<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1997
REGISTRATION NO. 333-38991
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
AMENDMENT NO.1 TO
FORM F-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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PEAK INTERNATIONAL LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-----------
NOT APPLICABLE
(TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)
BERMUDA 3089 NOT APPLICABLE
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
UNITS 3, 4, 5 AND 7, 37TH FLOOR
WHARF CABLE TOWER
9 HOI SHING ROAD
TSUEN WAN
N.T., HONG KONG
(852) 2402-5100
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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PEAK INTERNATIONAL, INC.
2111 KRAMER LANE
AUSTIN, TEXAS 78758
U.S.A.
(512) 339-4684
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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COPIES TO:
RICHARD A. DRUCKER, ESQ. JOHN E. LANGE, ESQ.
DAVIS POLK & WARDWELL PAUL, WEISS, RIFKIND, WHARTON &
THE HONG KONG CLUB BUILDING, 18TH GARRISON
FLOOR THE HONG KONG CLUB BUILDING, 13TH
3A CHATER ROAD FLOOR
CENTRAL, HONG KONG 3A CHATER ROAD
CENTRAL, HONG KONG
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [_]
-----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 4, 1997
, 1997
2,500,000 SHARES
[PEAK INTERNATIONAL LIMITED LOGO APPEARS HERE]
PEAK INTERNATIONAL LIMITED
(incorporated in Bermuda with limited liability)
COMMON STOCK
All of the 2,500,000 shares of common stock, par value $0.01 per share
("Common Stock"), of Peak International Limited (the "Company") (each a
"Share") offered hereby (the "Offering") are being offered by a shareholder of
the Company (the "Selling Shareholder"). See "Selling Shareholder." The Company
will not receive any proceeds from the sale of the Shares offered hereby.
The Company is a Bermuda holding company which owns 100% of the outstanding
shares of Peak Plastic & Metal Products (International) Limited, a company
incorporated under the laws of Hong Kong, and has certain other subsidiaries.
Following the Offering, the Selling Shareholder, who owned 77.2% of the Shares
prior to the Offering, will own 58.6% of the outstanding Shares and generally
will continue to be in a position to control actions that require shareholders'
approval, including the timing and payment of dividends and certain other
actions to be taken by the Company, and the election of the entire Board of
Directors of the Company. See "Selling Shareholder" and "Management."
Effective October 31, 1997, the Shares began to trade on the Nasdaq National
Market ("Nasdaq") under the symbol "PEAKF." Prior to October 31, 1997, the
Shares traded on Nasdaq under the symbol "PITLF." The last reported sale price
of the Shares on November 3, 1997 was $22 3/4 per Share. See "Price Range of
Shares."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS
PRICE UNDERWRITING TO THE
TO THE DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) SHAREHOLDER(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
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(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Selling Shareholder, estimated at
$1,000,000.
(3) The Selling Shareholder has granted to the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to 375,000
additional Shares at the Price to the Public, less Underwriting Discounts
and Commissions, solely to cover over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Selling
Shareholder will be $ , $ and $ , respectively. See
"Underwriting."
The Shares are being offered hereby by the several Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the underwriters and
subject to various prior conditions, including their right to reject orders in
whole or in part. It is expected that delivery of the share certificates will
be made in New York, New York, on or about , 1997.
DONALDSON, LUFKIN & JENRETTE BANCAMERICA ROBERTSON STEPHENS
SECURITIES CORPORATION
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form F-1 (including all amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Shares offered hereby.
This prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of
the Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
The Company is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), applicable to a foreign private issuer, and in accordance therewith
files reports and other information with the Commission. The Registration
Statement (with exhibits), as well as such reports and other information, when
so filed, can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549; and at the regional offices of the Commission at
Seven World Trade Center, 13th Floor, New York, New York 10048, and at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, such material can also be obtained from the Commission's
Web site at http://www.sec.gov. Such reports and other information may also be
inspected at the offices of Nasdaq, 1735 K Street, N.W., Washington, D.C.
20006. As a foreign private issuer, the Company is exempt from certain
provisions of the Exchange Act requiring the furnishing and content of proxy
statements and requiring reporting of insider purchases and sales.
