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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
(x) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required) For the Fiscal Year Ended March 31, 2001
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934 For the transition period from _______ to ________
Commission File No. 0-12718
SUPERTEX, INC.
(Exact name of Registrant as specified in its Charter)
California 94-2328535
(State or other jurisdiction of incorporation or organization) (IRS
Employer Identification No.)
1235 Bordeaux Drive Sunnyvale, California 94089
(Address of principal
executive offices)
Registrant's Telephone Number, Including Area Code: (408) 744-0100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of May 22, 2001, was $133,074,000 based on the closing price
reported for such date. Shares of common stock held by officers, directors
and other persons who may be deemed "affiliates" of the Registrant have been
excluded from this computation. This determination of affiliate status is
not necessarily a conclusive determination for other purposes. The total
number of shares outstanding of the Registrant's common stock as of May 22,
2001, were 12,403,539.
Documents Incorporated by Reference: Part III incorporates by reference
portions of the Company's definitive proxy statement for the Annual Meeting
of Shareholders to be held on August 17, 2001 (the "Proxy Statement").
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec. 229.405 of this chapter) 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.
Exhibit Index is on Page 38
Total number of pages is 66
(BLANK PAGE)
SUPERTEX, INC.
ANNUAL REPORT - FORM 10K
Table of Contents
Page No.
PART I
Item 1. Business 4
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters 9
Item 6. Selected Consolidated Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosure about Market
Risk 17
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 18
PART III
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and
Management 18
Item 13. Certain Relationships and Related Transactions 18
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K 19
Signatures 21
PART I
Item 1. Business
Supertex, Inc. ("Supertex" or the "Company") is a technology-based producer
of high voltage analog and mixed signal semiconductor components. It designs,
develops, manufactures, and markets integrated circuits utilizing
state-of-the-art high voltage DMOS, HVCMOS and HVBiCMOS analog and mixed signal
technologies. With respect to its DMOS transistor products, the Company has
maintained an established position in key products for telecommunication and
automatic test equipment industries. Supertex has been an industry leader in
high voltage integrated circuits (HVCMOS AND HVBiCMOS), which take advantage
of the best features of CMOS, bipolar, and DMOS technologies and integrate
them into the same chip. They are used by the flat panel display, printer,
medical ultrasound imaging, telephone, telecommunications and
instrumentation industries.
The Company markets its products through direct sales personnel, independent
sales representatives and distributors in the United States and abroad,
primarily to electronic equipment manufacturers.
The Company was incorporated in California in October 1975 and conducted an
initial public offering of its Common Stock in December 1983. Its executive
offices are located at 1235 Bordeaux Drive, Sunnyvale, California 94089, and
its principal manufacturing facilities are located at 71 Vista Montana,
San Jose, California 95134. To support new product development and four-inch
to six-inch conversion, two Design Centers were set up in the first fiscal
quarter of 2001, one in San Jose, California within our six-inch wafer
fabrication facility, and one in Kowloon Bay, Hong Kong. Supertex maintains
five direct field offices located in: (1) New York; (2) Texas; (3) The United
Kingdom; (4) Germany; and (5) Taiwan. The telephone number of its headquarters
is (408) 744-0100. The Company's mailing address is 1235 Bordeaux Drive, P.O.
Box 3607, Sunnyvale, California 94088-3607.
Products
Supertex has developed over the years a variety of high voltage analog and
mixed signal integrated circuits utilizing state-of-the-art high voltage DMOS,
HVCMOS and HVBiCMOS analog and mixed signal technologies. We supply standard
and custom interface products primarily for use in telecommunications,
imaging and medical electronics markets. We also provide wafer foundry
services for the manufacture of integrated circuits for customers using
customer-owned designs and mask toolings.
The Telecommunications Group consists of interface products used in telephone
handsets, solid state relays, modems, fax, ISDN, networking, PABX, and PCMCIA
cards, as well as diagnostic, curbside, set-top and central office equipment.
In addition, they are used in military radio frequency and microwave
communication applications.
The Imaging Group consists of interface products for Flat Panel Displays and
Non-impact Printers and Plotters. The flat panel display product family is
sold to customers using Electro-Luminescent (EL), Plasma, Vacuum Fluorescent,
Plasma- addressed LCD, Ferro-electric LCD, and Field Emission Display (FED)
technologies. There is also a family of products for driving EL panels to
back-light displays in hand-held instruments, such as cellular phones, PDAs,
pagers, HPCs, and meters. The printer product family is used in ink-jet and
electrostatic types of printers and plotters, which are mostly high end
products, with full color capability, high resolution and high speed output.
The Medical Electronics Group consists of products primarily for ultrasound
diagnostic imaging equipment as well as selected portable instrumentation
applications.
As a leading provider of products to these specific niche markets, Supertex
has been able to work very closely with key customers to define new products
and identify future market needs. Such close collaboration has facilitated
our development of a wide range of leading edge new products and has allowed
our customers to quickly develop new and more advanced products for their
markets.
In the DMOS transistor product line, Supertex focuses on certain niches such
as very low threshold and low leakage devices, which are most suitable for
telecommunication, automatic test equipment, and hand-held applications where
these features justify a premium. The DMOS transistor products also serve as
predecessors to a fully integrated solution such as high voltage integrated
circuits.
Research and Development
Supertex incurred expenses of $10,917,000, $8,468,000, and $7,195,000 on
research and development activities during fiscal years 2001, 2000, and 1999
respectively. Research and development activities in fiscal 2001 continued
at the rate of over twenty new product projects per year. During the first
quarter of fiscal year 2001, we opened a new design center in Hong Kong to
supplement our U.S. design group and formed the Special Telecommunication
Project Group to focus on photonic and fiber-optics for telecommunication
applications market.
We believe that our position as a leading supplier in our targeted markets
can only be maintained through continuous investments in research and
development. We focus our efforts on designing new products with existing
process technologies while also developing new process technologies to be
used for future products. We continuously strive to effectively monitor
and control our research and development programs in order to obtain better
performance and greater technological achievements at lower costs.
Manufacturing
Manufacturing operations include wafer fabrication, limited assembly and
packaging, product testing, and quality control.
We subcontract most of our standard component packaging and limited testing
to independent assemblers, principally in Thailand, Malaysia, the Philippines,
and Taiwan. We also maintained a specialized assembly area at our
manufacturing facilities to package engineering prototypes, to ensure high
priority deliveries, and to assemble high reliability circuits required in
military and other high reliability applications. After assembly, packaged
units are shipped back to our facility or to testing subcontractors for
final product testing. Quality control is performed at our headquarters
before shipment to customers. Although our off-shore assembly and test
subcontractors have not experienced any serious work stoppages, the
political situation in these countries can be volatile. Any prolonged work
stoppage or other inability to assemble products would have a material
adverse impact on our operating results although we have qualified assemblers
in different countries to reduce risk. Furthermore, economic risks, such as
changes in tariff or freight rates or interruptions in air transportation,
could adversely affect our operating results.
As a result of our acquisition on February 1, 1999 of the six inch wafer
fabrication (fab) facility in San Jose, California from Orbit Semiconductor,
a subsidiary of the DII Group, we believe that we are well-positioned to
fulfill our wafer manufacturing capacity needs for the near future. After
the acquisition, we ramped up the production volume of the new fab consisting
of foundry wafers and our proprietary core product wafers, while gradually
ramping down the production in our old fab. During the third quarter of
fiscal year 2000, we completed closing of the old 4-inch fab, transferring
remaining staff to the 6-inch fab, and training and certifying our employees
in the use of the six-inch fab. There were no material charges made for
closing down the four-inch fab and there was no material amount of four-inch
equipment remaining at March 31, 2001.
The availability of blank silicon wafers has improved considerably in the
past years. Assembly packages and other raw materials we use in the
manufacturing of our products are obtainable from several suppliers.
Some of these materials were in short supply in prior years, but recently
the supply of these materials appears to be plentiful and subject to
competitive pricing pressure. However, any future shortage of supply would
have a material adverse effect on our operating results. As is typical in
the semiconductor industry, we must allow for lead times in ordering certain
materials and services and often commit to volume purchases to obtain
favorable pricing concessions and resource allocations.
Environmental Laws
Government regulations impose various environmental controls on the waste
treatment and discharge of certain chemicals and gases after their use in
semiconductor processing. We believe that our activities comply with
present environmental regulations. However, increasing attention has been
focused on the environmental impact of semiconductor manufacturing
operations. While we have not experienced any material adverse effects on
our business or financial results from our compliance with environmental
regulations and installation of pollution control equipment, there can be no
assurance that changes in such regulations will not necessitate our
acquisition of costly equipment or other requirements in the future.
We work closely with pollution experts from federal, state, and local
agencies, especially from the cities of Sunnyvale and San Jose, California,
to ensure that we are in compliance with present requirements.
Sales
We market our standard and custom products in the United States and abroad
through our direct sales and marketing personnel in our headquarters, as well
as through independent sales representatives and distributors supported by
our field sales managers out of our sales offices in New York, Texas, the
United Kingdom, Germany, and Taiwan.
Export sales are made primarily through independent distributors to customers
in Europe and Asia, and represented 38%, 36%, and 51% of net sales in fiscal
years 2001, 2000, and 1999 respectively. Exports to Asia are largely to
customers in Japan. Export sales are denominated only in U.S. dollars.
Although export sales are subject to certain governmental commodity controls
and restrictions for national security purposes, we have not had any material
adverse effects on our business or financial results because of these
limitations.
In fiscal 2001, Microtek Inc., our primary distributor in Japan, accounted
for 12% of net sales. Sales to Microtek and Dii Semiconductor, a foundry
customer, accounted for 12% and 11% of net sales respectively in fiscal 2000,
and Microtek made up 16% of net sales for fiscal 1999. We have no long-term
production agreement with Microtek or Dii Semiconductor. Normal terms and
conditions of sale apply, which include a 60-day notice of cancellation and
charges for work-in-process for cancellations less than 60 days from
shipment. Outstanding accounts receivable from Microtek accounted for 7% of
gross accounts receivable as of March 31, 2001. While we have maintained a
good relationship with Microtek, Inc. for over fifteen years, a breakdown in
that relationship could materially and adversely affect our business and
financial results.
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market value. Our inventories include high technology
parts and components that are specialized in nature or subject to rapid
technological obsolescence. While we endeavor to minimize the required
inventory on hand and consider technological obsolescence when estimating
amounts required, such estimates may be inaccurate and are subject to change.
Revenue from direct product sales to end-user customers is generally
recognized upon transfer of title and risk of loss, which is generally upon
shipment of the product provided persuasive evidence of an arrangement
exists, the price is fixed or determinable, no significant obligations
remain and collection is probable. Provisions for estimated warranty
repairs, returns and other allowances are recorded at the time revenue is
recognized. Sales to distributors are made primarily under arrangements
allowing limited price protection and the right of stock rotation on
merchandise unsold by the distributors. Because of the uncertainty
associated with pricing concessions and possible returns, the Company defers
recognition of such sales and the related costs of sales until the
merchandise is sold by distributors to their end-user customers.
Seasonality
While there may be some seasonality in some of our markets, a seasonal
influence on sales has not been identified as a material trend.
Backlog
Our backlog at March 31, 2001 was approximately $23,956,000 compared with
$25,938,000 and $17,139,000 at March 31, 2000, and 1999, respectively. We
expect that all of the current backlog will be shipped in fiscal 2001.
Customers may cancel or reschedule orders without significant penalty, and
the price of products may be adjusted between the time the purchase order is
booked into backlog and the time the product is shipped to the customer.
For those reasons, we believe that backlog is not meaningful in predicting
our actual net revenue for any future period.
Competition
Because of our market niches, market statistics are not generally available
for many of our products. Competition in general among manufacturers of
semiconductor components and discrete transistors is intense. Many of our
domestic and foreign competitors have larger facilities, more financial,
technical, and human resources, and more diverse product lines. Factors
such as product prices, product performance, diversity of product lines,
delivery capabilities, and the ability to adapt to rapid technological
change to develop new and improved products are the principal methods of
competition in the industry. We believe we are a leader in certain markets
for our product families where we have a technological and/or cost advantage
and that we are generally competitive with respect to these factors.
Patents and Licenses
We hold numerous United States patents, which will expire between 2001 to
2018, and we have applications for additional patents pending. Although we
believe that our patents may have value, there can be no assurance that our
patents or any additional patents that may be obtained in the future will
provide meaningful protection from competition. We believe that our success
depends primarily on the experience, creative skills, technical expertise,
and marketing ability of our personnel rather than on the ownership of
patents. Patents may, however, be useful for cross-license purposes and have
served the Company well in the past.
Supertex is not aware that any of its products infringe on any valid patent
or other proprietary rights of third parties but it cannot be certain that
they do not do so. If infringement is alleged, there can be no assurance
that the necessary licenses could be obtained, or if obtained, would be on
terms or conditions that would not have a material adverse effect on the
Company.
Employees
At March 31, 2001, we had 400 full time employees primarily located in
Northern California. Many of our employees are highly skilled, and we
believe our continued growth and success will depend in part on our ability
to attract and retain such employees. At times, like other semiconductor
manufacturers, experience difficulty in hiring and retaining sufficient
numbers of skilled personnel.
We believe that the compensation, benefits, and incentives offered to our
employees are competitive with those generally offered throughout the
semiconductor industry. There are no collective bargaining agreements
between us and our employees, and there has been no work stoppage due to
labor difficulties. The Company considers its employee relations to be good.
Executive Officers of the Company
Name Position with the Company Age Officer Since
Henry C. Pao President, Principal Executive and 63 1976
Financial Officer
Richard E. Siegel Executive Vice President 55 1982
Benedict C. K. Choy Senior Vice President, Technology 55 1976
Development, and Secretary
Dennis E. Kramer Vice President, Materials 59 1996
William P. Ingram Vice President, Wafer Fab Operations 53 1999
Franklin Gonzalez Vice President, Process Technology 50 1999
Michael Lee Vice President, I.C. Design 46 1999
Dilip Kapur Vice President, Standard Products 52 2000
William Petersen Vice President, Worldwide Sales 48 2001
Officers appointed by the Board of Directors serve at the discretion of the
Board. There is no family relationship between any directors or executive
officers of the Company except as stated below.
Henry C. Pao is a founder of Supertex and has served as President, Principal
Financial and Executive Officer, and as a Director since the Company's
formation in fiscal 1976. Previously, he worked at Fairchild Semiconductor,
Raytheon, Sperry Rand and IBM. He has B.S., M.S., and Ph.D. degrees in
Electrical Engineering from University of Illinois at Champaign-Urbana.
Dr. Pao is the brother of Frank Pao, also a Director of the Company.
Richard E. Siegel joined the Company in 1981 as National Sales Manager, was
appointed Vice President of Sales and Marketing in April 1982, Senior Vice
President in February 1988, and has served as Executive Vice President since
November 1988. He has been a Director since 1988. Previously, he worked at
Signetics Corporation, Fairchild Semiconductor, Ford Instrument and Grumman
Aircraft Corporation. Mr. Siegel is also a member of the Board of Directors
for All American Semiconductor (NASD: SEMI). All American Semiconductor,
headquartered in Florida, is a national distributor of electronic components
manufactured by others and is a major distributor for Supertex. Mr. Siegel
has a B.S. degree in Mechanical Engineering from City College of New York,
augmented with Electrical Engineering courses from Brooklyn Polytechnic
Institute, New York.
Benedict C. K. Choy, a founder of the Company, joined Supertex in fiscal 1976
as Vice President, Device Technology and Process Development, and has served
as Senior Vice President since February 1988. He has been a Director since
1986. Previously, he worked at Fairchild Semiconductor, National
Semiconductor, and Raytheon. He has a B.S. degree in Electrical Engineering
from the University of California, Berkeley.
Dennis E. Kramer joined Supertex in September 1981 as Wafer Fab II Production
Manager. Over his tenure, he has managed many facets of the wafer
fabrication process as well as all the back-end manufacturing operations.
He was promoted to Vice President of Materials in 1996. Previously, he
worked at Siemens and Signetics Corporation. He has a B.S. degree in
Chemistry from University of California, Los Angeles and an MBA from Santa
Clara University.
William P. Ingram joined Supertex five years ago as its Director of Wafer
Fab Operations. Prior to joining Supertex, he was Vice President of
Technology Development at Crosspoint Solutions, before which he held
management positions at Fairchild and National Semiconductor. He began his
career at National after receiving his B.S. degree in Electrical Engineering
with honors from the North Carolina State University.
Franklin Gonzalez joined Supertex in November 1990 as a Process Development
Manager. In 1994, he was promoted to Director of Process Technology. Prior
to joining Supertex, he held various R&D management positions spanning over
seventeen years with such companies as ECI Semiconductor, Telmos and Harris
Semiconductor where he began his career. He has a Ph.D. in Electrical
Engineering from the University of Florida and a Masters in Electrical
Engineering from Stanford University.
Michael Lee re-joined Supertex in October 1993 as Director of I.C. Design.
Before that, he had a combined total of fifteen years of industry experience
in I.C. Design. He began his career at Supertex after receiving his Masters
in Electrical Engineering from UC Berkeley in 1978.
Dilip Kapur joined Supertex in March 1984 and has managed Marketing,
Applications, Marketing Communications and Product Engineering Departments.
He was promoted to Director of Marketing in 1990, and promoted to Vice
President Standard Products in December 2000. He has previously held
Application Engineering and Marketing positions at Computer Power Inc. and
Advani Oerlikon Ltd. He has a B.S. degree in Electrical Engineering from
MACT, Bhopal and a Diploma in International Trade from Indian Institute of
Foreign Trade, New Delhi.
William Petersen first [JL1]joined Supertex in 1984 as Sales Manager for the
Central Region of the United States. From 1990 through 1994, he was the
Company's National Sales Manager, overseeing sales operations throughout the
United States. Mr. Petersen re-joined Supertex in September 1999 as
Director of Sales. He was promoted to Vice President of Worldwide Sales in
February 2001. Prior to working at Supertex, he worked at Siemens as
Central Area Manager from 1980-1984. Mr. Petersen attended the University
of Iowa.
