compensation paid to
the Participant for the Limitation Year, adjusted, however, to
exclude the following items for such Limitation Year: (1) any
Employee Deferral Contributions made on such individual's behalf
under this Plan; and (2) any other elective contributions made on
his behalf pursuant to salary deferral or reduction arrangements
maintained by one or more Affiliated Companies under Sections
125, 401(k), 408(k) and 403(b) of the Code.
IV.9 Limitation on Annual Addition. The total Annual
Addition to a Participant's Accounts under this Plan and any
other defined contribution plans to which one or more Affiliated
Companies contributes shall not for any Limitation Year exceed
the Maximum Permissible Amount.
IV.10 Remedial Action. If the Annual Addition with
respect to the Accounts of any Participant under this Plan and
any other defined contribution plans to which one or more
Affiliated Companies contributes would for any Limitation Year
exceed the limitations imposed by Section 4.9, then the following
reductions to such Annual Addition shall be made, in the order
indicated and to the extent necessary to eliminate such excess:
(a) First, the Participant's after-tax employee
contributions under any other defined contribution plans to which
one or more Affiliated Companies contributes shall be refunded.
(b) Then, any Employee Deferral Contributions made on
the Participant's behalf for the Plan Year coincident with such
Limitation Year which were not entitled to a Company Matching
Contribution under Section 4.4 shall be distributed to the
Participant as a current cash payment, subject to applicable
withholding taxes.
(c) Next, any Employee Deferral Contributions made on
the Participant's behalf for the Plan Year coincident with such
Limitation Year which were entitled to a Company Matching
Contribution under Section 4.4 shall be distributed to the
Participant as a current cash payment, subject to applicable
withholding taxes, and no Company Matching Contributions shall be
made with respect to the distributed Employee Deferral
Contributions. Accordingly, the Company Matching Contributions
for such Plan Year are to be reduced as follows:
(1) To the extent Company Matching Contributions
have not already been made under the Plan on the Participant's
behalf, the reduction shall be effected by making an appropriate
reduction in the aggregate amount of Company Matching
Contributions required for such Plan Year to take into account
the distributed Employee Deferral Contributions no longer
eligible for a match under Section 4.4.
(2) To the extent Company Matching Contributions
have already been allocated to the Participant's Company Matching
Contributions Account for the Plan Year coincident with such
Limitation Year, such Company Matching Contributions (to the
extent attributable to the distributed Employee Deferral
Contributions) shall be withdrawn from the Account and reapplied
to the satisfaction of any Company Matching Contributions still
to be made on behalf of other Participants for such Plan Year.
Any Company Matching Contributions withdrawn from the Company
Matching Contributions Account and not so reapplied shall be held
unallocated in a suspense account and shall be used to reduce the
Company Matching Contributions required to be made for each
succeeding Plan Year until the suspense account is reduced to
zero (0). No profits or losses attributable to the assets of the
Fund shall be allocated to the suspense account, nor shall any
contributions to the Plan (other than Employee Deferral
Contributions) be made by the Company while there is an
outstanding balance in such suspense account. Upon the
termination of the Plan, any outstanding balance in the suspense
account shall revert to the Company.
(3) Then, the Participant's allocable share of
forfeitures under this Plan shall be subject to disposition in
accordance with the provisions of Section 4.11.
(4) Then, the Participant's share of the Company
Profit Sharing Contributions (if any) for the Plan Year
coincident with such Limitation Year shall be reduced. The
reduction shall be effected by (i) assuming, for purposes of the
Section 4.5 allocation for such Plan Year, that the Participant's
Eligible Earnings for the Plan Year is at a sufficiently reduced
level to avoid an allocation of the Company Profit Sharing
Contributions for such Plan Year which would otherwise be in
excess of the applicable Section 4.9 limitation and (ii) making
an appropriate reduction in the aggregate Company Profit Sharing
Contributions for such Plan Year. Such reduction shall have no
effect upon any other eligible Participant's allocable share of
the Company Profit Sharing Contributions for such Plan Year.
(5) Finally, the Participant's allocable share of
employer contributions and forfeitures under any other defined
contribution plans to which one or more Affiliated Companies
contributes shall be subject to reduction or other disposition in
accordance with the applicable provisions of such other plans.
IV.11 Reallocation of Forfeitures. Should a
Participant's allocable share of forfeitures for the Limitation
Year exceed the amount which may be allocated to his Accounts in
accordance with Section 4.9, then such excess shall be allocated
and reallocated, as of the close of that Limitation Year, to the
Company Profit Sharing Contribution Accounts of all other
eligible Participants in accordance with Section 4.5, to the
extent such allocation or reallocation will not cause the
Section 4.9 limits to be exceeded in such Limitation Year. Any
amount not so allocated as of the close of such Limitation Year
shall be credited to a suspense account and shall be allocated,
as of the close of each succeeding Limitation Year, to the
Company Profit Sharing Contributions Accounts of all eligible
Participants pursuant to Section 4.5, to the extent the
allocation will not cause the Section 4.9 limits to be exceeded
in any such Limitation Year. The Company shall not, for any Plan
Year (other than the Plan Year in which the excess forfeitures
arise), make any Company Matching Contributions, Company Profit
Sharing Contributions or Employee Deferral Contributions if there
is an outstanding balance in the suspense account as of the close
of the Limitation Year coincident with such Plan Year. Under no
circumstances shall the suspense account participate in the
periodic allocation of earnings, gains and losses of the Fund
pursuant to Section 8.2.
IV.12 Time Period for Payment of Company
Contributions. The Company contributions for any Plan Year shall
be determined and paid to the Trustee not later than the time
prescribed by law, including any extensions thereof, for filing
of the Company's federal income tax return for such year.
ARTICLE V
SPECIAL RULES GOVERNING EMPLOYEE DEFERRAL
CONTRIBUTIONS AND COMPANY MATCHING CONTRIBUTIONS
V.1 Limitations on Employee Deferral Contributions of
Highly Compensated Employees.
(a) Definitions. For purposes of this Article V, the
following definitions shall apply:
(1) "Actual Deferral Percentage" shall mean the
average of the ratios (calculated separately for each Eligible
Employee) of (i) the amount of Employee Deferral Contributions
actually payable to the Fund under the Plan on behalf of each
such Eligible Employee for such Plan Year to (ii) such Eligible
Employee's Compensation for such Plan Year; provided, however,
the Actual Deferral Percentages of an Eligible Employee who is a
Highly Compensated Employee participating in two (2) or more
plans described in Section 401(k) of the Code maintained by the
Affiliated Company shall be calculated in accordance with Section
401(k)(3)(A) of the Code.
(2) "Excess Contributions" shall mean the excess
of (i) the aggregate amount of Employee Deferral Contributions
contributed to the Fund on behalf of Highly Compensated Employees
for the Plan Year, over (ii) the maximum amount of Employee
Deferral Contributions permitted under the limitations of Section
5.1(b).
(b) Any other provision of the Plan to the contrary
notwithstanding, the average of the Actual Deferral Percentage
for Highly Compensated Employees for a Plan Year must bear such a
relationship to the average of the Actual Deferral Percentage for
all other Eligible Employees for such Plan Year so that at least
one of the following two (2) tests is satisfied:
(1) The average of the Actual Deferral Percentage
for the group of Highly Compensated Employees is not more than
the average of the Actual Deferral Percentage of all other
Eligible Employees multiplied by 1.25; or
(2) The excess of the average of the Actual
Deferral Percentage for the group of Highly Compensated Employees
over that of all other Eligible Employees is not more than two
(2) percentage points, provided the average of the Actual
Deferral Percentage for the group of Highly Compensated Employees
is not more than the average of the Actual Deferral Percentage of
all other Eligible Employees multiplied by two (2).
(c) The Committee shall determine from time to time
whether the Employee Deferral Contributions made or to be made in
any Plan Year on behalf of Highly Compensated Employees might
cause the Plan to fail to comply with the foregoing limitations.
If the Committee determines that such a failure might occur, the
Committee may in its sole discretion reduce the maximum
percentage of Eligible Earnings that may be elected as Employee
Deferral Contributions under the Plan by Highly Compensated
Employees or, if necessary to effect such compliance, may cause a
distribution of Excess Contributions as provided in Section 5.2.
Each determination by the Committee shall be made in its sole
judgment and shall be conclusive.
(d) Employee Deferral Contributions made on behalf of
a Participant shall be taken into account for a Plan Year only if
they relate to Compensation that either would have been received
by such Participant in the Plan Year (but for the deferral
election) or is attributable to services performed by the
Participant in the Plan Year and which would have been received
within two and one-half months after the end of such Plan Year
(but for the deferral election).
(e) For purposes of determining the Actual Deferral
Percentage of a Participant, Employee Deferral Contributions made
on behalf of a Participant shall be taken into account for a Plan
Year only if they are allocated to the Participant's Account as
of the a date within that Plan Year. For this purpose, an
Employee Deferral Contribution is considered allocated as of a
date within a Plan Year if such allocation is not contingent on
participation or performance of services after such date and the
elective contribution is actually paid to the trust not later
than 12 months after the Plan Year to which the Employee Deferral
Contribution relates.
(f) For purposes of determining whether the Plan
satisfies the actual deferral percentage test of Section 401(k)
of the Code, all elective contributions that are made under two
or more plans that are aggregated for purposes of Section
401(a)(4) or 410(b) of the Code (other than Section
410(b)(2)(A)(ii) of the Code) are to be treated as made under a
single plan and that if two or more plans are permissively
aggregated for purposes of Section 401(k) of the Code, the
aggregated plans must also satisfy Sections 401(a)(4) and 410(b)
of the Code as though they were a single plan. Moreover, in
calculating the Actual Deferral Percentage for purposes of
Section 401(k) of the Code, the actual deferral ratio of a Highly
Compensated Employee will be determined by treating all cash or
deferred arrangements under which the Highly Compensated Employee
is eligible (other than those that may not be permissively
aggregated) as a single arrangement.
(g) If an eligible Highly Compensated Employee is
either a five percent owner (as defined in Section 416(i)(1) of
the Code) or in the group of the ten Highly Compensated Employees
paid the greatest Compensation during the Plan Year, the combined
Actual Deferral Percentage for the family group (which includes
the Highly Compensated Employee and which is treated as one
Highly Compensated Employee) shall be determined by combining the
elective deferrals, compensation and amounts treated as elective
deferrals of all the eligible family members. The elective
deferrals, compensation and amounts treated as elective deferrals
of all family members are disregarded for purposes of determining
the Actual Deferral Percentage of all other Highly Compensated
Employees and non-Highly Compensated Employees.
V.2 Excess Contributions.
(a) If the Employee Deferral Contributions otherwise
applicable to the Employee Deferral Contributions Accounts of
Eligible Employees for the Plan Year would not satisfy one of the
requirements of Section 5.1(b), then either or both of the
remedial actions set forth below shall be taken:
(1) The Committee may, in its sole discretion, at
any time during the Plan Year, reduce the Employee Deferral
Contributions of one or more Participants who are among the group
of Highly Compensated Employees to the maximum deferral
percentage permissible for such Participant(s) without
contravention of the requirement that the aggregate Employee
Deferral Contributions made on behalf of all Participants who are
Highly Compensated Employees satisfy one of the deferral
percentage tests of Section 5.1(b).
(2) The Excess Contributions (and any income
allocable to such contributions) made for the Plan Year on behalf
of Participants who are among the group of Highly Compensated
Employees shall be distributed to them as a current cash payment,
subject to all applicable withholding taxes, prior to the close
of the Plan Year subsequent to the Plan Year in which the
requirements of Section 5.1(b) have not been met. (In order for
the Company to avoid an excise tax under Section 4979 of the
Code, such distribution would have to be made within two and one-
half (22) months after the close of the Plan Year.) In order to
determine that amount of Excess Contributions and the Highly
Compensated Employees to whom the Excess Contributions are to be
distributed, the Employee Deferral Contributions of Highly
Compensated Employees shall be reduced in order of the Actual
Deferral Percentages beginning with those Highly Compensated
Employees with the highest Actual Deferral Percentages until such
reduced percentage equals the greater of (i) the Actual Deferral
Percentage required in order to allow the Actual Deferral
Percentage for all Highly Compensated Employees to satisfy the
limitation of Section 5.1(b) or (ii) the Actual Deferral
Percentage of the Highly Compensated Employee with the next
highest percentage; then, the process shall be repeated in the
order of the Actual Deferral Percentages for the Highly
Compensated Employees, beginning with the Employee with the next
highest percentage until the limitation of Section 5.1(b) is
satisfied for the aggregate Employee Deferral Contributions made
on behalf of all Highly Compensated Employees.
(b) Any distribution required pursuant to Section
5.2(a) shall be effected in compliance with the following
procedures:
(1) The amount of Excess Contributions to be
distributed with respect to a Plan Year shall be reduced by the
excess Employee Deferral Contributions previously distributed to
the Highly Compensated Employee pursuant to Section 5.5 for the
calendar year coincident with the same Plan Year.
(2) The distribution to the affected Highly
Compensated Employees shall be made in proportion to their share
of Excess Contributions for the Plan Year.
(3) Income for the Plan Year for which the Excess
Contributions were made shall be distributed with the Excess
Contributions. Income allocable to such Excess Contributions
shall be calculated by multiplying (i) the income allocable to
the Participant's Employee Deferral Contributions Account for the
Plan Year for which the Excess Contribution are made by (ii) a
fraction the numerator of which is the Excess Contribution made
on the Participant's behalf for the Plan Year and the denominator
of which is the balance credited to the Participant's Employee
Deferral Contributions Account on the last day of such Plan Year,
decreased by the earnings and increased by the losses allocable
to such Account for such Plan Year.
(4) The Excess Contribution together with the
income allocable thereto, shall at the time of such distribution
be deducted from the Participant's Employee Deferral
Contributions Account.
(5) Should the Actual Deferral Percentage of a
Highly Compensated Employee be determined on the basis of the
Compensation and Employee Deferral Contributions of such
individual and his family members pursuant to Section 1.16, then
the excess Employee Deferral Contributions of such Highly
Compensated Employee shall be determined and distributed as
follows: first, the excess Employee Deferral Contributions
attributable to the family group shall be determined by adding
together the Employee Deferral Contributions and the
Compensation, respectively, of all family members whose Employee
Deferral Contributions and Compensation are taken into account in
calculating the Actual Deferral Percentage of such Highly
Compensated Employee; and then the excess Employee Deferral
Contributions so determined shall be allocated among those family
members in proportion to the Employee Deferral Contributions of
each family member and distributed to them in accordance with
such allocation.
V.3 Limitations on Allocation of Matching
Contributions to Accounts of Highly Compensated Employees.
