-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NHnhTrq6jcDLpiwZMSqbIGD6u4tk2N9C3dREY2QRkCgVfrL4CJGodtpvppbtWTaI VyK3qi8QQ/OI0pUuSprXAQ== 0001017062-98-000207.txt : 19980210 0001017062-98-000207.hdr.sgml : 19980210 ACCESSION NUMBER: 0001017062-98-000207 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971228 FILED AS OF DATE: 19980209 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROSEMI CORP CENTRAL INDEX KEY: 0000310568 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 952110371 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08866 FILM NUMBER: 98526323 BUSINESS ADDRESS: STREET 1: 2830 S FAIRVIEW ST STREET 2: PO BOX 26890 CITY: SANTA ANA STATE: CA ZIP: 92704 BUSINESS PHONE: 7149798220 FORMER COMPANY: FORMER CONFORMED NAME: MICROSEMICONDUCTOR CORP DATE OF NAME CHANGE: 19830323 10-Q 1 QUARTERLY REPORT DATED DECEMBER 28, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended December 28, 1997 ------------------------------------------------ or [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______ to _______ Commission File No. 0-8866 MICROSEMI CORPORATION --------------------- (Exact name of registrant as specified in its charter) Delaware 95-2110371 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2830 South Fairview Street, Santa Ana, California 92704 ------------------------------------------------------- (Address of principal executive offices) (Zip Code) (714) 979-8220 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] The number of shares outstanding of the issuer's Common Stock, $.20 par value, on January 12, 1998 was 9,214,676. 1 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS The unaudited consolidated financial information for the quarter ended December 28, 1997 of Microsemi Corporation and Subsidiaries (the "Company") and the comparative unaudited consolidated financial information for the corresponding period of the prior year, together with the balance sheet as of September 28, 1997 are attached hereto and incorporated herein by this reference. 2 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Balance Sheets (amounts in 000's)
December 28, 1997 September 28, 1997 ----------------- ------------------ ASSETS Current assets Cash and cash equivalents $ 5,753 $ 6,145 Accounts receivable less allowance for doubtful accounts, $2,614 at December 28, 1997 and $2,665 at September 28, 1997 25,212 25,093 Inventories 53,700 53,248 Deferred income taxes 8,160 8,160 Other current assets 2,034 4,363 -------- -------- Total current assets 94,859 97,009 -------- -------- Property and equipment, at cost 72,219 70,485 Less: Accumulated depreciation (36,625) (35,614) -------- -------- 35,594 34,871 -------- -------- Other assets 4,426 3,314 -------- -------- $134,879 $135,194 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable to banks and others $ 2,350 $ 4,633 Current maturity of long-term debt 3,577 3,574 Accounts payable 9,846 11,304 Accrued liabilities 16,151 15,942 Income taxes payable 6,201 5,743 -------- -------- Total current liabilities 38,125 41,196 -------- -------- Deferred income taxes 2,544 2,544 -------- -------- Long-term debt 46,394 47,621 -------- -------- Other long-term liabilities 1,908 1,924 -------- -------- Stockholders' equity Common stock, $.20 par value; authorized 20,000 shares; issued 9,176 shares at December 28, 1997 and 8,736 shares at September 28, 1997 1,835 1,747 Paid-in capital 17,046 16,197 Retained earnings 27,027 23,965 -------- -------- Total stockholders' equity 45,908 41,909 -------- -------- $134,879 $135,194 ======== ========
See accompanying Notes to Unaudited Consolidated Financial Statements. 3 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Income Statements (amounts in 000's, except earnings per share)
13 Weeks Ended 13 Weeks Ended December 28, 1997 December 29, 1996 ----------------- ----------------- Net sales $44,052 $35,759 Cost of sales 32,033 26,015 ------- ------- Gross profit 12,019 9,744 ------- ------- Operating expenses Selling 2,542 2,149 General and administrative 3,598 3,344 ------- ------- Total operating expenses 6,140 5,493 ------- ------- Income from operations 5,879 4,251 ------- ------- Other (expense) income Interest expense (net) (912) (960) Other 20 (34) ------- ------- Total other expense (892) (994) ------- ------- Income before income taxes 4,987 3,257 Provision for income taxes 1,895 1,368 ------- ------- Net income $ 3,092 $ 1,889 ======= ======= Earnings per share -Basic $ 0.35 $ 0.24 ======= ======= -Diluted $ 0.28 $ 0.19 ======= ======= Weighted average common shares outstanding -Basic 8,907 8,013 -Diluted 12,005 11,842
See accompanying Notes to Unaudited Consolidated Financial Statements. 4 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Statements of Retained Earnings (amounts in 000's)
13 Weeks Ended 13 Weeks Ended December 28, 1997 December 29, 1996 ----------------- ----------------- Retained earnings at beginning of period $23,965 $12,931 Net income 3,092 1,889 Translation loss from foreign currency (30) (3) ------- ------- Retained earnings at end of period $27,027 $14,817 ======= =======
See accompanying Notes to Unaudited Consolidated Financial Statements. 5 MICROSEMI CORPORATION AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows (amounts in 000's)
13 Weeks Ended 13 Weeks Ended December 28, 1997 December 29, 1996 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITITES: Net income $ 3,092 $ 1,889 Adjustments to reconcile net income to net cash provided from operating activities Depreciation and amortization 1,071 882 Increase (decrease) in allowance for doubtful accounts (51) 40 Changes in assets and liabilities, net of acquisition: Accounts receivable (68) 3,482 Inventories (452) (1,796) Other current assets 2,329 (206) Other assets (172) (129) Accounts payable (1,458) (827) Accrued liabilities 209 (1,564) Income taxes payable 458 (97) Other (30) (3) ------- ------- Net cash provided from operating activities 4,928 1,671 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Payment for acquisition - (2,200) Investment in an unconsolidated affiliate (1,000) - Purchases of property and equipment (1,734) (1,276) ------- ------- Net cash used in investing activities (2,734) (3,476) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in notes payable to banks and others (2,283) 1,714 Proceeds from issuance of long-term debt - 655 Payments of long-term debt (472) (355) Reduction of other long-term liabilities (16) (68) Exercise of employee stock options 185 49 ------- ------- Net cash provided from (used in) financing activities (2,586) 1,995 ------- ------- Net increase (decrease) in cash and cash equivalents (392) 190 Cash and cash equivalents at beginning of period 6,145 4,059 ------- ------- Cash and cash equivalents at end of period $ 5,753 $ 4,249 ======= =======
See accompanying Notes to Unaudited Consolidated Financial Statements. 6 MICROSEMI CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS December 28, 1997 1. PRESENTATION OF FINANCIAL INFORMATION The financial information furnished herein is unaudited, but, in the opinion of the management of Microsemi Corporation, includes all adjustments (all of which are normal, recurring adjustments) necessary for a fair presentation of the results of operations for the periods indicated. The results of operations for the first quarter of the current fiscal year are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The unaudited consolidated financial statements and notes should be read in conjunction with the financial statements and notes thereto in the Annual Report on Form 10-K for the fiscal year ended September 28, 1997. 2. INVENTORIES For interim reporting purposes, cost of goods sold and inventories are estimated based upon the use of the gross profit method applied to each product line. Inventories used in the computation of cost of goods sold were:
December 28, 1997 September 28, 1997 ----------------- ------------------ (amounts in 000's) Raw materials $17,019 $15,954 Work in process 21,771 23,774 Finished goods 14,910 13,520 ------- ------- $53,700 $53,248 ======= =======
3. ACCRUED LIABILITIES Accrued liabilities consist of:
December 28, 1997 September 28, 1997 ----------------- ------------------ (amounts in 000's) Accrued payroll, profit sharing, benefits and related taxes $ 7,283 $ 9,016 Accrued interest 3,241 2,641 Other accrued liabilities 5,627 4,285 ------- ------- $16,151 $15,942 ======= =======
7 4. BORROWINGS
Long-term debt consisted of: December 28, 1997 September 28, 1997 ----------------- ------------------ (amounts in 000's) City of Broomfield, Colorado, Industrial Development Bond-bearing interest at 7.875% due in installments from 1996 to 2000; secured by a first deed of trust $ 2,520 $ 2,520 City of Santa Ana, California, Industrial Development Revenue Bond-bearing interest at 6.75% due in installments from 1998 to 2005; secured by a first deed of trust 5,350 5,350 Convertible Subordinated Debentures-bearing interest at 5.875% due 2012 33,259 33,261 Convertible Subordinated Notes-bearing interest at 10% due in 1999 - 750 Equipment lease due to GE Capital Public Finance, Inc., bearing interest at 5.93%, payable in monthly installments through July 2002 2,475 2,700 Notes payable (PPC acquisition) bearing interest at 7% due monthly through September 2009 2,303 2,370 Notes payable-bearing interest at rates in ranges of 5% - 10% due between January 1998 and September 2002 4,064 4,244 ------- ------- 49,971 51,195 Less current portion (3,577) (3,574) ------- ------- $46,394 $47,621 ======= =======
A $2,520,000 Industrial Revenue Bond, due to the City of Broomfield, Colorado, carries an interest rate of 7.875% per annum. The terms of the bond require principal payments of $215,000 in 1998, $230,000 in 1999 and $2,075,000 in 2000. A $5,350,000 Industrial Development Revenue Bond was originally issued in April 1985, through the City of Santa Ana for the construction of improvements and new facilities at the Santa Ana plant. It was remarketed in 1995 and carries an average interest rate of 6.75% per annum. The terms of the bond require principal payments of $1,050,000 in 1998, $100,000 annually from 1999 to 2004 and $3,700,000 in 2005. A $5,557,000 letter of credit is carried by a bank to guarantee the repayment of this bond. There are no compensating balance requirements, however, the letter of credit agreement requires the Company to make collateral payments of $350,000 on February 1, 1996, 1997 and 1998, totaling $1,050,000 to assure the payment of principal scheduled for February 1, 1998. The payment of $1,050,000 has been made as required. An annual commitment fee of 2% is charged on this letter of credit. In addition, the agreement contains provisions regarding net worth and working capital. The Company was in compliance with the aforementioned covenants at December 28, 1997. In February 1987, the Company sold $40,250,000 of 5.875% convertible subordinated debentures due 2012. The debentures are convertible into common stock at $13.55 per share. As of September 28, 1997 8 they are redeemable at 100% of par plus accrued interest. Deferred debt issuance costs of $1,128,000 are included in other assets and are being amortized over the life of the debentures on a straight-line basis. In fiscal years 1987, 1988, 1989 and 1991, the Company repurchased a total of $6,969,000 of these debentures due to favorable market conditions. In the first quarter of fiscal year 1998, $2,000 was converted into 147 shares of common stock. Commencing in March 1997, the debentures require annual sinking fund payments in the amount of 5% of the principal amount thereof, less the principal amount of converted or redeemed debentures. As of December 28, 1997, the amount of redeemed and converted debentures would have satisfied this requirement through March 1, 1999. (See Note 8.) In June 1992, the Company of 10% Convertible Subordinated Notes, due in 1999, to an officer and two existing shareholders to finance a portion of an acquisition completed in fiscal year 1992. The notes were converted, at $1.875 per share, into 53,333; 613,331 and 400,000 shares of common stock in fiscal years 1996, 1997 and 1998, respectively. In June 1997, the Company entered into a $2,700,000 equipment lease agreement with GE Capital Public Finance, Inc., providing for monthly payments through July 2002 of $45,000 plus interest at 5.93% per annum. In September 1999, the Company issued notes of $2,370,000, related to the PPC acquisition, payable to the former owners, bearing an interest rate of 7%, due in monthly installments through September 2009. The Company maintains a revolving credit facility with a domestic bank which will continue through September 1999. Under the credit facility the Company can borrow up to $15,000,000. The credit line has an interest rate of prime and is secured by substantially all of the assets of the Company. In addition, the credit agreement contains provisions regarding net worth and working capital. The Company is in compliance with the aforementioned covenants at December 28, 1997. At December 28, 1997, $2,065,000 was borrowed under this credit facility. 5. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share". This Statement establishes standards for computing and requires the presentation of basic and diluted earnings per share (EPS). The Company has adopted this statement in the current period and has restated the EPS for the prior year period as required. Basic earnings per share have been computed based upon the weighted average number of common shares outstanding during the respective periods. Diluted earnings per share have been computed, when the result is dilutive, using the treasury stock method for stock options outstanding during the respective periods and based upon the assumption that the convertible subordinated debt had been converted into common stock as of the beginning of the respective periods, with a corresponding increase in net income to reflect a reduction in related interest expense, net of applicable taxes. 9 Earnings per share for the quarters ended December 28, 1997 and December 29, 1996 were calculated as follows:
December 28, 1997 December 29, 1996 ----------------- ----------------- BASIC Net income $ 3,092 $ 1,889 ======= ======= Weighted-average common shares outstanding 8,907 8,013 ======= ======= Basic earnings per share $ 0.35 $ 0.24 ======= ======= DILUTED Net income $ 3,092 $ 1,889 Interest savings from assumed conversions of convertible debt, net of income taxes 310 321 ------- ------- Net income assuming conversions $ 3,402 $ 2,210 ======= ======= Weighted-average common shares outstanding 8,907 8,013 Stock options 375 401 Convertible debt 2,723 3,428 ------- ------- Weighted-average common shares outstanding on a diluted basis 12,005 11,842 ======= ======= Diluted earnings per share $ 0.28 $ 0.19 ======= =======
10 6. STATEMENT OF CASH FLOWS For purposes of the unaudited Consolidated Statements of Cash Flows, the Company considers all short-term, highly liquid investments having a maturity of three months or less at the date of acquisition to be cash equivalents.
Supplementary information - ------------------------- 13 weeks ended 13 weeks ended December 28, 1997 December 29, 1996 ----------------- ----------------- (amounts in 000's) Cash paid during the period for: Interest $ 373 $ 289 ====== ====== Income taxes $1,502 $1,198 ====== ====== Non-cash financing activities: Conversion of subordinated debt into 400,147 and 240,000 shares of common stock (See Note 4) $ 752 $ 450 Business acquired in purchase transaction: Fair values of assets acquired $ - $2,900 Less debt issued - (700) ------ ------ Cash paid for acquisition $ - $2,200 ====== ======
7. CONTINGENCY In Broomfield, Colorado, the owner of a property located adjacent to a manufacturing facility owned by a subsidiary of the Company had filed suit against the subsidiary and other parties, claiming that contaminants migrated to his property, thereby diminishing its value. In August 1995, the subsidiary together with the former owners of the manufacturing facility, agreed to settle the claim and to indemnify the owner of the adjacent property from remediation costs. Although contaminants previously used at the facility are present in soil and groundwater on the subsidiary's property, the Company vigorously contests any assertions that the subsidiary is the cause of the contamination; however, there can be no assurance that recourse will be available against third parties. State and local agencies in Colorado are reviewing current data and considering study and cleanup options, and it is not yet possible to predict costs for remediation or the allocation thereof among potentially responsible parties. 8. SUBSEQUENT EVENTS On December 31, 1997, the Company sold General Microcircuits, Inc., a wholly owned subsidiary in Mooresville, North Carolina, for $5,000,000 in cash and $2,000,000 in a note receivable. Microsemi does not expect any material gain or loss from this transaction. On January 21, 1998, the Company and BKC Semiconductors Incorporated (BKC), Lawrence, Massachusetts, jointly announced a definitive agreement whereby Microsemi will acquire all of the common stock of BKC for approximately $13,400,000 in cash. Microsemi intends to finance this acquisition with cash on hand and borrowings under its existing credit facilities. BKC is a publicly held 11 company. It manufactures discrete semiconductors with sales of approximately $11,000,000 for the fiscal year ended September 28, 1997. The acquisition will be accounted for under the purchase method. On January 26, 1998, the Company announced that it intends to redeem its 5.875% convertible subordinated debentures as of February 12, 1998. The holders may convert their debentures into common stock of the Company, at any time prior to 5 p.m. Pacific Standard Time, February 12, 1998. The Company expects that most of the $33,259,000 outstanding debentures will be converted and has previously received notices from holders of $26,826,000 in face value of debentures, indicating their intention to convert their debentures into Common Stock. 12 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q includes forward looking statements, the realization of which may be impacted by certain important factors discussed below under "Important Factors Related to Forward-Looking Statements and associated Risks" and in Form 10-K for the fiscal year ended September 28, 1997. Introduction - ------------ Microsemi Corporation is a multinational supplier of high reliability power semiconductors, surface mount and custom diode assemblies for the electronics, computer, telecommunications, defense/aerospace and medical markets. The Company's semiconductor products include diodes, transistors and silicon controlled rectifiers (SCR's) which can be used in virtually all electrical and electronic circuits. Typical functions include solid state switching, signal processing, voltage and power regulation, circuit protection and absorption of electrical surges and transient voltage spikes. Technologies for these devices range from the very mature mesa rectifier diodes, still used in all types of power supply applications, to the newly designed micro-miniature transient absorbers, which are mounted within the cables used to connect computer or telecommunications equipment. Capital Resources and Liquidity - ------------------------------- Microsemi Corporation's operations in the three months ended December 28, 1997 were funded with internally generated funds and borrowings under the Company's line of credit. In September 1997, the Company renewed its credit line with a bank. Under the current line of credit, the Company can borrow up to $15,000,000. As of December 28, 1997, $2,065,000 was borrowed under this credit facility. At December 28, 1997, the Company had $5,753,000 in cash and cash equivalents. A $5,350,000 Industrial Development Revenue Bond was originally issued in April 1985, through the City of Santa Ana Industrial Development Authority for the construction of improvements and new facilities at the Santa Ana plant. It was remarketed in 1995 and carries an average interest rate of 6.75% per annum. The terms of the bond require principal payments of $1,050,000 in 1998, $100,000 annually from 1999 to 2004 and $3,700,000 in 2005. A $5,557,000 letter of credit is carried by a bank to guarantee the repayment of this bond. The principal payment of $1,050,000, consisting of $350,000 in cash and $700,000 in matured certificates of deposit, scheduled for February 1, 1998 has been made as required. Based upon information currently available, the Company believes that it can meet its current operating cash and debt service requirements with internally generated funds together with its available borrowings. In October 1996, Microsemi purchased certain assets and the right to manufacture a selected group of products of the high-reliability portion of SGS Thomson's Radio Frequency (RF) Semiconductor business in Montgomeryville, Pennsylvania (the RF Products acquisition). In September 1997, Microsemi PPC, Inc. (PPC), formerly known as Micro PPC Acquisition Corp., a wholly owned subsidiary of the Company, purchased substantially all of the assets and assumed certain liabilities of PPC Products Corp., Technett Seals Inc., and Semiconductors, Inc. (collectively referred to as PPC Products). PPC Products is a supplier of power transistors, fixed and adjustable linear regulators, and 13 power rectifiers and is located in Riviera Beach, Florida. The aggregate purchase price for both entities included approximately $5,201,000 in cash and $3,070,000 in notes payable. The Company's 5.875% Convertible Subordinated Debentures due 2012 require semiannual interest payments of approximately $977,000. The Debentures are callable at 100% of face value and are convertible at the option of the holder into Common Stock at a conversion price of $13.55 per share. On January 26, 1998, the Company announced that it intends to redeem the debentures. (See note 8.) On December 31, 1997, the Company sold General Microcircuits, Inc., a wholly owned subsidiary in Mooresville, North Carolina, for $5,000,000 in cash and $2,000,000 in a promissory note. Microsemi does not expect any material gain or loss from this transaction. On January 21, 1998, the Company and BKC Semiconductors Incorporated (BKC), Lawrence, Massachusetts, jointly announced a definitive agreement whereby Microsemi will acquire all of the outstanding stock of BKC for approximately $13,400,000. (See Note 8.) On January 29, 1998, the Company announced that it has made an equity investment of approximately $1,000,000 in Xemod, Inc. Xemod was founded in 1994 and headquartered in Sunnyvale, California. It designs, manufacturers and markets power amplifier semiconductor components targeted at the cellular and wireless communication markets. The Company has no other significant capital commitments. The average collection period of accounts receivable was 52 days for the current quarter compared to 59 days for the same period of fiscal year 1997. The improvement was due to higher sales and a better collection effort. The average days sales of products in inventories was 152 for the three months ended December 28, 1997 compared to 171 days for the corresponding period of fiscal year 1997. The decrease was primarily due to higher shipments in the current period and an effort to control inventories. RESULTS OF OPERATIONS FOR THE QUARTER ENDED DECEMBER 28, 1997 COMPARED TO THE QUARTER ENDED DECEMBER 29, 1996. Net sales for the first quarter of fiscal year 1998 increased $8,293,000 to $44,052,000, from $35,759,000 for the first quarter of fiscal year 1997; this increase was primarily due to strong demand for the space market related products, higher shipments of the Powermite and the addition of PPC Products, which was acquired in September 1997. Gross profit increased $2,275,000 to $12,019,000 or 27.3% of sales for the current quarter of fiscal year 1998 from $9,744,000 or 27.2% of sales for the first quarter of fiscal year 1997. The increase of gross profit was due to higher sales. Operating expenses for the current quarter of fiscal year 1998 increased $647,000 compared to that of the corresponding period of the prior year; primarily due to the addition of the PPC subsidiary. The effective tax rates of 38% and 42% in the first quarters of fiscal years 1998 and 1997 were the combined result of taxes computed on foreign and domestic income. The prior year tax rate was higher due to certain non-deductible losses, a less favorable mix of worldwide income and other adjustments. 