Item 2. Properties
The Company leases facilities at 71 Vista Montana, San Jose, California
covering approximately 61,700 square feet where the Company's six-inch wafer
fabrication and process engineering, and Telecom Design functions are
located.
The Company also leases facilities covering approximately 20,000 square feet
at 1225 Bordeaux Drive, Sunnyvale, California. Operations at these
facilities include the Company's process engineering, assembly, and quality
control functions. These facilities are leased from a corporation owned by a
former director of the Company. (See Note 7 of "Notes to Consolidated
Financial Statements.")
The Company owns its corporate headquarters, a facility of approximately
42,000 square feet at 1235 Bordeaux Drive, Sunnyvale, California, which
houses the executive offices, sales and marketing, product engineering,
test, production control, corporate financial and administrative staff.
The Company believes that its existing facilities and equipment are well
maintained and are in good operating condition.
Item 3. Legal Proceedings
Supertex is not currently a part of any material legal proceedings. However,
it may be involved from time to time in various legal actions arising in the
ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended March 31, 2001.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters
On May 22, 2001, the last reported sale price was $15 per share. There were
approximately 3,198 shareholders of record of common stock on May 22, 2001.
We have not paid cash dividends on our common stock in fiscal years 2001 and
2000, and the Board of Directors presently intends to continue this policy
in order to retain earnings for the development of the Company's business.
Accordingly, it is anticipated that no cash dividends will be paid to
holders of common stock in the foreseeable future.
The following table sets forth the range of high and low closing sale prices
reported on The NASDAQ Stock Market under the symbol SUPX for the periods
indicated.
Fiscal Years Ended March 31,
2001 2000
High Low High Low
First Quarter $ 50 3/4 $ 23 1/4 $ 11 $ 8 5/8
Second Quarter 53 1/4 33 5/16 16 10 5/8
Third Quarter 49 1/8 19 7/16 18 12
Fourth Quarter 20 13/16 11 7/8 34 7/8 18
Item 6. Selected Consolidated Financial Data
The selected financial information and other data presented below should be
read in conjunction with the "Consolidated Financial Statements," "Notes to
Consolidated Financial Statements," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included
elsewhere in this Form 10-K.
Fiscal Years Ended March 31
2001 2000 1999 1998 1997
(in thousands)
Balance Sheet Data:
Working capital .... $61,662 $52,950 $41,650 $44,868 $36,734
Total assets .... $98,695 $86,623 $74,589 $66,629 $56,408
Shareholders' equity $82,359 $72,269 $62,680 $57,217 $48,487
Fiscal Years Ended March 31,
2001 2000 1999 1998 1997
(in thousands, except per share amounts)
Statement of Operations Data:
Net sales..................... $81,455 $70,838 $50,721 $52,706 $48,935
Costs and expenses:
Costs of sales............. 48,790 44,976 28,867 28,709 26,073
Research and development... 10,917 8,468 7,195 5,582 5,306
Selling, general and
administrative............. 10,806 6,980 6,860 6,724 6,226
Write-off of acquired in
process Technology......... -- -- 2,506 -- --
Income from operations........ 10,942 10,414 5,293 11,691 11,330
Other income:
Interest income............ 2,466 1,978 1,981 1,666 1,430
Other income (loss), net... (1,153) 257 (130) 2 63
Income before provision for
income taxes.................. 12,255 12,649 7,144 13,359 12,823
Provision for income taxes.... 4,167 4,174 1,810 4,542 4,103
Net income................. $ 8,088 $ 8,475 $ 5,334 $ 8,817 $ 8,720
Net income per share:
Basic...................... $ 0.65 $ 0.70 $ 0.44 $ 0.73 $ 0.73
Diluted.................... $ 0.62 $ 0.68 $ 0.44 $ 0.71 $ 0.70
Shares used in per share computation:
Basic...................... 12,351 12,126 12,077 12,074 12,026
Diluted.................... 12,990 12,519 12,225 12,380 12,509
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement Regarding Forward Looking Statements This Annual Report
on Form 10-K includes forward-looking statements. These forward-looking
statements are not historical facts, and are based on current expectations,
estimates, and projections about our industry, our beliefs, our assumptions,
and our goals and objectives. Words such as "anticipates", "expects",
"intends", "plans", "believes", "seeks", and "estimates ", and variations of
these words and similar expressions, are intended to identify forward-looking
statements. Examples of the kinds of forward-looking statements in this
report include statements regarding the following: (1) we believe we are a
market leader, (2) our new fab will fulfill our wafer manufacturing capacity
needs, (3) current backlog will be shipped in fiscal 2002, (4) our
customers' problems with excess inventory may continue through at least the
first half of fiscal 2002, and (5) our patents may have value and may be
useful for cross-licensing. These statements are only predictions, are not
guarantees, of future performance, and are subject to risks, uncertainties,
and other factors, some of which are beyond our control and are difficult to
predict, and could cause actual results to differ materially form those
expressed or forecasted in the forward-looking statements. These risks and
uncertainties include those described below in "Risk Factors" and elsewhere
in this report. Except as required by law, we undertake no obligation to
update any forward-looking statement, whether as a result of new information,
future events, or otherwise.
Risk Factors Semiconductor companies as a group are subject to many similar
risks. These include the risks that (1) the demand for semiconductors
decreases as the industry has historically been very cyclical, (2) there
are shortages of raw materials and/or fab capacity, (3) there are changes in
underlying circuit or process technology or fab technology, or (4) there is
litigation regarding third party patents. Other factors that could affect
our future results include whether we can generate new bookings from both
new and current products; general economic conditions, both in the United
States and foreign markets, and economic conditions specific to the
semiconductor industry; risks associated with customer concentration; our
ability to introduce new products, to enhance existing products, and to meet
the continually changing requirements of our customers; our ability to
maintain and enhance relationships with our assembly and test subcontractors
and independent distributors and sales representatives; and whether we can
manufacture efficiently and control costs. In addition, we are subject to
the below-described risks, which are specific to us and our business:
* We have focused our product offerings primarily on niche markets which
leverage our capabilities and which we believe we can dominate. We attempt
to choose markets which are sizable enough to be worth pursuing but which
are not large enough to attract fierce competition. These markets could
grow enough to attract increased competition or else competitors could enter
due to happenstance or down-turns elsewhere. In addition, these niches
might be more susceptible to shrinkage than more diverse markets, due to
their concentration on a few product offerings.
* We are dependent upon one fab which we own and operate. We would be
susceptible were this fab to be unable to meet our needs, for example, were
this fab to become obsolete due to process technology changes, or to be
damaged, for example by fire or earthquake. We could encounter difficulties
in operating our fab, such as contaminants in the air or defects in
equipment, which could affect yields and production.
* We have several competitors which are substantially larger and could bring
to bear substantially more resources in our niche markets. We have been
able to maintain high margins in part because of our dominance of most of
our niche markets. Increased competition could cause our margins to
decrease.
* Our outstanding stock is owned more than 26% by Henry Pao, President, CEO,
and a director, and his father and brother. They have no agreement among
themselves to act together with respect to the Company or their
stockholdings. Were they to act in concert, they would be our largest
shareholder and would have an ability to elect one or more directors, to
direct management, and to delay or prevent a change in control.
* We sell a substantial amount of our products internationally. Problems
with foreign economies or wars, or changes in the exchange rate, could
adversely affect our foreign sales.
* We depend upon one customer, Microtek, for approximately 12% of our sales.
Microtek is our primary distributor in Japan with at least twenty
end-customers. Most of our customers can typically cancel or reschedule
orders without penalty so decreased demand for our products could translate
into decreased sales very rapidly.
* We are very dependent upon continued innovation of our engineers. The
competition for engineers with relevant experience is extremely intense in
the Silicon Valley, where most of our engineers are located. We must
compete in terms of salary, benefits, and working conditions with many
start-ups which can offer more equity. We have started an IC Design Center
in Hong Kong where competition is not as intense.
* We are dependent upon several key persons for management and engineering
expertise. Their loss would be detrimental to us.
* The shortage of energy supplies in California could have a negative impact
on the Company's future operating performance. California is currently
experiencing prolonged energy alerts caused by the shortage and substantially
increased costs of electricity and natural gas supplies. Our six-inch wafer
fabricating facility, process engineering, and Telecom design functions are
all located in San Jose, California, and certain product engineering,
assembly, and testing activities are conducted at our facilities in
Sunnyvale, California. While we maintain emergency generation capability for
health, life and safety, it is not sufficient to maintain our fab at an
operational status. Future interruptions in our power supplies or further
increases in our power costs could have a material adverse affect on our
operations and our financial results.
The following discussion should be read in conjunction with the
"Consolidated Financial Statements," "Notes to Consolidated Financial
Statements" and "Selected Consolidated Financial Data" included elsewhere
in this Form 10-K.
The following table sets forth items from the Statements of Income as a
percentage of net sales for the periods indicated:
Fiscal Years Ended March 31,
2001 2000 1999
Net sales................................. 100.0 % 100.0 % 100.0 %
Costs of sales............................ 59.9 63.5 56.9
Research and development.................. 13.4 11.9 14.2
Selling, general and administrative....... 13.3 9.9 13.6
Write off of acquired in
process technology........................ -- -- 4.9
Income from operations.................... 13.4 14.7 10.4
Other income
Interest income........................... 3.0 2.8 3.9
Other income (expense), net............... (1.4) 0.4 (0.2)
Income before provision for income taxes.. 15.0 17.9 14.1
Provision for income taxes ............... 5.1 5.9 3.6
Net income................................ 9.9 % 12.0 % 10.5 %
Overview
Supertex designs, develops, manufactures, and markets high voltage analog
and mixed signal integrated circuits utilizing state-of-the-art high voltage
DMOS, HVCMOS and HVBiCMOS analog and mixed signal technologies. We supply
standard and custom interface products primarily for the use in the
telecommunications, imaging, and medical electronics markets. We also
provide wafer foundry services for the manufacture of integrated circuits
for customers using customer-owned designs and mask toolings.
Recent Developments
During the third and fourth quarter of fiscal 2001, we experienced a slowing
of demand for our products. Sales were unexpectedly weak during the third
quarter, partly due to a last minute delivery stretch-out by our customers
resulting, we believe, from their inventory corrections, and partly due to a
slowdown in the telecom capital equipment industry. In the fourth quarter,
sales were adversely affected by the Company's decision to hold up shipments
to our certain customers pending resolution of credit issues. Our sales
continued to be affected by the general slowdown in the economy and in
particular the abrupt business deceleration at our telecom equipment
customers. We believe that our customers' problems with excess inventory
may continue through at least the first half of fiscal year 2002 due to the
global economic slowdown, with weakness in almost all the markets we serve.
We are hopeful that as the economy recovers in the coming quarters, these
problems will be resolved.
Despite the general slowdown, we have continued our heavy investment in
research and development, in particular, in driver integrated circuits for
optical MEMS and network power interface circuits for photonic and gigabit
Ethernet modules and voice over Internet protocol (VoIP) telephone systems.
We expect to release a record number of new products in the new fiscal year,
although they may not contribute materially to our sales in their first
year. We are also reviewing several cost reduction programs which may be
implemented in the coming quarters.
Results of Operations
Fiscal 2001 VS Fiscal 2000
Net Sales The Company had net sales of $81,455,000 in fiscal 2001, an
increase of $10,617,000 or 15% from the previous fiscal year. The increase
in the current year's net sales is primarily due to increased unit sales
volume of both core and foundry products. Our core business consists of
proprietary products for the telecommunications, imaging and medical
electronics industries.
As percentage of total sales for the year ended March 31, 2001, sales to the
medical market accounted for 35.1% of total sales in fiscal 2001 compared to
33.8% in the previous year. The telecommunications market represented 26.8%
and 28.9% of total sales for the fiscal year 2001 and 2000, respectively.
Sales to the Imaging market accounted for 26.4% of total sales for fiscal
2001 compared to 23.1% in fiscal 2000. Sales to all other markets represented
11.6% in fiscal 2001 and 14.1% in fiscal 2000. On a dollar basis, sales of
our medical electronics products increased 20% to $28,620,000, sales of our
telecommunications products increased 7% to $21,851,000, and sales of our
imaging products increased 31% to $21,537,000.
In fiscal 2001, the Company derived approximately 38% of its net sales from
customers outside the United States, primarily in Asia and Europe, compared
to 36% in fiscal 2000. Dollar sales to international customers also
increased approximately 19%, primarily due to increase in unit sales volume
to Western Europe.
Gross Margin The Company's gross margin as a percentage of net sales was
40.1% for fiscal year 2001. This compared to 36.5% for fiscal year 2000.
The improvement in gross margin is primarily due to higher production volume
in our new six-inch fab operation, with its increased economies of scale.
Research and Development Research and development (R&D) expenses, which
include payroll and benefits, processing costs and process transfer costs,
were 13.4% and 11.9% of net sales in fiscal 2001 and 2000, respectively.
Dollar expenditures for research and development were $10,917,000 and
$8,468,000 for fiscal 2001 and 2000, respectively. The increase in R&D
expense for this year was attributed to the increase in payroll and benefit
expense of $1,624,000 and the transfer costs of $1,536,000 relating to a)
the development and re-tooling of the old mask sets of our proprietary
products; and b) the development of new processes for the six inch fab.
During the year, we staffed and equipped our new design center in Hong Kong
and the Special Telecom Project Design Group in San Jose, California.
In February 1999, the Company acquired certain assets related to the
six-inch fabrication facility of Orbit Semiconductor for a total cash
purchase price of approximately $10,000,000 including direct costs incurred.
The acquisition of assets has been accounted for as a purchase and the
results of operations have been included in the consolidated statement of
operations of the Company from the date of acquisition. The purchase price
was allocated to assets acquired based on their respective fair values. The
allocation of the purchase price was as follows (in thousands):
Property and equipment $ 5,277
Purchased technology 1,735
Assembled workforce 482
In-process technology 2,506
-------
$10,000
The amounts allocated to purchased technology and assembled workforce were
determined through known valuation techniques in the high technology
industry. The in-process technologies were wafer-manufacturing processes
which were under development. These technologies were valued on the premise
of fair market value in continued use, employing a version of the income
approach referred to as the discounted cash flow method. This methodology
is based on discounting to present value, at an appropriate risk-adjusted
discount rate, the net cash flow that is expected to result from owning
these technologies. Supertex management is primarily responsible for the
valuation of the acquired in-process research and development.
The value assigned to in-process technology was determined by identifying
development projects for which technological feasibility had not been
established and estimating the expected cash flows from the projects once
commercially feasible. These cash flows were discounted back to their
present value and a percentage of completion discount was applied to the
calculation.
The discount rate used was based on the relative risk involved with
intangible assets of this nature, and included an analysis of various
factors that could influence the risk associated with realizing projected
revenues during the economic life. The cost of equity was calculated at
25.5%. This plus a 5% risk premium was determined as the appropriate
discount rate to use. The premium reflects the additional uncertainty and
risk inherent in technology under development and the amount of time
remaining to complete the technology.
The percentage of completion for the in-process projects ranged from 50%
to 90% complete, resulting in estimated cost to complete of $7,200,000. The
technological feasibility of the in-process technology had not been
established and had no alternative future use. Accordingly, the entire
$2,506,000 has been charged to operations in the fourth quarter of fiscal
1999.
At the acquisition of the Orbit 6-inch fab, there were seven processes in
the research and development phase. These processes were being developed
without any specific product of Supertex in mind, merely to be added to the
Company's broad range of available processes offered to the general foundry
market. The potential applications for each of these processes and their
description are described below:
Process No. Nature of Application
1 Very high density analog logic circuits
2 Very high density digital logic circuits
3 Charged coupled device (CCD) imaging circuits and infrared sensors
4 Low voltage hand-held equipment
5 Fluorescent lamps display drivers
6 High Density analog or mixed signal circuits
7 Precision temperature control or sensing circuits
The status of each of the above process at the time of acquisition are
further described in the following table:
Status of Acquired In-Process Manufacturing Technologies
As of February 1, 1999
Project Percent of Total Cost to Expected Start of Risk-adjusted
No. Completion Development Complete Time to material net discount rate
Cost Complete cash inflows
1 70% $ 2,000 $ 600 Fiscal 2001 Fiscal 2001 30.5%
2 70% 2,000 600 Fiscal 2001 Fiscal 2001 30.5%
3 90% 500 50 Fiscal 2000 Fiscal 2000 30.5%
4 50% 500 250 Fiscal 2001 Fiscal 2000 30.5%
5 90% 1,000 100 Fiscal 2000 Fiscal 2000 30.5%
6 90% 500 50 Fiscal 2000 Fiscal 2000 30.5%
7 70% 700 210 Fiscal 2001 Fiscal 2001 30.5%
All of the above processes were completed by March 31, 2001 and there were
no significant variances to the original expected completion dates,
projected original revenues and anticipated cost to complete the project.
Selling, General and Administrative Selling, general and administrative
expenses, which include commissions, payroll and benefits, were 13.3% and
9.9% of net sales in fiscal 2001 and 2000, respectively. In fiscal 2001,
the selling, general and administrative expenses were $10,806,000 compared
to $6,980,000 for fiscal 2000. Dollar increases in selling, general and
administrative expenses were primarily due to an increase in bad debt
expense of $1,100,000, additional staff, salary adjustment and related
benefit of $979,000, commission on sales of $577,000 and consulting fees
of $273,000.
Interest Income Interest income, which consists primarily of interest
income from the Company's cash, cash equivalents and short-term investments,
was $2,466, 000 in fiscal 2001 [JL5]compared to $1,978,000 in fiscal 2000.
The increase in interest income was due to larger average cash and investment
balance.
Other Income(Expense) Other expense of $1,153,000 for fiscal 2001 consist
mainly of an impairment charge taken in the fourth fiscal quarter of
$1,000,000 due to the uncertainty surrounding the recoverability of an
investment in a start up company. In fiscal 2000, other income of $257,000
consists primarily of gain on disposal of surplus equipment and sublease
expenses net of sublease income.
Provision for Income Taxes Income taxes for fiscal 2001 and 2000 were at
34% and 33% respectively, of income before provision for income taxes.