(a) Definitions. For purposes of this Section 5.3,
the following definitions shall apply:
(1) "Contribution Percentage" shall mean the
average of the ratios (calculated separately for Highly
Compensated Employees and for all other Eligible Employees) of
(i) the Company Matching Contributions payable to the Fund under
the Plan on behalf of each such Highly Compensated Employee or
each of the other Eligible Employees for such Plan Year (plus, at
the election of the Company and to the extent allowed by
applicable Treasury regulations, the Employee Deferral
Contributions made on behalf of the Highly Compensated Employees
or the other Eligible Employees for the Plan Year) to (ii) the
Compensation of the Highly Compensated Employees or the other
Eligible Employees for such Plan Year, provided, however, the
Contribution Percentage of an Eligible Employee who is a Highly
Compensated Employee participating in two (2) or more plans
maintained by an Affiliated Company shall be calculated in
accordance with Section 401(m)(2)(B) of the Code. The
Contribution Percentage for the family unit of a Highly
Compensated Employee which is subject to the aggregation rules
set forth in Section 1.16 shall be the Contribution Percentage
determined by combining the Company Matching Contributions and
Compensation of all eligible family members. The Company
Matching Contributions and Compensation of all family members are
disregarded in determining the actual Contribution Percentages
for the group of Employees who are not Highly Compensated
Employees.
(2) "Excess Aggregate Contributions" shall mean
the excess of (i) the amount of Company Matching Contributions
(and Employee Deferral Contributions taken into account in
computing the Contribution Percentage) actually made on behalf of
Highly Compensated Employees for the Plan Year over (ii) the
maximum amount of such contributions permitted under the
limitations of Section 5.3(b). The Excess Aggregate
Contributions of Highly Compensated Employees whose Contribution
Percentage is determined under the family aggregation rules
described in Section 5.2(b)(5) shall be determined first by
reducing the Contribution Percentage in accordance with the
"leveling" method described below and then allocating the Excess
Aggregate Contributions determined thereby among the family
members in proportion to the Company Matching Contributions made
on behalf of each family member who has been combined under the
family aggregation rule. Under the "leveling" method, the
Contribution Percentage of a Highly Compensated Employee with the
highest actual Contribution Percentages is reduced to the extent
required to:
(i) enable the Plan to satisfy the
percentage test set forth in Section 5.1(b); or
(ii) cause such Highly Compensated Employee's
Contribution Percentage to equal the Contribution Percentage of
the Highly Compensated Employee with the next highest
Contribution Percentage.
This leveling process must be repeated until the Plan satisfies
the percentage tests set forth in Section 5.3(b).
(b) Any other provision of the Plan to the contrary
notwithstanding, the average of the Contributing Percentages for
Highly Compensated Employees for a Plan Year shall not exceed the
greater of:
(1) One hundred twenty-five percent (125%) of the
Contribution Percentage for all other Eligible Employees; or
(2) The lesser of two hundred percent (200%) of
the Contribution Percentage for all other Eligible Employees, or
such Contribution Percentage for all other Eligible Employees
plus two (2) percentage points.
The Committee shall determine from time to time whether the
Excess Aggregate Contributions made or to be made in any calendar
year on behalf of Highly Compensated Employees might cause the
Plan to fail to comply with the foregoing limitations. If the
Committee determines that such a failure might occur, the
Committee may reduce the percentage of Employee Deferral
Contributions by Highly Compensated Employees that will be
matched by the Company pursuant to Section 4.4, or the Committee
may take remedial action under Section 5.3(c). Each
determination by the Committee shall be made in its sole judgment
and shall be conclusive. In determining the amount of the Excess
Aggregate Contributions, such determination shall be made only
after determination of the excess elective deferral under Section
5.6 and Section 402(g) of the Code and the determination of
Excess Contributions under Section 5.1 and Section 401(k) of the
Code.
(c) Remedial Action Through Interaction with Section
5.1(b).
(1) In the event that one or more dollars of
Employee Deferral Contributions are distributed to a Participant
as an Excess Contribution under Section 5.2 or as an excess
elective deferral under Section 5.6, then the Participant shall
not be entitled to any Company Matching Contributions on the
Employee Deferral Contributions so distributed. Accordingly, any
Company Matching Contributions which may have previously been
made upon the distributed Employee Deferral Contributions shall
be forfeited and shall be used to reduce any future Company
Matching Contributions required pursuant to the provisions of
Section 4.4.
(2) By reason of such interaction between the
distribution of excess Employee Deferral Contributions and excess
dollar deferrals and the forfeiture of the Company Matching
Contributions thereon from the Participant's Company Matching
Contributions Account, compliance with the Section 5.1(b)
limitations of the Plan applicable to the Participant's Employee
Deferral Contributions shall automatically assure compliance with
the Section 5.3(b) limitations of the Plan applicable to the
Company Matching Contributions which may be allocated for the
Plan Year to the Company Matching Contributions Accounts of
Participants who are among the group of Highly Compensated
Employees. However, should the Contribution Percentage of any
Highly Compensated Employee who participates in both this Plan
and any other plan maintained by one or more Affiliated Companies
to which after-tax employee contributions or matching employer
contributions are made for the same Plan Year exceed the
applicable limitation of Section 5.3(b), then the remedial action
provided under such other plan shall be taken, in addition to the
action required under this Plan, to assure that the Contribution
Percentage for such Highly Compensated Employee does not cause
the Section 5.3(b) limitation to be exceeded for such Plan Year.
(3) The income allocable to any Company Matching
Contributions which are forfeited from the Company Matching
Contributions Account of a Highly Compensated Employee pursuant
to the remedial provisions of this Section 5.3(c) shall be
calculated as follows: the income allocable to any such
forfeited Company Matching Contributions for the Plan Year for
which such Company Matching Contributions are made shall be
calculated by multiplying the income allocable to the Company
Matching Contributions Account for the Plan Year for which the
forfeited Company Matching Contributions are made shall be
multiplied by a fraction the numerator of which is the Company
Matching Contributions to be forfeited from such Account and the
denominator of which is the balance credited to such Account on
the last day of such Plan Year, decreased by the earnings and
increased by the losses allocable to such Account for the Plan
Year.
(d) Other Limitations.
(1) In calculating the actual contribution
percentage test ("ACP Test") of Section 401(m) of the Code for a
Plan Year, contributions will be taken into account as follows:
An employee contribution is to be taken into account if it is
paid to the trust during the Plan Year or paid to an agent of the
Plan and transmitted to the trust within a reasonable period
after the end of the Plan Year. An excess contribution would
have been received in cash by the Participant had the Participant
not elected to defer the amounts. A Company Matching
Contribution taken into account for a Plan Year only if it is (1)
made on account of the Participant's election or employee
contributions for the Plan Year, (2) allocated to the
Participant's Account as of a date within that year, and (3) paid
to the trust by the end of the 12th month following the close of
that year. Qualified matching contributions which are used to
meet the requirements of Section 401(k)(3)(A) of the Code are not
to be taken into account for purposes of the ACP test of Section
401(m) of the Code.
(2) For purposes of determining whether the Plan
satisfies the ACP Test of Section 401(m) of the Code, all
employee and matching contributions that are made under two or
more plans that are aggregated for purposes of Sections 401(a)(4)
and 410(b) of the Code (other than Section 410(b)(2)(A)(ii) of
the Code) are to be treated as made under a single plan and that
if two or more plans are permissively aggregated for purposes of
Section 401(m), the aggregated plans must also satisfy Sections
401(a)(4) and 410(b) of the Code as though they were a single
plan.
(3) For purposes of calculating the actual
contribution percentage for purposes of Section 401(m) of the
Code, the actual contribution ratio of a compensated employee
will be determined by treating all plans subject to Section
401(m) of the Code under which the Highly Compensated Employee is
eligible (other than those that may not be permissively
aggregated) as a single plan.
(4) If a Highly Compensated Employee is either a
five percent owner (as defined in Section 416(i)(1) of the Code)
or in the group of the ten Highly Compensated Employees paid the
greatest Compensation during the Plan Year, the combined
Contribution Percentage for the family group (which includes the
Highly Compensated Employee and which is treated as one Highly
Compensated Employee) shall be determined by combining the after-
tax contributions, compensation, matching contributions and
amounts treated as matching contributions of all the eligible
family members. The after-tax contributions, compensation,
matching contributions and amounts treated as matching
contributions of all family members are disregarded for purposes
of determining the Contribution Percentage of all other Highly
Compensated Employees and non-Highly Compensated Employees.
V.4 Aggregate Limitations. The Employee Deferral
Contributions and the Company Matching Contributions for the Plan
Year allocable to the Accounts of Participants who are among the
group of Highly Compensated Employees must on an aggregate basis
satisfy one of the following alternative tests:
(a) The sum of the Actual Deferral Percentage (as
defined in Section 5.1(a)(i)) and the Contribution Percentage (as
defined in Section 5.3(a)(1)) for the group of Highly Compensated
Employees must not for such Plan Year exceed the sum of (i) the
product of 1.25 and the greater of (I) the Actual Deferral
Percentage for the group of non-Highly Compensated Employees or
(II) the Contribution Percentage for the group of non-Highly
Compensated Employees and (ii) two percentage points plus the
lesser of the percentage determined under clause (I) or (II)
above, but in no event may the amount determined under this item
(ii) exceed 200% of the lesser of the clause (I) or (II)
percentage above.
(b) The sum of the Actual Deferral Percentage and the
Contribution Percentage for the group of Highly Compensated
Employees must not for such Plan Year exceed the sum of (i) the
product of 1.25 and the lesser of (I) the actual deferral
percentage for the group of non-Highly Compensated Employees or
(II) the Contribution Percentage for the group of non-Highly
Compensated Employees and (ii) two percentage points plus the
greater of the percentage determined under clause (I) or (II)
above, but in no event may the amount determined under this item
(ii) exceed 200% of the greater of the clause (I) or (II)
percentage above.
V.5 Remedial Action. If the Company Matching
Contributions and Employee Deferral Contributions otherwise
allocable for the Plan Year to the Accounts of Highly Compensated
Employees would not when combined satisfy one of the aggregate
percentage tests specified in Section 5.4, then the following
provisions shall become applicable:
(a) Within two and one-half (22) months after the
close of the Plan Year, the Excess Combined Contributions made
for such Plan Year on behalf of one or more Participants who are
among the group of Highly Compensated Employees, together with
any income allocable to such Excess Combined Contributions, shall
be reduced to zero (0), first through the deduction and
distribution from the Employee Deferral Contributions Accounts of
such Participants of any Employee Deferral Contributions
(together with the income allocable thereto) for such Plan Year
which are not otherwise entitled to any Company Matching
Contributions for that Plan Year, and then through the
simultaneous (1) deduction and distribution from their Employee
Deferral Contributions Accounts of a portion of their Employee
Deferral Contributions (together with the income allocable
thereto) for such Plan Year which are entitled to a Company
Matching Contribution for that Plan Year and (2) deduction from
their Company Matching Contributions Accounts of the Company
Matching Contributions (together with the income allocable
thereto) made on those deducted and distributed Employee Deferral
Contributions.
(b) The term "Excess Combined Contributions" shall
mean for each Highly Compensated Employee the amount by which the
(i) Company Matching Contributions and the Employee Deferral
Contributions (expressed as a percentage of taxable Compensation)
actually credited for the Plan Year to his Accounts, determined
after any remedial actions required by Sections 5.2(a) and 5.2(c)
have been taken, exceeds (ii) the maximum combined percentage
permissible for such individual without contravention of the
requirement that the combined Company Matching Contributions and
Employee Deferral Contributions satisfy the aggregate percentage
test of Section 5.4. The clause (ii) percentage applicable to
each Highly Compensated Employee shall be determined in
accordance with the following process: first, the combined
percentage for the Highly Compensated Employee with the highest
such percentage shall be reduced until such reduced percentage
equals the greater of (I) the combined percentage required in
order to allow the combined Company Matching Contributions and
Employee Deferral Contributions on behalf of all Highly
Compensated Employees to satisfy the limitations of Section 5.4
or (II) the combined percentage of the Highly Compensated
Employee with the next highest percentage; then, the process
shall be repeated in the order of the combined percentage for the
Highly Compensated Employees, beginning with the Employee with
the next highest percentage, until the limitation of Section 5.4
is satisfied for the combined Company Matching Contributions and
Employee Deferral Contributions made on behalf of all Highly
Compensated Employees.
(c) Remedial action under subparagraph (a) above shall
be effected with respect to the Highly Compensated Employees in
proportion to their Excess Combined Contributions for the Plan
Year.
(d) The income allocable to any Employee Deferral
Contributions deducted from the Participant's Employee Deferral
Contributions Account pursuant to paragraph (a) above and the
income allocable to any Company Matching Contributions deducted
from his Company Matching Contributions Account shall be
determined in accordance with the same income allocation
procedures in effect under Sections 5.3(c)(3) and 5.6,
respectively, and shall be deducted from the Employee Deferral
Contributions Account and Company Matching Contributions Account
concurrently with the remedial paragraph (a) action.
(e) Any Company Matching Contributions deducted from
the Participant's Company Matching Contributions Account pursuant
to the provisions of this Article V shall nevertheless be treated
as an Annual Addition under Section 4.8 for the Limitation Year
for which such Company Matching Contributions are made. All such
Company Matching Contributions deducted from the Company Matching
Contributions Accounts of Participants pursuant to this Article V
shall be applied to the satisfaction of future Company Matching
Contributions.
V.6 Limitations on Employee Deferral Contributions.
(a) In no event shall the Affiliated Company
contribute on behalf of any Participant for the Participant's
taxable year Employee Deferral Contributions which when added
together with similar contributions under all plans maintained by
the Affiliated Company exceed $7,000, as indexed below, (or the
"Section 402(g) limit"). If at any point during the taxable
year, it becomes apparent that a Participant's Employee Deferral
Contributions will exceed the $7,000 limit, as indexed, the
Participant's deferral election will be reduced by unilateral
action of the Committee, and a flat dollar amount will be
contributed to the Participant's Employee Deferral Contributions
Account each pay period for the remainder of the taxable year so
that the Participant's aggregate Employee Deferral Contributions
for the taxable year shall not exceed the $7,000 limit, as
indexed. The flat dollar amount will be expressed in a fraction
the numerator of which is the difference between the balance of
the Employee Deferral Contributions Account and the maximum
$7,000 limit, as indexed, and the denominator of which is the
number of pay periods left in the taxable year. If, however,
there is still an excess dollar deferral at the end of the
taxable year, the excess Employee Deferral Contributions
(together with any income thereon) shall be paid to such
Participant as a current cash payment.
(b) In the event the sum of (i) the Employee Deferral
Contributions made during the Participant's taxable year by the
Affiliated Company on behalf of the Employee under this Plan and
by any other employer on the Participant's behalf to other plans
complying with Section 401(k) of the Code, (ii) the contributions
made by any other employer during such taxable year on behalf of
the Employee to the extent not includable as income under Section
402(h)(1)(B) of the Code, and (c) the contributions made by any
other employer on behalf of the Employee during the tax year to
purchase an annuity contract complying with the provisions of
Section 403(b) of the Code by reason of a salary reduction
agreement (as defined under Section 3121(a)(5)(D) of the Code),
exceeds the $7,000 limit, as indexed below, then all or a portion
of such excess may be distributed to the Employee by April 15th
of the year following the close of the taxable year during which
the excess elective deferral was made in any amount up to the
total excess (plus income allocable to the excess), provided that
no later than March 1 of such year, or such earlier date as the
Committee may elect in its sole discretion, the Participant has
notified the Committee of the portion of the excess Employee
Deferral Contributions to be distributed from the Plan.