14 Important factors related to forward-looking statements and associated risks - ---------------------------------------------------------------------------- This Form 10-Q contains certain forward-looking statements that are based on current expectations and involve a number of risks and uncertainties. The forward-looking statements included herein are based on, among other items, current assumptions that the Company will be able to meet its current operating cash and debt service requirements with internally generated funds and its available line of credit, that it will be able to successfully resolve disputes and other business matters as anticipated, that competitive conditions within the semiconductor, surface mount and custom diode assembly industries will not change materially or adversely, that the Company will retain existing key personnel, that the Company's forecasts will reasonably anticipate market demand for its products, and that there will be no materially adverse change in the Company's operations or business. Other factors that could cause results to vary materially from current expectations are discussed elsewhere in this Form 10-Q. Assumptions relating to the foregoing involve judgments that are difficult to predict accurately and are subject to many factors that can materially affect results. Forecasting and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause the Company to alter its forecasts, which may in turn affect the Company's results. In light of the factors that can materially affect the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. The unaudited consolidated financial statements and notes should be read in conjunction with the financial statements and notes thereto in the Annual Report in Form 10-K for the fiscal year ended September 28, 1997. Additional factors that could cause results to vary materially from current expectations are discussed under the heading "Important factors related to forward-looking statements and associated risks" in the Company's annual report in Form 10-K as filed December 29, 1997 with the Securities and Exchange Commission, and elsewhere in that Form 10-K. Order Backlog - ------------- The Company's consolidated order backlog was $67,000,000 as of December 28, 1997, compared to $64,000,000 at December 29, 1996 and $67,000,000 at September 28, 1997. Backlog of General Microcircuits, Inc., has been eliminated from the previously published amounts. (See note 8.) The Company's backlog as of any particular date may not be representative of actual sales for any succeeding period because lead times for the release of purchase orders depend upon the scheduling practices of individual customers, the delivery times of new or non-standard products can be affected by scheduling factors and other manufacturing considerations, the rate of booking new orders can vary significantly from month to month, and the possibility of customer changes in delivery schedules or cancellations of orders. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- Inapplicable Item 2. Changes in Securities --------------------- Inapplicable Item 3. Defaults Upon Senior Securities ------------------------------- Inapplicable Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) Inapplicable (b) Inapplicable (c) Inapplicable (d) Inapplicable Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: Exhibit 10.82 Change of Control Agreement with Mr. Philip Frey, Jr. Exhibit 10.83 Change of Control Agreement with Mr. David R. Sonksen. Exhibit 10.84 Supplemental Executive Retirement Plan Exhibit 27 Unaudited Financial Data Schedule for the three months ended December 28, 1997. (b) Reports on Form 8-K: None 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MICROSEMI CORPORATION By: /s/ DAVID R. SONKSEN ----------------------------------- David R. Sonksen Vice President-Finance and Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer and duly authorized to sign on behalf of the Registrant) DATED: February 6, 1998 17 EX-10.82 2 CHANGE OF CONTROL AGREEMENT WITH PHILIP FREY, JR. EXHIBIT 10.82 AGREEMENT by and between MICROSEMI CORPORATION and Philip Frey, Jr. TABLE OF CONTENTS ----------------- 1. Term.................................................................. 3 2. Terminations by Executive............................................. 3 a. Termination by Executive for "Good Reason"........................ 3 b. Change of Control................................................. 4 c. Voluntary Termination by Executive................................ 4 3. Executive's Benefits Following Termination............................ 5 a. Executive's Benefits in Termination by Executive without "Good Reason" following Change in Control............................... 5 (i) Salary..................................................... 5 (ii) Incentive Compensation..................................... 5 (iii) Car Allowance.............................................. 5 (iv) Stock Options.............................................. 5 (v) Medical Insurance.......................................... 5 (vi) Retirement Plans; Unvested Company Contribution............ 6 (vii) Vacation and Sick Leave.................................... 6 (viii) General.................................................... 6 b. Executive's Benefits in Termination by Executive for "Good Reason" or by Company following Change in Control......................... 6 (i) Salary..................................................... 6 (ii) Incentive Compensation..................................... 7 (iii) Car Allowance.............................................. 7 (iv) Stock Options.............................................. 7 (v) Medical and Life Insurance................................. 7 (vi) Retirement Plans; Unvested Company Contribution............ 7 (vii) Vacation and Sick Leave.................................... 8 (viii) General.................................................... 8 4. Other Benefits Following Termination.................................. 8 5. Excise Taxes.......................................................... 8 6. Indemnification....................................................... 9 7. Obligatory Restrictions on Executive.................................. 9 a. Non-Competition................................................... 10 b. No Solicitation of Employees...................................... 10 c. Consideration..................................................... 10 8. Termination of Certain Benefits Following New Employment.............. 10 9. No Mitigation by Executive Required................................... 11 10. Binding Agreement..................................................... 11 11. No Attachment......................................................... 11 12. Assignment and Other Rights........................................... 12
13. Waiver................................................................ 12 14. Notice................................................................ 12 15. Governing Law......................................................... 13 16. Costs................................................................. 13 17. Severability.......................................................... 13 18. Arbitration........................................................... 13 19. Entire Agreement...................................................... 14 20. Separate Counsel...................................................... 15
2 AGREEMENT THIS AGREEMENT dated as of November 18, 1997 is made by and between Philip Frey, Jr. ("Executive") and MICROSEMI CORPORATION, a Delaware corporation ("Company") NOW, THEREFORE, for good and valuable considerations, receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Term. The term of this Agreement shall commence on the date hereof. The term of this Agreement shall be renewed automatically on a daily basis so that the outstanding term is always two (2) years after the date on which notice of non-renewal or termination of this Agreement is given by the Executive to the Company or by the Company to the Executive. This Agreement relates to Executive's employment with the Company, or any subsidiary, successor, assign or affiliate of the Company, under any written or oral agreement. For purposes of the following provisions "Date of Termination" means the effective date of termination of Executive's employment with any of the entities described above, after notice and lapse of the notice period as required herein. 2. Terminations by Executive. a. Termination by Executive for "Good Reason." Following a Change in Control, Executive may terminate his active employment under his oral or written employment agreement with the Company upon five (5) days' written notice to the Company given within ninety (90) days following the date on which the Executive becomes aware of any of the following events, each of which shall be deemed to be good reason for termination by Executive: (i) any reduction in, or limitation upon, the compensation, reimbursable expenses or other benefits provided in this Agreement, other than (A) as generally effected by valid public law or regulation or (B) as results from change in the amount of the incentive compensation pool if not resulting from changes in the incentive pool formula or allocations and not resulting from accounting or operational effects of the acquisition; (ii) any change in assignment of Executive's primary duties to a work location more than 50 miles from the Company's principal executive office at 2830 South Fairview Street, Santa Ana, California 92704, without Executive's prior written consent; (iii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; 3 (iv) any material breach by the Company of any provision of this Agreement; or (v) any action taken by the Board or a standing Committee of the Board in connection with, or the formation of a special Committee of the Board for the purpose of, effecting any of the events listed in subparagraphs (i) through (iv) immediately above; b. Change of Control. For purposes of this Agreement, "Change in Control" means the occurrence of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company's then outstanding voting securities; (ii) Consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty-one percent (51%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approving a plan of complete liquidation of the Company or a consummation of the sale or disposition by the Company of all or substantially all of the Company's assets. c. Voluntary Termination by Executive. After a Change in Control, without reason or for any reason other than one set forth in Section 2.a above, Executive may voluntarily terminate his employment with the Company under any oral or written employment agreement upon a minimum of one (1) month's written notice to the Company. 3. Executive's Benefits Following Termination. a. Executive's Benefits in Termination by Executive without "Good Reason" following Change in Control. If this Agreement is terminated following a Change in Control by Executive without "Good Reason": 4 (i) Salary. Executive or his estate shall be entitled to receive 100% of his latest base salary for a period of n months following the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date notice of termination is given). (ii) Incentive Compensation. Executive or his estate will be entitled to receive a prorated portion of the incentive compensation for the partial year ending on the Date of Termination. (iii) Car Allowance. The car allowance shall continue until the expiration of n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Company gives notice of termination), subject to termination as described in Section 7. (iv) Stock Options. The restricted stock granted by the Company to Executive under all plans and all stock options and general stock appreciation rights granted by the Company to Executive will remain in existence, and continue to vest and remain exercisable for a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Company gives notice of termination), subject in either case to the latest expiration date specified in the restricted stock or option agreements. (v) Medical and Life Insurance. Payment of premiums for medical, dental and vision insurance and life insurance by the Company shall continue on and subject to the terms of this Agreement for a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Company gives notice of termination), subject to termination under Section 7. (vi) Retirement Plans; Unvested Company Contribution. The Executive shall be entitled to receive, not later than the fifteenth (15th) day following the Date of Termination, all benefits payable to him under any of the Company's tax-qualified employee benefit plans and any other plan, program or arrangement relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the aforementioned plans. The Company 5 shall not be required to pay Executive any amount of unvested Company contributions credited to the Executive's account under any tax-qualified employee benefit plan maintained by the Company as of the Date of Termination. In the event that this paragraph should conflict with the provisions of any of the Company's tax-qualified employee benefit plans and any other plan, program or arrangement relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the aforementioned