Fiscal 2000 VS Fiscal 1999
Net Sales The Company had net sales of $70,838,000 in fiscal 2000, an
increase of $20,117,000 or 39.7% from the previous fiscal year. The
increase in the current year's net sales is primarily due to the addition
of the foundry business resulting from the acquisition of the submicron
wafer fabrication facility (fab) on February 1, 1999. This foundry business
represented 32.3% of the total increase over fiscal 1999 net sales. The
remaining 7.4% of the increase over fiscal 1999 net sales is due to
increased sales of core products.
In fiscal 2000, approximately 36% of the Company's net sales were derived
from customers outside the United States, primarily in Europe and Asia
(versus 51% in fiscal 1999). The decrease in percentage of international
sales is primarily due to the acquisition and growth of the foundry
business, which has only U.S. customers. International sales represented
50% and 55% of net sales from our core business in fiscal 2000 and 1999,
respectively. All of the Company's sales to international customers were
denominated in U.S. currencies. There was no currency exchange exposure.
Gross Margin The Company's gross margin as a percentage of net sales was
36.5% and 43.1%, in fiscal 2000 and 1999, respectively. Gross margin for
the current fiscal year was adversely affected by the Company incurring
additional overhead expenses as a result of operating two fabs, including
the depreciation of the capitalized assets and the amortization of other
assets associated with the new fab. Gross margin during fiscal 2000 was
also affected by lower margins associated with the foundry business
resulting from the acquisition of the Company's new fab.
Research and Development Research and development expenses, which include
payroll and benefits, processing costs and process transfer costs, were
11.9% and 14.2% of net sales in fiscal 2000 and 1999, respectively. Dollar
expenditures for research and development were $8,468,000 and $7,195,000
for fiscal 2000 and 1999, respectively. While the dollar expenditure for
fiscal 2000 is higher than the prior fiscal year, the growth in net sales
caused the percentage of research and development expense to net sales to
decline. The increase in research and development dollar expenditure is due
to expenses incurred in process transfer and development.
Selling, General and Administrative Selling, general and administrative
expenses, which include commissions, payroll and benefits, were 9.9% and
13.6% of net sales in fiscal 2000 and 1999, respectively. In fiscal 2000,
the selling, general and administrative expenses were $6,980,000 compared
to $6,860,000 for fiscal 1999. While the selling, general and
administrative expenses remained relatively the same as the previous year,
the increase in net sales amount caused the percentage of selling, general
and administrative expenses as a percent of net sales to decrease 3.7%.
Interest Income Interest income, which consists primarily of interest
income from the Company's cash, cash equivalents and short-term investments,
was $1,978,000 in fiscal 2000 as compared with $1,981,000 in fiscal 1999.
The decrease in interest income was caused by the decrease in cash available
for investment due to the purchase of the new fab.
Other Income Other Income of $257,000 for fiscal 2000 consists primarily
of gain on disposal of surplus equipment and sublease expenses net of
sublease income. The increase in this category for the fiscal 2000 when
compared to fiscal 1999 was primarily due to the gain on disposal of
surplus equipment.
Provision for Income Taxes Income taxes for fiscal 2000 and 1999 were at
33.0% and 25.3%, respectively, of income before provision for income taxes.
The current fiscal year's tax provision is 33% compared to a lower tax
provision for fiscal 1999. Higher tax credits and additional expenses from
the acquisition of the six-inch fab caused fiscal 1999 tax rate to be
significantly lower.
Financial Condition
Overview Total assets grew to $98,695,000 at the end of fiscal 2001, up
from $86,623,000 at the end of fiscal 2000. The increase was due primarily
to profit generated from operations during the year.
Liquidity and Capital Resources On March 31, 2001, the Company had
$44,282,000 in cash, cash equivalents, and short-term investments, compared
with $34,176,000 on March 31, 2000 and compared with $28,397,000 on
March 31, 1999. The Company's primary source of funds for fiscal 2001, 2000,
and 1999 has been the net cash generated from operating activities of
$15,008,000, $9,022,000, and $10,274,000, respectively. Net cash provided
by operating activities in fiscal 2001 of $15,008,000 consisted principally
of net income of $8,088,000 and non-cash charges for depreciation and
amortization of $5,146,000. Factors affecting cash flow from operating
activities are as follows:
* There was an increase in the provision for doubtful accounts and sales
returns of $3,195,000 due to the existence of certain slow-paying customers
with large past due balances
* There was an increase in income taxes payable of $1,270,000, due to
higher amount of taxable income.
* There was an impairment charge of $1,000,000 due to the uncertainty
surrounding the recoverability of an investment in a start-up company
* There was an increase in accounts payable and accrued expenses of
$1,311,000 resulting from normal operating activities
* There was an increase in deferred revenue of $427,000
* There was an increase in accounts receivable of $2,303,000 primarily
caused by the increase in net sales
* There was an increase deferred income taxes of $2,654,000
* There was an increase in prepaid expenses and other assets of $659,000
relating primarily to the remaining prepaid software license and maintenance
contract of $587,000.
* There was a gain from sale of four-inch fab equipment of $508,000
Net cash provided by investing activities in fiscal 2001 was $5,714,000,
which consisted primarily of proceeds from maturities of short-term
investments of $50,868,000 offset by purchases of short-term investments of
$39,276,000, purchases of long-term investments of $1,750,000, and the
purchase of property and equipment of $5,093,000.
Net cash provided by financing activities in fiscal 2001 was $976,000,
which consisted of proceeds from exercises of stock options of $1,151,000
partially offset by repurchases of the Company's common stock in the amount
of $175,000.
As of March 31, 2001, the Company's working capital was $61,662,000, which
included approximately $44,282,000 in cash, cash equivalents and short-term
investments.
The Company anticipates that the available funds and cash expected to be
generated from operations will be sufficient to meet cash and working
capital requirements through the end of fiscal 2002. The Company expects
to spend approximately $8,800,000 for capital acquisitions during fiscal
2002.
Recent Accounting Pronouncements In June 1998, the FASB issued Statement
of Financial Accounting Standards No. 133, ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
new standards of accounting and reporting for derivative instruments and
hedging activities. SFAS No. 133 requires that all derivatives be recognized
at fair value in the statement of financial position and that the
corresponding gains or losses be reported either in the statement of
operations or as a component of comprehensive income, depending on the type
of hedging relationship that exists. SFAS No. 133 is effective for fiscal
years beginning after June 15, 2000. Earlier application is allowed as of
the beginning of any quarter beginning after issuance. The Company adopted
SFAS No. 133 effective April 1, 2001. The adoption of SFAS 133 did not
have a material impact on its the Company's financial position or results
of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to financial market risks due primarily to changes in
interest rates. The Company does not use derivatives to alter the interest
characteristics of its investment securities. The Company has no holdings of
derivative or commodity instruments. The fair value of the Company's
investment portfolio or related income would not be significantly impacted
by changes in interest rates since the investment maturities are short and
the interest rates are primarily fixed.
Item 8. Financial Statements and Supplementary Data
The Financial Statements and Financial Statement Schedule are listed in
Item 14 of this report.
Supplementary Quarterly Financial Data:
Quarters Ended
Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2001 2000 2000 2000 2000 1999 1999 1999
(Unaudited) (in thousands, except per share amounts)
Statement of Operations Data:
Net sales.................... $16,431 $ 20,209 $ 22,512 $ 22,303 $ 20,095 $ 17,709 $ 16,737 $ 16,297
Costs of sales............... 10,583 11,800 13,018 13,389 12,445 11,065 10,725 10,741
Income (loss) from operations.. (111) 2,787 4,062 4,204 3,384 3,122 2,679 1,229
Income (loss) before provision
for income taxes.......(1,047) 3,299 5,308 4,695 4,442 3,648 2,963 1,596
Net income (loss)..............$ (691) $ 2,177 $ 3,503 $ 3,099 $ 2,977 $ 2,444 $ 1,985 $ 1,069
Net Income (loss) per share....
Basic..................$ (0.06) $ 0.18 $ 0.28 $ 0.25 $ 0.24 $ 0.20 $ 0.16 $ 0.09
Diluted................$ (0.06) $ 0.17 $ 0.27 $ 0.24 $ 0.23 $ 0.20 $ 0.16 $ 0.09
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Certain information required by Part III is incorporated by reference from
the Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the solicitation of proxies for the
Company's 2001 Annual Meeting of Stockholders (the "Proxy Statement").
Item 10. Directors and Executive Officers of the Registrant
Information regarding our directors is set forth under "Election of Directors -
Nominees" in the Proxy Statement and is incorporated by reference. The
required information regarding executive officers is included in Part I hereof
under caption "Executive Officers of the Company."
Item 11. Executive Compensation
Information regarding the Company's remuneration of its officers and directors
is set forth under "Compensation of Directors" and "Compensation of Executive
Officers" in the Proxy Statement and is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding the security ownership of certain beneficial owners and
management is set forth under "Security Ownership of Certain Beneficial Owners
and Management" in the Proxy Statement and is incorporated by reference.
Item 13. Certain Relationships and Related Transactions
The Company leases a Sunnyvale facility under a month-to-month operating lease
of $38,000 from Fortuna Realty Co, a corporation owned by former Supertex
Director, Yunni Pao. The total rental expenses paid to the former company
director were $408,000, $388,000 and $375,000 in fiscal years 2001, 2000 and
1999, respectively. The Company believes that the lease with Fortuna Realty
Co. is at prevailing market rates.
Mr. Richard Siegel, the Executive Vice President of the Company, is a member
of the Board of Directors for All American Semiconductor. All American
Semiconductor is a national distributor of electronic components manufactured
by others and is a major distributor for Supertex. Sales to this distributor
for fiscal years 2001, 2000 and 1999 were $3,969,000, $4,114,000 and
$3,038,000, respectively. Supertex has no long-term production agreement
with All American Semiconductor.
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
Page No.
1. Report of Independent Accountants................................. 22
2. Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 2001 and 2000.... 23
For the three years ended March 31, 2001, 2000, and 1999:
Consolidated Statements of Income................. 24
Consolidated Statements of Shareholders' Equity... 25
Consolidated Statements of Cash Flows............. 26
Notes to Consolidated Financial Statements................ 27
3. Financial Statement Schedule. The following Financial Statement
Schedule of Supertex,Inc., is filed as part of this report and should
be read in conjunction with the Consolidated Financial Statements of
Supertex.
Schedule for fiscal years ended March 31, 2001, 2000, and 1999:
Schedule II Valuation and Qualifying Accounts...............37
All other schedules have been omitted since the required information is not
present or it is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
consolidated financial statements, including notes thereto.
4. Exhibits.
Exhibit Exhibit Description
2.1 (1) Agreement for purchases and sale of assets by and between Supertex,
Inc. and Orbit Semiconductor dated January 16, 1999.
3.1 (2) Restated Articles of Incorporation of Registrant filed May 21, 1980.
3.2 (2) Certificate of Amendment of Articles of Incorporation filed
April 16, 1981.
3.3 (2) Certificate of Amendment of Articles of Incorporation filed
September 30, 1983.
3.4 (5) Bylaws of Registrant, as amended.
10 Deferred [JL6]Compensation Plan (Supplemental Employee Retirement Plan)
which became effective January 1, 1996.
10.2 Lease Assignment agreement for 71 Vista Montana, San Jose, California,
dated February 1, 1999 among Orbit Semiconductor, as assignor, Sobrato
Development Companies #871, as landlord, and Supertex, Inc., as
assignee.
10.6 (4) 1991 Stock Option Plan which became effective, with form of
stock option agreement.
10.6a (5) 1991 Stock Option Plan, as amended as of August 4, 1995, with
form of stock option agreement.
10.6b (6) 1991 Stock Option Plan, as amended as of August 6, 1999, with
form of stock option agreement.
10.6c (7) 2000 Employee Stock Purchase Plan.
10.7 (2) Profit Sharing Plan.
10.21 (3) Certificate of Amendment of Articles of Incorporation filed
October 14, 1988.
10.22 (4) Agreement with Texas Instruments Inc. dated May 31, 1991.*
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 Power of Attorney.
(1) Incorporated by reference to the exhibit of the same number filed with
current report on form 8-K dated January 19, 1999.
(2) Incorporated by reference to exhibit of same number of Registrant's
Registration Statement on Form S-1 (File No. 2-86898), which
became effective December 6, 1983.
(3) Incorporated by reference to exhibit filed with Quarterly Report on
Form 10-Q for period ended October 1, 1988.
(4) Incorporated by reference to exhibit filed with Annual Report on Form
10-K for year ended March 31, 1991.
(5) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 33-43691) which
became effective September 1, 1995.
(6) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 33-43691) which became
effective September 29, 1999.
(7) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 333-47606) which became
effective October 6, 2000.
* Confidential treatment of portions of this exhibit was granted by
order dated August 12, 1991.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the period
covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SUPERTEX, INC.
Dated: June 22, 2001 /s/ Henry C. Pao
Henry C. Pao, President, Principal Financial and
Accounting Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Henry C. Pao, 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 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 Act of 1934, this report has
been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ Henry C. Pao President, Principal Executive and June 22, 2001
(Henry C. Pao) Financial Officer and Director
/s/ Richard E. Siegel Executive Vice President and Director June 22, 2001
(Richard E. Siegel)
/s/ Benedict C. K. Choy Senior Vice President and Director June 22, 2001
(Benedict C. K. Choy)
/s/ Mark W. Loveless Director June 22, 2001
(Mark W. Loveless)
/s/ Frank C. Pao Director June 22, 2001
(Frank C. Pao)
/s/ Elliott Schlam Director June 22, 2001
(Elliott Schlam)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Supertex, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(2) present fairly, in all material respects, the
financial position of Supertex, Inc. and its subsidiary at March 31, 2001 and
March 31, 2000, and the results of their operations and their cash flows for
each of the three years in the period ended March 31, 2001, in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 14(a)(3) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 27, 2001
SUPERTEX, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,
2001 2000
ASSETS
Current Assets:
Cash and cash equivalents.................................................................. $44,282 $ 22,584
Short term investments..................................................................... 0 11,592
Trade accounts receivable,
net of allowances of $2,412 in
2001 and $1,366 in 2000.................................................................... 13,536 14,428
Inventories................................................................................ 14,388 15,083
Prepaid expenses and other current assets.................................................. 1,404 755
Deferred Income taxes...................................................................... 4,388 2,862
Total current assets................................................................ 77,998 67,304
Property, plant and equipment, net.......................................................... 15,200 14,890
Intangible and other assets, net.............................................................. 2,499 2,559
Deferred income taxes......................................................................... 2,998 1,870
TOTAL ASSETS.................................................................................. $98,695 $86,623
LIABILITIES
Current Liabilities:
Trade accounts payable..................................................................... $6,659 $8,395
Accrued salaries, wages and employee benefits.............................................. 7,173 4,495
Other accrued liabilities.................................................................. 645 276
Deferred revenue........................................................................... 1,262 835
Income taxes payable....................................................................... 597 353
Total current liabilities.......................................................... 16,336 14,354
Commitments and contingencies (Note 7)
SHAREHOLDERS' EQUITY
Preferred stock, no par value -- 10,000 shares authorized, none outstanding........... -- --
Common stock, no par value -- 30,000 shares authorized;
issued and outstanding 12,394 shares in 2001 and 12,251 shares in 2000........... 25,318 23,167
Retained earnings..................................................................... 57,041 49,102
Total shareholders' equity.................................................... 82,359 72,269
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................................................$ 98,695 $ 86,623
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Year Ended March 31,
2001 2000 1999
Net sales............................................$ 81,455 $ 70,838 $ 50,721
Costs and expenses:
Costs of sales............................... 48,790 44,976 28,867
Research and development..................... 10,917 8,468 7,195
Selling, general and administrative.......... 10,806 6,980 6,860
Write-off of acquired in process technology.. -- -- 2,506
Total costs and expenses................ 70,513 60,424 45,428
Income from operations............................... 10,942 10,414 5,293
Other income:
Interest income.............................. 2,466 1,978 1,981
Other income (expense), net.................. (1,153) 257 (130)
Income before provision for income taxes.. 12,255 12,649 7,144
Provision for income taxes........................... 4,167 4,174 1,810
Net income...........................................$ 8,088 $ 8,475 $ 5,334
Net income per share:
Basic........................................$ 0.65 $ 0.70 $ 0.44
Diluted......................................$ 0.62 $ 0.68 $ 0.44
Shares used in per share computation:
Basic........................................ 12,351 12,126 12,077
Diluted...................................... 12,990 12,519 12,225
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Accumulated
Other
Common Stock Comprehensive Retained Shareholders'
Shares Amount Income Earnings Equity
Balance, March 31, 1998...............................$ 12,097 $ 20,658 $ -- $36,559 $57,217
Stock options exercised....................... 63 282 -- -- 282
Stock repurchased............................. (61) (103) -- (456) (559)
Tax benefit from stock options................ -- 50 -- -- 50
Change in unrealized holding gains and losses. -- -- 356 -- --
Net income.................................... -- -- -- 5,334 --
Total comprehensive income.................... -- -- -- -- 5,690
Balance, March 31, 1999............................... 12,099 20,887 356 41,437 62,680
Stock options exercised....................... 247 1,602 -- -- 1,602
Stock repurchased ............................ (95) (155) -- (810) (965)
Tax benefit from stock options................ -- 833 -- -- 833
Change in unrealized holding gains and losses -- -- (356) -- --
Net income.................................... -- -- -- 8,475 --
Total comprehensive income.................... -- -- -- -- 8,119
Balance, March 31, 2000............................... 12,251 23,167 -- 49,102 72,269
Stock options exercised....................... 162 1,151 -- -- 1,151
Stock repurchased............................. (19) (26) -- (149) (175)
Tax benefit from stock options................ -- 1,026 -- -- 1,026
Change in unrealized holding gains and losses. -- -- -- -- --
Net income......................................... -- -- -- 8,088 --
Total comprehensive Income......................... -- -- -- -- 8,088
Balance, March 31, 2001 .............................. 12,394 $25,318 $ -- $57,041 $82,359
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended March 31,
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................$ 8,088 $ 8,475 $ 5,334
Non-cash adjustments to net income:
Depreciation and amortization ..................... 5,146 6,118 4,135
Write-off of in-process technology................. -- -- 2,506
Write-off of long-term investments................. 1,000 -- --
Provision for doubtful accounts and sales returns.. 3,195 3,150 2,417
Provision for excess and obsolete inventories...... 1,636 (458) 1,300
(Gain) / Loss on disposal of assets................ (508) (203) --
Deferred income taxes..............................(2,654) 1,017) (1,533)
Changes in operating assets and liabilities:
Accounts receivable................................(2,303) (6,718) (3,828)
Inventories........................................ (941) (3,295) (2,367)
Prepaid expenses and other assets.................. (659) (308) (238)
Trade accounts payable and accrued expenses........ 1,311 2,455 3,830
Income taxes payable............................... 1,270 1,186 (1,029)
Deferred revenue .................................. 427 (363) (253)
Total adjustments.......................................... 6,920 547 4,940
Net cash provided by operating activities.................. 15,008 9,022 10,274
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangible assets.............................. -- -- (4,723)
Purchases of property and equipment........................ (5,093) (3,880) (7,586)
Proceeds from disposal of property and equipment........... 965 -- --
Purchases of short term investments........................(39,276) (54,152) (41,172)
Purchases of long term investments.........................( 1,750) -- --
Proceeds from maturities of short term investments......... 50,868 42,767 47,118
Net cash provided by (used in) investing activities........ 5,714 (15,265) (6,363)
CASH FLOWS FROM FINANCING ACTIVITIES
Stock options exercised.................................... 1,151 1,602 282
Stock repurchased.......................................... (175) (965) (559)
Net cash provided by (used in) financing activities........ 976 637 (277)
NET INCREASE IN CASH AND CASH EQUIVALENTS.................. 21,698 (5,606) 3,634
CASH AND CASH EQUIVALENTS:
Beginning of year.................................. 22,584 28,190 24,556
End of year......................................$ 44,282 $ 22,584 $ 28,190
See accompanying Notes to Consolidated Financial Statements.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business The Company designs, manufactures and markets custom and
standard semiconductor products.