Notwithstanding the provisions of this Section 5.6, any excess
elective deferrals described hereunder shall be considered for
purposes of determining Excess Contributions under the
discrimination rules of this Article V, unless otherwise provided
by the applicable Treasury rules or regulations. Any excess
Employee Deferral Contributions made under the Plan which are not
distributed by April 15th after the tax year in which such excess
occurred shall be subject to the distribution restrictions
applicable to the Employee Deferral Contributions.
(c) Notwithstanding the foregoing, the $7,000
threshold shall be adjusted for each Plan Year commencing on or
after January 1, 1988 to take into account any cost-of-living
increase adjustment for that Plan Year allowable pursuant to the
applicable Treasury regulations or rulings under Sections
402(g)(5) and 415(d) of the Code. The income allocable to the
excess Employee Deferral Contributions shall be calculated by
multiplying (1) the income allocable to the Participant's
Employee Deferral Contributions Account for the taxable year for
which the excess Employee Deferral Contributions are made, by (2)
a fraction the numerator of which is the excess Employee Deferral
Contribution made on the Participant's behalf for such taxable
year and the denominator of which is the balance credited to the
Employee Deferral Contributions Account of such Participant on
the last day of the taxable year, decreased by the earnings and
increased by the losses allocable to such Account for the year.
ARTICLE VI
SPECIAL PROVISIONS FOR STOCK BONUS ACCOUNTS
VI.1 Special Requirements for Stock Bonus Accounts.
(a) In General. This Section 6.1 shall apply to Stock
Bonus Account and shall not eliminate any form of distribution
otherwise available under the Plan or the commencement date of
that distribution.
(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
Transfer Account and reinvested in one (1) or more other
investment funds in accordance with Section 6.3.
(c) Time of Distribution. Notwithstanding any other
provision of the Plan other than such provisions as require the
consent of the Participant and the Participant's Spouse to a
distribution with a present value in excess of $3,500, a
Participant may elect to have his Stock Bonus Account distributed
as follows:
(1) If the Participant incurs a Severance Date by
reason of the attainment of Normal Retirement Age, death or Total
Disability, the distribution of his Stock Bonus Account balance
will begin not later than one (1) year after the close of the
Plan Year in which such event occurs, unless the Participant
elects otherwise under the Plan.
(2) If the Participant incurs a Severance Date
for any other reason, and is not reemployed by the Company at the
end of the fifth (5th) Plan Year following the Plan Year of such
separation from service, distribution of the Participant's Stock
Bonus Account balance shall begin not later than one (1) year
after the close of the fifth (5th) Plan Year following the Plan
Year in which the Participant separated from service, unless the
Participant elects otherwise under the Plan.
(3) If the Participant separates from service for
a reason other than those described in paragraph (1) above and is
employed by the Company as of the last day of the fifth (5th)
Plan Year following the Plan Year of such separation from
service, any distribution to the Participant prior to his
subsequent separation from service shall be made in accordance
with terms of the Plan other than this Section 6.1.
For purposes of this Section 6.1, Common Stock shall not include
any employer securities acquired with the proceeds of a loan
described in Section 404(a)(9) of the Code until the close of the
Plan Year in which such loan is repaid in full.
(d) Period for Payment. Distributions required under
Section 6.1 shall be made in substantially equal annual payments
over a period of five (5) years, unless the Participant elects
otherwise under the Plan. In no event shall such distribution
period exceed the period permitted under Section 401(a)(9) of the
Code. Notwithstanding the foregoing provisions of this Section
6.1(c), if the vested balance of a Participant's Stock Bonus
Account is in excess of $500,000 (multiplied by the adjustment
factor in effect pursuant to Section 409(o)(2) of the Code) as of
the date distribution is required to begin under Section 6.1(b),
then the distributions required under this Section 6.1 shall be
made in substantially equal annual payments over a period not
longer than five (5) years plus an additional one (1) year (up to
an additional five (5) years) for each $100,000 increment, or
fraction of such increment, by which the value of the
Participant's Stock Bonus Account exceeds $500,000, unless the
Participant elects otherwise under the Plan. In no event shall
such distribution period exceed the period permitted under
Section 401(a)(9) of the Code.
VI.2 Put Option Requirements.
(a) In General. This Section 6.2 shall apply to
distributions of employer securities which were acquired by the
Burr-Brown Corporation Stock Bonus Plan, in the event Company
Stock is not readily tradable on an established security market
and shall not eliminate any other form of distribution available
under the Plan on the commencement date for that distribution.
(b) Put Option Payment. Notwithstanding any other
provisions of the Plan, the Plan shall provide the Participant
with a put option that complies with the requirements of Section
409(h) of the Code. Such put option shall provide that if the
Participant exercises such put option, the Company, or the Plan,
if the Plan so elects, shall repurchase the distributed Company
Stock as follows:
(1) If the distribution constitutes a Total
Distribution, payment of the fair market value of the repurchased
Company Stock shall be made in five (5) substantially equal
annual payments. The first installment shall be paid no later
than thirty (30) days after the Participant exercises the put
option. The Plan will pay a reasonable rate of interest and
provide adequate security on amounts not paid after thirty (30)
days.
(2) If the distribution does not constitute a
Total Distribution, the Plan shall pay the Participant an amount
equal to the fair market value of the repurchased Company Stock
no later than thirty (30) days after the Participant exercises
the put option.
VI.3 Reinvestment of Stock Bonus Account.
(a) Transfer to 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 Transfer Account
maintained under the same trust under 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
Transfer Account will be effected on the date indicated below for
the applicable due date.
Due Date Effective Date
of of
Transfer Notice 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 Transfer Account at any one transfer opportunity under
Section 6.3(a) shall be limited to the greater of: (i) 150 shares
of Company Stock or (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 Transfer Account.
Each Participant may elect to liquidate in whole or in part the
Company Stock held in his Stock Bonus Transfer 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 provided 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 on July 17, 1995 and continue through
July 24, 1995, with 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
Transfer 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 Transfer Account reinvested in one or more investment
funds under Article VII shall nevertheless be distributable,
following the Participant's Severance Date, in 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.
ARTICLE VII
INVESTMENT FUNDS AND INVESTMENT OF CONTRIBUTIONS
VII.1 Investment Funds. A Participant may choose a
Fixed Income Investment Sub-Account or one or more Variable
Income Investment Sub-Accounts.
VII.2 Investment Elections. Each Participant shall
make an investment election which will apply to the investment of
his Accounts in one or more of the various available investment
funds. Separate investment elections with respect to a
Participant's different Accounts may not be made. All investment
choices by the Participant shall be made pursuant to rules and
procedures established by the Committee.
VII.3 Changes in Investment Elections. A
Participant may elect to change his investment election with
respect to future contributions made for him pursuant to the
rules and procedures established by the Committee.
VII.4 Transfers Between Funds. A Participant may
transfer amounts between his Investment Sub-Accounts at any time
by notifying the Committee. Such transfer will be made on the
date specified, subject to any restrictions pursuant to rules and
procedures established by the Committee.
VII.5 Restrictions on Insiders. Each Participant
who is at the time an officer or director of Burr-Brown
Corporation subject to the short-swing profit restrictions of the
Federal securities laws ("Section 16 Insider") may only effect
investment directives with respect to the acquisition or
disposition of shares of Company Stock under the Plan in
accordance with the following provisions:
(a) Should the Section 16 Insider elect to have his
Employee Deferral Contributions invested in whole or in part in
shares of Company Stock on an on-going basis as such
contributions are made to the Plan, then the Section 16 Insider
(as well as any other Participant) will have the right, upon
proper notice to the Committee, to discontinue such investment at
any time. However, the Section 16 Insider must, for a period of
at least six (6) months thereafter, cease any further purchases
or acquisitions of Company Stock under the Plan, whether through
a reinvestment of the existing balance credited to his Accounts
or through any new Employee Deferral Contributions made to the
Plan.
(b) Directives by a Section 16 Insider to invest his
Accounts in whole or in part in Company Stock or to liquidate one
or more shares of Company Stock at the time held in his Accounts
may only be given by such Section 16 Insider during one of the
quarterly window periods beginning on the third (3rd) business
day following the release to the public of the Company's
quarterly or annual financial statements and ending on the
twelfth (12th) business day following such public release. In no
event, however, may such investment directive with respect to
Company Stock be given within six (6) months after the end of the
last such window period in which the Participant issued a
previous investment directive with respect to Company Stock.
(c) Should the Section 16 Insider direct the
liquidation of any Company Stock at the time held in his Account,
then such individual may not, for a period of at least six (6)
months thereafter, purchase or acquire any additional Company
Stock under the Plan, whether through a reinvestment of the
existing balance credited to his Account or through any new
Employee Deferral Contributions made to the Plan. Accordingly,
any on-going election by such Section 16 Insider to have his
Employee Deferral Contributions applied to the purchase of
Company Stock must be suspended for at least six (6) months
following the investment directive to liquidate any Company Stock
held in his Account.
ARTICLE VIII
INDIVIDUAL ACCOUNTS
VIII.1 Accounts for Participants. The following
Accounts may be established under the Plan for a Participant:
(a) An Employee Deferral Contributions Account shall
be established for each Participant. Employee Deferral
Contributions directed by a Participant shall be allocated to the
Participant's Employee Deferral Contributions Account.
(b) A Company Profit Sharing Account shall be
established for each Participant. Company Profit Sharing
Contributions for a Participant shall be allocated to the
Participant's Company Profit Sharing Contributions Account in
accordance with Section 4.5.
(c) A Company Matching Contributions Account shall be
established for each Participant. Company Matching Contributions
for a Participant shall be allocated to the Participant's Company
Matching Contributions Account.
(d) A 1986 Profit Sharing Account shall be established
for each Participant who participated in the Plan prior to 1987.
(e) A Rollover Account shall be established, as
provided in Section 4.6.
(f) A Stock Bonus Account shall be established for
each Participant who had an account in the Burr-Brown Corporation
Stock Bonus Plan which was merged into this Plan effective July
1, 1989.
(g) A Stock Bonus Transfer Account shall be
established for each Participant who transfers all or part of his
Stock Bonus Account to such Transfer Account in accordance with
Section 6.3.
Accounts shall be for bookkeeping purposes only, and, except as
may be otherwise necessary with respect to one of the Accounts,
the establishment of Accounts shall not require any segregation
of the Fund's assets.
VIII.2 Valuation of Accounts. As of each Valuation
Date, the value of each Account shall be adjusted to reflect the
effect of distributions, withdrawals, transfers, income, realized
and unrealized profit and losses, contributions and all other
transactions with respect to the Fund since the immediately
preceding Valuation Date in accordance with a method adopted by
the Committee which is consistently followed and uniformly
applied. For purposes of this Section 8.2, the value of an
Account will be the fair market value as of the applicable
Valuation Date. A Participant's Account may be subject to
charges and expenses involved in administering the Plan pursuant
to Section 19.4. Any of such charges and expenses may instead be
paid by the Company, at the Company's sole election.
VIII.3 Rollover Accounts. With the consent of the
Committee, which shall be granted in its sole discretion and only
if it is certain that the amount to be transferred constitutes a
Rollover Contribution, an Employee may transfer to the Fund an
amount that constitutes a Rollover Contribution. Notwithstanding
any provisions of the Plan to the contrary, the following shall
apply with respect to a Rollover Contribution:
(a) A Rollover Account shall be established for each
Employee who makes a Rollover Contribution. Commencing on the
date the Rollover Contribution is transferred to the Fund, the
Rollover Account shall share in the earnings or losses of the
Fund for such Plan Year in the manner described in Section 8.2.
(b) A Rollover Account shall be treated in all
respects the same as all other Accounts except that no Company
contributions shall ever be added to a Rollover Account.
(c) An Employee shall be treated the same as a
Participant hereunder from the time of the transfer (but shall
not actually be a Participant until satisfying the requirements
of Article III, and shall be eligible for an allocation of
Employee Deferral Contributions hereunder only upon satisfying
all requirements of the Plan as though this Section were not a
part hereof).
(d) A Rollover Contribution shall not be accepted by
the Committee if it is a direct or indirect transfer of any
assets of any qualified plan under Section 401(a) of the Code
which is required to provide annuity distributions to terminating
participants pursuant to the provisions described in Section
401(a)(11)(B)(iii)(III) of the Code.
ARTICLE IX
VESTING
IX.1 Vesting in the Employee Deferral Contributions
Account, the 1986 Profit Sharing Account, the Stock Bonus Account
and the Rollover Account. An Employee's interest in his Employee
Deferral Contributions Account, 1986 Profit Sharing Account,
Stock Bonus Transfer Account and Rollover Account herein shall be
fully vested at all times.
IX.2 Vesting in Company Matching Contributions Account
and the Company Profit Sharing Contributions Account. The
Participant's interest in his Company Profit Sharing
Contributions Account and Company Matching Contributions Account
shall become fully vested at the earliest of the following dates:
(a) The date of the Participant's death while an
Employee of an Affiliated Company,
(b) The date the Participant incurs a Total
Disability,
(c) The Participant's attainment of Normal Retirement
Age,
(d) The date of termination of this Plan, or
(e) The date the Participant completes four (4) years
of Vesting Service.
IX.3 Determination of Vested Interest in the Company
Profit Sharing Contributions Account and Company Matching
Contributions Account in the Event of a Severance Date. Prior to
the date that the Participant's nonforfeitable interest in his
Company Profit Sharing Contributions Account and Company Matching
Contributions Account becomes fully vested pursuant to Section
9.2, his nonforfeitable interest in those Accounts shall be the
appropriate percentage under the following table:
Years of Vesting Nonforfeitable
Service Percentage
less than 1 0%
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
Any amounts credited to the Company Profit Sharing Contributions
Account or Company Matching Contributions Account in which the
Participant is not vested may be forfeited in accordance with
Sections 9.4 and 11.3. In the event the Participant's unvested
benefits are not otherwise earlier forfeited, such non-vested
benefits shall in all events be completely forfeited upon his
incurrence of a Period of Severance of sixty (60) months or more.
IX.4 Restoration of Forfeiture. If a Participant
incurs a Severance Date and thereby ceases to be an Employee
prior to the time he is one hundred percent (100%) vested in his
Company Matching Contributions Account and/or Company Profit
Sharing Contributions Account and he receives a distribution of
his entire vested interest in his Company Matching Contributions
Account, or Company Profit Sharing Contributions Account pursuant
to Section 11.4 prior to sustaining a Period of Severance of
sixty (60) months or more, the entire unvested amount credited to
the Participant's applicable Accounts shall be forfeited and
reallocated in accordance with the provisions of Section 11.3 as
of the year-end Valuation Date coincident with or immediately
following such distribution. If such Participant shall become an
Employee prior to sustaining a Period of Severance of sixty (60)
months or more, such individual shall resume participation in the
Plan in accordance with Section 3.4, and an amount equal to the
amount forfeited from each Account in connection with his prior
distribution shall be restored to that Account, provided he
repays in full the amount distributed from that Account on or
before the earlier of the fifth (5th) anniversary of the date of
his resumption of Employee status or his incurrence of a Period
of Severance of sixty (60) months or more. Forfeitures for the
year of restoration will be used to restore such amounts. In the
event there are not sufficient forfeitures, the Company will make
a special contribution to complete the restoration. Under no
circumstances shall Service rendered by a Participant who has
previously incurred a Period of Severance of sixty (60) months or
more, be taken into account in determining the percentage to
which the Participant is vested in that portion of his Company
Profit Sharing Contributions Account or Company Matching
Contributions Account (including allocated forfeitures)
attributable to contributions made prior to such Period of
Severance of sixty (60) months or more.