plans, then the provisions of the plan shall govern. (vii) Vacation and Sick Leave. The Company shall also pay Executive, not later than the second day following the Date of Termination, a pro rata amount of his base salary under his employment agreement, in effect on the Date of Termination, for each day of vacation leave which has accrued as of the Date of Termination, but which is unpaid as of such date, to which Executive is entitled under the Company's vacation leave policy. The Company shall be required to pay for sick leave days only to the extent that Executive has taken sick leave on or prior to the Date of Termination to which Executive is entitled under the Company's sick leave policy. (viii) General. Executive or his estate shall also be entitled to any other amounts then owing or accrued but unpaid to the Executive pursuant to any plans or arrangements of the Company. b. Executive's Benefits in Termination by Executive for "Good Reason" or by Company following Change in Control. If this Agreement is terminated following a Change in Control by Executive for "Good Reason" or by the Company: (i) Salary. Executive or his estate shall be entitled to receive 100% of his latest base salary for a period equal to the longer of (a) a period of two (2) years following the Date of Termination or (b) a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Date of Termination). (ii) Incentive Compensation. Executive or his estate will be entitled to receive incentive compensation of two (2) times the highest annual incentive compensation amount paid during any of the preceding three (3) full plan years. (iii) Car Allowance. The car allowance shall continue for a period equal to the longer of (a) a period of two (2) years following the Date of Termination or (b) a period 6 ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Date of Termination), in either case subject to termination as described in Section 7. (iv) Stock Options. The restriction or forfeiture period on any restricted stock granted by the Company to Executive under all plans and all stock options and general stock appreciation rights granted by the Company to Executive shall lapse or accelerate, as the case may be, and become fully vested and exercisable on the Date of Termination, and shall remain exercisable for a period equal to the longer of (a) a period of two (2) years following the Date of Termination or (b) a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Date of Termination), subject in either case to the latest expiration date specified in the restricted stock or option agreements. (v) Medical and Life Insurance. Payment of premiums for medical, dental and vision insurance and life insurance by the Company shall continue on and subject to the terms of this Agreement for a period equal to the longer of (a) a period of two (2) years following the Date of Termination or (b) a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Date of Termination), in either case subject to termination under Section 7. (vi) Retirement Plans; Unvested Company Contribution. The Executive shall be entitled to receive, not later than the fifteenth (15th) day following the Date of Termination, all benefits payable to him under any of the Company's tax-qualified employee benefit plans and any other plan, program or arrangement relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the aforementioned plans. The Company shall also pay Executive, not later than the fifteenth (15th) day following the Date of Termination, an amount equal to all unvested Company contributions credited to the Executive's account under any tax-qualified employee benefit plan maintained by the Company as of the Date of Termination. In the event that this paragraph should conflict with the provisions of any of the Company's tax-qualified employee benefit plans and any other plan, program or arrangement relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the 7 aforementioned plans, then the provisions of the plan shall govern, provided that the Company's contribution shall vest pursuant to this Section. (vii) Vacation and Sick Leave. The Company shall also pay Executive, not later than the second day following the Date of Termination, a pro rata amount of his base salary under his employment agreement, in effect on the Date of Termination, for each day of vacation leave which has accrued as of the Date of Termination, but which is unpaid as of such date, to which Executive is entitled under the Company's vacation leave policy. The Company shall be required to pay for sick leave days only to the extent that Executive has taken sick leave on or prior to the Date of Termination to which Executive is entitled under the Company's sick leave policy. (viii) General. Executive or his estate shall also be entitled to any other amounts then owing or accrued but unpaid to the Executive pursuant to any plans or arrangements of the Company. 4. Other Benefits Following Termination. Executive shall also be entitled to the following additional benefits upon or following such termination: a. During the period following employment or benefits hereunder, to the extent required by law, Executive shall have the rights under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), or any successor statute. 5. Excise Taxes. If all or any portion of the amounts payable to Executive or on Executive's behalf under this Agreement or otherwise are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (or similar state tax and/or assessment), the Company shall pay to Executive an amount necessary to place Executive in the same after-tax position as Executive would have been had no such excise tax been imposed. The amount payable pursuant to the preceding sentence shall be grossed-up to the extent necessary to pay income and excise taxes due on such amount. The determination of the amount of any such tax indemnity shall initially be made by the independent accounting firm then employed by the Company. If at a later date it is determined (pursuant to final regulations or published rulings of the IRS, final judgment of a court of competent jurisdiction or otherwise) that the amount of excise taxes payable by Executive is greater than the amount initially so determined, then the Company (or its successor) shall pay Executive an amount equal to the sum of (1) such additional excise taxes, (2) any interest, fines and penalties resulting from such underpayment, plus (3) a gross-up amount 8 necessary to reimburse Executive for any income, excise or other taxes payable by Executive with respect to the amounts specified in (1) and (2) above, and the reimbursement provided by this clause (3). 6. Indemnification. For at least ten (10) years following the Date of Termination for any reason, Executive shall continue to be indemnified under the Company's Certificate of Incorporation and Bylaws at least to the same extent indemnification was available prior to the Date of Termination and permitted by law, and Executive shall be insured under the directors' and officers' liability insurance, the fiduciary liability insurance and the professional liability insurance policies that are the same as, or provide coverage at least equivalent to, those applicable or made available by the Company to the then members of senior management of the Company. Independent of such provision, if at any time Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, by reason of the fact that Executive is or was a director or officer of the Company or serves or served any other corporation fifty percent (50%) or more owned or controlled by the Company in any capacity at the Company's request, Executive shall be indemnified by the Company, and the Company shall pay Executive's related expenses when and as incurred, all to the full extent permitted by law. 7. Obligatory Restrictions on Executive. Executive agrees that during the period of the commencing on the Date of Termination and extending the lesser of two years or n months (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date notice of termination is given), except as provided below or with the Company's written consent, he will be bound by the following restrictive covenants: a. Non-Competition. Following any involuntary termination following a Change in Control or a termination by Executive for Good Reason following a Change in Control, the restrictions in this paragraph, and any similar restrictions under any employment agreement between the Company and Executive or otherwise shall be of no force or effect. In the event of a voluntary termination (other than for Good Reason) by Executive following a Change in Control, Executive will not, directly or indirectly, engage for his own account in, or own, manage, operate, control, be employed as an employee or consultant, buy, participate in, or be connected in any manner with the ownership, management, operation or control of any firm, corporation, association, or other business entity which is in competition with the business of the Company; provided that Executive may invest in a business competitive with the Company to an extent not exceeding five percent (5%) of the total outstanding shares at the time of such investment in each one or more 9 companies. A business will be considered for this purpose in competition with the Company if and only if the products of such business include more than one- third of the Company's products as of immediately prior to the Change in Control. In the event of a breach or threatened breach by Executive of the provisions of this paragraph, the Company shall be entitled to an injunction restraining Executive from violating the provisions of this paragraph. b. No Solicitation of Employees. Executive will not solicit or, with the exception of any persons related to Executive by blood, marriage, or adoption, not more remote than first cousin, employ any current or future employee of the Company and will not intentionally disparage the Company, its management or its products. c. Consideration. Executive's obligations are made partly in consideration of the salary and other benefits paid or committed to be paid by the Company following the Date of Termination. The restrictive covenants on the part of Executive set forth in this Section 20 shall survive the termination of this Agreement, and the existence of any claims or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense in the enforcement of these covenants. 8. Termination of Certain Benefits Following New Employment. If Executive accepts a substantial engagement or employment ("New Employment") with any other corporation, partnership, trust, government or other entity at any time during the term of benefit continuation referred to above, the Company may elect that Executive cease to be entitled to car allowance or medical, dental or vision insurance benefits effective upon the commencement of such other engagement or employment. However, Executive shall nevertheless continue to be entitled to the other benefits of this Agreement and shall continue to be bound by the provisions of this Agreement for any remaining duration of any period then applicable to Executive. For the purposes of this provision, "employment" or "engagement" shall exclude (i) service as an officer or director of a personal investment holding company, (ii) service as a director on the Board of a corporation or nonprofit organization, (iii) engagement as a bona fide part- time consultant, or (iv) self-employment or engagement as an officer or director of an operating corporation or enterprise (as opposed to a personal investment holding company) founded or controlled by Executive and which has (and only so long as it continues to have) revenues of less than $25 million per year. 10 9. No Mitigation by Executive Required. Company recognizes that because of Executive's special talents, stature and opportunities in the electronics industry, in the event of termination by the Company or Executive before the end of the agreed term, the parties acknowledge and agree that the provisions of this Agreement regarding further payment of base salary, bonuses, and the exercisability of stock options and lapse of the restrictive or forfeiture period on restricted stock constitute fair and reasonable provisions for the consequences of such termination, do not constitute a penalty, and such payments and benefits shall not be limited or reduced by amounts Executive might earn or be able to earn from any other employment or ventures during the remainder of the agreed term of this Agreement. Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. 10. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of Executive, his heirs, distributees and assigns, and the Company, its successors and assigns. Executive may not, without the express written permission of the Company, assign or pledge any rights or obligations hereunder to any person, firm or corporation. Such permission shall not be unreasonably withheld. If the Executive should die while any amount would still be payable to Executive if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with this Agreement to the Executive's estate. 11. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 12. Assignment and Other Rights. The Company will require any successor (whether direct or indirect, by operation of law, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same 11 amount and on the same terms as the Executive would be entitled hereunder, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be the Date of Termination. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business and/or assets that assumes and agrees to perform this Agreement by operation of law, or otherwise. 13. Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 14. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Executive at his home address appearing in the records of the Company, in the case of the Executive, and in the case of the Company, to the attention of the Chairman of the Board at the principal executive offices of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. Acceptance by Executive of benefits of participation shall constitute a certification by Executive of his continued eligibility for participation. 15. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of California. 16. Costs. Each of the parties shall pay its own expenses, including attorneys' fees, in the negotiation and preparation of this Agreement. 17. Severability. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If 12 any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. If this Agreement is held invalid or cannot be enforced, then to the full extent permitted by law, any prior agreement between the Company (or any predecessor thereof) and Executive shall be deemed reinstated as if this Agreement has not been executed. 18. Arbitration. a. Any disagreement, dispute, controversy or claim arising out of or in any way related to this Agreement or the subject matter thereof or the interpretation hereof or any arrangements relating hereto or contemplated herein or the breach, termination or invalidity hereof shall be settled exclusively and finally by arbitration. b. The arbitration shall be conducted in accordance with the Commercial Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA"). The arbitral tribunal shall consist of one arbitrator. c. The Company shall pay all of the fees, if any, and expenses of such arbitration, and shall also pay all Executive's expenses, including attorneys' fees, incurred in connection with the arbitration regardless of the final outcome of such arbitration. d. The arbitration shall be conducted in Orange County, California, or in any other city or county in the United States of America as the parties to the dispute may designate by mutual written consent. e. Any decision or award of the tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties hereto hereby waive to the extent permitted by law any rights to appeal or to review such award by any court or tribunal. The parties hereto agree that the award may be enforced against the parties to the arbitration proceeding or their assets wherever the award may be entered in any court having jurisdiction thereof. f. The parties stipulate that discovery may be held in any such arbitration proceeding as provided in Section 1283.05 of the California Code of Civil Procedure, as may be amended or revised from time to time. 13 g. During the period until the dispute is finally resolved in accordance with this Section, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, employee benefit and insurance plans, programs, arrangements and perquisites in which the Executive was participating or entitled when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this paragraph (c). Amounts paid under this paragraph (c) shall be repaid to the Company or be offset against or reduce any other amounts due the Executive under this Agreement, as appropriate, only upon the final resolution of the dispute. 19. Entire Agreement. As of the date hereof, all previous agreements relating to the employment of Executive, however styled, are hereby superseded to the extent inconsistent herewith, and, excepting Executive's present participation in Company stock and/or other benefit plans or programs and the agreements thereunder, which are hereby reaffirmed in all respects by both parties thereto except as expressly modified by this Agreement, this Agreement embodies all agreements, contracts, and understandings by and between the parties hereto. In addition, this Agreement supersedes and amends any subsequent employment agreement between Executive and the Company except to the extent such subsequent agreement expressly provides or provides benefits in excess of those herein provided. Should any other agreement, plan or arrangement between Company and Executive or other officers or employees of the Company provide for greater benefits upon a change in control, the terms of such other agreement, plan or arrangement shall apply to Executive on a "most favored" basis. This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought. 20. Separate Counsel. The Company has been represented by Stradling, Yocca, Carlson & Rauth in the negotiation and execution of this Agreement. The Executive has been invited and given opportunity to engage counsel to review or negotiate this Agreement, and Executive has either done so or chosen not to engage counsel. 14 IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. EXECUTIVE: COMPANY: MICROSEMI CORPORATION /s/ Philip Frey, Jr. By: /s/ Martin H. Jurick - ---------------------------- ---------------------------------- Martin H. Jurick, Chairman of the Compensation Committee 15 EX-10.83 3 CHANGE OF CONTROL AGREEMENT WITH DAVID SONKSEN EXHIBIT 10.83 AGREEMENT by and between MICROSEMI CORPORATION and David R. Sonksen TABLE OF CONTENTS ----------------- 1. Term.................................................................. 3 2. Terminations by Executive............................................. 3 a. Termination by Executive for "Good Reason"........................ 3 b. Change of Control................................................. 4 c. Voluntary Termination by Executive................................ 4 3. Executive's Benefits Following Termination............................ 5 a. Executive's Benefits in Termination by Executive without "Good Reason" following Change in Control......................... 5 (i) Salary..................................................... 5 (ii) Incentive Compensation..................................... 5 (iii) Car Allowance.............................................. 5 (iv) Stock Options.............................................. 5 (v) Medical Insurance.......................................... 5 (vi) Retirement Plans; Unvested Company Contribution............ 6 (vii) Vacation and Sick Leave.................................... 6 (viii) General.................................................... 6 b. Executive's Benefits in Termination by Executive for "Good Reason" or by Company following Change in Control......................... 6 (i) Salary..................................................... 6 (ii) Incentive Compensation..................................... 7 (iii) Car Allowance.............................................. 7 (iv) Stock Options.............................................. 7 (v) Medical and Life Insurance................................. 7 (vi) Retirement Plans; Unvested Company Contribution............ 7 (vii) Vacation and Sick Leave.................................... 8 (viii) General.................................................... 8 4. Other Benefits Following Termination.................................. 8 5. Excise Taxes.......................................................... 8 6. Indemnification....................................................... 9 7. Obligatory Restrictions on Executive.................................. 9 a. Non-Competition................................................... 10 b. No Solicitation of Employees...................................... 10 c. Consideration..................................................... 10 8. Termination of Certain Benefits Following New Employment.............. 10 9. No Mitigation by Executive Required................................... 11 10. Binding Agreement..................................................... 11 11. No Attachment......................................................... 11 12. Assignment and Other Rights........................................... 12
13. Waiver............................................................. 12 14. Notice............................................................. 12 15. Governing Law...................................................... 13 16. Costs.............................................................. 13 17. Severability....................................................... 13 18. Arbitration........................................................ 13 19. Entire Agreement................................................... 14 20. Separate Counsel................................................... 15
2 AGREEMENT THIS AGREEMENT dated as of November 18, 1997 is made by and between Philip Frey, Jr. ("Executive") and MICROSEMI CORPORATION, a Delaware corporation ("Company") NOW, THEREFORE, for good and valuable considerations, receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Term. The term of this Agreement shall commence on the date hereof. The term of this Agreement shall be renewed automatically on a daily basis so that the outstanding term is always two (2) years after the date on which notice of non-renewal or termination of this Agreement is given by the Executive to the Company or by the Company to the Executive. This Agreement relates to Executive's employment with the Company, or any subsidiary, successor, assign or affiliate of the Company, under any written or oral agreement. For purposes of the following provisions "Date of Termination" means the effective date of termination of Executive's employment with any of the entities described above, after notice and lapse of the notice period as required herein. 2. Terminations by Executive. a. Termination by Executive for "Good Reason." Following a Change in Control, Executive may terminate his active employment under his oral or written employment agreement with the Company upon five (5) days' written notice to the Company given within ninety (90) days following the date on which the Executive becomes aware of any of the following events, each of which shall be deemed to be good reason for termination by Executive: (i) any reduction in, or limitation upon, the compensation, reimbursable expenses or other benefits provided in this Agreement, other than (A) as generally effected by valid public law or regulation or (B) as results from change in the amount of the incentive compensation pool if not resulting from changes in the incentive pool formula or allocations and not resulting from accounting or operational effects of the acquisition; (ii) any change in assignment of Executive's primary duties to a work location more than 50 miles from the Company's principal executive office at 2830 South Fairview Street, Santa Ana, California 92704, without Executive's prior written consent; (iii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company; 3 (iv) any material breach by the Company of any provision of this Agreement; or (v) any action taken by the Board or a standing Committee of the Board in connection with, or the formation of a special Committee of the Board for the purpose of, effecting any of the events listed in subparagraphs (i) through (iv) immediately above; b. Change of Control. For purposes of this Agreement, "Change in Control" means the occurrence of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company's then outstanding voting securities; (ii) Consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty-one percent (51%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approving a plan of complete liquidation of the Company or a consummation of the sale or disposition by the Company of all or substantially all of the Company's assets. c. Voluntary Termination by Executive. After a Change in Control, without reason or for any reason other than one set forth in Section 2.a above, Executive may voluntarily terminate his employment with the Company under any oral or written employment agreement upon a minimum of one (1) month's written notice to the Company. 