Principles of Consolidation The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated.
Fiscal Period The Company uses a 52-53 week fiscal year ending the Saturday
nearest March 31. The Company's fiscal years in the accompanying financial
statements have been shown ending on March 31. Fiscal year 2001 comprises
52 weeks, fiscal year 2000 comprises 53 weeks, and fiscal year 1999 comprises
52 weeks.
Use of Estimates in Preparation of the Financial Statements The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Certain Risks and Uncertainties The Company's business is concentrated in
the high voltage semiconductor component industry, which is rapidly changing,
highly competitive and subject to competitive pricing pressures. The
Company's operating results may experience substantial period-to-period
fluctuations due to these factors, including the cyclical nature of the
semiconductor industry, the changes in customer requirements, the timely
introduction of new products, the Company's ability to implement new
capabilities or technologies, its ability to manufacture efficiently, its
reliance on subcontractors and vendors, and the general economic conditions.
Cash and Cash Equivalents The Company considers all highly liquid debt and
equity instruments purchased with an original maturity of three months or
less to be cash equivalents.
Financial Instruments Short-term investments, which are categorized as
available-for-sale, consist principally of commercial paper that matures
within one year and are stated at fair market value, which approximates cost.
Unrealized holding gains and losses are reflected at a net amount as a
separate component of the shareholders' equity until realized. For the
purpose of computing realized gains and losses, cost is identified on a
specific identification basis.
Investments in equity securities that are not traded on public markets are
accounted for under the cost method of accounting. The Company periodically
evaluates the carrying value of such equity investments and when a decline in
the value is other than temporary, the securities are reduced to their fair
value. An impairment charge was taken in the fourth fiscal quarter of 2001
for $1,000,000 due to the uncertainty surrounding the recoverability of an
investment in a start-up company. The Company's Supplemental Employee
Retirement Plan has investments in equity securities that are not publicly
traded.
Concentration of credit risk and foreign operations Financial instruments
which potentially subject the Company to concentrations of credit risk
consists principally of cash and cash equivalents and accounts receivable.
The Company's accounts receivable are derived from revenue and earned from
customers located in the U.S. and certain foreign countries and regions,
including Europe and Japan. Sales to foreign customers for the year ended
March 31, 1999, 2000, and 2001 all of which were denominated in U.S. dollars,
accounted for 51%, 36%, and 38% of net sales, respectively. The Company
performs ongoing credit evaluations of its customers' financial condition and
requires no collateral from its customers.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company sells its semiconductor products in North America, Europe and the
Pacific Rim to numerous customers. Allowances for potential credit losses
are maintained and such losses historically have not been material.
Substantially all of the Company's cash, cash equivalents and short term
investments are held at four major financial institutions domiciled in the
United States.
Significant Customers In fiscal 2001, Microtek Inc., the Company's master
distributor in Japan, accounted for 12% of net sales. No other customer
accounted for over 10% of net sales. In fiscal 2000, sales to Microtek and
Dii Semiconductor accounted for 12% and 11% of net sales respectively and
Microtek made up 16% of net sales for fiscal 1999. Outstanding accounts
receivable from Microtek accounted for 7% of gross accounts receivable as of
March 31, 2001.
Inventories Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or market value. The Company's inventories
include high technology parts and components that are specialized in nature
and subject to rapid technological obsolescence. While the Company has
programs to minimize the required inventories on hand and considers
technological obsolescence when estimating amounts required to reduce
recorded amounts to market values, it is reasonably possible that such
estimates could change in the near term.
Property, Plant and Equipment Property and equipment are stated at cost and
generally depreciated using accelerated methods over estimated useful lives
of five years or less. Building and building improvements are recorded at
cost and are depreciated on a straight-line basis over the useful life of the
building. Leasehold improvements are recorded at cost and are amortized on
a straight-line basis over the lesser of the related lease term or the
estimated useful life of the assets. The Company reviews for impairment of
its long-lived assets whenever events or changes in circumstances indicate
that the carrying amount of an asset might not be recoverable. In certain
situations, an impairment loss would be recognized.
Impairment of Long-lived assets Long-lived assets and certain identifiable
intangible assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of such
assets may not be recoverable. Determination of recoverability is based on
an estimate of undiscounted future cash flows resulting from the use of the
asset and its eventual disposition. Measurement of an impairment loss for
long-lived assets and certain identifiable intangible assets that management
expects to hold and use are based on the fair value of the asset. Long-lived
assets and certain identifiable intangible assets to be disposed of are
reported at the lower of carrying amount or fair value less costs to sell.
Supertex, Inc. assesses the recoverability of the carrying amount of an asset
when the following events and conditions occur:
* A significant decrease in the market value of an asset
* A significant change in the extent or manner in which an asset is used or a
significant physical change in an asset
* A significant adverse change in legal factors or in the business climate
that could affect the value of an asset or an adverse action or assessment
by a regulator
* An accumulation of costs significantly in excess of the amount originally
expected to acquire or construct an asset
* A current period operating or cash flow loss combined with a history of
operating or cash flow losses or a projection or forecast that
demonstrates continuing losses associated with an asset used for the
purpose of producing revenue.
The Company incurred a charge of $272,000 in fiscal 2001 for the impairment
of unsold four-inch equipment as of March 31, 2001.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Intangible Assets Intangible assets were recorded in conjunction with the
Asset Purchase Agreement with Orbit Semiconductor. Intangible assets consist
of purchased technology and assembled workforce, which are being amortized on
a straight-line basis over their estimated useful lives of two years and five
years, respectively.
The Company assesses the recoverability of intangible assets by determining
whether the amortization of the asset's net book value over its remaining
life can be recovered through projected undiscounted future cash flows.
Intangible assets consist of the following at March 31, 2001 and 2000 (in
thousands):
March 31,
2001 2000
Purchased technology $1,735 $1,735
Assembled workforce 482 482
------ ------
2,217 2,217
Less accumulated amortization (1,944) (1,124)
------ ------
$ 273 $1,093
Revenue Recognition Revenue from direct product sales to end-user
customers is generally recognized upon transfer of title and risk of loss,
which is generally upon shipment of the product provided persuasive evidence
of an arrangement exists, the price is fixed or determinable, no significant
obligations remain and collection is probable. Provisions for estimated
warranty repairs, returns and other allowances are recorded at the time
revenue is recognized. Sales to distributors are made primarily under
arrangements allowing limited price protection and the right of stock
rotation on merchandise unsold by the distributors. Because of the
uncertainty associated with pricing concessions and possible returns, the
Company defers recognition of such sales and the related costs of sales until
the merchandise is sold by distributors to their end-user customers.
Net Income per Share Basic earnings per share ("EPS") is computed as net
income divided by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could
occur from common shares issuable through stock options, warrants, and other
convertible securities. The following is a reconciliation of the numerator
(net income) and the denominator (number of shares) used in the basic and
diluted EPS calculations.
Fiscal Year Ended
March 31,
2001 2000 1999
BASIC:
Weighted average shares
outstanding for the period......... 12,351 12,126 12,077
Net income.........................$ 8,088 $ 8,475 $ 5,334
Net income per share...............$ 0.65 $ 0.70 $ 0.44
DILUTED:
Weighted average shares
outstanding for the period......... 12,351 12,126 12,077
Potential common stock............. 639 393 148
Total common and common
equivalent shares.................. 12,990 12,519 12,225
Net income.........................$ 8,088 $ 8,475 $ 5,334
Net income per share...............$ 0.62 $ 0.68 $ 0.44
Options to purchase the Company's common stock of 83,513 shares at a price
of $46.34 per share, 9,230 shares at prices between $16.50 - $26.06, and
515,446 shares at prices between $8.88 - $16.75 in fiscal 2001, 2000, and
1999, respectively, were outstanding but were not included in the computation
of diluted earnings per share because the option exercise prices were
greater than the average market price of the common stock.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Accounting for Stock-based Compensation The Company accounts for stock-based
employee compensation arrangements using the intrinsic value method as
described in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25") and Financial Accounting Standards
Board Interpretation No. 44 "Accounting for Certain Transaction Involving
Stock Compensation" ("FIN 44"). Accordingly, compensation cost for stock
options is measured as the excess, if any, of the fair value of the Company's
stock at the date of grant over the stock option exercise price. The Company
accounts for stock issued to non-employees in accordance with the provisions
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") and Emerging Issues Task Force
Consensus No. 96-18, "Accounting for Equity Instruments that are offered to
other than employees for acquiring or in conjunction with selling goods or
services" ("EITF 96-18"). Under SFAS No. 123 and EITF 96-18, stock option
awards issued to non-employees are accounted for at their fair value,
determined using the Black-Scholes option pricing method. The fair value of
each non-employee stock option or award is remeasured at each period end
until a commitment date is reached, which is generally the vesting date.
Income Taxes The Company utilizes the liability method to account for income
taxes where deferred tax assets or liabilities are determined based on the
temporary differences between the bases used for financial versus tax
reporting of assets and liabilities, using tax laws and rates in effect for
the year in which the differences are expected to affect taxable income.
Advertising Costs The Company expenses advertising and promotional costs as
they are incurred. Advertising costs for the last three fiscal years were
immaterial.
Fair Value of Financial Instruments Carrying amounts of certain of the
Company's financial instruments including cash, cash equivalents, accounts
receivable, and accounts payable approximate fair value due to their short
maturities. We measure a Financial Instrument's "other than temporary"
impairment, if any, using its fair value.
Comprehensive Income In fiscal 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes standards for
disclosure and financial statement display for reporting total comprehensive
income and its individual components. Comprehensive income, as defined,
includes all changes in equity during a period from non-owner sources. The
Company's comprehensive income includes net income and unrealized gains and
losses on investments and is displayed in the statement of shareholders'
equity,
Recent Accounting Pronouncements In June 1998, the FASB issued Statement of
Financial Accounting Standards No. 133, ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new
standards of accounting and reporting for derivative instruments and hedging
activities. SFAS No. 133 requires that all derivatives be recognized at fair
value in the statement of financial position and that the corresponding gains
or losses be reported either in the statement of operations or as a component
of comprehensive income, depending on the type of hedging relationship that
exists. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000. Earlier application is allowed as of the beginning of any quarter
beginning after issuance. The Company adopted SFAS No. 133 effective April
1, 2001. The adoption of SFAS 133 did not have a material impact on the
Company's financial position or results of operations.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. INVENTORIES (in thousands):
March 31,
2001 2000
Raw materials.................... $ 1,662 $ 1,088
Work-in-process.................. 9,281 11,652
Finished goods................... 3,445 2,343
-------- --------
$ 14,388 $ 15,083
3. PROPERTY AND EQUIPMENT (in thousands):
March 31,
2001 2000
Land............................. $ 825 $ 825
Machinery and equipment.......... 31,531 32,439
Leasehold improvements........... 3,592 2,518
Building......................... 2,038 2,038
Furniture and fixtures........... 247 209
-------- --------
38,233 38,029
Less accumulated depreciation
and amortization................. (23,033) (23,139)
-------- --------
$ 15,200 $ 14,890
4. ACQUISITION OF WAFER FABRICATION OPERATION (in thousands):
In February 1999, the Company acquired certain assets related to the six-inch
wafer fabrication facility and related operations of Orbit Semiconductor for
a total cash purchase price of approximately $10,000,000 including direct
costs incurred. The acquisition of assets has been accounted for as a
purchase and the results of operations have been included in the consolidated
statement of operations of the Company from the date of acquisition. The
purchase price was allocated to assets acquired based on their respective
fair values. The allocation of the purchase price was as follows (in
thousands):
Property and equipment $ 5,277
Purchased technology 1,735
Assembled workforce 482
In-process technology 2,506
-------
$10,000
The amounts allocated to purchased technology and assembled workforce were
determined through known valuation techniques in the high technology industry.
The value assigned to in-process technology was determined by identifying
development projects for which technological feasibility had not been
established and estimating the expected cash flows from the projects once
commercially feasible. These cash flows were discounted back to their
present value and a percentage of completion discount was applied to the
calculation. The percentage of completion for the in-process projects ranged
from 50% to 90% complete, resulting in estimated cost to complete of
$7,200,000. The technological feasibility of the in-process technology had
not been established and had no alternative future use. Accordingly, the
entire $2,506,000 has been charged to operations in the fourth quarter of
fiscal 1999.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. INCOME TAXES
The components of the provision for income taxes for fiscal years ended March
31, 2001, 2000, and 1999 are as follows (in thousands):
March 31,
2001 2000 1999
Federal - current................. $ 6,058 $ 4,713 $ 3,226
Federal - deferred................ (2,464) (718) (1,304)
------- ------- -------
3,594 3,995 1,922
State - current................... 763 478 117
State- deferred................... (190) (299) (229)
------- ------- -------
573 179 (112)
------- ------- -------
$4,167 $ 4,174 $ 1,810
Substantially all of the Company's revenue is taxable in the United States.
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before provision for income
taxes as follows:
2001 2000 1999
Statutory provision............... 35% 34% 34%
State tax, net of federal benefits 3 3 5
Tax credits....................... (4) (1) (6)
Benefit of foreign sales
corporation....................... (4) (2) (4)
Other............................. 4 (1) (4)
---- ---- ----
34% 33% 25%
Income taxes of $5,543,000, $4,110,000, and $4,891,000 were paid during
fiscal 2001, 2000, and 1999, respectively.
The components of the deferred tax assets are as follows (in thousands):
March 31,
2001 2000
Deferred tax assets:
Depreciation and amortization.... $2,484 $2,097
Accrued employee benefits........ 693 907
Inventory reserves............... 914 125
Accrued liabilities.............. 1,454 601
State deferred taxes
(net of federal benefits)........ 188 120
Deferred revenue on shipments
to distributors.................. 698 319
Allowances for doubtful accounts
and sales returns................ 955 181
Manufacturing investment credit.. -- 233
Other............................ -- 149
------ ------
Total deferred tax assets........ $7,386 $4,732
Management has determined that no valuation allowance is required because,
although realization is not assured, the Company has sufficient taxable
income in carryback years to absorb items deductible in the future for
federal tax purposes and anticipates that its estimated future taxable
income will allow the deferred tax asset for state tax purposes to be fully
realized in future years. The amount of the deferred tax asset that is
realizable could be reduced in the near term if actual results differ
significantly from estimates of future taxable income.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. EMPLOYEE BENEFIT PLANS
Profit Sharing Plan -- The Company has a discretionary profit sharing plan
for the benefit of eligible employees. Related expenses were $1,229,000,
$1,152,000, and $914,000 in fiscal 2001, 2000, and 1999, respectively.
Savings and Retirement Plan -- The Supertex Savings and Retirement Plan
allows for employee savings intended to qualify under the provisions of
Section 401 of the Internal Revenue Code. Employees having at least three
months of permanent service may make pretax contributions of 1% to 20% of
qualified compensation, with the Company matching certain percentages of
employee contributions, all of which are 100% vested. In fiscal years 2001,
2000 and 1999, the Company's matching contributions were $234,000, $254,000
and $189,000, respectively.
Supplemental Employee Retirement Plan -- The Supplemental Employee
Retirement Plan (the "SERP") is a non-qualified deferred compensation plan
that covers a select group of management or highly compensated employees of
the Company. The SERP was adopted by the Company effective January 1, 1996.
The Plan assets are included in cash and cash equivalents and long-term
investments in the Company's financial statements and such assets shall at
all times be subject to claims of the general creditors of the Company.
Certain assets designated for the Plan are invested in limited partnership
interests which are not traded in public markets. SERP obligations are
based on the fair value of the underlying assets owed to participants as
stipulated by the SERP and are included in accrued liabilities in the
financial statements. The Deferred Compensation Committee is responsible
for the general administration and interpretation of the SERP and for
carrying out its provisions.
Employee Stock Purchase Plan -- The shareholders of the Company approved the
adoption of the 2000 Employee Stock Purchase Plan (the "ESPP") and the
reservation of 500,000 shares of common stock at the August 18, 2000 annual
shareholder's meeting. Eligible employees may elect to withhold up to 20% of
their cash compensation to purchase shares of the Company's common stock at
a price equal to 85% of the market value of the stock at the beginning or
ending of a six month offering period, whichever is lower. An eligible
employee may purchase no more than 500 shares during any calendar year.