IX.5 Amendments to Vesting Schedule. No amendments to
the vesting provisions set forth in Sections 9.1 through 9.3
shall deprive an Employee who is a Participant on the later of
(a) the date the amendment is adopted, or (b) the date the
amendment is effective, of any nonforfeitable benefit to which he
is entitled under the Plan (determined as of such date) without
regard to such amendment. If the vesting provisions designated
in Sections 9.1 through 9.3 are amended, each Participant whose
benefits would be determined under such schedule and who has
completed three (3) years of Vesting Service shall have the right
to elect, during the period computed pursuant to this Section
9.5, to have his nonforfeitable benefit determined without regard
to such amendment; provided, however, that no election shall be
provided to any Participant whose nonforfeitable percentage under
the schedule, as amended, cannot at any time be less than the
percentage computed without regard to such amendment. The
election period shall commence on the date the amendment is
adopted and end on the latest of: (a) sixty (60) days after
adoption of the amendment, (b) sixty (60) days after the
effective date of the amendment, or (c) sixty (60) days after the
Participant is notified of the amendment in writing by the
Company or Committee. Such election, if exercised, shall be
irrevocable, and shall be available only to an Employee who is a
Participant when the election is made.
ARTICLE X
WITHDRAWALS DURING EMPLOYMENT
X.1 In-Service Withdrawals. Subject to the limitation
of Section 10.2, a Participant who has incurred a Financial
Hardship, as hereinafter described in Section 10.2, may withdraw
all or a portion of the value of his Employee Deferral
Contributions Account or Rollover Account.
X.2 Withdrawal Rules. Withdrawals pursuant to Section
10.1 shall be permitted subject to the following rules:
(a) Withdrawals shall be made by filing a written
request with the Committee on such form as the Committee may
prescribe. Withdrawals shall take effect as of the date a
written request is approved by the Committee, and payment of the
amount to be withdrawn shall be made as soon as practicable
thereafter.
(b) All withdrawals shall be paid in a lump sum.
(c) All withdrawals shall first be made from a
Participant's Rollover Account and then from his Employee
Deferral Contributions Account.
(d) The Committee shall approve a distribution from
the Fund to a Participant due to Financial Hardship only in the
event such distribution is necessary to meet the Financial
Hardship of the Participant.
(1) There is a Financial Hardship only if the
reason for the distribution would be to pay one of the following
expenses:
(i) Medical expenses (as described in
Section 213(d) of the Code) of the Participant, the Participant's
spouse or dependents;
(ii) Costs directly related to the purchase
(excluding mortgage payments) of the principal residence of the
Participant;
(iii) Tuition and related educational
fees for the next twelve (12) months of post-secondary education
for the Participant, the Participant's spouse or dependents; or
(iv) Expenses necessary to prevent the
eviction from, or foreclosure on the mortgage of, the principal
residence of the Participant.
(2) If there is a Financial Hardship under
subparagraph (1) above, distribution will be considered necessary
to satisfy the Financial Hardship if made subject to the
following requirements:
(i) The amount distributed must not exceed
the amount needed (which may include amounts necessary to pay
income taxes and penalties resulting from the distribution).
(ii) The Participant must have obtained all
distributions and nontaxable loans available under this Plan and
any other qualified plan maintained by the Company or any other
Affiliated Company.
(iii) If the Participant withdraws
amounts from his Employee Deferral Contributions Account, he will
be suspended from making elective and after-tax contributions to
this Plan or any other qualified plan of the Company or any other
Affiliated Company for a period of at least twelve (12) months
following the receipt of the distribution.
(iv) For purposes of Section 4.4, if the
Participant withdraws from his Employee Deferral Contributions
Account, the Section 5.6 limitation on Employee Deferral
Contributions for the year subsequent to the year of the
distribution shall be reduced by the total amount of Employee
Deferral Contributions made by the Participant during the year of
the distribution.
(e) If a Participant's Account subject to a withdrawal
is invested in more than one investment fund, the withdrawal
shall be made from such fund or funds as elected by the
Participant. In the absence of such election, the withdrawal
shall be made pro-rata from each such fund.
(f) Distributions from the Employee Deferral
Contributions Account of a Participant on account of Financial
Hardship shall not exceed the Employee Deferral Contributions
made on behalf of the Participant; the income allocable to the
Participant's Employee Deferral Contributions Account shall not
be included in the distributable amount.
X.3 Withdrawal of Company Matching Contributions.
Effective December 23, 1994, Participants may only withdraw that
portion of their Company Matching Contributions Account
consisting of pre-1993 Company Matching Contributions (and
earnings) that have been in the Plan for two years.
ARTICLE XI
DISTRIBUTION UPON TERMINATION OF EMPLOYMENT
XI.1 Death. Upon the death of the Participant while in
Employee status, a distribution of the deceased Participant's
Accrued Benefit shall be made to his Beneficiary in Company
Stock, to the extent the Participant's Accounts are invested in
Company Stock and the balance in cash; provided, however, the
Beneficiary may elect to receive the cash equivalent of the
Company Stock held in all Accounts except the Stock Bonus
Account. The Participant shall have the unrestricted right to
designate one or more Beneficiaries to receive the death benefits
to which he is entitled hereunder, and to change any such
designation. However, if an individual other than the
Participant's Spouse is named as Beneficiary, then the Spouse
must consent in writing to the Participant's designation of such
other Beneficiary, and such consent form must be witnessed by a
notary public or a member of the Committee and must acknowledge
the effect such designation will have upon the benefits otherwise
payable to the Spouse under the Plan. Each such Beneficiary
designation shall be evidenced by a written instrument filed with
the Committee. If such designation is not on file with the
Committee at the time of the death of the Participant, or if for
any reason in the sole discretion of the Committee such
designation is defective, then the Participant's Spouse, if
living, his children, if living, or his estate, in that order of
preference, shall be conclusively deemed to be the Beneficiary
designated to receive such benefit. Notwithstanding this spousal
consent requirement, if the Participant establishes to the
satisfaction of a Plan representative that such written consent
may not be obtained because there is no Spouse or the Spouse
cannot be located, the Beneficiary designation shall be valid
without spousal consent. Any spousal consent necessary under
this provision shall be valid only with respect to the Spouse who
signs the consent. Should the Participant designate a person
other than (or in addition to) his Spouse as Beneficiary and not
obtain the spousal consent to such designation required under
this Section 11.1, then any benefits payable under the Plan upon
the Participant's death shall be paid entirely to the
Participant's surviving Spouse.
XI.2 Payments Upon Separation from Service. Upon a
Participant's separation from service, 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 nonforfeitable
interest under the Plan, payment shall be made to 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 Transfer Account) is invested in shares of Company Stock,
the Participant (or his or her Beneficiary) may elect to receive
the distribution of that balance in such shares or in the cash
equivalent of those shares.
XI.3 Forfeiture of Non-vested Benefits. The non-vested
portion of each of the Participant's Accounts shall be forfeited
as of the Valuation Date as of which the Participant receives his
distribution under Section 11.2. The non-vested portion of any
amounts credited to him but not yet allocated to his Accounts as
of the Valuation Date shall also be forfeited. Forfeitures shall
be applied first to restore Accounts of rehired Employees
pursuant to Section 9.4 and then to reduce future Company
contributions.
XI.4 Timing of Distributions.
(a) The Accrued Benefit to which a Participant or his
Beneficiary becomes entitled in accordance with this Article XI
shall be paid in a lump sum at such time as the Participant
elects in his written election to the Committee. If the
Participant's vested Account balances have always been equal to
or less than $3,500, the Committee shall have the right to direct
the Trustee to distribute the vested Account balances to the
Participant in a lump sum as soon as practicable after the
Valuation Date ending after his Severance Date. In the case of
death or retirement on or after the Normal Retirement Date, the
lump sum payment of the vested Account balances shall be made as
soon as practicable after the Valuation Date ending after the
Severance Date. In all other cases, the Committee may not
immediately distribute benefits without the Participant's
consent. The term "immediately distribute" shall mean the
distribution is made prior to Normal Retirement Age. If the
Participant's aggregate vested Account balances exceeds $3,500,
no distribution shall be made to the Participant prior to his
attainment of Normal Retirement Age, unless the Participant's
written consent to any earlier distribution is obtained not more
than ninety (90) days prior to the distribution date. A
Participant's failure to so consent shall be deemed to be an
election to defer commencement of any benefit distribution.
Until such time as the amounts in the Participant's Accounts are
paid to him or his Beneficiary, the amounts in his Accounts shall
remain deposited in the Participant's appropriate investment
funds and shall continue to share in the investment earnings and
losses of those funds. Distributions of all Accounts other than
Company Stock distributed from the Stock Bonus Account shall be
made in lump sum distribution.
(b) Not less than thirty (30) days nor more than
ninety (90) days prior to the date specified for distribution the
Participant shall be provided with written information relating
to his right to defer such distribution in accordance with the
guidelines of this Section 11.4. After incurring a Severance
Date as described in Sections 11.1 and 11.2, determination of the
value of the Participant's distribution shall be made as of the
Valuation Date immediately preceding the date on which the
Participant takes distribution. However, such distribution may
commence less than thirty (30) days after the written information
is provided to such Participant (provided that Sections
401(a)(11) and 417 of the Code do not apply), if the Committee
(1) clearly informs the Participant that he has the right to a
period of at least thirty (30) days after receiving such
information to consider whether or not to elect a distribution
(and, if applicable, a particular distribution option); and (2)
the Participant, after receiving such information, affirmatively
elects a distribution.
(c) Notwithstanding anything in this Section 11.4 or
in Section 11.5 to the contrary, unless the Participant otherwise
agrees, the distribution of the Participant's Accounts shall
commence no later than sixty (60) days after the close of the
Plan Year in which the Participant attains age 65, or in which
occurs the tenth (10th) anniversary of the year in which the
Participant commenced participation in the Plan, or in which the
Participant terminates his employment with the Company, whichever
occurs last. However, the benefits payable to a Participant
under this Section 11.4 or Section 11.5 shall in all events
commence no later than April 1 of the year following the calendar
year in which he attains age 702.
XI.5 Forms and Timing of Distributions from Stock Bonus
Account.
(a) Subject to the terms of Article VI, after a
Participant incurs a Severance Date described in Sections 11.1
and 11.2, determination of the value of the Participant's
distribution from his Stock Bonus Account shall be made as of the
Valuation Date immediately preceding the date on which the
Participant takes distribution. If the vested balance of the
Participant's entire Stock Bonus Account has always been equal to
or less than $3,500, the Committee shall have the right to direct
the Trustee to distribute the vested Stock Bonus Account balance
to the Participant in the form of a lump sum distribution as soon
as practicable after the Valuation Date ending after the
Severance Date. In the case of death or retirement on or after
the Normal Retirement Date, payment shall commence as soon as
practicable after the Valuation Date ending after the Severance
Date. In all other cases, the Committee may not immediately
distribute benefits without the Participant's consent, subject to
Section 11.4. The term "immediately distribute" shall mean the
distribution is made prior to Normal Retirement Age. If consent
is required, the Participant must consent to the timing of the
distribution. A Participant's failure to so consent shall be
deemed to be an election to defer commencement of any benefit
distribution. Until such time as the amounts in the
Participant's Account is paid to him or his Beneficiary, the
amounts in his Stock Bonus Account shall remain deposited in such
Account.
(b) If distribution from the Participant's Stock Bonus
Account is made in installments pursuant to the provisions of
Article VI and such installment distribution is not completed by
the Required Beginning Date (which, for purposes of this Section,
shall mean April 1 of the calendar year following the calendar
year in which the Employee attains age 702), or if the
Participant has not otherwise begin to receive the distribution
of his Accounts under the Plan prior to such Required Beginning
Date, then the unpaid balance credited to the Stock Bonus Account
or all Accounts, as the case may be, on the Required Beginning
Date shall be distributed in accordance with the proposed
Treasury regulations under Section 401(a)(9) of the Code,
including the minimum distribution incidental benefit
requirements of section 1.401(a)(9)-2 of such regulations.
Accordingly, in determining the minimum amount to be distributed
to such Participant in each calendar year following the calendar
year in which the Participant attains age 702, the minimum
distribution rules of Section 401(a)(9) of the Code and the
proposed Treasury regulations thereunder shall apply as follows
and shall supersede any other distribution provisions to the
contrary in the Plan:
(1) The minimum amount distributed each calendar
year must not be less than the quotient obtained by dividing the
adjusted vested balance of the Participant's Stock Bonus Account
or all Accounts, as the case may be, as valued in accordance with
subparagraph (2) below by the applicable life expectancy in
effect for the Participant, reduced by one (1) for each calendar
year which elapses since the date such life expectancy is last
calculated in accordance with subparagraph (3) below.
(2) The adjusted vested balance of each
applicable Account for the first minimum distribution year (the
calendar year in which the Participant attains age 702) shall be
the value of such Account as of the last Valuation Date in the
calendar year immediately preceding the start of such
distribution year. The adjusted vested balance of such Account
for the second minimum distribution year shall be the value of
that Account as of the last Valuation Date in the calendar year
immediately preceding the start of such distribution year,
reduced by the amount of the required distribution for the first
minimum distribution year, to the extent paid to the Participant
in the second distribution year on or before the Required
Beginning Date. The adjusted vested balance of the Account for
each succeeding minimum distribution year shall be the value of
such Stock Bonus Account as of the last Valuation Date in the
calendar year immediately preceding the start of that
distribution year. The value of the Account will in all
instances be increased for any participating Company
contributions or forfeitures allocated to, or reduced by any
distributions or withdrawals made from, the Account after the
applicable Valuation Date and prior to the start of the minimum
distribution year to which such Valuation Date relates.
(3) The applicable life expectancy shall be the
life expectancy of the Participant and shall be calculated on the
basis of his attained age on his birthday in the calendar year in
which he attains age 702. The return multiples in Tables V and
VI of Section 1.72-9 of the Treasury regulations shall be
utilized in the determination of the applicable life expectancy
period. The life expectancy of the Participant shall not be
recalculated during the minimum distribution period.
(4) The first calendar year for which a minimum
distribution shall be required under this Section 11.5(b) shall
be the calendar year in which the Participant attains age 702,
and such distribution shall be made no later than the Required
Beginning Date. Each subsequent minimum distribution shall be
made no later than the last day of the calendar year for which
such distribution is required, with the first such subsequent
distribution to be made no later than December 31 of the calendar
year immediately following the calendar year in which the
Participant attains age 702.