ENFORCEMENT OF CIVIL LIABILITIES
The Company is an exempted company (that is, it is exempted from the
provisions of Bermuda law which stipulate that at least 60% of the equity must
be beneficially owned by Bermudians) organized under the laws of Bermuda, and
all or a substantial portion of its assets are located outside the United
States. In addition, most of the members of the Board of Directors and the
officers of the Company and certain of the experts named herein are resident
outside the United States (principally in the Hong Kong Special Administrative
Region ("Hong Kong") and elsewhere in the People's Republic of China (the
"PRC" or "China")), and all or a substantial portion of the assets of such
persons are or may be located outside the United States. As a result, it may
not be possible for investors to effect service of process within the United
States upon such persons, or to enforce against them, the Company or the
Selling Shareholder judgments obtained in United States courts predicated upon
the civil liability provisions of the federal securities laws. The Company and
the Selling Shareholder have been advised by their Bermuda counsel, Conyers
Dill & Pearman, and their Hong Kong counsel, Richards Butler, that in the
opinion of such counsel there is doubt as to the enforceability in Bermuda and
Hong Kong, respectively, in original actions or in actions for enforcement of
judgments of United States courts, of civil liabilities predicated solely upon
the United States federal securities laws.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE SHARES ON
NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
NO ACTION HAS BEEN TAKEN BY THE REPRESENTATIVES OF THE UNDERWRITERS OR THE
COMPANY TO PERMIT A PUBLIC OFFERING OF THE SHARES IN ANY JURISDICTION OTHER
THAN THE UNITED STATES. THE DISTRIBUTION OF THIS PROSPECTUS AND OFFERS AND
SALES OF SHARES IN FOREIGN JURISDICTIONS MAY BE RESTRICTED BY LAW. SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
appearing elsewhere herein. Unless otherwise indicated, the information
contained herein assumes no exercise of the Underwriters' over-allotment
option. All references to the "Company" herein are references to Peak
International Limited, a company incorporated under Bermuda law on January 3,
1997, and, unless the context otherwise requires, its subsidiaries and
predecessors. All references to "Peak (HK) " herein are to Peak Plastic & Metal
Products (International) Limited, a company incorporated in Hong Kong and a
wholly-owned indirect subsidiary of the Company and, unless the context
otherwise requires, its subsidiaries and predecessors. References in this
Prospectus to the historical business and operations of the Company assume that
the corporate reorganization in 1997 (the "Restructuring") by which, among
other things, Peak (HK) became a wholly-owned subsidiary of the Company and the
Company acquired its other subsidiaries, had already occurred as of the times
to which the references relate. Any discrepancies in the tables included in
this Prospectus between the amounts indicated and the totals thereof are due to
rounding. All references to "US Dollars, " "US$" or "$" herein are to United
States Dollars, references to "HK Dollars" or "HK$" are to Hong Kong Dollars
and references to " Fiscal 1993," "Fiscal 1994," "Fiscal 1995," "Fiscal 1996,"
"Fiscal 1997," "Fiscal 1998" and "Fiscal 1999" are to the years ended March 31,
1993, 1994, 1995, 1996, 1997, 1998 and 1999, respectively.
THE COMPANY
The Company is a leading supplier of precision engineered packaging products
for the storage, transportation and automated handling of semiconductor devices
and other electronic components. The Company's products are designed to
interface with automated handling equipment used in the production and testing
of semiconductor and electronic products. The Company's customers include
semiconductor companies such as Texas Instruments, SGS-Thomson, Philips and
Motorola, as well as subcontract assembly and test companies such as ASAT and
ASE. The Company's products are designed to ensure that semiconductor devices
and electronic components, which are often delicate and may have significant
value, are protected from mechanical and electrical damage during storage,
transportation and automated handling.
The Company produces principally matrix trays, shipping tubes, reels and
carrier tape. The Company also produces leadframe boxes and interleaves used in
the storage and transportation of leadframes. In addition, the Company sells
recycled matrix trays and reels under the trade name "SemiCycle." The Company
believes that its recycling programs, whereby the Company collects and recycles
both products manufactured by itself and products manufactured by others,
enable it to expand its customer base by providing it with opportunities to
supply both newly-manufactured and recycled products to customers.