There were no shares issued under the ESPP for the year ended March 31, 2001.
Stock Option Plan -- The 1991 Stock Option Plan (the Option Plan) provides
for granting incentive stock options to employees, and non-statutory stock
options to employees and consultants. Terms for exercising options are
determined by the Board of Directors, and options expire at the earlier of
the term provided in the Notice of Grant or upon termination of employment
or consulting relationship.
A total of 2,825,715 shares of the Company's common stock were reserved for
issuance under the 1991 Plan. Options granted under the Plan are granted at
the fair market value of the Company's common stock on the date of grant and
generally expire 7 years from the date of grant or at termination of service,
whichever occurs first. The options generally are exercisable beginning one
year from date of grant and generally vest over a five-year period.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Activity under the Option Plan is as follows (in thousands, except share and
per share data):
Available Options Outstanding Weighted
for Average
Grant Shares Price Per share Exercise Price
----------------------------------------------------------
Balance,
March 31, 1998 378,535 1,011,560 $ 2 3/4 - 16 3/4 $ 9.06
Granted (430,500) 430,500 9 5/8 - 11 10.82
Exercised (63,000) 2 3/4 - 10 1/8 4.55
Canceled 93,700 (93,700) 2 7/8 - 16 3/4 12.57
Balance,
March 31, 1999 41,735 1,285,360 2 3/4 - 16 3/4 9.62
Authorized 900,000
Granted (377,600) 377,600 13 1/2 - 26 1/16 15.11
Exercised (246,840) 2 3/4 - 12 1/2 6.98
Canceled 156,300 (156,300) 3 1/4 - 16 1/2 10.94
Balance,
March 31, 2000 720,435 1,259,820 2 7/8 - 26 1/16 11.62
Granted (549,560) 549,560 3 1/4 - 46 11/32 29.03
Exercised (161,580) 2 7/8 - 16 3/4 8.36
Canceled 130,720 (130,720) 3 1/4 - 46 11/32 14.92
Balance,
March 31, 2001 301,595 1,517,080 $ 4 1/2 - 46 11/32 $17.48
The options outstanding and currently exercisable by exercise price under the
Option Plan at March 31, 2001 are as follows:
Options Outstanding Options Exercisable
--------------------------------------------------------------------------------------
Range of Number Weighted-Average Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Remaining Contractual Exercise Price Outstanding Exercise Price
Life
$ 4.50 - $10.75 446,900 4.05 $10.05 196,900 $9.23
$11.00 - $13.50 420,020 4.47 $12.34 152,800 $12.05
$13.69 - $26.06 384,910 6.25 $17.56 33,580 $16.69
$28.31 - $46.34 265,250 6.31 $38.04 -- $ --
- --------------- ------- ---- ------ ------- ------
$ 4.50 - $46.34 1,517,080 5.12 $17.48 383,280 $11.01
The weighted average fair value of options granted during fiscal 2001, 2000,
and 1999 was $19.99 per share, $7.44 per share, and $5.89 per share,
respectively. All options were granted at market price of the Company's
common stock on the date of grant.
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
To compute the estimated fair value of each option grants under the Option
Plan and employee's purchase rights under the ESPP, the Black-Scholes method
was used with the following weighted average assumptions and dividend yield
of 0% for all years presented:
Employee Stock Option Plan Employee Stock
Purchase Plan
2001 2000 1999 2001 2000 1999
Risk-free interest rate 5.78% 5.39% 5.00% 6.35% -- --
Expected term of option
from vest date 1.13 0.97 0.61 0.50 -- --
Expected volatility 104.00% 60.00% 61.00% 98.91% -- --
Had the Company recorded compensation costs for the Stock Option Plan and the
ESPP based on the fair value at the grant date for the awards consistent with
the provisions of SFAS 123, the net income and net income per share for the
years ended March 31, 2001, 2000, and 1999 would have been reduced to the
pro forma amounts indicated below:
(in thousands except per share data) 2001 2000 1999
Net income As reported $8,088 $8,475 $5,334
Pro forma $4,204 $7,015 $4,261
Diluted earnings
per share As reported $ 0.62 $ 0.68 $ 0.44
Pro forma $ 0.33 $ 0.56 $ 0.35
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
As part of the acquisition of the Orbit's six inch wafer fabrication
operation, the Company assumed an operating lease for its manufacturing
facility. The lease expires on April 30, 2004 with two (2) options to
extend the term of the lease, each for a period of five (5) years. Monthly
rent during the entire term is $71,000 which is adjusted annually based on
Bureau of Labor Statistic's Consumer Price Index. The Company is responsible
for maintenance costs, including real property taxes, utilities, insurance
and other costs. The Company also leases a Sunnyvale facility under a
month-to-month operating lease of $38,000 from a corporation owned by one of
the Company's former directors. Under the lease, the Company is responsible
for maintenance costs, including real property taxes, utilities and other
costs. In addition, following the acquisition of the six-inch wafer
fabrication facility, the Company assumed an existing equipment operating
lease from Orbit Semiconductor. This operating lease consists of three
different lease schedules representing three groups of equipment. Operating
lease expenses were approximately $623,000, $773,000 and $129,000 in fiscal
years 2001, 2000, and 1999, respectively. Future minimum lease payments
under all operating leases at March 31, 2001 are as follows (in thousands):
Fiscal Year
2002 2003 2004 2005 Total
$ 1,270 $ 846 $ 846 $ 71 $3,033
SUPERTEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Future sublease income under all operating leases at March 31, 2000 are as
follows:
Fiscal Year
2002 2003 2004 2005 Total
$ 260 $ 25 $ 2 $ -- $ 287
Facilities rental expenses, net of facilities sublease, were approximately
$659,000, $944,000,and $462,000, (net of facilities sublease income of
$593,000, $260,000, and $49,000) in fiscal years 2001, 2000, and 1999,
respectively. Of the total rental expenses paid, $408,000, $388,000, and
$375,000 were paid to the Company's former director in fiscal 2001, 2000,
and 1999 respectively.
In addition to the foregoing, from time to time the Company is subject to
possible claims or assessments from third parties arising in the normal
course of business. Management has reviewed such possible claims and
assessments with legal counsel and believes that it is unlikely that they
will result in a material adverse impact on the Company's financial position
or results of operations.
8. SEGMENT INFORMATION
The Company operates in one business segment. The Company's principal markets
are in the United States, Europe and Asia. Following is a summary of the
geographic information related to revenues for the years ended March 31,
2001, 2000, and 1999:
(in thousands) 2001 2000 1999
Revenues
United States $ 50,822 $ 45,148 $ 24,608
Europe 12,762 9,372 11,379
Japan 9,438 8,727 6,735
Asia
(excluding Japan) 6,597 6,063 5,480
Other 1,836 1,528 2,519
------- ------- --------
Total Revenue $ 81,455 $ 70,838 $ 50,721
International sales are entirely comprised of export sales. The Company's
assets are primarily located in the United States. The Company does not
segregate information related to operating income generated by its export
sales.
SCHEDULE II
SUPERTEX, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Charged to Balance at
Beginning Costs and Write-Off End
of Period Expenses of Accounts of Period
---------------------------------------------------------
Year ended March 31, 1999
Allowance for sales returns......$ 543 $ 1,932 $ 2,102 $ 373
Allowance for doubtful accounts.. 157 485 (5) 647
Inventory allowances............. 874 1,300 727 1,447
Year end March 31, 2000
Allowance for sales returns......$ 373 $ 2,975 $ 2,503 $ 845
Allowance for doubtful accounts.. 647 175 301 521
Inventory allowances............. 1,447 (458) 133 856
Year end March 31, 2001
Allowance for sales returns......$ 845 $ 1,920 $ 1,859 $ 906
Allowance for doubtful accounts.. 521 1,275 290 1,506
Inventory allowances............. 856 1,636 675 1,817
SUPERTEX, INC.
EXHIBIT INDEX
(The Registrant will furnish to any shareholders who so request a copy of
this Annual Report on Form 10-K and any Exhibit listed below, provided that
the Registrant may require payment of a reasonable fee not to exceed its
expense in furnishing such information.)
Exhibit Exhibit Description
2.1 (1) Agreement for purchases and sale of assets by and between Supertex,
Inc. and Orbit Semiconductor dated January 16, 1999.
3.1 (2) Restated Articles of Incorporation of Registrant filed May 21, 1980.
3.2 (2) Certificate of Amendment of Articles of Incorporation filed April
16, 1981.
3.3 (2) Certificate of Amendment of Articles of Incorporation filed
September 30, 1983.
3.4 (5) Bylaws of Registrant, as amended.
10 Deferred Compensation Plan (Supplemental Employee Retirement
Plan) which became effective January 1, 1996.
10.2 Lease Assignment agreement for 71 Vista Montana, San Jose,
California, dated February 1, 1999 among Orbit Semiconductor, as
assignor, Sobrato Development Companies #871, as landlord, and
Supertex, Inc., as assignee.
10.6 (4) 1991 Stock Option Plan which became effective, with form of stock
option agreement.
10.6a (5) 1991 Stock Option Plan, as amended as of August 4, 1995, with form
of stock option agreement.
10.6b (6) 1991 Stock Option Plan, as amended as of August 6, 1999, with form
of stock option agreement.
10.6c (7) 2000 Employee Stock Purchase Plan.
10.7 (2) Profit Sharing Plan.
10.21 (3) Certificate of Amendment of Articles of Incorporation filed
October 14, 1988.
10.22 (4) Agreement with Texas Instruments Inc. dated May 31, 1991.*
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1 Power of Attorney.
(1) Incorporated by reference to the exhibit of the same number filed with
current report on form 8-K dated January 19, 1999.
(2) Incorporated by reference to exhibit of same number of Registrant's
Registration Statement on Form S-1 (File No. 2-86898), which became
effective December 6, 1983.
(3) Incorporated by reference to exhibit filed with Quarterly Report on
Form 10-Q for period ended October 1, 1988.
(4) Incorporated by reference to exhibit filed with Annual Report on Form
10-K for year ended March 31, 1991.
(5) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 33-43691) which became
effective September 1, 1995.
(6) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 33-43691) which became
effective September 29, 1999.
(7) Incorporated by reference to exhibit included in Registrant's
Registration Statement on Form S-8 (File No. 333-47606) which became
effective October 6, 2000.
* Confidential treatment of portions of this exhibit was granted by
order dated August 12, 1991.
Exhibit 23.1
CONSENT [JL12]OF [JL13]INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-47606 and 33-43691) of Supertex, Inc. of our
report dated April 27, 2001 relating to the financial statements and
financial statement schedule, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
San Jose, California
June 21, 2001
Exhibit 10
SUPERTEX, INC.
DEFERRED COMPENSATION PLAN
(EFFECTIVE JANUARY 1,1996)
TABLE OF CONTENTS
ARTICLE I PLAN ADMINISTRATION ............................................ 2
ARTICLE II ELIGIBILITY, PARTICIPATION AND BENEFICIARY DESIGNATION ........ 3
ARTICLE III PLAN CONTRIBUTIONS AND ALLOCATIONS ........................... 3
ARTICLE IV VESTING........................................................ 5
ARTICLE V PARTICIPANTS' ACCOUNTS . . . . . . . . . . ..................... 5
ARTICLE VI ALLOCATION OF TRUST INCOME OR LOSS............................. 6
ARTICLE VII IN-SERVICE WITHDRAWALS ....................................... 7
ARTICLE VIII PAYMENTS TO A PLAN BENEFICIARY .............................. 7
ARTICLE IX TRUST.......................................................... 9
ARTICLE X GENERAL DUTIES OF THE COMMITTEE AND THE TRUSTEE ................10
ARTICLE XI TRUSTEE RESPONSIBILITY REGARDING PAYMENT TO TRUST
BENEFICIARIES WHEN COMPANY INSOLVENT...............................10
ARTICLE XII INVESTMENT AND ADMINISTRATION OF TRUST FUND ..................12
ARTICLE XIII ACCOUNTING BY TRUSTEE .......................................14
ARTICLE XIV RESPONSIBILITY OF TRUSTEE ....................................15
ARTICLE XV TAXES, EXPENSES AND COMPENSATION OF TRUSTEE ...................15
ARTICLE XVI PROTECTION OF TRUSTEE ........................................16
ARTICLE XVII INDEMNIFICATION OF TRUSTEE ..................................17
ARTICLE XVIII RESIGNATION AND REMOVAL OF TRUSTEE .........................17
ARTICLE XIX DURATION AND TERMINATION OF TRUST AND AMENDMENT...............18
ARTICLE XX CLAIMS PROCEDURE ..............................................18
ARTICLE XXI MISCELLANEOUS ................................................19
SUPERTEX, INC.
DEFERRED COMPENSATION PLAN
THIS PLAN, effective as of January 1, 1996 (the "Effective Date"), is adopted
by Supertex, Inc. (the "Company"), acting on behalf of itself and any
subsidiaries. Throughout, the Company shall include wherever relevant any
entity that is directly or indirectly controlled by the Company or any entity
in which the Company has a significant equity or investment interest, as
determined by the Company.
RECITALS:
1. The Company wishes to establish a supplemental employee
retirement plan for the benefit of a select group of management or
highly compensated employees of the Company.
2. The Company wishes to provide that the plan to be established
under this plan or agreement shall be designated as the Supertex, Inc.
Deferred Compensation Plan (the "Plan").
3. The Company wishes to provide under the Plan for the payment of
vested accrued benefits to the Executives and their beneficiary or
beneficiaries ("Plan Beneficiaries").
4. The Company wishes to provide under the Plan that the Company
shall pay all of the accrued benefits from its general assets.
5. The Company may in the future establish an irrevocable trust
(the "Trust") to set aside contributions by the Company to meet its
obligations under the Plan.
6. In the event the Company establishes the Trust hereunder,
contributions to the Trust shall be held by a trustee (the "Trustee")
and invested, reinvested and distributed, all in accordance with the
provisions of this Plan.
7. The Company intends that any Trust it establishes hereunder be
a "grantor trust" with the corpus and income of the Trust treated as
assets and income of the Company for federal and state income tax
purposes.
8. The Company intends that Plan assets and the assets of any
Trust it establishes hereunder shall at all times be subject to the
claims of the general creditors of the Company.
9. The Company intends that in the event it establishes the Trust
hereunder, the existence of such Trust shall not alter the
characterization of the Plan as "unfunded" for purposes of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and shall not be construed to provide income to the participants
under the Plan prior to actual payment of the accrued benefits there
under.
NOW THEREFORE, the Company does hereby establish the Plan and, as applicable,
the Trust, and does also hereby agree that the Plan and Trust shall be
structured, held and disposed of as follows:
ARTICLE I
PLAN ADMINISTRATION
A. The Plan shall be administered by the Deferred Compensation Plan
Committee of the Company (the "Committee"). Subject to the provisions in the
Plan and to the specific duties delegated by the Board of Directors (the
"Board") to such Committee, the Committee shall be responsible for the
general administration and interpretation of the Plan and for carrying out
its provisions. Unless otherwise determined by the Committee, the Plan shall
be administered on a January 1 to December 31 Plan year. The Committee shall
have such powers as may be necessary to discharge its duties hereunder,
including, but not by way of limitation, the following powers and duties:
(1) discretionary authority to construe and interpret the terms
of the Plan, and to determine eligibility and the amount, manner and
time of payment of any benefits hereunder,
(2) to prescribe forms and procedures for purposes of Plan
participation and distribution of benefits;
(3) to direct the Trustee as to the distribution of Plan assets
held in Trust, if any; and
(4) to take such other action as may be necessary and appropriate
for the proper administration of the Plan.
B. The Committee may adopt such rules, regulations and bylaws and may make
such decisions as it deems necessary or desirable for the proper
administration of the Plan. Any rule or decision that is not inconsistent
with the provisions of the Plan shall be conclusive and binding upon all
persons affected by it, and there shall be no appeal from any ruling by the
Committee that is within its authority, except as otherwise provided herein.
C. The Committee shall have the power to (i) determine the rate of earnings
creditable to Participants Accounts, (ii) identify investment choices for the
Trust Fund, if any, and (iii) appoint or Employ agents; record keepers and
advisors to assist the Committee in discharging its duties under the Plan.
ARTICLE II
ELIGIBILITY PARTICIPATION AND BENEFICIARY DESIGNATION
A. Eligible Employees. The following categories of employees
("Eligible Employees") shall be eligible to participate in the Plan:
(i) employees who hold the position of President, Vice-President or Director;
and (ii) any other employee or category of employee that is designated by the
Chief Executive Officer of the Company or by the Committee as eligible to
participate in the Plan. The Committee reserves the right to modify the
definition of Eligible Employee at any time. Any Eligible Employee who has
commenced participation in the Plan shall be referred to in this Plan as a
"Participant."
B. Participation. Each Eligible Employee may elect to participate in the
Plan for the Plan year beginning January 1, 1996 by completing a deferred
compensation agreement ("Deferred Compensation Agreement") within 30 days
following the Effective Date. For Plan years beginning on and after January
1, 1996, an Eligible Employee who wishes to participate in the Plan for such
Plan year (including Eligible Employees who are then participating in the
Plan) must complete a Deferred Compensation Agreement in the 30-day
enrollment period immediately preceding the commencement of such Plan year.
Any individual who becomes an Eligible Employee after the commencement of a
Plan year may participate in the Plan by filing a Deferred Compensation
Agreement within 30 days following the date on which the Committee gives such
individual written notice that the individual is an Eligible Employee, Any
Eligible Employee who does not execute a Deferred Compensation Agreement
within the time periods described herein may participate in the next Plan
year by filing an executed Deferred Compensation Agreement with the Committee
before the beginning of such Plan year.
C. Beneficiary Designation. Each Participant, prior to entering the Plan,
may designate a beneficiary or beneficiaries to receive the remainder of any
interest of the Participant under the Plan in the event of the Participant's
death. A Participant may change his or her beneficiary designation at any
time on written notice to the Committee. Each beneficiary designation shall
be in a form prescribed by the Committee and shall be effective only when
filed with the Committee during the Participant's lifetime. Each beneficiary
designation filed with the Committee shall cancel all previously filed
beneficiary designations. In the absence of a valid designation, or if no
designated beneficiary survives the Participant, the Participant's interest
shall be distributed to the Participant's estate.