(5) Should the minimum distributions required
under this Section 11.5(b) commence prior to the date on which
the Participant ceases Employee status, then the unpaid vested
balance credited to the Participant's Stock Bonus Account at the
time of his subsequent cessation of Employee status for any
reason (including death) shall be distributed over the shorter of
the following two periods: (i) the balance of the minimum
distribution period in effect for the Participant or (ii) the
installment distribution period in effect for that Account under
Article VI; for all other Accounts, the distribution will be made
in the form of a lump sum payment under Section 11.4(a). In no
event may the distribution in any calendar year within the
applicable period be less than the minimum distribution required
for such calendar year in accordance with the preceding
provisions of this Section 11.5(c). In addition, the Participant
(or the designated Beneficiary of a deceased Participant) may, at
any time following such cessation of Employee status, request an
immediate lump sum distribution of the unpaid vested balance of
the Stock Bonus Account.
XI.6 Participant Payment Election Regarding Stock Bonus
Transfer Account. A Participant may elect to receive the
distribution of the nonforfeitable balance of any Stock Bonus or
Stock Bonus Transfer Account maintained for him or her under the
Plan in shares of Company Stock, whether or not that particular
Account is at the time 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 Transfer Accounts shall be
made in accordance with the provisions of Article VI and Section
11.5.
XI.7 Unclaimed Amounts; Notices. Neither the Company,
the Committee nor the Trustee shall be obliged to search for, or
ascertain the whereabouts of, any Participant or Beneficiary.
The Committee, by certified or registered mail addressed to the
Participant's or Beneficiary's last known address of record with
the Committee or the Company, shall notify any Participant or
Beneficiary that he is entitled to a distribution under the Plan.
In the event that the Participant or Beneficiary shall make no
claim for benefits or shall fail to make his correct address
known, the Committee may direct the Trustee to segregate the
Participant's Accounts in interest-bearing deposits with a
federally insured institution, and the Committee and the Trustee
shall have no other investment responsibility with regard to such
benefits. After so segregating such benefits, the Committee
shall notify the Social Security Administration of the
Participant's or Beneficiary's failure to claim the distribution
to which he is entitled. The Committee shall request the Social
Security Administration to notify the Participant or Beneficiary
in accordance with any procedures it has established for this
purpose. The segregated deposits shall be entitled to all income
they earn and shall bear all expense or loss they incur.
XI.8 Direct Rollovers. Notwithstanding any provision
of this Plan to the contrary that would otherwise limit a
Distributee's election under this Plan, a Distributee shall have
the right, exercisable in accordance with the procedure
established by the Committee in compliance with Section 402 of
the Code, to have all or any portion of an Eligible Rollover
Distribution from this Plan paid as a Direct Rollover to an
Eligible Retirement Plan designated by such Distributee.
XI.9 Payment Upon Sale of Substantially all the Assets
or a Subsidiary. A Participant's nonforfeitable interest in his
or her Employee Deferral Account, determined in accordance with
Article IX, may be distributed upon either the sale or
disposition by the Company to an unrelated corporation of
substantially all of the assets used in the trade or business or
the sale or disposition by the Company of its interest in a
subsidiary to an unrelated entity, but only with respect to
Participants who continue employment with the acquiring
corporation and if the acquiring corporation does not maintain
the Plan after the disposition.
ARTICLE XII
LOANS
XII.1 Loan Applications. Except as provided below,
each Participant or other "party in interest" (as defined in
Section 3(14) of the Act) who has an interest in the outstanding
balance of any Employee Deferral Contributions Account and
Rollover Account may submit a written application to the
Committee for a loan from the Plan in an amount not in excess of
the maximum amount allowable under Section 12.2. The Committee
shall act on each loan application in a uniform and non-
discriminatory manner. The Committee shall not reject any
application on the basis of the applicant's age or sex but may
make distinctions on the basis of the applicant's credit-
worthiness and financial need.
XII.2 Loan Terms. Upon approval of any application
under Section 12.1, the Committee shall direct the Trustee to
make a loan to the applicant in accordance with the following
provisions:
(a) The minimum amount an individual may borrow is
$1,000, or such smaller amount as the Committee shall establish
from time to time.
(b) The maximum amount of the loan shall not (when
added to the outstanding balance of all other loans ("Plan
Loans") made to the applicant under this Plan or any other
defined benefit or defined contribution plan to which any
Affiliated Company contributes) exceed the lesser of:
(1) $50,000 (less the excess of (i) the highest
principal amount in the aggregate outstanding under any other
Plan Loans to the applicant during the immediately preceding
twelve (12) months over (ii) the aggregate principal amount
outstanding under such Plan Loans on the date such loan is made);
or
(2) fifty percent (50%) of the vested balance
credited to the Employee Deferral Contributions Account, Rollover
Account, Company Matching Contributions Account, Company Profit
Sharing Contributions Account and 1986 Profit Sharing Account at
the time the loan is made (as determined pursuant to the
valuation provisions of Section 8.2).
In no event, however, shall the amount loaned to the
applicant exceed one hundred percent (100%) of the balance
credited to the Employee Deferral Contributions Account and
Rollover Account at the time the loan is made, less any earmarked
investments credited to such Account under Section 12.5.
(c) The cost of processing the loan application may be
deducted from the Employee Deferral Contributions Account and/or
the Rollover Account or may be withheld from the amount borrowed,
at the discretion of the Committee.
(d) The loan shall be evidenced by the applicant's
promissory note in the amount of the loan, made payable to the
order of the Trustee.
(e) The loan shall have a fixed term not in excess of
five (5) years (or fifteen (15) years if the proceeds of the loan
to a Participant are applied to the acquisition of real estate
which is to serve as his primary residence), subject to
acceleration upon the occurrence of (1) the applicant's failure
to pay any installment of principal or interest when due, (2) the
applicant's qualification for an immediate distribution from the
Plan or, if the applicant is a Participant, his cessation of
Employee status, (3) the filing of bankruptcy proceedings by or
against the applicant, the assignment of the applicant's assets
for the benefit of his creditors or the appointment of a receiver
for the applicant's assets, or any other similar event of
acceleration specified in the promissory note.
(f) The loan shall bear a market rate of interest,
payable at least annually. Such market rate shall be determined
on the basis of the interest rates charged for similar-purpose
loans by banks and other reputable financial institutions
selected by the Committee as representative lenders.
(g) The loan shall be adequately secured through the
conveyance to the Fund of a security interest in fifty percent
(50%) of the applicant's right, title and interest in and to all
Accounts under the Plan.
(h) The loan shall be repayable through level
amortization payments over the term of the loan. Such payments
shall be effected through periodic payroll deductions from the
applicant's salary and other cash earnings each payroll period
the loan is outstanding; provided, however, if payroll deductions
are impossible (e.g., the applicant is on an unpaid leave of
absence) the loan shall be repayable in periodic cash
installments payable at least quarterly.
(i) The remaining terms and conditions of the loan and
related documentation shall be established by the Committee.
(j) The provisions of this Article XII and loans made
hereunder shall be interpreted and construed so as to prevent any
such loan from being treated as a taxable distribution under
Section 72(p) of the Code.
XII.3 Offset Rights. If the borrower is the
Participant, then no distributions shall be effected from his
Accounts at any time after his cessation of Employee status,
unless and until all loans under this Article XII, including
interest thereon, have been repaid in full. Should any other
person become entitled to a distribution under the Plan at a time
when one or more Article XII loans to such person remain
outstanding, then the unpaid balance of such loans shall become
immediately due and payable, up to an amount equal to the amount
to be distributed to him under the Plan. The Trustee shall,
accordingly, collect such accelerated indebtedness by withholding
it from and offsetting it against the amount to be distributed.
To the extent any Qualified Domestic Relations Order requires
payment to an Alternate Payee at a time when a loan is
outstanding to the Participant from whose Account the Qualified
Domestic Relations Order requires payment, the terms of such
Order shall control.
XII.4 Liquidation of Account. The proceeds for
each loan under the Plan shall be taken directly from the
Employee Deferral Contributions Account and/or the Rollover
Account, as applicable, in which the applicant has an interest by
liquidating one or more of the investments at the time held in
such Account(s). The applicant shall accordingly provide the
Committee with investment directives specifying which of the
applicant's investments under the Plan are to be liquidated in
order to provide the loan proceeds. The Committee shall promptly
direct the Trustee to liquidate one or more investments held in
the Account(s) in accordance with the applicant's instructions.
In the absence of such instructions from the applicant, the loan
proceeds shall be obtained by liquidating a portion of each
investment held in the Account(s), with the amount so liquidated
to be in the same proportion as the market value of each such
investment bears to the total market value of all investments
held in the Account(s).
XII.5 Earmarked Investment. All notes evidencing
Article XII loans from the Employee Deferral Contributions
Account and/or the Rollover Account, as applicable, shall
constitute an earmarked investment of the applicable Account(s).
Accordingly, each of such Account(s) shall at the time the loan
is made be divided into two (2) subaccounts. Subaccount One
shall be credited with the note and shall not share in the
investment gains or losses of the Fund under Article VIII.
Subaccount Two shall be credited with that portion of the Account
which is not loaned to the applicant (including payments of
interest and principal made on the note) and shall be
periodically adjusted under Section 8.2 for its allocable share
of the investment gains and losses of the Fund. To the extent
the Employee Deferral Contributions Account and/or the Rollover
Account, as applicable, has an earmarked investment under this
Section 12.5, then all Employee Deferral Contributions and/or
Rollover Contributions thereafter allocated to such Account shall
be credited to Subaccount Two, where they shall remain until they
become the subject of a subsequent loan under this Article XII.
ARTICLE XIII
FIDUCIARY
XIII.1 Plan Administrator. The Company shall be the
Plan Administrator, but it may delegate its duties as such to a
committee appointed in accordance with Article XIV.
XIII.2 Named Fiduciary. The Plan Administrator
shall be a "named fiduciary" of the Plan with authority to manage
and control Plan assets and to select the Investment Manager.
XIII.3 Employment of Advisors. A "named fiduciary,"
and any "fiduciary" named by a "named fiduciary," may employ one
or more persons to render advice with regard to any
responsibility of such "named fiduciary" or "fiduciary" under the
Plan.
XIII.4 Multiple Fiduciary Capacities. Any "named
fiduciary" and any other "fiduciary" may serve in more than one
fiduciary capacity with respect to the Plan.
XIII.5 Indemnification. The Company shall maintain
and keep in force such insurance as the Plan Administrator shall
determine to insure and protect the Company's directors,
officers, employees and any appropriately authorized delegates or
appointees of them against any and all claims, damages,
liability, loss, cost or expense (including attorney's fees)
arising out of or resulting from (including failure to act with
respect to) any responsibility, duty, function or activity of any
such person in relation to the Plan (or Trust, if applicable),
including without limitation, the members of the Board, the
Committee, the members of the Committee, and directors, officers
and employees of the Company performing responsibilities, duties,
functions, and/or actions at the direction or under the authority
of any of the foregoing.
In lieu of and/or as a supplement and in addition to
the insurance referred to in the foregoing sentence, the Company
shall indemnify and hold harmless its directors, officers and
employees against any and all claims, damages, liability, loss,
cost or expense arising in connection with (including failure to
act with respect to) any responsibility, duty, function or
activity of any such person in relation to the Plan (or Trust, if
applicable) including without limitation the members of the
Board, the Committee, the members of the Committee, and
directors, officers and employees of the Company performing
responsibilities, duties, functions and/or actions at the
direction or under the authority of any of the foregoing;
provided, however, that no such indemnification shall extend to
any matter as to which it shall have been adjudged by any court
of competent jurisdiction that such person has acted in bad faith
or was guilty of gross negligence in the performance of his
duties unless such court shall, in view of all the circumstances
of the case, determine that such person is fairly and reasonably
entitled to indemnification.
ARTICLE XIV
ADMINISTRATION
XIV.1 The Committee.
(a) The Plan Administrator shall appoint a Committee,
consisting of at least two (2) members, to be known as the
"Committee" which shall serve at the pleasure of the Plan
Administrator. Unless the Plan Administrator otherwise provides,
any members of the Committee who is a director or Employee of the
Company at the time of his appointment will be considered to have
resigned from the Committee when no longer a director or
Employee. At least one (1) member of the Committee shall be an
officer of the Company.
(b) All of the reasonable expenses of the Committee
shall be paid from the Fund, unless paid directly by the Company.
Directors and Employees shall receive no compensation for their
services rendered to or as members of the Committee.
(c) The Committee shall act by a majority of its
members at the time in office and such action may be taken either
by a vote at a meeting or in writing without a meeting. The
Committee may authorize in writing any person to execute any
document or documents on its behalf, and any interested person,
upon receipt of notice of such authorization directed to it, may
thereafter accept and rely upon any document executed by such
authorized person until the Committee shall deliver to such
interested person a written revocation of such authorization.
(d) A member of the Committee who is also a
Participant shall not vote or act upon any matter relating
specifically to himself.
XIV.2 Powers and Duties of the Committee. The
Committee shall be empowered to perform the administrative duties
described in this Plan and shall have all powers necessary to
enable it to properly carry out such duties. Without limiting
the generality of the foregoing, the Committee shall have the
power to construe and interpret this Plan, to hear and resolve
claims relating to this Plan, and to decide all questions and
disputes arising under this Plan. The Committee shall have full
power and authority to determine the eligibility of employees to
participate in the Plan, the service to be credited to the
Employees, the status and rights of a Participant, the identity
of the beneficiary or beneficiaries entitled to receive any
benefits payable hereunder on account of the death of a
Participant, and the amount of the benefits (if any) to which any
Participant or his Spouse or beneficiary is entitled under the
Plan. Except as is otherwise provided hereunder, the Committee
shall determine the manner and time of payment of benefits under
this Plan. All benefit disbursements by the Trustee shall be
made upon the instructions of the Committee. The decision of the
Committee upon all matters within the scope of its authority
shall be binding and conclusive upon all persons. The Committee
shall file all reports and forms lawfully required to be filed by
the Committee with any governmental agency or department, federal
or state, and shall distribute any forms, reports, statements or
plan descriptions lawfully required to be distributed to
Participants and others by any governmental agency or department,
federal or state. The Committee shall keep itself advised with
respect to the investment of the Fund and shall, not less
frequently than annually, report to the Employer regarding the
investment and reinvestment of the Fund. The Committee shall
have power to direct specific investments of the Fund only where
such power is expressly conferred by this Plan and only to the
extent described in this Plan. All other investment duties shall
be the responsibility of the Trustee.
XIV.3 Delegation of Responsibility by the
Committee. The Committee may designate persons, including
persons other than "named fiduciaries," to carry out the
responsibilities of the Committee provided for hereunder. The
Committee shall not be liable for any act or omission of a person
so designated.
XIV.4 Investment Direction by Plan Administrator.
(a) The Board may authorize in writing any person to
execute any document or documents on its behalf, and any
interested person, upon receipt of notice of such authorization
directed to it, may thereafter accept and rely upon any document
executed by such authorized person until the Company shall
deliver to such interested person a written revocation of such
authorization.