3. Executive's Benefits Following Termination. a. Executive's Benefits in Termination by Executive without "Good Reason" following Change in Control. If this Agreement is terminated following a Change in Control by Executive without "Good Reason": 4 (i) Salary. Executive or his estate shall be entitled to receive 100% of his latest base salary for a period of n months following the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date notice of termination is given). (ii) Incentive Compensation. Executive or his estate will be entitled to receive a prorated portion of the incentive compensation for the partial year ending on the Date of Termination. (iii) Car Allowance. The car allowance shall continue until the expiration of n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Company gives notice of termination), subject to termination as described in Section 7. (iv) Stock Options. The restricted stock granted by the Company to Executive under all plans and all stock options and general stock appreciation rights granted by the Company to Executive will remain in existence, and continue to vest and remain exercisable for a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Company gives notice of termination), subject in either case to the latest expiration date specified in the restricted stock or option agreements. (v) Medical and Life Insurance. Payment of premiums for medical, dental and vision insurance and life insurance by the Company shall continue on and subject to the terms of this Agreement for a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Company gives notice of termination), subject to termination under Section 7. (vi) Retirement Plans; Unvested Company Contribution. The Executive shall be entitled to receive, not later than the fifteenth (15th) day following the Date of Termination, all benefits payable to him under any of the Company's tax-qualified employee benefit plans and any other plan, program or arrangement relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the aforementioned plans. The Company 5 shall not be required to pay Executive any amount of unvested Company contributions credited to the Executive's account under any tax-qualified employee benefit plan maintained by the Company as of the Date of Termination. In the event that this paragraph should conflict with the provisions of any of the Company's tax-qualified employee benefit plans and any other plan, program or arrangement relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the aforementioned plans, then the provisions of the plan shall govern. (vii) Vacation and Sick Leave. The Company shall also pay Executive, not later than the second day following the Date of Termination, a pro rata amount of his base salary under his employment agreement, in effect on the Date of Termination, for each day of vacation leave which has accrued as of the Date of Termination, but which is unpaid as of such date, to which Executive is entitled under the Company's vacation leave policy. The Company shall be required to pay for sick leave days only to the extent that Executive has taken sick leave on or prior to the Date of Termination to which Executive is entitled under the Company's sick leave policy. (viii) General. Executive or his estate shall also be entitled to any other amounts then owing or accrued but unpaid to the Executive pursuant to any plans or arrangements of the Company. b. Executive's Benefits in Termination by Executive for "Good Reason" or by Company following Change in Control. If this Agreement is terminated following a Change in Control by Executive for "Good Reason" or by the Company: (i) Salary. Executive or his estate shall be entitled to receive 100% of his latest base salary for a period equal to the longer of (a) a period of two (2) years following the Date of Termination or (b) a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Date of Termination). (ii) Incentive Compensation. Executive or his estate will be entitled to receive incentive compensation of two (2) times the highest annual incentive compensation amount paid during any of the preceding three (3) full plan years. (iii) Car Allowance. The car allowance shall continue for a period equal to the longer of (a) a period of two (2) years following the Date of Termination or (b) a period 6 ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Date of Termination), in either case subject to termination as described in Section 7. (iv) Stock Options. The restriction or forfeiture period on any restricted stock granted by the Company to Executive under all plans and all stock options and general stock appreciation rights granted by the Company to Executive shall lapse or accelerate, as the case may be, and become fully vested and exercisable on the Date of Termination, and shall remain exercisable for a period equal to the longer of (a) a period of two (2) years following the Date of Termination or (b) a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Date of Termination), subject in either case to the latest expiration date specified in the restricted stock or option agreements. (v) Medical and Life Insurance. Payment of premiums for medical, dental and vision insurance and life insurance by the Company shall continue on and subject to the terms of this Agreement for a period equal to the longer of (a) a period of two (2) years following the Date of Termination or (b) a period ending n months after the Date of Termination (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date the Date of Termination), in either case subject to termination under Section 7. (vi) Retirement Plans; Unvested Company Contribution. The Executive shall be entitled to receive, not later than the fifteenth (15th) day following the Date of Termination, all benefits payable to him under any of the Company's tax-qualified employee benefit plans and any other plan, program or arrangement relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the aforementioned plans. The Company shall also pay Executive, not later than the fifteenth (15th) day following the Date of Termination, an amount equal to all unvested Company contributions credited to the Executive's account under any tax-qualified employee benefit plan maintained by the Company as of the Date of Termination. In the event that this paragraph should conflict with the provisions of any of the Company's tax-qualified employee benefit plans and any other plan, program or arrangement relating to deferred compensation, retirement or other benefits including, without limitation, any profit sharing, 401(k), employee stock ownership plan, or any plan established as a supplement to any of the 7 aforementioned plans, then the provisions of the plan shall govern, provided that the Company's contribution shall vest pursuant to this Section. (vii) Vacation and Sick Leave. The Company shall also pay Executive, not later than the second day following the Date of Termination, a pro rata amount of his base salary under his employment agreement, in effect on the Date of Termination, for each day of vacation leave which has accrued as of the Date of Termination, but which is unpaid as of such date, to which Executive is entitled under the Company's vacation leave policy. The Company shall be required to pay for sick leave days only to the extent that Executive has taken sick leave on or prior to the Date of Termination to which Executive is entitled under the Company's sick leave policy. (viii) General. Executive or his estate shall also be entitled to any other amounts then owing or accrued but unpaid to the Executive pursuant to any plans or arrangements of the Company. 4. Other Benefits Following Termination. Executive shall also be entitled to the following additional benefits upon or following such termination: a. During the period following employment or benefits hereunder, to the extent required by law, Executive shall have the rights under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), or any successor statute. 5. Excise Taxes. If all or any portion of the amounts payable to Executive or on Executive's behalf under this Agreement or otherwise are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (or similar state tax and/or assessment), the Company shall pay to Executive an amount necessary to place Executive in the same after-tax position as Executive would have been had no such excise tax been imposed. The amount payable pursuant to the preceding sentence shall be grossed-up to the extent necessary to pay income and excise taxes due on such amount. The determination of the amount of any such tax indemnity shall initially be made by the independent accounting firm then employed by the Company. If at a later date it is determined (pursuant to final regulations or published rulings of the IRS, final judgment of a court of competent jurisdiction or otherwise) that the amount of excise taxes payable by Executive is greater than the amount initially so determined, then the Company (or its successor) shall pay Executive an amount equal to the sum of (1) such additional excise taxes, (2) any interest, fines and penalties resulting from such underpayment, plus (3) a gross-up amount 8 necessary to reimburse Executive for any income, excise or other taxes payable by Executive with respect to the amounts specified in (1) and (2) above, and the reimbursement provided by this clause (3). 6. Indemnification. For at least ten (10) years following the Date of Termination for any reason, Executive shall continue to be indemnified under the Company's Certificate of Incorporation and Bylaws at least to the same extent indemnification was available prior to the Date of Termination and permitted by law, and Executive shall be insured under the directors' and officers' liability insurance, the fiduciary liability insurance and the professional liability insurance policies that are the same as, or provide coverage at least equivalent to, those applicable or made available by the Company to the then members of senior management of the Company. Independent of such provision, if at any time Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, by reason of the fact that Executive is or was a director or officer of the Company or serves or served any other corporation fifty percent (50%) or more owned or controlled by the Company in any capacity at the Company's request, Executive shall be indemnified by the Company, and the Company shall pay Executive's related expenses when and as incurred, all to the full extent permitted by law. 7. Obligatory Restrictions on Executive. Executive agrees that during the period of the commencing on the Date of Termination and extending the lesser of two years or n months (where n is equal to the sum of three (3) months plus a number of months equal to the number of years elapsed from the Hire Date to the date notice of termination is given), except as provided below or with the Company's written consent, he will be bound by the following restrictive covenants: a. Non-Competition. Following any involuntary termination following a Change in Control or a termination by Executive for Good Reason following a Change in Control, the restrictions in this paragraph, and any similar restrictions under any employment agreement between the Company and Executive or otherwise shall be of no force or effect. In the event of a voluntary termination (other than for Good Reason) by Executive following a Change in Control, Executive will not, directly or indirectly, engage for his own account in, or own, manage, operate, control, be employed as an employee or consultant, buy, participate in, or be connected in any manner with the ownership, management, operation or control of any firm, corporation, association, or other business entity which is in competition with the business of the Company; provided that Executive may invest in a business competitive with the Company to an extent not exceeding five percent (5%) of the total outstanding shares at the time of such investment in each one or more 9 companies. A business will be considered for this purpose in competition with the Company if and only if the products of such business include more than one- third of the Company's products as of immediately prior to the Change in Control. In the event of a breach or threatened breach by Executive of the provisions of this paragraph, the Company shall be entitled to an injunction restraining Executive from violating the provisions of this paragraph. b. No Solicitation of Employees. Executive will not solicit or, with the exception of any persons related to Executive by blood, marriage, or adoption, not more remote than first cousin, employ any current or future employee of the Company and will not intentionally disparage the Company, its management or its products. c. Consideration. Executive's obligations are made partly in consideration of the salary and other benefits paid or committed to be paid by the Company following the Date of Termination. The restrictive covenants on the part of Executive set forth in this Section 20 shall survive the termination of this Agreement, and the existence of any claims or cause of action by Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense in the enforcement of these covenants. 