ARTICLE III
PLAN CONTRIBUTIONS AND ALLOCATIONS
A. Participant Deferrals. Each Participant participating in the Plan shall
execute a Deferred Compensation Agreement authorizing the Company to withhold
a percentage amount of the Participant's Compensation which would otherwise
be paid to the Participant with respect to services rendered. Compensation
under the Plan is defined as the annual base salary together with any
commissions and any, cash incentives, bonuses or profit sharing payable to
the Participant in connection with the Participant's services to the Company,
including all amounts which a Participant elects to have the Company
contribute to the Plan on his or her behalf as a deferral contribution
("Compensation"). The deferral percentage is applied to Compensation after
all other applicable payroll deductions have been applied. The Committee may,
in its discretion, permit Participants to specify different deferral
percentages for different categories of Compensation (e.g., salary, bonus,
commissions) and may establish in the Deferred Compensation Agreement minimum
and maximum levels of Compensation that may be deferred pursuant to the Plan.
Compensation deferrals made by a Participant under this Plan shall be held as
an asset of the Company In the "event the Company establishes the Trust
hereunder, (i) the Company may, but shall not be required to, transfer assets
into the Trust in an amount equal to the aggregate accrued liability to Plan
Participants, and (ii) compensation deferral contributions subsequent to the
establishment of the Trust shall be deferred into the Trust.
B. Election Changes. A Participant may, in such form and at such time or
times as the Committee may prescribe, discontinue or change his or her
Compensation deferral election. Any such change in the Participant's
Compensation deferral election shall not take effect until the commencement
of the next Plan year, unless otherwise authorized by the Committee. The
Committee has the power to establish uniform and nondiscriminatory rules and
from time to time to modify or change such rules governing the manner and
method by which Compensation deferral elections shall be made, as well as the
manner and method by which Compensation deferral elections may be changed or
discontinued temporarily or permanently. All compensation deferral
contributions shall be authorized by the participant in writing, made by
payroll deduction, deducted from the Participant's Compensation without
reduction for any taxes or withholding (except to the extent required by law
or the regulations). In the event the Company establishes the Trust hereunder,
Compensation deferral contributions shall be paid over to the Trust by the
Company. Notwithstanding the foregoing, each Participant shall remain liable
for any and all employment taxes owing with respect to such Participant's
Compensation deferral contributions.
C. Cessation of Eligible Status. In the event a Participant ceases to be an
Eligible Employee while also a participant in the Plan, such individual may
continue to make Compensation deferral contributions under the Plan through
the end of the payroll period in which the individual ceases to be an
Eligible Employee. Thereafter, such individual shall not make any further
Compensation deferral contributions to the Plan unless or until he or she
again meets the eligibility requirements of Article II above.
D. Company Discretionary Contributions. The Company may, in its sole
discretion, make discretionary contributions to the Accounts of one or more
Participants at such times, in such amounts and under such vesting terms as
the Board shall determine.
E. Allocations. The Compensation deferral contributions and any Company
contributions made under the Plan on behalf of a Participant shall be
credited to the Participant's Account. The Committee shall establish and
maintain separate subaccounts as it determines to be necessary and
appropriate for the proper administration of the Plan. In the event the
Company establishes the Trust hereunder, the Committee may cause the Trustee
to maintain and invest separate asset accounts corresponding to each
Participant Account. Each Participant Account consists of the aggregate
interest of the Participant under the Plan (and, if applicable, in the Trust
Fund), as reflected in the records maintained by the Company (or the Trustee)
for such purposes.
ARTICLE IV
VESTING
A. Compensation Deferral Contributions. The value of a Participant's Account
attributable to Participants' Compensation deferral contributions shall
always be fully vested and nonforfeitable
B. Company Contributions. The value of a Participant's Account attributable
to any Company contributions pursuant to Article III D shall vest at such
time or times as the Board may specify in connection with any such
contributions. In the absence of Board specification, a Participant's
interest in Company contributions shall be fully vested and nonforfeitable.
Upon termination of a Participant's employment with the Company for any
reason, any portion of the Participant's Account that is not then vested
('including allocable earnings, as determined by the Committee), shall be
forfeited. The Board or its Committee shall specify whether, and to what
extent, forfeitures shall be allocated among Participants.
ARTICLE V
PARTICIPANTS' ACCOUNTS
A. Separate Accounts. The Committee shall open and maintain a separate
Account for each Participant. Each participant's Account shall reflect the
amounts allocated thereto and distribution therefrom and such other
information as affects the value of such Account pursuant to this Plan. The
establishment and maintenance of separate Accounts for each Participant
shall not be construed as giving any person an interest in assets of the
Company or right to payment other than as provided hereunder. Except as
provided in Article VI, in the event the Company establishes the Trust
hereunder, each Participant shall be credited with income on the balance in
his or her Account as of each Valuation Date (as defined in Article VI.C
below). Income shall be credited to Participants' Accounts by applying an
earnings factor established by the Board or the Committee. The Committee
shall make all determinations with respect to the crediting of credited
interest to Participants' Accounts, and such determinations shall be final
and binding on all interested parties.
B. Statement of Accounts. As soon as practicable after the end of each Plan
year, the Committee shall furnish to each Participant a statement of Account,
determined as of the end of such Plan year. Upon the discovery of any error
or miscalculation in an Account, the Committee shall correct it, to the
extent correction is practically feasible; provided, however, that any such
statement of Account shall be considered to reflect accurately the status of
the Participant's Account for all purposes under the Plan unless the
Participant reports a discrepancy to the Committee within six (6) months
after receipt of the statement. The Committee shall have no obligation to
make adjustments to a Participant's Account for any discrepancy reported to
the Committee more than six (6) months after receipt of the statement, or
for a discrepancy caused by the Participant's error. Statements to
Participants are for reporting purposes only, and no allocation valuation or
statement shall vest any right or title in any specificassets or in any part
of the Trust Fund, if any, nor require any segregation
of assets, except as is specifically provided in this Plan.
C. Distribution of Accounts. Payment to a Participant shall be based on the
value of the vested portion of the Participant's Account as of the Valuation
Date immediately preceding the date of distribution plus any contribution
subsequently credited to such Account and less any distributions subsequently
made from the Account.
ARTICLE VI
ALLOCATION OF TRUST INCOME OR LOSS
A. Determination of Net Income. In the event the Company establishes the
Trust hereunder, then, as of each Valuation Date (as defined in Article VI.C
below), the Committee shall determine the net income or loss of the Trust
Fund based on a statement from the Trustee of the receipts and disbursements
of the Trust Fund since the immediately preceding Valuation Date and of the
fair market value of the Fund as of the Valuation Date. If one or more
separate investment funds have been established as provided in Article XII,
each fund shall be valued separately on each Valuation Date and the net
income or loss of each fund shall be allocated to each Account invested in
such investment fund.
B. Valuation. In the event the Company establishes the Trust hereunder, then,
as of each Valuation Date and prior to any allocation of contributions and
forfeitures to be made as of such date, the net income or loss of the Trust
Fund since the immediately preceding Valuation Date, including net
appreciation or depreciation and any expenses paid by the Trust, shall be
allocated to each Account. Such allocation shall be based upon the ratio
that the value as of the immediately preceding Valuation Date of each such
Account invested in the Trust Fund bears to the value as of the immediately
preceding Valuation Date of all Accounts invested in the Trust Fund. If one
or more separate investment funds have been established, the net income or
loss of each fund shall be allocated to each Account invested in such
investment fund in proportion to the value of each Account invested in such
funds as of the immediately preceding Valuation Date. The Committee shall
adopt suitable procedures to establish a proportionate crediting of Trust
income or loss to those portions of Accounts in the case of contributions or
in-service withdrawals that have occurred in the interim period since the
immediately preceding Valuation Date.
C. Valuation Dates. Participant Accounts, the Trust Fund, any separate
investment funds and any segregated account shall be valued as of the last
day of each Plan year and as of any other date the Company specifies.
D. Special Valuation Dates at Committee Discretion. The Committee may direct
the Trustee to determine the fair market value of the Trust Fund and may make
a determination of Trust income or loss as of any date other than the last
day of a Plan year of the Company.
ARTICLE VII
IN-SERVICE WITHDRAWALS
A. Hardship Withdrawal. If a Participant suffers an unforeseeable emergency,
as defined herein, the Committee, in its sole discretion, may pay to the
Participant only that portion, if any, of the vested portion of his or her
Account that the Committee determines is necessary to satisfy the emergency
need, including any amounts necessary to pay any federal, state or local
income taxes reasonably anticipated to result from the distribution. A
Participant requesting an emergency payment shall apply for the payment in
writing in a form approved by the Committee and shall provide such additional
information as the Committee may require. For purposes of this Plan, the term
"unforeseeable emergency" shall mean severe financial hardship to the
Participant resulting from (1) a sudden and unexpected illness or accident
of the Participant or of a dependent of the Participant, (2) loss of the
Participant's property due to casualty or (3) similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control
of the Participant.
B. Voluntary Withdrawal. At the request of a Participant, the Committee may
authorize a withdrawal of the Participant's vested accrued benefit
(including any earnings attributable thereto), provided that as the
consequence of making such a withdrawal, (1) Participant shall forfeit an
amount equal to ten percent (10%) of the requested withdrawal; and (2) the
Participant shall be suspended from making further contributions to the Plan
for a period of not less than twelve (12) months following any such
withdrawal. The Committee may establish reasonable procedures and limitations
concerning Participants' withdrawal rights pursuant to this Article VII.B as
the Committee may, in its sole discretion, deem necessary or appropriate or
in furtherance of the purposes of the Plan. Distributions pursuant to
Participant withdrawal elections under this Article VII.B shall be trade as
soon as practicable following the Committee's receipt of a Participant's
written withdrawal election, which election shall be in such form as the
Committee shall prescribe.
ARTICLE VIII
PAYMENTS TO A PLAN BENEFICIARY
A. General. Payments of vested accrued benefits to Plan Beneficiaries shall
be made in accordance with the Deferred Compensation Agreement between the
Company and the Participant; provided, however, that in the event the Company
establishes the Trust hereunder, the Trustee shall make such payments, as
directed by the Committee, to the extent the Company is not at such time
Insolvent as defined in Article XI. Except as otherwise expressly provided in
the Participant's Deferred Compensation Agreement, no distribution shall be
made or commenced prior to the Participant's termination of employment or
death, or a "Change of Control," whichever occurs earlier. For purposes of
this Plan, a "Change of Control" shall be deemed to have occurred if any
person (including a "Group" as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) acquires shares of the Company either (i)
having a majority of the total number of votes that may be cast for the
election of directors of the Company or (ii) possessing, directly or
indirectly, the power to control the direction of management or policies of
the Company, provided, however, that no Change of Control shall be deemed to
occur in the event of a merger, consolidation or reorganization of the
Company where the shareholders of the Company are substantially the same as
before such merger, consolidation or reorganization. In the event the Company
establishes the Trust hereunder, the Trustee shall have no responsibility to
determine whether a Change in Control has occurred and shall be advised of
such event by the Company.
B. Method of Distribution. Payment to any Plan Beneficiary shall be made
pursuant to the Deferred Compensation Agreement executed by the Participant,
in whole or in part, in cash and/or in kind, as determined in the discretion
of the Committee:
(1) In a lump sum, or
(2) In two (2), three (3) or five (5) annual installments equal to 1/n of
the Participant's vested accrued benefit where n is the number of
installments remaining to be paid.
C. Distributions: Withholding. In the event the Company establishes the Trust
hereunder, with respect to each Participant the Company shall deliver to the
Trustee a schedule (the "Payment Schedule") that indicates the amounts
payable in respect of the Participant (and his or her beneficiaries) that
provides a formula or other instructions acceptable to the Trustee for
determining the amounts so payable, the form in which such amount is to be
paid and the time of commencement for payment of such amounts. The Payment
Schedule shall be delivered to the Trustee not more than 30 business days nor
fewer than 15 business days prior to the first date on which a payment is to
be made to the Participant. Any change to a Payment Schedule shall be
delivered to the Trustee not more than 30 days nor fewer than 15 days prior
to the date on which the first payment is to be made in accordance with the
changed Payment Schedule. Except as otherwise provided herein, the Trustee
shall make payments to Participants and their beneficiaries in accordance
with such Payment Schedule. The Trustee shall make provisions for the
reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of Plan benefits and
shall pay amounts withheld to the appropriate taxing authorities or determine
that such amounts have been reported, withheld and paid by the Company, it
being understood among the parties hereto that (1) the Company shall on a
timely basis provide the Trustee specific information as to the amount of
taxes from the Trustee and properly pay and report such withheld taxes from
the Trustee and properly pay and report such amounts to the appropriate
taxing authorities. In the absence of the Trust, distribution of Plan
benefits shall be subject to applicable tax withholding by the Company.
D. Certain Distributions. In case of any distribution to a minor or to a
legally incompetent person, the Committee may (1) make, or, if applicable,
direct the Trustee to make, the distribution to his legal representative, to
a designated relative, or directly to such person for his benefit, or (2)
use, or, if applicable, instruct the Trustee to use, the distribution
directly for his support, maintenance, or education. The Trustee shall not
be required to oversee the application, by any third party, of any
distributions made pursuant to this Article VII.D.
E. IRS Determination. Notwithstanding any other provisions of this Plan, if
the Company establishes the Trust hereunder and amounts held in the Trust are
found in a "determination" (within the meaning of Section 1313(x) of the
Internal Revenue Code of 1986, as amended (the "Code")), to have been
includible in the gross income of any Plan Beneficiary prior to payment of
such amounts from the Trust, the Trustee shall, as soon as practicable pay
such amounts to the Plan Beneficiary, as directed by the Company. For
purposes of this Section, the Trustee shall be entitled to written notice
from the Committee that a determination described in the preceding sentence
has occurred and to receive a copy of such notice. The Trustee shall have no
responsibility until so advised by the Committee.
ARTICLE IX
TRUST
A. Trust. The Company may, by written resolution of the Board or the
Committee, establish the Trust for purposes of the Plan. In the absence of
the Trust, all amounts withheld or otherwise held for the account of a
Participant shall remain the sole property of the Company, subject to the
claims of the Company's general creditors and available for the Company's use
for whatever purposes are desired. In the event the Company establishes the
Trust hereunder, the Trust shall consist of such sums of money and other
property acceptable to the Trustee as from time to time shall be paid or
delivered to the Trustee. All such money and other property, all investments
and reinvestments made therewith or proceeds thereof and all earnings and
profits thereon, less all payments and charges as authorized herein, shall
constitute the "Trust Fund" or "Trust." The Trust Fund shall at all times be
subject to the claims of general creditors of the Company as provided in
Article XI.
B. Grantor Trust. The Trust established hereunder, if any, shall be
irrevocable, but for the issuance by the Internal Revenue Service of
unfavorable tax rulings on the status of the Trust as a grantor trust.
Subject to Article XI, any Trust assets shall be held for the exclusive
purpose of providing accrued benefits to the Plan Beneficiaries and
defraying expenses of the Trust in accordance with the provisions of this
Plan. No part of the income or corpus of the Trust Fund shall be recoverable
by or for the Company prior to the termination of the Trust and the
satisfaction of all liabilities under the Plans.
C. Assignment. No right or interest to receive accrued benefits from the
Trust may be assigned, sold, anticipated, alienated or otherwise transferred
by the Plan Beneficiaries.
D. Trustee. The Trustee of the Trust shall accept the Trust established under
this Plan on the terms and subject to the provisions set forth herein, and
shall agree to discharge and perform fully and faithfully all of the duties
and obligations imposed upon it under this Plan.
E. Trust Assets. In the event the Company establishes the Trust hereunder,
the principal of the Trust and any earnings thereon shall be held separate
and apart from other funds of the Company and shall be used exclusively for
the uses and purposes herein set forth. Neither the Plan Beneficiaries nor
the Plan shall have any prefaced claim on, or any beneficial ownership
interest in, any assets of the Trust prior to the time such assets are paid
to a Plan Beneficiary as vested accrued benefits as provided in Article IX,
and all rights created under the Plan and the Trust under this Plan shall be
mere unsecured, contractual rights of the Participants against the Company.
ARTICLE X
GENERAL DUTIES OF THE COMMITTEE AND THE TRUSTEE
A. Committee Duties. The Committee will provide the Trustee, if any, with a
copy of any future amendment to this Plan promptly upon its adoption. The
Committee may from time to time hire outside consultants, accountants,
actuaries, legal counsel or recordkeepers to perform such tasks as the
Committee may from time to time determine.
B. Trustee Duties. In the event the Company establishes the Trust hereunder,
the Trustee shall invest and reinvest the Trust Fund as provided in Article
XII of this Plan. The Trustee shall collect the income on the Trust Fund,
and make distributions there from, all as hereinafter provided.
C. Company Contributions. In the event the Company establishes the Trust
hereunder and while the Plan remains in effect, prior to any Change in
Control, as defined below, the Company shall make contributions to the Trust
Fund at least once each quarter. The amount of any quarterly contributions
shall be at the discretion the Company. At the close of each Plan year, the
Company shall make an additional contribution to the Trust Fund to the extent
that previous contributions to the Trust Fund for the current Plan year are
not equal to the total of the Compensation deferrals made by each Participant
plus Company discretionary contributions, if any, accrued, as of the close of
the current Plan year. The Trustee, if any, shall not be liable for any
failure by the Company to provide contributions sufficient to pay all accrued
benefits under the Plan in full in accordance with the terms of this Plan.
D. Department of Labor Determination. In the event that any Participants are
found to be ineligible, that is, not members of a select group of management
or highly compensated employees, according to a determination made by the
Department of Labor, the Committee shall take whatever steps it deems
necessary, in its sole discretion, to equitably protect the interests of the
affected Participants.
ARTICLE XI
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
TRUST BENEFICIARIES WHEN COMPANY INSOLVENT
A. Company Insolvency. The Company shall be considered "Insolvent" and an
"Insolvency" shall be deemed to exist for purposes of this Plan under any of
the following circumstances:
(1) The Company is unable to pay its debts as they mature, defined as
having a weighted average overdue payables balance in excess of 270
days.