(b) The Board shall have power to establish the
funding policy of the Plan pursuant to Section 14.7 and make and
deal with any investment of the Fund in any manner consistent
with the Plan which they deem advisable.
(c) The Board shall have all the rights, powers,
duties and obligations regarding investment of Plan assets
granted or imposed upon it elsewhere in the Plan.
(d) The Board shall exercise its responsibilities
hereunder in a uniform and nondiscriminatory manner.
(e) The Board shall designate a representative to
enter into one or more contracts with a Funding Agent under which
the Funding Agent establishes and makes available separate
investment funds to which the Participants may direct the
investment of their Accounts. Any such contract(s) may provide
for the contributions thereunder to be held in the Funding
Agent's general account or in one or more of its commingled
separate accounts.
(f) The Committee shall make recommendation to the
Board with regard to the exercise of the Board's powers described
in subparagraphs (a) through (e).
XIV.5 The Investment Manager. The Board may, by an
instrument in writing, appoint one or more persons (each of which
is hereinafter referred to as an "Investment Manager") as adviser
to the Board in respect of investments and may, subject to any
restrictions upon investment imposed upon the Board by any
regulation prescribed by the Secretary relating to the qualified
status of the Fund as tax exempt, or by the Act, delegate to an
Investment Manager from time to time, the power to manager,
acquire and dispose of any Plan assets. Each person so appointed
shall be an Investment Adviser registered under the Investment
Advisers Act of 1940, a bank as defined in that Act, or any
insurance company qualified to manage, acquire, or dispose of any
asset of the Plan under the laws of more than one state. Each
Investment Manager shall acknowledge in writing that he is a
"fiduciary" with respect to the Plan. The Board shall enter into
an agreement with each Investment Manager specifying the duties
and compensation of such Investment Manager and the other terms
and conditions under which such Investment Manager shall be
retained. The Board shall not be liable for following the advice
of any Investment Manager, with respect to any duties delegated
to any Investment Manager.
XIV.6 Appointment of a Trustee. The Board may, by
an instrument in writing, appoint one or more persons to serve as
Trustee (each of which is herein referred to as a "Trustee") of
all or a portion of the Future Investment Trust and the Stock
Bonus Trust. Each Trustee shall be subject to direction by the
Company or an Investment Manager and shall have no discretion
with respect to management and control of Plan assets, except, to
the extent that the instrument appointing such Trustee provides
that such Trustee shall have power to manage and control Plan
assets. Each Trustee shall accept its appointment by an
instrument in writing. The Company shall enter into an agreement
with each Trustee specifying the duties and compensation of such
Trustees and the other terms and conditions under which such
Trustees shall serve. Neither the Company nor the Board shall be
liable for any act or omission of any Trustee with respect to any
duties delegated to such Trustee. The Board may, at any time,
terminate the appointment of any Trustee.
XIV.7 Funding Policy. The funding policy of the
Plan shall be as follows:
(a) Subject to Article VII, Company contributions
allocated to the Fund shall be invested in a manner consistent
with the investment objectives determined by the Board. The
Board shall communicate its investment objectives and funding
policy to the Funding Agent as to the Fund and/or to other
Investment Managers.
(b) The Board shall review at least annually the
funding policy and investment objectives of the Plan after
reviewing the recommendations of the Committee and shall
communicate any revision in such objectives to the Funding Agent
as to the Fund and/or to other Investment Managers.
XIV.8 Compensation of Investment Manager and
Trustees. Each Investment Manager and each Trustee, if any,
shall be paid such reasonable compensation, in addition to their
expenses, as shall from time to time be agreed upon by the
Company and each Trustee and each Investment Manager, as the case
may be.
XIV.9 Facility of Benefit Payment. Whenever, in
the Committee's opinion, a person entitled to receive any payment
of a benefit or installment thereof hereunder is under a legal
disability or is incapacitated in any way so as to be unable to
manage his financial affairs, the Committee may direct the
Trustee to make payments to such person or to his legal
representative or to a relative or friend of such person for his
benefit, or to direct the Trustee to apply the payment for the
benefit of such person in such manner as the Committee considers
advisable. Any payment of a benefit in accordance with the
provisions of this Section 14.9 shall be a complete discharge of
any liability for the making of such payment under the provision
of the Plan.
XIV.10 Claims and Appeals.
(a) Claims Procedure. Should any Participant or
Beneficiary believe he is entitled to a benefit from the Plan
which differs from the benefit determined by the Committee, such
Participant or Beneficiary may file a written claim with the
Committee. Within ninety (90) days after receipt of such claim
(or if an extension of time for processing the claim is required,
within one hundred eighty (180) days after receipt of such
claim), the Committee shall notify the claimant in writing as to
whether the claim has been granted. If the claimant has not
received written notice of such decision within the ninety (90)
day period (or a one hundred eighty (180) day period, if an
extension of time is required), the claimant shall, for the
purpose of subparagraph (b), regard his claim as denied.
Any notice of denial of a claim shall be set forth in a
manner calculated to be understood by the claimant giving:
(1) the specific reason or reasons for the
denial;
(2) the specific reference to the pertinent Plan
provisions on which the denial is based;
(3) a description of any additional material or
information necessary for the claimant to perfect the claim and
an explanation of why such material or information is necessary;
and
(4) appropriate information as to the steps to be
taken if the Participant or Beneficiary wishes to submit his
claim for review.
(b) Review Procedure. Any claimant (or his duly
authorized representative) whose claim for benefits is denied in
whole or in part may appeal to the Committee for a full and fair
review of the decision by submitting to the Committee, within
sixty (60) days after receiving from the Committee written notice
of such denial (as set forth in subparagraph (a)), a written
statement:
(i) Requesting a review by the Committee of his
claim for benefits;
(ii) Setting forth all of the grounds upon which
the request for review is based and any facts in support thereof;
and
(iii) Setting forth any issues or comments which
the claimant deems pertinent to his claim.
(c) Timing of Response on Review. The Committee shall
act upon each such claim within sixty (60) days after receipt of
the claimant's request for review by the Committee, unless
special circumstances require an extension of time for
processing. If such an extension is required, written notice of
the extension shall be furnished to the claimant within the
initial sixty (60) day period, and a decision shall be rendered
as soon as possible, but not later than one hundred twenty (120)
days after receipt of the initial request for review. The
Committee shall make a full and fair review of each such claim
and any written materials submitted by the claimant in connection
therewith, and the Committee may require the claimant to submit
such additional facts, documents, or other evidence as the
Committee may, in its sole discretion, deem necessary or
advisable in making such a review. On the basis of its review,
the Committee shall make an independent determination of the
claimant's eligibility for benefits under the Plan. The decision
of the Committee on any benefit claim shall be final and
conclusive upon all persons.
(d) Denial of Appeal. In the event the Committee
denies an appeal in whole or in part, the Committee shall give
written notice of such decision to the claimant, setting forth in
a manner calculated to be understood by the claimant the specific
reasons for such denial and specific reference to the pertinent
Plan provisions on which the decision of the Committee was based.
ARTICLE XV
RIGHTS OF PARTICIPANTS
XV.1 Limitations on Rights of Participants. The
adoption and maintenance of this Plan shall not be construed as
creating any contract of employment between the Company and any
Employee. The Company shall have the right in all respects to
deal with its Employees, their hiring, discharge, compensation
and conditions of employment as though this Plan did not exist.
No Employee shall have any right to question the action of the
Company or the Board in terminating Company liability to
contribute to this Plan or in terminating this Plan in its
entirety. Each Participant shall have the right only to see the
record of the accounts with respect to his own participation, and
shall have no right to inquire as to accounts with respect to
other persons.
The sole rights of a Participant under this Plan shall
be to have this Plan administered according to its provisions, to
receive whatever benefits he is entitled to receive hereunder,
and to name the Beneficiary to receive any death benefits to
which such person may be entitled in accordance with the terms of
this Plan.
XV.2 Prohibition Against Assignment or Alienation of
Benefits. No benefit, right or interest of any kind of any
Participant in this Plan may be assigned, transferred, pledged,
mortgaged or otherwise alienated or anticipated, nor shall any
such benefit, right or interest be subject to garnishment,
attachment, execution or levy of any kind, or any other legal
process, whether by virtue of bankruptcy, insolvency or other
operation of law (other than (a) Federal tax levies and
executions on Federal tax judgments, (b) payments made from the
Accounts of a Participant in satisfaction of the rights of
alternate payees pursuant to a Qualified Domestic Relations Order
under Article XIX) or (c) the enforcement of any security
interests or offset rights applicable to Employee Deferral
Contributions Account and Rollover Account of a Participant
pursuant to the loan provisions of Article XII).
ARTICLE XVI
AMENDMENT OF THE PLAN
XVI.1 Amendment of the Plan. The Company acting
through the Board shall have the right at any time, through a
written instrument duly executed and acknowledged by an
authorized officer of the Company to modify, alter, or amend this
Plan, in whole or in part, prospectively or retroactively, to any
extent and in any manner as it shall deem advisable. Upon
delivery of the instrument of amendment to each participating
Affiliated Company and the Trustee, the amendment shall become
effective in accordance with its terms as to all Participants and
all other persons having or claiming any interest under the Plan.
However, no such amendment shall operate to (a) cause any part of
the Fund to revert to or be recoverable by any Affiliated Company
or to be used for, or diverted to, purposes other than the
exclusive benefit of Participants and their Beneficiaries; (b)
reduce the then outstanding balances in the Accounts of
Participants; or (c) cause or effect any discrimination in favor
of Highly Compensated Employees; or (d) substantially increase
the duties of the Committee and the Trustee hereunder without
their written consent.
ARTICLE XVII
TERMINATION OF THE PLAN
XVII.1 Termination of the Plan. The Company intends
to make contributions to the Plan indefinitely, but it is under
no obligation or liability whatsoever to continue its
contributions to the Plan or to maintain the Plan for any given
length of time. The Company may, in its sole discretion,
discontinue contributions at any time without liability
whatsoever for such action. In addition, the Board may, at any
given time terminate the Plan in whole or in part.
XVII.2 Effect of Discontinuance. In the event the
Board decides to discontinue further contributions to the Plan,
the duties of the Committee shall continue as before, and the
provisions of the Plan (other than the provisions relating to
contributions by the Company) shall remain in force with respect
to the Employee/Participants of the Company. The Fund shall also
remain in existence, and all the provisions of the Fund (other
than provisions relating to contributions by the Company) shall
continue in effect. Any unallocated balance in the Section 4.10
suspense account at the close of the Plan Year in which the
discontinuance of contributions occurs shall be allocated (to the
extent permissible) to the Company Profit Sharing Contributions
Account of each Participant in Employee status at the end of the
Plan Year of discontinuance, with such allocation to be in
proportion to the Eligible Earnings paid to each such Participant
for such Plan Year. Any other unallocated funds existing at the
date of discontinuance (other than any Employee Deferral
Contributions, Company Matching Contributions, Company Profit
Sharing Contributions, and forfeitures), shall be allocated to
all Accounts outstanding on such date in accordance with Section
8.2. If the Company completely discontinues all contributions to
the Plan, then all amounts credited to the Accounts of
Participants in accordance with the provisions of this
Section 17.2 shall become fully vested and non-forfeitable.
XVII.3 Effect of Termination. If the Plan is term
inated completely or if there is a partial termination of the
Plan with respect to the Employees of the Company, all amounts
credited to the Accounts of affected Participants shall
immediately vest in full and become non-forfeitable, and in no
event shall any part of the Fund revert to or revest in the
Affiliated Company, except as herein provided. The Committee
shall, in accordance with Section 8.2, value the assets of the
Fund and the individual Accounts of all affected Participants as
of the date of termination and, after satisfying current obliga
tions of the Plan and setting aside funds for anticipated future
obligations of the Fund, including (but not limited to) the
Trustee's compensation and expenses, shall (in accordance with
Section 8.2) allocate to all Accounts outstanding on the date of
termination the net increase or decrease in the fair market value
of the Fund since the immediately preceding Valuation Date
(excluding, however, any Employee Deferral Contributions, Company
Profit Sharing Contributions and Company Matching Contributions,
and forfeitures for the Plan Year of termination, which are to be
allocated in accordance with Article IV). Any unallocated
balance in the Section 4.10 suspense account at the date of
termination with shall be allocated (to the extent permissible
under Section 4.10) to the Accounts of all Participants who
continue in Employee status through the end of the Plan Year of
termination, with such allocation to be in proportion to the
Eligible Earnings paid to each such Participant for such Plan
Year. Upon a complete termination of the Plan, any remaining
balance in the Section 4.10 suspense account shall be returned to
the Company.
The Trustee shall pay to each Participant for whom the
termination is effective (or his Beneficiary) the net value of
his Accounts in accordance with the written directives of the
Committee. However, should the Company not dissolve or cease all
operations as of the date of Plan termination, then the Employee
Deferral Contributions Accounts of each such Participant shall
not be distributed pursuant to the provisions of this
Section 17.3, but shall continue to be held in trust for
subsequent distribution in accordance with Article XI, unless no
other successor defined contribution plan (other than an
employees stock ownership plan, as defined in Section 4975(e)(7)
of the Code) is established and the Participants consents to the
immediate lump sum distribution of his Accounts.
XVII.4 Plan Transfers or Mergers. The merger or
consolidation with, or transfer of the allocable portion of the
assets and liabilities of the Fund to, any other qualified
retirement plan, trust or fund shall be permitted only if the
benefit each Participant would receive if the Plan were
terminated immediately after such merger, consolidation or
transfer would be at least as great as the benefit he would have
received had this Plan been terminated immediately before the
date of merger, consolidation or transfer.
XVII.5 Corporate Changes. The Plan shall not be
automatically terminated by the Company's acquisition by or
merger into any other company, trade or business, but the Plan
may be continued after such merger, provided the successor
employer agrees to continue the Plan with respect to Participants
employed by the Company. All rights to amend, modify, suspend or
terminate the Plan with respect to Participants employed by the
Company shall be transferred to the successor employer, effective
as of the date of the merger or acquisition.
XVII.6 Determination of Partial Termination. For
purposes of this Article XVII, a partial termination of the Plan
shall be deemed to occur only if there is a determination, either
made or agreed to by the Committee or the Company, or made by the
Internal Revenue Service and upheld by a decision of a court of
final jurisdiction, that a particular event or transaction which
has transpired (including the sale or transfer of all or
substantially all of the assets of the Affiliated Company or the
cessation of operations at one or more of its facilities)
constitutes a partial termination within the meaning of Section
411(d)(3)(A) of the Code.
ARTICLE XVIII
TOP-HEAVY PLAN PROVISIONS
XVIII.1 Definitions. For purposes of this
Article XVIII, the following terms shall have the meanings
indicated:
(a) "Determination Date" shall mean for any Plan Year
the last day of the immediately preceding Plan Year, except for
the initial Plan Year it shall be the last day of such initial
Plan Year.