8. Termination of Certain Benefits Following New Employment. If Executive accepts a substantial engagement or employment ("New Employment") with any other corporation, partnership, trust, government or other entity at any time during the term of benefit continuation referred to above, the Company may elect that Executive cease to be entitled to car allowance or medical, dental or vision insurance benefits effective upon the commencement of such other engagement or employment. However, Executive shall nevertheless continue to be entitled to the other benefits of this Agreement and shall continue to be bound by the provisions of this Agreement for any remaining duration of any period then applicable to Executive. For the purposes of this provision, "employment" or "engagement" shall exclude (i) service as an officer or director of a personal investment holding company, (ii) service as a director on the Board of a corporation or nonprofit organization, (iii) engagement as a bona fide part-time consultant, or (iv) self-employment or engagement as an officer or director of an operating corporation or enterprise (as opposed to a personal investment holding company) founded or controlled by Executive and which has (and only so long as it continues to have) revenues of less than $25 million per year. 10 9. No Mitigation by Executive Required. Company recognizes that because of Executive's special talents, stature and opportunities in the electronics industry, in the event of termination by the Company or Executive before the end of the agreed term, the parties acknowledge and agree that the provisions of this Agreement regarding further payment of base salary, bonuses, and the exercisability of stock options and lapse of the restrictive or forfeiture period on restricted stock constitute fair and reasonable provisions for the consequences of such termination, do not constitute a penalty, and such payments and benefits shall not be limited or reduced by amounts Executive might earn or be able to earn from any other employment or ventures during the remainder of the agreed term of this Agreement. Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. 10. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of Executive, his heirs, distributees and assigns, and the Company, its successors and assigns. Executive may not, without the express written permission of the Company, assign or pledge any rights or obligations hereunder to any person, firm or corporation. Such permission shall not be unreasonably withheld. If the Executive should die while any amount would still be payable to Executive if he had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with this Agreement to the Executive's estate. 11. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect. 12. Assignment and Other Rights. The Company will require any successor (whether direct or indirect, by operation of law, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same 11 amount and on the same terms as the Executive would be entitled hereunder, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be the Date of Termination. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business and/or assets that assumes and agrees to perform this Agreement by operation of law, or otherwise. 13. Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 14. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the Executive at his home address appearing in the records of the Company, in the case of the Executive, and in the case of the Company, to the attention of the Chairman of the Board at the principal executive offices of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. Acceptance by Executive of benefits of participation shall constitute a certification by Executive of his continued eligibility for participation. 15. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of California. 16. Costs. Each of the parties shall pay its own expenses, including attorneys' fees, in the negotiation and preparation of this Agreement. 17. Severability. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not held so invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If 12 any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. If this Agreement is held invalid or cannot be enforced, then to the full extent permitted by law, any prior agreement between the Company (or any predecessor thereof) and Executive shall be deemed reinstated as if this Agreement has not been executed. 18. Arbitration. a. Any disagreement, dispute, controversy or claim arising out of or in any way related to this Agreement or the subject matter thereof or the interpretation hereof or any arrangements relating hereto or contemplated herein or the breach, termination or invalidity hereof shall be settled exclusively and finally by arbitration. b. The arbitration shall be conducted in accordance with the Commercial Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA"). The arbitral tribunal shall consist of one arbitrator. c. The Company shall pay all of the fees, if any, and expenses of such arbitration, and shall also pay all Executive's expenses, including attorneys' fees, incurred in connection with the arbitration regardless of the final outcome of such arbitration. d. The arbitration shall be conducted in Orange County, California, or in any other city or county in the United States of America as the parties to the dispute may designate by mutual written consent. e. Any decision or award of the tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties hereto hereby waive to the extent permitted by law any rights to appeal or to review such award by any court or tribunal. The parties hereto agree that the award may be enforced against the parties to the arbitration proceeding or their assets wherever the award may be entered in any court having jurisdiction thereof. f. The parties stipulate that discovery may be held in any such arbitration proceeding as provided in Section 1283.05 of the California Code of Civil Procedure, as may be amended or revised from time to time. 13 g. During the period until the dispute is finally resolved in accordance with this Section, the Company will continue to pay the Executive his full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, employee benefit and insurance plans, programs, arrangements and perquisites in which the Executive was participating or entitled when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this paragraph (c). Amounts paid under this paragraph (c) shall be repaid to the Company or be offset against or reduce any other amounts due the Executive under this Agreement, as appropriate, only upon the final resolution of the dispute. 19. Entire Agreement. As of the date hereof, all previous agreements relating to the employment of Executive, however styled, are hereby superseded to the extent inconsistent herewith, and, excepting Executive's present participation in Company stock and/or other benefit plans or programs and the agreements thereunder, which are hereby reaffirmed in all respects by both parties thereto except as expressly modified by this Agreement, this Agreement embodies all agreements, contracts, and understandings by and between the parties hereto. In addition, this Agreement supersedes and amends any subsequent employment agreement between Executive and the Company except to the extent such subsequent agreement expressly provides or provides benefits in excess of those herein provided. Should any other agreement, plan or arrangement between Company and Executive or other officers or employees of the Company provide for greater benefits upon a change in control, the terms of such other agreement, plan or arrangement shall apply to Executive on a "most favored" basis. This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension, or discharge is sought. 20. Separate Counsel. The Company has been represented by Stradling, Yocca, Carlson & Rauth in the negotiation and execution of this Agreement. The Executive has been invited and given opportunity to engage counsel to review or negotiate this Agreement, and Executive has either done so or chosen not to engage counsel. 14 IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. EXECUTIVE: COMPANY: MICROSEMI CORPORATION /s/ David R. Sonksen By: /s/ Martin H. Jurick - ---------------------------- ------------------------------- Martin H. Jurick, Chairman of the Compensation Committee 15 EX-10.84 4 SUPPLEMENT EXECUTIVE RETIREMENT PLAN Exhibit 10.84 MICROSEMI CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective September 15, 1986 (the "Effective Date"), Microsemi Corporation (the "Company") hereby establishes the Microsemi Corporation Supplemental Executive Retirement Plan (the "Plan") for the benefit of those Participants and their Beneficiaries set forth on Exhibit "A" attached to the Plan, and incorporated herein by this reference. ARTICLE I PURPOSE OF THE PLAN 1.1 Plan Purpose. The Plan is established for the purpose of providing ------------ retirement benefits for a select group of management or highly compensated employees of the Company and is intended to be an unfunded plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"). All benefits under the Plan will be provided solely from the general assets of the Company. It is intended that the Plan be exempt from Parts II, III and IV of Title I of ERISA pursuant to ERISA Sections 201(2), 301(a)(3) and 401(a)(1). ARTICLE II PARTICIPATION 2.1 Eligibility. The Board of Directors of the Company (the "Board"), in its ----------- sole discretion, has designated those individuals eligible to participate in the Plan. Each individual so designated shall automatically become a participant ("Participant") as of the date determined by the Board. Each Participant who has commenced participation in the Plan shall continue to be a Participant until he or she terminates his or her employment with the Company by reason of his or her retirement, death, disability, resignation, dismissal or otherwise. Notwithstanding the foregoing, the Board expressly reserves the right to remove any Participant under the Plan from participation in the Plan at any time for cause prior to the Participant's Retirement Date. The persons designated as Participants as of the Effective Date are those individuals set forth on Exhibit "A" attached hereto and incorporated herein by this reference. ARTICLE III AMOUNT OF BENEFIT 3.1 Retirement Benefit. Commencing with the Commencement Date and ------------------ terminating on the first day of the 119th calendar month following the Commencement Date (the "Pension Period"), the Company shall pay each Retiree an amount equal to his Monthly Benefit. In the event that the Retiree dies after the Commencement Date, the Monthly Benefit shall be paid to the Beneficiary for the remainder of the Pension Period. 3.2 Death Benefit. In the event that a Participant dies while he or she is ------------- an employee of the Company, commencing with the Beneficiary Commencement Date and terminating on the first day of the 119th calendar month following the Beneficiary Commencement Date (the "Death Benefit Period"), the Company shall pay the Beneficiary an amount equal to the Monthly Death Benefit. In the event that the Beneficiary dies after the Beneficiary Commencement Date, the Monthly Death Benefit shall be paid to the Beneficiary's estate during the Death Benefit Period. 