(2) A receiver or trustee is appointed to take possession of all or
substantially all of the assets of the Company.
(3) There is a general assignment by the Company for the benefit of
creditors.
(4) An action or proceeding is commenced by or against the Company
under any insolvency or bankruptcy act, or any other statute or
regulation having as its purpose the protection of creditors, and the
action or proceeding is not discharged within 60 days after the date
of commencement.
B. Plan Suspension. Notwithstanding any provision in this Plan to the
contrary, if the Company establishes the Trust hereunder and at any time
while the Trust is still in existence the Company becomes Insolvent, the
Trustee shall upon written notice thereof suspend the payment of all amounts
from the Trust Fund and shall thereafter (i) not permit any further elective
Compensation deferral contributions by the Participants and (ii) discontinue
all contributions by the Company to the Trust on behalf of the Participants.
The Trustee shall hold the Trust Fund in suspense for the benefit of the
Company's creditors until it rives a court order directing the disposition
of the Trust Fund; provided, however, that the Trustee may deduct or continue
to deduct its fees and expenses, including fees of any consultants,
actuaries, accountants, legal counsel or recordkeepers retained by the
Company or Trustee to provide services to the Trust.
C. Notice of Insolvency. By its approval and execution of this Plan, the
Company represents and agrees that its Board, the Committee, and its Chief
Executive Officer or his designee, as from time to time acting, shall have
the fiduciary duty and responsibility on behalf of the Company's creditors
to give to the Trustee, if any, prompt written notice of the Company's
Insolvency and the Trustee shall be entitled to rely thereon to the
exclusion of all directions or claims to pay vested accrued benefits
thereafter made. Absent such notice, the Trustee, if any, shall have no
responsibility for determining whether or not the Company has become
Insolvent.
D. If after being Insolvent, the Company later becomes solvent without the
entry of a court order concerning the disposition of the Trust Fund, if any,
or if any bankruptcy or insolvency proceedings referred to in Article XI.A
are dismissed, the Company shall by written notice so inform the Trustee, if
any, and the Trustee shall thereupon resume all its duties and
responsibilities under this Plan without regard to this Article XI until and
unless the Company again becomes Insolvent as such term is defined herein.
E. If the Trustee discontinues payments from the Trust pursuant to this
Article XI and subsequently resumes payments, or removes the suspended status
of the Trust, interest will be added to the Accounts of all Participants,
including those Accounts from which a payment was held in suspense, for the
period of discontinuance at not less than the average rate on 90-Day Treasury
Bills auctioned during the period of discontinuance, to be determined and
calculated by the Committee. The Company will not make any other
contributions to the Trust that otherwise would have been made during the
period of discontinuance.
ARTICLE XII
INVESTMENT AND ADMINISTRATION OF TRUST FUND
A. Investments. In the event the Company establishes the Trust Fund hereunder,
the Trustee, or the Trustee's designee, shall be authorized and empowered:
(1) To invest and reinvest the Trust Fund, together with the income
therefrom, in common stock, preferred stock, convertible preferred stock,
bonds, debentures, convertible debentures and bonds, mortgages, notes,
commercial paper and other evidences of indebtedness (including those
issued by the Trustee), shares of mutual funds (which funds may be
sponsored, managed or offered by an affiliate of the Trustee), guaranteed
invest contracts, bank investment contracts, other securities, policies of
life insurance, annuity contracts, options, options to buy or sell
securities or other assets, and all other property of any type (personal,
real or mixed, and tangible or intangible);
(2) To deposit or invest all or any part of the Trust Fund in savings
accounts or certificates of deposit or other deposits in a bank or saving
and loan association or other depository institution, including the
Trustee or any of its affiliates, provided with respect to such deposits
with the Trustee or an affiliate the deposits bear a reasonable interest
rate;
(3) To hold, manage, improve, repair and control all property, real or
personal, forming part of the Trust Fund; to sell, convey, transfer,
exchange, partition, lease for any term, even extending beyond the
duration of this Trust, and otherwise dispose of the same from time to
time;
(4) To hold in cash, without liability for interest, such portion of the
Trust Fund as is pending investments, or payment of expenses, or the
distribution of benefits;
(5) To take such actions as may be necessary or desirable to protect the
Trust Fund from loss due to the default on mortgages held in the Trust
including the appointment of agents or trustees in such other
jurisdictions as may seem desirable, to transfer property to such agents
or trustees, to grant to such agents such powers as are necessary or
desirable to protect the Trust Fund, to direct such agent or trustee, or
to delegate such power to direct, and to remove such agent or transfer;
(6) To settle, compromise or abandon all claims and demands in favor of
or against the Trust;
(7) To exercise all of the further rights, powers, options and privileges
granted, provided for, or vested in trustees generally under the laws of
the state in which the Trustee is incorporated as set forth above, so that
the powers conferred upon the Trustee herein shall not be in limitation
of any authority conferred by laws, but shall be in addition thereto;
(8) To maintain accounts at, execute transactions through, and lend bonds
or other securities to, any brokerage or other firm, including any firm
which is an affiliate of the Trustee.
Persons dealing with the Trustee shall be under no obligation to see to the
proper application of any money paid or property delivered to the Trustee or
to inquire into the Trustee's authority as to any transaction.
B. Segregated Investments - Participant Instruction Permitted. In the event
the Company establishes the Trust hereunder, then, at the discretion of the
Committee, Participants maybe permitted to instruct the Trustee in writing
regarding the investment of funds in their Accounts, subject to Article XII.C
below and in a manner and form prescribed by the Committee; provided that
such right to instruct shall apply on a nondiscriminatory basis to all
Participants who meet the requirements established by the Committee. Such
investment Accounts shall be segregated and shall be valued separately by the
Trustee. Valuations of such Accounts shall be made at such times as the
Committee may require, but no less frequently than annually. In no event, for
valuation, purposes, shall the property constituting such separate Accounts,
or the net income or loss thereon, be commingled with other Participants'
Accounts. Such separate Accounts may be charged with their proportionate
share of any general expenses charged to the Trust or with the full share of
any expense incurred directly or indirectly in connection with such Accounts.
C. Participant Instruction Subject to Committee and Trustee Approval. Neither
the Committee nor the Trustee, if applicable, shall be under any obligation
to approve or disapprove any specific investment medium or any Participant
investment instruction. Neither the Company nor the Trustee, if applicable,
has any liability for any losses or damage that may occur or result from (i)
the approval of or failure to approve of any specific investment medium; (ii)
the imposition of any administrative rules relating to the timing of
investment elections of any sort; or (iii) any administrative delay in
carrying out or failure to carry out investment elections within a specified
time. The Committee or the Trustee, if any, may disapprove or refuse to carry
out any investment directions which in its opinion would subject the Company
or the Trustee to burdensome administrative responsibilities or which the
Committee determines to be inappropriate from a legal, financial or social
perspective. Prior to carrying out any investment instruction of a
Participant, the Trustee, if any, may require releases or any other
documents, agreements or indemnifications as it may consider necessary. The
Trustee, if any, in approving any invest medium or in making investments
under this Plan, shall not be restricted by statutes governing the legal
investment of trust funds.
D. Separate Investment Funds - Committee May Establish Separate Funds. The
Committee may, in its sole discretion, direct the Trustee, if any, to create
one or more separate investment funds, having such different specific
investment objectives as the Committee shall from time to time determine.
The Committee shall determine and may from time to time redetermine the
number of investment funds and the specific objectives of said funds and the
investments or kinds of investment which shall be authorized therefor.
E. Committee To Establish Rules. The Committee may at any time make such
uniform and nondiscriminatory rules as it determines necessary regarding the
administration of Plan investments in general and Participant investment
instruction in particular. The Committee may also develop and maintain rules
governing the rights of Participants to change their investment instructions
and the frequency with which such changes can be made.
ARTICLE XIII
ACCOUNTING BY TRUSTEE
In the event the Company establishes the Trust hereunder, the Trustee shall
keep accurate and detailed records of all investments, receipts,
disbursements, and all other transactions required to be done, including such
specific records as shall be agreed upon in writing between the Committee
and the Trustee. All such accounts, books and records shall be open to
inspection and audit at reasonable times by the Committee, the Committee's
representatives or agents. Within one hundred and twenty (120) days following
the close of each calendar quarter and within one hundred and twenty (120)
days after the removal or resignation of the Trustee, the Trustee shall
deliver to the Committee a written account of its administration of the Trust
during such quarter or during the period from the close of the last preceding
quarter to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other actions effected by it,
including a description of all securities and investments purchased and sold,
with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities
and other property held in the Trust at the end of such quarter or as of the
date of such removal or resignation, as the case may be. The written approval
of any accounting by the Committee shall be final as to all matters and
transactions stated or shown therein and binding upon the Committee and all
persons who then shall be or then after shall become interested in this
Trust. Failure of the Committee to notify the Trustee within 180 days after
receipt of any accounting of its disapproval of such accounting shall be the
equivalent of written approval.
ARTICLE XIV
RESPONSIBILITY OF TRUSTEE
In the event the Company establishes the Trust Fund hereunder, the Trustee
shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use; provided, however, that
the Trustee shall incur no liability to anyone for any action taken pursuant
to a direction, request or approval given by the Committee or any
Participant which is contemplated by and complies with the terms of this
Plan, and to that extent the Trustee shall be relieved of the prudent person
rule for investments. The Trustee shall also incur no liability to any
person for any failure to act in the absence of direction, request or
approval from. The Committee which is contemplated by, and in conformity
with, the terms of this Plan. In the event of a dispute between the Company
as the Committee and a Participant, the Trustee may apply to a court of
competent jurisdiction to resolve the dispute. The Trustee may hire agents,
accountants, actuaries, recordkeepers, and financial consultants. Expenses of
such persons shall be deemed to be expenses of management and administration
of the Trust within the meaning of Article XV.D, below. The Trustee shall
have, without exclusion, all powers conferred on the Trustee by applicable
law unless expressly provided otherwise herein.
ARTICLE XV
TAXES. EXPENSES AND COMPENSATION OF TRUSTEE
A. Company Assets. It is the intention of the Company to have the corpus and
income of the Plan and any Trust established hereunder treated as assets and
income of the Company to be used to satisfy the Company's legal liability
under the Plan in respect of all of the Participants, and the Company agrees
that all income, deductions and credits of the Plan and any Trust Fund belong
to the Company as owner for income tax purposes and will be included on the
Company's income tax returns.
B. Taxes. The Company shall from time to time pay taxes (references in this
Plan to the payment of taxes shall include interest and applicable penalties)
of any and all kinds whatsoever which at any time are lawfully levied upon or
become payable in respect of the Plan or Trust Fund, the income or any
property forming a part thereof or any security transaction pertaining
thereto. To the extent that any taxes levied or assessed upon the Trust Fund,
if any, are not paid by the Company or contested by the Company pursuant to
the last sentence of this Article, the Trustee shall pay such taxes out of
the Trust Fund, and the Company shall, upon demand by the Trustee, deposit
into the Trust Fund an amount equal to the amount paid from the Trust Fund to
satisfy such tax liability. If requested by the Company, the Trustee shall at
the Company's expense, contest the validity of such taxes in any manner
deemed appropriate by the Company or its counsel, but only if it has received
an indemnity bond or other security satisfactory to it to pay any expenses
of such contest. Alternatively, the Company may itself contest the validity
of any such taxes, but any such contest shall not affect the Company's
obligation to reimburse the Trust Fund for taxes paid from the Trust Fund.
C. Compensation: Expenses. In the event the Company establishes the Trust
hereunder, the Trustee shall be paid compensation by the Company the amount
of its fees in accordance with the fee schedule agreed to by the Company and
the Trustee; provided, however, that a Trustee who is an officer, director
or employee of the Company shall serve without compensation. The Trustee, if
any, shall be reimbursed by the Company for its reasonable expenses of
management and administration of the Trust, including reasonable compensation
of any agent engaged by the Trustee to assist it in such management and
administration. The Trustee shall be able to charge the Trust Fund for such
compensation and for any reasonable expenses including counsel, appraisal or
accounting fees, and the same may be deducted from the Trust Fund unless
paid by the Company within sixty (60) days after the Company receives written
billing by the Trustee; provided that this paragraph shall not apply while a
dispute over the amount of such charges exists.
ARTICLE XVI
PROTECTION OF TRUSTEE
A. Certification. In the event the Company establishes the Trust hereunder,
the Company shall certify to the Trustee the name or names of any person or
persons authorized to act for the Company. Such certification shall be signed
by the Secretary of the Company duly authorized by the Board. Until the
Company notifies the Trustee, in a similarly signed notice, that any such
person is no longer authorized to act for the Company, the Trustee may
continue to rely upon the authority of such person. The Trustee may rely upon
any certificate, notice or direction of the Company which the Trustee
reasonably believes to have been signed by a duly-authorized officer or agent
of the Company. Notices to the Trustee shall be sent in writing to the
Trustee at such address as the Trustee shall specify. No communication shall
be binding upon the Trust Fund or the Trustee until it is received by the
Trustee and unless it is in writing and signed by an authorized person.
Notices to the Company shall be sent in writing to the attention of its
Chief Financial Officer, c/o Supertex, Inc., 1235 Bordeaux Drive, Sunnyvale,
CA 94088-3607, or to such other address as the Company may specify. No notice
shall be binding upon the Company until it is received by the Company.
B. Legal Counsel. The Trustee, if any, may consult with any legal counsel
("Legal Counsel") for the purpose of obtaining advice on topics including but
not limited to the construction of this Plan and Trust, its duties hereunder,
or any act which it proposes to take or omit, and shall not be liable for any
action taken or omitted in good faith pursuant to such advice. Expenses of
Legal Counsel shall be deemed to be expenses of management. and
administration of the Trust within the meaning of Article XV.D hereof.
C. Trustee Duties. In the event the Company establishes the Trust hereunder,
the Trustee shall discharge its duties in a manner consistent with the
objectives of this Plan. The Trustee shall not be liable for any loss
sustained by the Trust Fund by reason of the purchase, retention, sale or
exchange of any investment in good faith and in accordance with the
provisions of this Plan. The Trustee shall have no responsibility or
liability for any failure of the Company to make contributions to the Trust
Fund. The Trustee's duties and obligations shall be limited to those
expressly imposed upon it under the provisions of this Plan relating to the
Trust.
ARTICLE XVII
INDEMNIFICATION OF TRUSTEE
In the event the Company establishes the Trust hereunder, the Company shall
indemnify the Trustee and each of its affiliates (collectively, the
"Indemnified Parties") against, and shall hold them harmless from, any and
all loss, claims, liability, and expense, including reasonable attorneys'
fees, imposed upon or incurred by any Indemnified Party as a result of any
acts taken, or any failure to act, in accordance with the directions from the
Company or any designee of the Company, or by reason of the Indemnified
Party's good faith execution of its duties with respect to the Trust,
including, but not limited to, its holding of assets of the Trust, the
Company's obligations in the foregoing regard to be satisfied promptly by the
Company, provided that in the event the loss, claim, liability or expense
involved is deter by a no longer appealable final judgment entered in a
lawsuit or proceeding to have resulted from the gross negligence or willful
misconduct of the Trustee, the Trustee shall promptly on request thereafter
return to the Company any amount previously received by the Trustee under
this Article with respect to such loss, claim, liability or expense. If the
Company does not pay such costs, expenses and liabilities in a reasonably
timely manner, the Trustee may obtain payment from the Trust Fund without
direction from the Company.
ARTICLE XVIII
RESIGNATION AND REMOVAL OF TRUSTEE
A. Resignation In the event the Company establishes the Trust hereunder,
the Trustee may resign upon thirty (30) days' prior written notice to the
Company, except that any such resignation shall not be effective until a
successor trustee has been appointed, and such successor has accepted the
appointment in writing, but in any event no later that 90 days after such
resignation. The Company shall condition its acceptance of such successor on
the obtaining from such successor of a written statement that the successor
has read the Trust Agreement and understands its obligations thereunder.
B. Removal. The Company may remove the Trustee upon thirty (30) days' prior
written notice to the Trustee.
C. Successor Trustee. Upon the resignation or removal of the Trustee and
appointment of a successor, the Trustee shall transfer and deliver the Trust
Fund to such successor. The transfer shall be completed within 60 days after
receipt of notice of resignation, removal or transfer, unless the Company
extends the time limit, provided that the Trustee is furnished assurance by
the Company satisfactory to Trustee that all fees and expenses reasonably
anticipated will be paid. Following the effective date of the appointment of
the successor, the Trustee's responsibility hereunder shall be limited to
managing the assets in is possession, transferring such assets to the
successor and settling its final account. Neither the Trustee nor the
successor shall be liable for the acts of the other. All of the provisions
set forth herein with respect to the Trustee shall relate to each successor
with the same force and effect as if such successor had been originally
named as the Trustee hereunder.
ARTICLE XIX
DURATION AND TERMINATION OF TRUST AND AMENDMENT
A. Irrevocable. In the event the Company establishes the Trust hereunder,
the Trust shall be irrevocable and shall continue until all vested accrued
benefits have been paid.
B. Termination of Trust. If the Trust, if any, terminates under the
provisions of Article XIX.A, the Trustee shall liquidate the Trust Fund and,
after its final accounting has been settled, shall distribute to the Company
the net balance of any assets of the Trust Fund remaining after all vested
accrued benefits and administration expenses have been paid. Upon making
such distribution, the Trustee shall be relieved from all further liability.
C. Plan Amendment. This Plan may be amended, or the Plan terminated or
suspended, by an instrument in writing executed on behalf of the Company by
the Chief Executive Officer of the Company or the Committee, or a duly
appointed representative of the Board and delivered to the Trustee, if any,
provided, however, that (i) no amendment will be made to this Plan which
will cause this Plan, the Trust, if any, or the assets of the Trust Fund to
be governed by or subject to Part 2, 3 or 4 of Title I of ERISA, (ii) no
such amendment shall adversely affect any Plan Beneficiary's accrued benefit,
(iii) no such amendment shall increase or change the duties or
responsibilities of the Trustee, if any, unless the Trustee consents thereto
in writing, and (iv) no such amendment which would cause the Trust, if any,
to be other than a "grantor trust," or have contributions to the Trust by
the Company, or income and gains of the Trust Fund, constitute a taxable
event to the Trust or to the Participants.