(b) "Key Employee" shall mean for any Plan Year any
Employee or former Employee (or Beneficiary of any deceased
Employee) who is (as of the Determination Date for such Plan
Year), or who was at any time during any of the four (4) Plan
Years ended immediately prior to the Plan Year in which such
Determination Date occurs:
(1) an officer of an Affiliated Company who
received aggregate annual Compensation (for the same Plan Year he
was such an officer) which was in excess of fifty percent (50%)
of the maximum dollar limitation in effect for such Plan Year
under Section 415(b)(1)(A) of the Code,
(2) one of the ten (10) Employees owning
(actually or constructively under Section 318 of the Code) the
largest percentage interest in any Affiliated Company, provided
such individual owns more than a one half percent (2%) interest
in such Affiliated Company and his aggregate Compensation for the
same Plan Year is greater than the maximum dollar limitation in
effect for such Plan Year under Section 415(c)(1)(A) of the Code,
(3) a Five Percent (5%) owner of any Affiliated
Company, or
(4) a one percent (1%) owner of any Affiliated
Company who received aggregate annual Compensation for the same
Plan Year in excess of $150,000.00.
The determination of Key Employee status shall be made pursuant
to the criteria set forth in Section 416(i) of the Code and the
Regulations issued thereunder. Ownership interests shall be
determined in accordance with the attribution rules of Section
318 of the Code.
If the number of officers which would otherwise be
taken into account under subparagraph (1) for any Plan Year
exceeds ten percent (10%) of the total number of Employees of all
the Affiliated Companies, then the number of such officers
actually qualifying as Key Employees under subparagraph (1) for
such Plan Year shall be limited to that number of officers, not
in excess of ten percent (10%) of such total number of Employees,
selected from the group of all Employees determined to be
officers at any time during the five (5) Plan Year period ending
with the Determination Date for the current Plan Year, who
received the highest annual Compensation for any Plan Year
(during such five (5) year period) for which they were officers.
For purposes of subparagraph (2) above, should two (2)
Employees own the same percentage interest in one or more
Affiliated Companies, then the Employee having the greater
aggregate annual Compensation for the Plan Year shall be deemed
to own the larger percentage interest.
(c) "Non-Key-Employee" shall mean any Employee who is
not a Key Employee and shall include any Employee who is a former
Key Employee.
(d) "Permissive Aggregation Group" shall mean a group
of plans consisting of the Required Aggregation Group plus any
other plan of the Affiliated Companies which, when considered
together with the Required Aggregation Group, would continue to
satisfy the requirements of Sections 401(a)(4) and 410 of the
Code.
(e) "Required Aggregation Group" shall mean a group of
plans consisting of (1) this Plan and any other qualified plan of
one or more Affiliated Companies (including a simplified employee
pension plan) in which at least one Key Employee participates and
(2) any other qualified plan of the Affiliated Companies which
enables any plan described in subparagraph (1) above to meet the
requirements of Sections 401(a)(4) or 410 of the Code.
(f) "Remuneration" shall have the meaning assigned to
such term in Section 4.8(i) and shall be applied on an aggregate
basis as if all the Affiliated Companies were a single employer
entity paying such Remuneration.
(g) "Top-Heavy Contribution" shall have the meaning
assigned to such term in Section 18.3.
(h) "Top-Heavy Ratio" shall mean that fraction the
numerator of which is the sum of the account balances of all Key
Employees under this Plan (and, if this Plan is part of a
Required Aggregation Group or a Permissive Aggregation Group, the
sum of (1) the account balances of all Key Employees under all
other defined contribution plans (within such Required or
Permissive Aggregation Group) maintained by one or more
Affiliated Companies, and (2) the present value of the accrued
benefits of all Key Employees under all defined benefit plans
(within such Required or Permissive Aggregation Group) maintained
by one or more Affiliated Companies), and the denominator of
which is the sum of the account balances of all Participants
under this Plan (and, if this Plan is part of a Required
Aggregation Group or a Permissive Aggregation Group, the sum of
(1) the account balances of all Participants under all other
defined contribution plans (within such Required or Permissive
Aggregation Group) maintained by one or more Affiliated
Companies, and (2) the present value of the accrued benefits of
all Participants under all defined benefit plans (within such
Required or Permissive Aggregation Group) maintained by one or
more Affiliated Companies.
In determining the Top-Heavy Ratio, the following rules
shall apply:
(1) The value of such account balances and the
present value of such accrued benefits shall be determined as of
the most recent Top-Heavy Valuation Date within the twelve (12)
month period ending on the Determination Date. Each account
balance so determined shall be adjusted for (a) the amount of any
contributions made after such Top-Heavy Valuation Date but on or
before the Determination Date or, with respect to defined
contribution plans subject to Section 412 of the Code, (b) the
amount of any contributions to be allocated as of a date on or
before the Determination Date though not yet required to be
actually contributed. Except as otherwise provided in
subparagraph (2) below or in the Regulations issued under
Section 416(g)(3) of the Code, the value of each such account
balance or accrued benefit shall also include all distributions
made from such account or made with respect to such accrued
benefit during the five (5) Plan Year period ending on the
Determination Date. The present value of each accrued benefit
under a defined benefit plan shall be determined as if the
individual ceased Employee status as of the Top-Heavy Valuation
Date and shall be calculated in accordance with the actuarial
assumptions in effect for such purpose under the defined benefit
plan under which such benefit is payable. The accrued benefit of
an Employee other than a Key Employee shall be determined under
the method, if any, that uniformly applies for accrual purposes
under all defined benefit plans maintained by one or more
Affiliated Companies or if there is no such method, as if such
benefit accrued not more rapidly than the slowest accrual rate
permitted under Section 411(b)(1)(C) of the Code.
(2) Should there be effected a transfer from one
qualified plan to another (by rollover or plan-to-plan transfer)
which is (a) incident to a plan merger or consolidation or
incident to a plan division, (b) made between two plans
maintained by the same employer (as determined pursuant to the
aggregation rules of Section 414(b), (c) or (m) of the Code) or
(c) otherwise not initiated by the Employee, then the
Participant's accrued benefit or account balance under the
transferee plan shall include any amount attributable to such
transfer which is received or accepted by such plan on or before
the Determination Date, and the transferor plan shall not be
required to include such amount in the Participant's accrued
benefit or account balance as of such Determination Date or any
date thereafter. With respect to any rollover or plan-to-plan
transfer not otherwise described in the preceding sentence, the
Participant's accrued benefit or account balance under the
transferor plan shall include any amount distributed or
transferred by such plan, and the transferee plan shall not be
required to include, as part of the Participant's accrued benefit
or account balance, any amount attributable to the assets
received in such transfer if accepted after December 31, 1983,
but such transferee plan shall be required to include the assets
received in such transfer in the calculation of the Participant's
accrued benefit or account balance if such assets were accepted
prior to January 1, 1984.
(3) No accrued benefit or account balance of a
Participant or Beneficiary shall be taken into account for
purposes of calculating the Top-Heavy Ratio if the Participant
has not been an Employee during the five (5) Plan Year period
ending with the Determination Date for a particular Plan Year,
and no accrued benefit or account balance of a Participant or
Beneficiary shall be taken into account for purposes of
calculating the Top-Heavy Ratio if the Participant ceases to be a
Key Employee.
(4) When two or more plans constitute a Required
Aggregation Group or a Permissive Aggregation Group, the present
value of the accrued benefits or the value of the account
balances (as adjusted for distributions to Key Employees and all
Employees for the relevant five (5) Plan Year period) shall be
determined separately for each plan on the basis of the
determination date in effect for that plan. The plans are then
to be aggregated by adding together the results obtained for each
plan as of the determination date falling within the same
calendar year as the determination dates for all the other
aggregated plans.
(5) The calculation of the Top-Heavy Ratio shall
be made in accordance with Section 416 of the Code and the
Regulations issued thereunder.
(i) "Top-Heavy Valuation Date" shall mean the
Valuation Date coincident with or immediately preceding the
Determination Date.
XVIII.2 Top-Heavy Status. This Plan shall be
considered "Top-Heavy" with respect to any Plan Year if, as of
the Determination Date for such Plan Year, any of the following
conditions exists:
(a) The Top-Heavy Ratio for this Plan exceeds sixty
percent (60%) and this Plan is not a part of any Required
Aggregation Group;
(b) This Plan is part of a Required Aggregation Group
but not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the Required Aggregation Group exceeds sixty percent
(60%); or
(c) This Plan is part of a Required Aggregation Group
and also part of one or more Permissive Aggregation Groups and
the Top-Heavy Ratio for each Permissive Aggregation Group exceeds
sixty percent (60%).
XVIII.3 General Rules. For any Plan Year for which
the Plan is "Top-Heavy" as set forth in Section 18.2, any other
provision of this Plan to the contrary notwithstanding, this Plan
shall be subject to the following provisions:
(a) The vesting provisions of Section 18.4;
(b) The minimum contribution provisions of Section
18.5; and
(c) The limitation on contribution provisions of
Section 18.6.
XVIII.4 Vesting Provisions. Each Participant who has
completed an Hour of Service during any Plan Year in which the
Plan is Top-Heavy shall have his nonforfeitable right to his
Company Matching Contributions Account and Company Profit Sharing
Contributions Account be determined as of the last day of such
Plan Year as follows, unless the Plan's vesting provisions
otherwise provide the Participant with a vested balance of a
greater amount:
Years of Vesting Service Percentage Vested
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
XVIII.5 Minimum Contribution Provisions. Subject to
Section 18.7, each Eligible Employee who (a) is a Non-Key
Employee (as defined in Section 18.1(c) below) and (ii) is
employed on the last day of the Plan Year, even if such
individual has failed to complete 1,000 Hours of Service during
such Plan Year, shall be entitled to have contributions
(excluding Employee Deferral Contributions) and forfeitures
allocated to such Non-Key Employee's Account equal to an amount
of the lesser of (a) three percent (3%) of the Eligible
Employee's Remuneration, or (b) the percentage of Remuneration
represented by the aggregate amount of Employee Deferral
Contributions, Company Matching Contributions, Company Profit
Sharing Contributions and forfeitures under this Plan and all
other employer contributions and forfeitures under any other
defined contribution plans to which one or more Affiliated
Companies contributions which are allocated for such Plan Year to
the Accounts of the Key Employees for whom such aggregate
percentage is the highest for such Plan Year, taking into account
only the first One Hundred Fifty Thousand Dollars ($150,000)
subject to future cost of living increases under Section
401(a)(17) of the Code.
If Company Matching Contributions under this Plan are
utilized to satisfy such minimum Top-Heavy Contribution, then the
Company Matching Contributions for such Plan Year must satisfy
the non-discrimination standards of Section 401(a) of the Code
without regard to Section 401(m) of the Code. Accordingly, the
contribution percentage test of Section 7.1 shall not be
applicable to such Company Matching Contributions.
The Top-Heavy Contributions shall be paid to the
Trustee as soon as possible after the end of the Plan Year for
which such contributions are made, but in any event within the
time limits prescribed under applicable state and federal tax
laws for the current deductibility thereof.
The Committee shall maintain a Top-Heavy Contribution
Account for each Eligible Employee which shall be credited with
all Top-Heavy Contributions made on the Eligible Employee's
behalf pursuant to the provisions of this Section 18.5. Such
Account shall be adjusted periodically to reflect the Eligible
Employee's share of the earnings, gain and losses of the Fund
attributable to the Top-Heavy Contributions credited to the
Account. Each Eligible Employee shall vest in his Top-Heavy
Contribution Account in accordance with this Article XVIII.
XVIII.6 Coordination of Plans. In the event that
both this Plan and the Burr-Brown Corporation Employee Retirement
Income Plan (or any other defined benefit plan maintained by the
Company) are deemed top-heavy for the same Plan Year, each
Employee covered under both plans who receives the defined
benefit minimum under the defined benefit plan shall not be
entitled to any minimum contribution under this Plan for such
Plan Year.
XVIII.7 Limitation of Contributions. In the event
that the Company also maintains a defined benefit plan on behalf
of Participants in this Plan, one of the two following provisions
shall apply:
(a) If for the Plan Year this Plan would not continue
to be a Top-Heavy Plan (as determined in accordance with Section
18.2 below) if "ninety percent (90%)" were substituted for
sixty percent (60%)," then Section 18.5 shall apply for such Plan
Year as if amended so that the "four percent (4%)" were
substituted for "three percent (3%)" therein.
(b) If for the Plan Year this Plan would continue to
be a Top-Heavy Plan (as determined in accordance with Section
18.2 below) if "ninety percent (90%)" were substituted for "sixty
percent (60%)," then the denominator of both the defined
contribution plan fraction and the defined benefit plan fraction
shall be calculated for the Plan Year by substituting "1.0" for
"1.25" in each place such figure appears under Section 415 of the
Code, except with respect to any individual for whom there are no
Company contributions allocated for any accruals for such
individual under the defined benefit plan.
ARTICLE XIX
QUALIFIED DOMESTIC RELATIONS ORDERS
XIX.1 Definitions. For purposes of this
Article XIX, the following definitions shall apply:
(a) "Alternate Payee" shall mean any spouse, former
spouse, child or other dependent of a Participant for whom a
Domestic Relations Order specifies the right to receive all or a
portion of the benefits otherwise payable under the Plan to such
Participant.
(b) "Domestic Relations Order" shall mean any
judgment, decree or order (including approval of a property
settlement agreement) which provides or otherwise conveys,
pursuant to applicable state domestic relations laws (including
community property laws), child support, alimony payments or
marital property rights to an Alternate Payee.
(c) "Earliest Retirement Age" shall mean, with respect
to any Participant, the earlier of (1) the date on which the
Participant is entitled to a distribution from the Plan or
(2) the later of (i) the date the Participant will attain age
fifty (50) or (ii) the earliest date the Participant would be
entitled to a distribution of benefits under the Plan were he to
cease Employee status.
(d) "Qualified Domestic Relations Order" shall mean
any Domestic Relations Order which satisfies the following three
(3) requirements:
(1) such Order establishes (or otherwise
recognizes the existence of) the right of an Alternate Payee to
receive all or a portion of the benefits otherwise payable under
the Plan to a Participant;
(2) such Order specifies (i) the name and last
known mailing address of the Participant, (ii) the name and
mailing address of each Alternate Payee covered by such Order,
(iii) the amount or percentage of the Participant's benefits
under the Plan payable to each such Alternate Payee or the manner
in which such amount or percentage is to be calculated, and
(iv) the number of payments or the duration of the pay-out period
to which the Order applies; and
(3) such Order does not require the Plan to
(i) provide any type or form of benefit or option not otherwise
available under the Plan, (ii) provide increased benefits under
the Plan or (iii) pay benefits to an Alternate Payee which are
required to be paid to another Alternate Payee pursuant to any
Qualified Domestic Relations Orders previously issued to the
Plan.
A Domestic Relations Order shall not be considered to
be in violation of the requirement of clause (i) of sub
paragraph (3) above merely because such Order requires the
payment of benefits to an Alternate Payee on or after the date
the Participant attains the Earliest Retirement Age, whether or
not such Participant actually ceases Employee status on or before
such date. Accordingly, such payments shall be made as if the
Participant ceased Employee status on the date on which benefits
are to enter pay status under the Order.