3.3 Definitions. As used in this Agreement, the following defined terms ----------- shall mean: (a) Beneficiary. "Beneficiary" means: ----------- (i) the Participant's surviving spouse; (ii) If his or her surviving spouse is still alive, the Participant may designate another person to be the Beneficiary only if his or her spouse consents in writing to the designation of such person as the Beneficiary and the consent acknowledges the effect of the designation and is witnessed by an officer of the Company or a notary public, or it is established to the satisfaction of an officer of the Company that the consent required under this paragraph may not be obtained because there is no spouse, the spouse cannot be located, or such other circumstances as may be authorized by the Board. (iii) In the case where a deceased Participant failed to designate a Beneficiary, the Board is unable to locate a designated Beneficiary, the Beneficiary predeceased the Participant, or the designation of the Beneficiary by the Participant is legally ineffective, any distribution on behalf of a Participant shall be paid to the person or persons included in the highest priority category among the following: (A) The Participant's surviving Spouse; (B) The Participant's surviving children, including adopted children; (C) The Participant's surviving parents; (D) The Participant's surviving brothers and sisters (whether whole or half-blood); or (E) The Participant's estate. In the event the Participant has neither a surviving spouse nor a properly designated Beneficiary, the remaining portion of his benefit shall be made to his estate. (b) Beneficiary Commencement Date. "Beneficiary Commencement Date" means the ----------------------------- first day of the calendar month following the calendar month in which a Participant dies. (c) Commencement Date. "Commencement Date" means the first day of the calendar ----------------- month following the calendar month in which a Participant attains his Retirement Date. (d) Monthly Benefit. "Monthly Benefit" means one-twelfth of a Participant's --------------- Plan Benefit for the Plan Year in which the Participant commences retirement. (e) Monthly Death Benefit. "Monthly Death Benefit" means one-twelfth of a --------------------- Participant's Plan Benefit for the Plan Year in which the Participant dies. (f) Plan Year. "Plan Year" means the calendar year, January 1 through --------- December 31. 2 (g) Retiree. "Retiree" means a Participant who has attained his Retirement ------- Date. (h) Retirement Date. "Retirement Date" means the date on which a Participant --------------- terminates his employment with the Company after he or she has retired from employment with the Company and has been designated as a Retiree by the Board of Directors, in its sole and absolute discretion. (i) Years of Service. "Years of Service" means a Plan Year in which the ---------------- Participant was employed on a full time basis by the Company on each business day during the Plan Year. 3.4 Payees under Legal Disability. If the Board reasonably believes that any ----------------------------- payee is legally incapable of giving a valid receipt and discharge for any payment due him, the Board may have the payment, or any part of it, made to the person (or persons or institution) whom it reasonably believes is caring for or supporting such payee. Any such payment shall be a payment for the benefit of the payee and shall, to the extent thereof, be a complete discharge of any liability under the Plan to the payee. 3.5 Payment of Benefits. All payments under the Plan shall be delivered in ------------------- person or mailed to the last address of the Participant (or, in the case of the death of the Participant, to that of the Beneficiary determined under the rules of Section 3.3). Each Participant shall be responsible for furnishing the Committee with the Participant's correct current address and the correct current name and address of the Beneficiary. 3.6 Claims Procedure. In the event a claim for benefit by either a ---------------- Participant, Retiree or Beneficiary is denied (in whole or in part), the denial and the appeal of the decision shall be handled in accordance with the provisions of Department of Labor Regulation 2560.503-1. ARTICLE IV BENEFITS UNFUNDED 4.1 Benefits Unfunded. The benefits under this Plan shall not be funded, but ----------------- shall constitute an unsecured liability payable, when due, by the Company out of its general assets. 4.2 Program to Satisfy Plan Obligations. Notwithstanding Section 4.1 above, ----------------------------------- the Board may, in its sole discretion, elect to set aside amounts ("Reserves") for the purpose of paying benefits under the Plan. Reserves, if any, may be in an amount determined by the Board in its sole discretion. Reserves may be invested or not invested in the manner determined by the Board in its sole discretion. Should the Board decide to establish Reserves, the Reserves shall remain assets of the Company. In no event shall any Participant, Retiree or Beneficiary have any right to any specific asset designated to be Reserves under this Section. 3 ARTICLE V VESTING OF BENEFITS 5.1 Vesting. Except as provided in this Article, all Participants are fully ------- vested in their Accounts in the Plan. 5.2 Termination for Cause. In the event that a Participant's employment with --------------------- the Company is terminated for cause by the Board, the Board, in its sole and absolute discretion, may declare the benefits payable under Section 3.1 or 3.2 forfeited and may terminate the Company's obligation to pay future benefits to that Participant, Retiree or Beneficiary under the Plan. 5.3 Unfair Trade Practices. Notwithstanding the provisions of Section 5.1, ---------------------- if a Participant, Retiree or Beneficiary either uses, divulges, furnishes or makes accessible to anyone any knowledge or information with respect to any confidential, proprietary or secret aspect of the business or any program of the Company or engages in any act of unfair competition with the Company or accepts employment or consults for a competitor of the Company, the Board, in its sole and absolute discretion, may declare the benefits payable under Section 3.1 or 3.2 forfeited and may terminate the Company's obligation to pay future benefits to that Participant, Retiree or Beneficiary under the Plan. 5.4 Limitation on Vesting. Notwithstanding the vesting of a Participant's --------------------- benefits under this Article, a Participant's benefits under this Plan shall remain an unsecured, unfunded promise to pay benefits by the Company. All benefits under the Plan, whether fully vested, partially vested or unvested, are payable only in accordance with Article VI. ARTICLE VI PLAN ADMINISTRATION 6.1 Plan Administration. ------------------- (a) Authority to control and manage the operation and administration of the Plan shall be vested in the Board. The Board shall have all powers necessary to supervise the administration of the Plan and control its operations. (b) In addition to any powers and authority conferred on the Committee elsewhere in the Plan or by law, the Board shall have the following powers and authority: (i) To designate agents to carry out responsibilities relating to the Plan; (ii) To administer, interpret, construe and apply this Plan and to answer all questions which may arise or which may be raised under this Plan by the Participant, Retiree, Beneficiary or other person whatsoever; (iii) To establish rules and procedures from time to time for the conduct of its business and for the administration and effectuation of its responsibilities under the Plan; and (iv) To perform or cause to be performed such further acts as it may deem to be 4 necessary, appropriate, or convenient for the operation of the Plan. (c) Any action taken in good faith by the Board in the exercise of authority conferred upon it by this Plan shall be conclusive and binding upon the Participant, Retiree and Beneficiaries. All discretionary powers conferred upon the Board shall be absolute. 6.2 Limitation on Liability. No employee or member of the Board shall be ----------------------- subject to any liability with respect to his duties under the Plan unless the person acts fraudulently or in bad faith. To the extent permitted by law, the Company shall indemnify each member of the Board, and any other employee of the Company with duties under the Plan who was or is a party, or is threatened to be made a party, to any threatened, pending or completed proceeding, whether civil, criminal, administrative, or investigative, by reason of the person's conduct in the performance of his duties under the Plan. ARTICLE VII MISCELLANEOUS MATTERS 7.1 Amendment and Termination. The Company expects the Plan to be permanent, ------------------------- but since future conditions affecting the Company cannot be anticipated or foreseen, the Company reserves the right to amend, modify, or terminate the Plan at any time by action of the Board. Upon termination of the Plan, all benefits shall become payable to the Participants and Beneficiaries and shall be subject to the provisions of Section 4.1. 7.2 Benefits Not Alienable. Benefits under the Plan may not be assigned or ---------------------- alienated, whether voluntarily or involuntarily. 7.3 No Enlargement of Employee Rights. This Plan is strictly a voluntary --------------------------------- undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company and the Participant or to be consideration for, or an inducement to, or a condition of, the employment of the Participant. Nothing contained in the Plan shall be deemed to give the right to the Participant to be retained in the employ of the Company or to interfere with the right of the Company to discharge the Participant at any time. No person shall have any right to any benefits under this Plan, except to the extent expressly provided herein. 7.4 Governing Law. To the extent not preempted by federal law, all legal ------------- questions pertaining to the Plan shall be determined in accordance with the laws of the State of California. IN WITNESS WHEREOF, in order to record the adoption of the Plan, Microsemi Corporation has caused this instrument to be executed by its duly authorized officer to be effective January 1, 1994. MICROSEMI CORPORATION By: /s/ Philip Frey, Jr. -------------------- Its: President, CEO ----------------------------- 5 EXHIBIT "A" SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) ---------------------------------------------
BENEFIT SERVICE NAME *CATEGORY DATE ---- --------- -------- P. Frey 1 7/5/71 J. Sandera 1 11/15/71 J. McKnight 2 3/12/73 B. Brandt 2 2/12/73 R. Robinson 2 1/5/70 P. Kellogg 2 10/12/64 J. Lim 2 1/11/65 C. Schumacher 2 7/12/76
* Benefit Category: 1 - 30% of annual salary, defined as the cumulative total salary paid during the 12 months prior to retirement (excluding all bonus, special allowances, 401(k) payments, and any other special non-salary payments), shall be paid to the participant each year as an annual ONE LUMP SUM PAYMENT WHICH IS TO BE PAID ON THE FIRST DAY OF THE SECOND MONTH AFTER RETIREMENT, and on each anniversary thereafter for 10 payment years certain. Should the participant die prior to the final payment of the 10 payments, payments, up to the total of 10 such payments, are to be made to the estate of the employee on each scheduled payment date. Participants are fully vested and qualified for the benefits of the plan and may take full advantage of the SERP immediately or at any future date decided either by the Board of Directors or lacking such direction by the Board, according to participant choice. 2 - 20% of 1994 salary (excluding all 401(k), bonus or other special non-salary payments), shall be paid annually for 10 years certain, to the named participants upon their retirement by either their choice or the choice of the Company. 30% of the 1994 salary (excluding all 401(k) or other special non-salary payments), shall be paid annually for 10 years certain to the named participants upon their retirement by either their choice or the choice of the Company, if they will have completed at least 30 years of credited employment with the Company. For all employment years between 20 and 30, the percentage of 1994 salary shall be a straight line interpolation, and for each month of employment beyond 20, and additional .00833 fraction of their 1994 salary shall be added to the 20% base of 20 years, up to a maximum of 30% after 30 years (i.e., +1% per year up to 30 years). The payments shall be made each month, starting upon the 1st day of the second month after retirement, and continue for 120 months. Should the participant die before payments have been completed, the remainder of the payments will be made to the estate of the participant. EX-27 5 FINANCIAL DATA SCHEDULE
5 1000 3-MOS SEP-27-1998 SEP-29-1997 DEC-28-1997 5,753 0 27,826 2,614 53,700 94,859 72,219 36,625 134,879 38,125 46,394 0 0 1,835 44,073 134,879 44,052 44,052 32,033 32,033 (20) 0 912 4,987 1,895 3,092 0 0 0 3,092 .35 .28
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