ARTICLE XX
CLAIMS PROCEDURE
The Committee shall provide adequate notice in writing to any Plan
Beneficiary whose claim for benefits under this Plan is denied, setting
forth the specific reasons for such denial. The notice of denial shall be
written in manner calculated to be understood by the Plan Beneficiary. In
addition, the Committee shall afford a reasonable opportunity to any
participant whose claim for benefits has been denied for a full and fair
review of the decision denying the claim in accordance with reasonable
procedures adopted by the Committee.
ARTICLE XXI
MISCELLANEOUS
A California Law. This Plan and the Trust hereby created shall be construed
and regulated by the laws of the State of California.
B. Headings. The headings of sections in this Plan are used herein for
convenience of reference only and in case of any conflict the text of this
Plan shall control.
C. Successsorship. This Plan shall be binding upon and inure to the benefit
of any successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise, and any
subsequent successor thereto; and any such successor shall be deemed to be
the "Company" under this Plan.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first
above written.
SUPERTEX, INC.
By: /s/ Henry C. Pao
Henry C. Pao
President and C.E.O.
Date: January 1, 1996
Exhibit 10.2
LEASE ASSIGNMENT AGREEMENT
THIS LEASE ASSIGNMENT AGREEMENT (this "Assignment") is made as of the 1st day
of February, 1999 (the "Effective Date"), by and among ORBIT SEMICONDUCTOR,
INC., a Delaware Corporation ("Seller"), SUPERTEX, INC., a California
corporation ("Buyer"), and SOBRATO DEVELOPMENT COMPANIES #871, a California
limited partnership ("Landlord"), with reference to the following facts and
objectives:
A. Landlord and Paradigm Technology, Inc. ("Paradigm") entered that certain
Lease dated December 7, 1988, regarding the improved real estate commonly
known as 71 Vista Montana, San Jose, California (the "Premises"). Such Lease
was amended by that certain First Amendment to Lease dated May 4, 1987, that
certain Second Amendment to Lease dated June 18, 1990, and that certain Third
Amendment to Lease dated December 21, 1995, all between Landlord and
Paradigm. The interest of the tenant under such Lease was assigned by
Paradigm to Seller pursuant to that certain Assignment of Lease and Consent
to Assignment of Lease (the "Prior Assignment") dated November 15, 1996, by
Paradigm, Seller and Landlord. Such Lease, as so amended, assigned and
consented to, is referred to herein as the "Lease".
B. Seller and Buyer have entered that certain Agreement for Purchase and
Sale of Assets dated January 16, 1999 (the "Purchase Agreement"), pursuant
to which, among other things, Seller has agreed to assign the Lease to Buyer.
C. Seller and Buyer mutually desire that Seller assign the Lease to Buyer,
and Landlord desires to consent to such assignment on the terms and
conditions of this Assignment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Seller, Buyer and Landlord
hereby agree as follows:
1. Assignment. Seller hereby assigns to Buyer, and Buyer hereby accepts
from Seller, the entire, undivided right, title, interest and estate of the
"Tenant" under the Lease and all of Seller's right, title and interest in,
under and to the Lease and the Premises (including, without limitation, all
security deposits and all rights and options to extend the term of the Lease).
Buyer hereby assumes all obligations of the "Tenant "under the Lease accruing
on or after the Effective Date. Seller hereby represents and warrants to
Buyer that Seller currently owns and holds the entire right, title and estate
of the "Tenant" under the Lease free and clear of any liens, encumbrances,
options, subleases or rights of others and that no person or entity other
than Seller has any right or option to occupy any of the Premises. In
particular, but without limitation, the Sublease dated November __,1996, by
Seller and Paradigm regarding a portion of the Premises has terminated, and
Paradigm has no further right or option to occupy any of the Premises.
2. Responsibilities Under Lease Indemnification.
A. Seller (and not Buyer) shall be responsible for payment of all rents and
other amounts and the performance of all obligations required under the Lease
to be paid or performed for any period prior to the Effective Date,
including, without limitation, any and all indemnity obligations of Seller
under the Lease accrued with respect to facts or circumstances first
occurring prior to the Effective Date.
B. Buyer (and not Seller) shall be responsible for the payment of all rents
and other amounts and the performance of all obligations required under the
Lease to be paid or performed for any period on or after the Effective Date,
including, without limitation, any and all indemnity obligations of the
"Tenant" under the Lease accruing with respect to facts or circumstances
first occurring on or after the Effective Date.
C. Subject to the other terms and conditions of this Assignment, to the
extent that Seller has made payments or performed obligations pursuant to
the Lease that relate to periods on or after the Effective Date, and to the
extent that Buyer has made payments or performed obligations pursuant to the
Lease that relate to periods prior to the Effective Date, such amounts and
obligations shall be prorated as of the Effective Date, and the party with a
net obligation to the other shall promptly pay such amount on or after the
Effective Date.
D. Seller shall indemnify, defend, protect and hold harmless Buyer from and
against any and all losses, costs, claims, liabilities and damages
(including reasonable attorneys' fees) (collectively "Claims") arising from
or related to (i) the Premises and/or the Lease which Claims shall have
accrued prior to the Effective Date, (ii) any event or condition that shall
have occurred or existed on or with respect to the Lease and/or the Premises
prior to the Effective Date (including, without limitation, any Claims
resulting from the release, presence or transportation of Hazardous
Materials in, on, under or over the Premises prior to the Effective Date),
(iii) Seller's breach of any of its obligations under the Lease or this
Assignment, and (iv) any use or occupancy of any of the Premises by Seller
or any of its agents, representatives, licensees, or invitees from and after
the Effective Date. Seller's foregoing indemnity under clauses (i), (ii)
and (iii), but specifically excluding clause (iv), shall be subject to the
limitations provided in Section 2.16 of the Purchase Agreement.
E. Buyer shall indemnify, defend, protect and hold harmless Seller from and
against any and all Claims arising from or related to (i) the Premises and/or
the Lease that accrue on or after the Effective Date, (ii) any event or
condition that occurs or exists on or with respect to the Lease and/or the
Premises on or after the Effective Date (including, without limitation, any
Claims resulting from the release, presence or transportation of Hazardous
Materials in, on, under or over the Premises on or after the Effective Date),
other than continuing events or conditions that first occurred or existed
prior to the Effective Date, and (iii) Buyer's breach of any of its
obligations under the Lease or this Assignment; provided, however, that
Buyer's foregoing covenants shall not apply to any Claims arising from or
relating in any manner to the use or occupancy of any of the Premises by
Seller or any of its agents, representatives, licensees or invitees from and
after the effective Date.
3. Landlord Consent and Related Covenants. Landlord hereby consents to the
assignment of the Lease by Seller to Buyer on the terms and conditions of
this Assignment. In addition, Landlord covenants and agrees, and Seller and
Buyer acknowledge and agree, as follows:
A. All references in the Lease to the "Tenant" shall mean and refer only to
Buyer and not to Seller with respect to any facts or circumstances relating
specifically to such "Tenant" and not to the Premises and first accruing on
or after the Effective Date. Without limiting the generality of the
foregoing sentence, from and after the date of this Assignment, (i) all
references in the Lease to the Tenant's net worth shall mean and refer only
to the net worth of Buyer and not Seller, (ii) all references in clause (d)
of Section 22 of the Lease to the "Tenant" shall mean and refer only to
Buyer and shall not refer to Seller, and (iii) the payment and performance
of all obligations, and the giving of all notices, by Landlord to and for
the benefit of the Tenant shall be to and for the benefit of Buyer and not
Seller.
B. From and after the Effective Date, Buyer shall solely be entitled to
exercise all rights, powers, privileges, options and elections, and to make
and give all approvals, consents, determinations, selections, designations,
judgments and decisions, of the "Tenant" under and with respect to the Lease
and the Premises. Any effort by Seller or any other party to exercise, give
or make-any of the foregoing shall be of no effect. Landlord shall, however,
promptly deliver to Buyer copies of all notices, demands, and other
communications received by Landlord from Seller.
C. In the event that Seller rejects or otherwise terminates, or attempts to
reject or otherwise terminate, the Lease pursuant to the United States
Bankruptcy Code or any other law or proceeding involving the rights of
creditors, as between Landlord and Buyer (and their respective successors and
assigns under the Lease and with respect to the Premises), the Lease and this
Assignment shall not be terminated or otherwise affected thereby, but shall
continue in full force and effect as a direct agreement between Landlord and
Buyer (or their respective successors and assigns, if applicable). In such
event, however, Landlord and Buyer (upon the request of either such party)
shall execute and deliver a new lease on the same terms and conditions as the
Lease, as modified by this Assignment with respect to Buyer.
D. Only the first paragraph of Section 5 of the Lease, entitled "Security
Deposit", shall apply to Buyer. No Letter of Credit will be required under
the Lease after the Effective Date.
E. Landlord consents to Buyer's use at the Premises of the materials
described on Exhibit "A" hereto. In using such materials, however, Buyer
shall comply with all terms and conditions of the Lease, including Section 18,
entitled "Toxic Waste and. Environmental Damage".
F. Concurrently with Landlord's execution and delivery of this Assignment,
Seller and Buyer have paid Landlord the aggregate amount of Six Hundred
Thousand Dollars ($600,000), receipt of which is hereby acknowledged by
Landlord. No other money or consideration whatsoever will be payable to
Landlord under Section 29 of the Lease or otherwise in connection with this
Assignment.
G. Notwithstanding anything to the contrary in the Lease, Landlord and
Buyer release each other and their respective agents, employees, successors,
assigns and subtenants from all liability for injury to any person or damage
to any property that is caused by or results from a risk which is actually
insured against, which is required to be insured against under the Lease, or
which would normally be covered by "all risk" property insurance, without
regard to the negligence or willful misconduct of the person or entity so
released.
H. Notwithstanding this Assignment, Buyer assumes no liability or obligation
of the Tenant arising from or relating to the Lease and/or the Premises which
accrued prior to the Effective Date. Landlord shall look solely to Seller
for the payment and performance of all liabilities and obligations of the
Tenant arising from or relating to the Lease and/or the Premises accruing
prior to the Effective Date.
I. Seller shall have the right to use and occupy approximately 2,300 square
feet of space in the Premises for up to thirty (30) days after the Effective
Date.
4. Landlord Estoppel. Landlord hereby certifies to Seller and Buyer as
follows, with the intent that Seller and Buyer will rely hereon in
consummating this Assignment: (i) the Lease is in full force and effect; (ii)
there currently exists no breach or default by the Tenant under the Lease,
and, to Landlord's best knowledge, there has not occurred any event or
condition which, with the giving of notice or the passage or time or both,
could constitute such a breach or default; (iii) the Tenant has not defaulted
in any payment of rent during the twelve (12) months immediately preceding
the Effective Date; (iv) the total amount of the monthly rent currently
payable under the Lease is $ 67,977.80 and monthly installments thereof have
been paid through January, 1999; (v) there are no unpaid taxes, insurance,
operating expenses or other charges under Lease which have been billed by
Landlord to the Tenant; (vi) the amount of the security deposit held by
Landlord under the Lease equals $65,000; (vii) attached hereto as Exhibit "B"
is a true, correct and complete copy of the Lease (including all amendments
and modifications), and the Lease constitutes the entire agreement between
Landlord and the Tenant as to the Lease of the Premises and has not been
modified, amended or supplemented, nor have any terms or conditions thereof
been waived, except as identified in such Exhibit "B"; (viii) to Landlord's
best knowledge, Landlord has performed all of its obligations under the Lease
accruing prior to the Effective Date; (ix) Landlord has not received from
Seller any notice of default by Landlord under the Lease; (x) the term of the
Lease commenced on May 1, 1989, and will expire on April 30, 2004; (xi) the
Tenant has one (1) option to extend the term of the Lease for a period of
five (5) years, and, to Landlord's best knowledge, nothing has occurred that
would invalidate such option or preclude Buyer from effectively exercising
such option; and (xii) all amounts owing to Landlord under the Prior
Assignment and all amounts owing to Landlord in connection with the "Tenant
Interior Improvements" under the Lease have been paid in full.
5. Landlord Release. Landlord hereby irrevocably and unconditionally
releases and forever discharges Seller and its parent company, The DII Group,
Inc., a Delaware corporation, in all and any capacities, including but not
limited to individually or as a guarantor, partner, employee, officer or
agent of other entities, and its owners, predecessors, successors, assigns,
agents, directors, officers, employees, servants, managers, representatives,
attorneys, and insurance carriers, and all persons acting by, through, or in
concert with any such parties, of and from any and all legal and equitable
charges, complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorneys' fees and costs
actually incurred), of any nature whatsoever, that Landlord has against
Seller that may accrue after the Effective Date, arising directly or
indirectly out of or in any way connected with the matters described in the
Lease or this Assignment. The foregoing release shall not, however, affect
any rights, remedies, liabilities or obligations as between Seller and Buyer.
6. Entire Agreement. This Assignment, together with the Lease, constitutes
the entire agreement among Landlord, Seller and Buyer regarding the Lease and
the Premises, and there are no binding agreements or representations among
the parties except as expressed herein (or in the Purchase Agreement as
between Seller and Buyer). This Assignment shall not be legally binding
until it is executed by Landlord, Seller and Buyer. No subsequent change or
addition to this Assignment shall be binding unless in writing and signed by
the party sought to be bound thereby.
7. Miscellaneous. All capitalized terms used, but not defined, in this
Assignment shall have the meanings ascribed to them in the Lease. This
Assignment may be executed in one or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same document. Should any provision of this Assignment prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provision hereof, and such remaining provisions shall
remain in full force and effect. The captions used in this Assignment are
for convenience only and shall not be considered in the construction or
interpretation of any provision hereof. The language of this Assignment
shall in all cases be construed as a whole according to its fair meaning and
not strictly for or against either Seller, Buyer or Landlord, all of whom are
represented by counsel in connection with the negotiation and preparation of
this Assignment. The validity, effect, construction, performance and
enforcement of this Assignment and the rights and obligations of the parties
hereunder shall be governed in all respects by the laws of the State of
California. Seller shall from time to time execute and deliver such
additional documents and take such additional actions as Buyer may reasonably
request to carry out the purposes of this Assignment.
8. Brokerage Commissions. Each party hereto (i) represents to the others
that it has not had any dealings with any real estate brokers, leasing agents
or salesmen or incurred any obligations for the payment of real estate
brokerage commissions or finders' fees which would be earned or due and
payable by reason of this Assignment, and (ii) agrees to indemnify, defend
and hold harmless the other parties from any claim for any such commissions
or fees which result from the actions of the indemnifying party.
9. Authority. Each party hereto represents and warrants to the other
parties that (i) the person or persons executing this Assignment on behalf
of such party is/are duly authorized to execute this Assignment on behalf of
such party, and (ii) such party has the right, power and authority to execute
and deliver this Assignment to the other parties and to perform its
obligations hereunder.
IN WITNESS WHEREOF, Seller, Buyer and Landlord have executed this Assignment
as of the Effective Date.
SELLER:
ORBIT SEMICONDUCTOR, INC.
a Delaware corporation
By: /S/ Lan D. Robertson
Name: Lan D. Robertson
Title: Treasurer
BUYER:
SUPERTEX, INC.
a California corporation
By: /S/ Henry C. Pao
Name: Henry C. Pao
Title: President
Landlord
SOBRATO DEVELOPMENT COMPANIES #871
a California limited partnership
By: /S/
Name:
Title: Managing General Partner
Orbit Semiconductor, Inc.
Lease Agreement
EXHIBIT A List of Materials
111 Trichloroethane
Acetelyne
Acetic Acid
Acetone
Ammonia
Ammonium Fluoride
Ammonium Hydroxide
Argon
AZ 400K Developer (Potassium Hydroxide)
AZ P4210 (Photoresist Propylene Glycol Monomethyleither Acetate (108-65-8)
Boron Trichloride
Boron Trifluoride
Buffered Oxide Etch
Carbon Dioxide
Chlorine
Chlorodifluoromethane (Freon 22)
Deionized Water
Diborane
Dichlorosilane
Dipotassium Phosphate
EGMEA
Ethanol
Ethyl Pyruvate
Ethyl-3-ethoxypropionate Novalac Resin Methacrylate Copolymer Napthoquinone
diazide
Ethylene Glycol
Ethylene Glycol Monomethylether-acetate
Fluoboric Acid.
Glutaraldehyde
Halogenated Cleaning Solution.
HCL
Helium
Hexafluoroethane
Hexamethyldisilazane
Hydrocarbon Mix
Hydrocarbon Mixture
Hydrochloric Acid
Hydrofluoric Acid
Hydrogen
Hydrogen Peroxide
Isoproply Alchohol.
K-Dimethyldinitrocarbonate
Liquid Nitrogen
Liquid Oxygen
Magnesium Hydroxide
Mineral Spirits
Misc Bases
Misc Flammable Liquids
Misc Oxidizers
Misc. Glycols
Monomethylether-acetate
N-Butyl Acetate
Nitric Acid
Nitrogen
Nitrogen Trifluoride
Nitrous Oxide
N-Methyl Pyrrolidine
Oxygen
PBR3 - Phosophorus tribromide
PGMEA
Phosphine
Phosphine - Hydrogen mixture
Phosphine - Silane mixture
Phosphoric Acid
Potassium Hydroxide
Propylene Glycol Monomethyl Ether Acetate
Silane
Sodium Bisulfite
Sodium Molybdate
Sodium Nitrite
Sulfur Hexafluoride
Sulfuric Acid
SVC - 25 (Parts Cleaner)
SVC - 80 Ink Remover
SVC-12 Acetone Replacement
Synthetic Oil
Tetraethylorthosilicate
Tetrafluoroethane
Tetrafluoromethane
Tetramethylammonium Hydroxide
Trifluoroethane
Trifluoromethane (Freon 23)
Tungston Haxafluoride
Vacuum Pump Oil
Various High and Low pH Chemicals
Zinc Chloride