XIX.2 Notification. Upon receipt of a Domestic
Relations Order, the Committee shall promptly notify the affected
Participant and the Alternate Payee of the receipt of such Order
and the procedures established by the Committee for determining
whether such Order satisfies the requirements for recognition as
a Qualified Domestic Relations Order. Such notice shall also
advise the Alternate Payee of his right to designate a representa
tive to receive communications from the Committee concerning the
disposition of the Domestic Relations Order. Within a reasonable
time after providing such notification, the Committee shall,
pursuant to such procedures, determine whether or not the Order
is a Qualified Domestic Relations Order and shall notify the
Participant and each Alternate Payee (or his representative) of
such determination.
XIX.3 Procedures. The Committee shall establish
reasonable procedures for determining the qualified status of
Domestic Relations Orders and for effecting distributions
pursuant to all such Orders which are determined to be Qualified
Domestic Relations Orders. Such procedures shall be reviewed
periodically by the Committee to determine whether they remain
reasonable and efficient and comply with applicable requirements
of the Act, the Code and Treasury regulations issued thereunder.
XIX.4 Payment.
(a) During the period in which the qualified status of
a Domestic Relations Order is being determined, the Committee
shall defer the payment of all Plan benefits affecting the
Participant which are in dispute and shall segregate, in a
separate Account maintained under the Plan, all amounts which
would otherwise be payable to the Alternate Payee during such
period were the Order determined to be a Qualified Domestic
Relations Order.
(b) If the Committee determines, within eighteen (18)
months after the date the first payment to the Alternate Payee
would otherwise be required pursuant to the terms of the Order,
that such Order is a Qualified Domestic Relations Order, then the
Committee shall authorize the payment of the entire balance of
the segregated Account (including any earnings thereon) to the
person or persons entitled thereto. Such payment shall be made
in any form in which benefits under the Plan may be distributed
to Participants or their Beneficiaries. Distribution to an
Alternate Payee may begin at any time provided in a Domestic
Relations Order, notwithstanding that the affected Participant
has not actually ceased Employee status at that time.
(c) If the Committee determines, within such eighteen
(18)-month period under paragraph (b) above, that such Order is
not a Qualified Domestic Relations Order, or if the qualified
status of such Order cannot be determined prior to the expiration
of such eighteen (18)-month period, then the Committee shall
authorize the payment of the segregated Account (including any
earnings thereon) to the person or persons who would have been
entitled to the amounts credited to such Account had the Order
not been issued. If such person is the Participant, then the
Account shall remain part of the Fund and shall not be
distributed until the Participant becomes entitled to benefits
under the Plan in accordance with the provisions of Article X or
XI. Should there be a subsequent determination that the Order is
in fact a Qualified Domestic Relations Order, then such
determination shall be applied on a prospective basis only.
ARTICLE XX
MISCELLANEOUS PROVISIONS
XX.1 Plan Interpretation. It is intended that this
Plan meet all requirements for profit-sharing plan qualification
under the Code and that it comply with the Act, as amended from
time to time. If any provision of this Plan is subject to more
than one interpretation, such ambiguity shall be resolved in
favor of that interpretation which is consistent with this Plan
being a qualified Plan within the meaning of Sections 401(a),
401(k) and 501(a) of the Code and in compliance with the Act, as
amended or replaced by an applicable law of like intent and
purpose.
XX.2 Consents by Board and Committees. All consents of
the Board and of the Committee herein may be granted or withheld
in the sole and absolute discretion of such parties and, if
granted, may be granted on such terms and conditions as the Board
or the Committee, as the case may be, in its sole and absolute
discretion, determines. Neither the Board nor the Committee, in
granting or withholding such consents, or in making such
determinations, or in taking any other actions in connection with
the administration of the Plan and the Fund, shall discriminate
in favor of Employees who are "Highly Compensated Employees".
XX.3 Return of Contributions. Assets held in the Fund
must be held for the exclusive benefit of the Participants and
their Beneficiaries, and such assets may never revert to or inure
to the benefit of the Company except under the following
conditions:
(a) Each contribution made under this Plan is hereby
made expressly conditional upon the current deductibility of such
contribution under Section 404 of the Code. Accordingly, to the
extent the Internal Revenue Service shall deny a deduction for
any such contribution made by the Company, the amount of the
contribution for which no deduction is allowed shall be returned
to the Company within one (1) year after such disallowance.
(b) If, within one (1) year after making a contri
bution to the Plan, the Company or the Committee certifies that
such contribution was made under mistake of fact, the Trustee
shall upon the direction of the Committee before the expiration
of such year return such contribution (excluding earnings
attributable to the mistaken contribution, however, losses
attributable to mistaken contributions reduce the amount to be
returned) to the Company.
(c) Any forfeitures remaining in the Section 4.10
suspense account upon the complete termination of the Plan shall
be returned by the Trustee to the Company.
If the contributions to be refunded under subparagraph
(a) or (b) are Employee Deferral Contributions, then such
contributions, together with the earnings thereon, shall not be
refunded to the Company but shall be paid as a direct cash bonus
to the Participants on whose behalf such Employee Deferral
Contributions were made. Such payment shall be subject to the
satisfaction of all applicable Federal and state tax withholding
requirements.
XX.4 Plan Expenses. All expenses incident to the
operation of the Plan and the Fund, including, but not limited
to, administrative expenses, the compensation of any Trustee(s),
Investment Manger(s), attorneys who are not employees of the
Company, advisors, actuaries, fiduciaries, record keepers and
such other persons providing technical and clerical assistance as
may be required, shall be paid out of or reimbursed by the Fund,
except to the extent that the Company may elect to pay part or
all thereof directly or to the extent prohibited by law.
Expenses that are allocable to a particular investment fund will
be charged against that fund. Nonallocable expenses will be
charged ratably to all funds based on the aggregate value of each
fund as of the immediately preceding Valuation Date. All
expenses of administration may be charged proportionately against
the amount outstanding to the credit of each Participant's
Account, unless paid by the Company.
XX.5 Applicable Law. The Plan shall be construed and
its validity determined according to the laws of the State of
Arizona, to the extent such laws are not preempted by federal
law. In case any provision of the Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not
affect the remaining parts of the Plan, but the Plan shall be
construed and enforced as if said illegal and invalid provision
had never been inserted herein. All controversies, disputes and
claims arising hereunder shall be submitted to the United States
District Court for the District of Arizona after exhausting the
claims procedure provided in Section 14.10, except as otherwise
provided in any agreement entered into with the Trustee.
XX.6 Headings. The titles to sections and headings of
this Plan are for convenience of reference, and in case of any
conflict the text of the Plan, rather than such titles and
headings, shall control.
ADDENDUM SPECIAL TERMINATION
PROVISIONS
A. Stock Bonus Accounts of Lanpoint Employees.
Effective on or about July 1, 1994, the Company will spin off its
Lanpoint Division and the employees thereof to an Affiliated
Company, Intelligent Instrumentation, Inc. ("I3"). An employee
of Lanpoint Division prior to the spin off who directly transfers
to I3 without any intervening period of employment ("Lanpoint
Employee") shall have the following options with regard to his
Stock Bonus Account:
(1) Option 1: a Lanpoint Employee can elect
to retain his Stock Bonus Account in the Plan;
(2) Option 2: a Lanpoint Employee can elect
to take an in-service distribution of all of the
Company Stock allocated to his Stock Bonus
Account; or
(3) Option 3: a Lanpoint Employee can elect
to have his Stock Bonus Account liquidated and
have the cash transferred to the Section 401(k)
plan of I3 and thereby waive any right to receive
Company Stock upon subsequent termination of
employment with an Affiliated Company.
B. Vesting of Accounts of Lanpoint Employees. The
Accounts of an employee of I3 who was a Lanpoint Employee (as
defined in paragraph A) shall be fully vested in such Accounts as
of the date of transfer of such Lanpoint Employee.
C. Transfer of Accounts of Lanpoint Employees. The
Accounts (other than the Stock Bonus Account) of a Lanpoint
Employee (as defined in paragraph A) shall be transferred to the
Section 401(k) plan of I3 on or about September 30, 1994. The
Stock Bonus Account shall be transferred on or before March 31,
1995.
IN WITNESS WHEREOF, the Plan has been adopted on the
18th day of July, 1996.
BURR-BROWN CORPORATION
By Syrus P. Madavi
Title: President & CEO
Exhibit 10.19 - Amendment to Loan Agreement
AMENDMENT NO. 1 TO LOAN AGREEMENT
THIS AMENDMENT NO. 1 TO LOAN AGREEMENT (this "Amendment"),
is made this 15th day of November, 1996, by and between BURR-
BROWN CORPORATION, a Delaware corporation ("Borrower"), and WELLS
FARGO BANK, National Association (the "Bank").
I. . Recitals.
A. Borrower and the Bank (as successor by merger to First
Interstate Bank of Arizona, N.A.) are parties to that Loan
Agreement dated January 31, 1996 (the "Loan Agreement").
Capitalized terms used without definition herein are used with
the meanings attributed to such terms in the Loan Agreement.
B. Borrower and the Bank desire to modify and amend the
Loan Agreement to provide, among other things, (a) that the
Bank's obligation to make Advances under the Loan Agreement is
reduced from $15,000,000 to $10,000,000 in maximum principal
amount, (b) that the definition of Termination Date be amended,
(c) that the Commitment Fee be reduced, and (d) that Section 9.6
of the Loan Agreement relating to Debt Coverage Ratio be amended
and restated to provide for an EBITDA coverage ratio.
Accordingly, in consideration of the premises and other
good and valuable consideration, the receipt and adequacy are
acknowledged by the parties hereto, the parties hereto agree as
follows:
I. . Modification and Amendment of Loan Agreement.
A. The Loan Agreement is hereby modified and amended as
follows:
1. Definition of "Termination Date". The definition of
"Termination Date" set forth in Annex 1 to the Loan Agreement is
hereby amended in its entirety to read as follows:
'"Termination Date" means the earlier of
the following: (a) May 1, 1998 or (b) the
date on which the Revolving Commitment is
terminated pursuant to subsection 10.2."'
1. Definition of "Debt Service Ratio". The defined term
"Debt Service Ratio" is deleted in its entirety from Annex 1 to
the Loan Agreement, and each reference, if any, to the term Debt
Service Ratio contained elsewhere in Loan Agreement shall be
deemed to be a reference to the term EBITDA Coverage Ratio
(hereinafter defined).
2. Definition of "EBITDA Coverage Ratio". The following
definition is added to Annex 1 to the Loan Agreement in the
proper alphabetical sequence:
""EBITDA Coverage Ratio" means the result of the
following calculation, expressed as a percentage, for
Borrower and the Subsidiaries as at the end of any
fiscal quarter of Borrower:
(a) the sum of Borrower's Consolidated Net
Income, interest expense net of capitalized interest
expense, depreciation expense, and amortization of
intangibles expense, measured over the preceding four
fiscal quarters of Borrower; divided by
(b) the sum of interest expense net of
capitalized interest expense, measured over the
preceding four fiscal quarters of Borrower, plus the
prior quarterly period current maturity of long-term
debt and the prior quarterly period current maturity of
subordinated indebtedness."
1. Definition of "Revolving Credit Commitment Amount".
The definition of "Revolving Credit Commitment Amount" set forth
in Annex 1 to the Loan Agreement is hereby amended in its
entirety to read as follows:
'"Revolving Credit Commitment Amount"
means Ten Million Dollars ($10,000,000.00)
(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)."'
1. Amendment of Section 3.4 Commitment Fee. The words
"three-eights of one percent (0.375%)" are deleted from the first
sentence of Section 3.4 of the Loan Agreement, and the words "one-
quarter of one percent (0.25%)" are inserted in place thereof.
2. Amendment of Section 9.6. The caption and the text of
Section 9.6 of the Loan Agreement is deleted in its entirety and
are replaced by the following:
"EBITDA Coverage Ratio. The Borrower
shall not permit the EBITDA Coverage Ratio to be
less than 2.0 to 1 as of the last day of any
fiscal quarter of Borrower."
I. . Borrower's Representations; Effectiveness of this
Amendment.
Borrower represents and warrants to the Bank that:
A. Immediately before and after giving effect to this
Amendment, the representations and warranties of the Borrower in
Section 7 of the Loan Agreement are true and correct as though
made on the date hereof, except for changes that are permitted by
the terms of the Loan Agreement; and
B. Immediately before and after giving effect to this
Amendment, no Default and no Event of Default shall have occurred
and be continuing.
This Amendment shall become effective when the Bank and Borrower
shall each have executed and delivered to the other a counterpart
of this Amendment.
The Bank acknowledges and agrees that the reduction of the
commitment fee to 0.25% shall be effective from November 1, 1996,
and the Bank and Borrower agree that the reduction of the Bank's
Revolving Commitment Amount shall also be effective from November
1, 1996.
I. . Acknowledgements. Borrower and the Bank acknowledge
that, as amended hereby, the Loan Agreement remains in full force
and effect and that each reference to the Loan Agreement shall
refer to the Loan Agreement as amended hereby. The Borrower
confirms that it will continue to comply with the covenants set
out in the Loan Agreement and the other Loan Documents, as
amended hereby, and that its representations and warranties set
out in the Loan Agreement and the other Loan Documents, as
amended hereby, are true and correct as of the date of this
Amendment in all material respects. The Borrower further
represents and warrants that (i) the execution, delivery and
performance of this Amendment by the Borrower is within its
corporate powers and has been duly authorized by all necessary
corporate action; (ii) this Amendment has been duly executed and
delivered by Borrower and constitutes the legal, valid and
binding obligation of Borrower enforceable against Borrower in
accordance with its terms; and (iii) the conditions set forth in
subsections 3.1 and 3.2 of this Amendment have all been
satisfied.
II. . General.
A. Borrower agrees to reimburse the Bank upon demand for
all reasonable expenses (including reasonable attorneys fees and
legal expenses) incurred by the Bank in the preparation,
negotiation and execution of this Amendment and any other
document required to be furnished herewith.
B. This Amendment may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original but all such counterparts
shall constitute but one and the same instrument.
C. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
D. This Amendment shall be governed by, and construed in
accordance with, the internal law, and not the law of conflicts,
of the State of Arizona, but giving effect to federal laws
applicable to national banks.
E. This Amendment shall be binding upon and inure to the
benefit of Borrower and the Bank and their respective successors
and assigns.
F. This instrument supersedes and replaces any and all
prior versions of this Amendment No. 1 to Loan Agreement,
including any executed version that inadvertently omitted
provisions relating to the amendment of the term "Revolving
Credit Commitment Amount" which is hereinabove set forth, and no
such version shall have any force or effect whatever.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to Loan Agreement to be executed as of the day
and year first above written.
BURR-BROWN CORPORATION
By G. Roger Myers
Its Treasurer
WELLS FARGO BANK, NATIONAL ASSOCIATION
By
Paul C. Hornung, Vice President
Exhibit 23 - Consent of Ernst & Young
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, 1997, included in the 1996 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, 1997, 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 28, 1997