In recent years, the Company has experienced a significant increase in demand
for its products as a result of unit volume growth and other developments in
the global semiconductor industry. First, the increasing complexity of
semiconductor devices and use of automated production equipment have shifted
the use of packaging products by semiconductor companies away from traditional
products, such as tubes, in favor of products such as matrix trays and carrier
tape which require precision engineering. Second, with the advent of Surface
Mount Technology ("SMT"), increasing lead-count and finer lead-to-lead spacing,
semiconductor devices have become more susceptible to mechanical damage during
shipment. As a result, the use of precision engineered packaging products such
as matrix trays has increased. Third, the Company believes that the recent
trend in the global semiconductor industry towards increased out-sourcing of
various steps of the IC production process, such as assembly and testing, will
also benefit the Company as semiconductor companies increasingly look for
suppliers of packaging products with the ability to supply large quantities of
a wide range of products on short notice to different subcontractor assembly
and test companies at various locations.
During the last three years, the Company's consolidated net sales have
increased from $35.1 million in Fiscal 1995 to $54.9 million in Fiscal 1996 and
to $57.6 million in Fiscal 1997, and its consolidated net income has increased
from $2.7 million in Fiscal 1995 to $11.5 million in Fiscal 1996 and $13.5
million in Fiscal 1997. The Company's consolidated net sales increased from
$25.6 million for the six months ended September 30, 1996 to $34.0 million for
the six months ended September 30, 1997, and its consolidated net income
increased from $5.5 million for the six months ended September 30, 1996 to $9.1
million for the six months ended September 30, 1997. The Company believes that
its growth has largely been attributable to the implementation of its business
strategy.
3
<PAGE>
The Company's objective is to increase its market presence in serving the
growing semiconductor and electronics industries by providing top quality
service, precision engineered packaging solutions and recycling alternatives to
manufacturers of semiconductor devices and electronic components through its
integrated manufacturing capability and its recycling programs, with collection
points in Asia, North America and Europe. The key elements of the Company's
business strategy are:
Leverage Industry Expertise of Senior Management. Members of the
Company's senior management team have extensive experience in the
semiconductor industry which provides them with a first hand understanding
of customer and market requirements. The Company believes that the industry
experience and close customer relationships of its senior management enable
the Company to identify and evaluate potential markets for future product
development.
Maintain Close Customer Relationships. The Company maintains close
relationships with its customers through an extensive network of
strategically located sales, customer service and product distribution
sites and by working closely with its customers in developing precision
engineered packaging solutions for the storage, transportation and
automated handling of their products. In addition, the Company's recycling
programs provide it with opportunities to monitor changes in particular
customer requirements.
Shorten Delivery Time. The Company intends to attract and retain
customers on the basis of its ability to deliver large quantities of
products on short notice to meet customer demand. By initiating its
recycling programs, stocking certain key products in a network of Just-in-
Time ("JIT") warehouses, maintained either by the Company's local sales
representatives or the Company, and increasing its tooling capacity and raw
material compounding capabilities, the Company has been able to achieve
shorter production cycles and improve its responsiveness to customer
requirements for flexibility in delivery.
Offer a Broad Range of Products. In recent years, the Company has
expanded its product offerings from tubes to include matrix trays, recycled
matrix trays and tape-and-reel products. The Company's ability to offer a
broad range of products allows the Company to compete effectively with
other suppliers of packaging products to the semiconductor and electronics
industries, a number of which are single-product suppliers.
Increase Volume Supply Capabilities. The Company has been expanding its
production and tooling capacities and its recycling programs so as to
increase its high volume supply capabilities. Since 1992, the Company has
expanded the production capacity of its facilities in Shenzhen, China in
order to meet growing demand. The Company is planning further expansion
through the construction of an additional plant to be located approximately
three miles from the existing production facilities, which would double the
Company's production capacity.
Emphasize Quality Assurance and Process Control. The Company performs
quality assurance and statistical process control procedures at each major
stage of production for its products. These include the inspection of
incoming raw materials, statistical process control at the injection
molding (for trays and reels) and extrusion (for tubes) stages of
production and the inspection and testing of finished products. The
Company's production facilities in Shenzhen, China have been certified as
meeting the ISO 9002 quality standards since October 1994.
4
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Selling Shareholder.. 2,500,000 Shares
Common Stock outstanding after the Offering...... 13,461,538 Shares
Use of proceeds.................................. The Company will not receive
any of the proceeds from the
sale of any Shares sold by
the Selling Shareholder. See
"Use of Proceeds."
Nasdaq National Market symbol.................... PEAKF(1)
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA(2)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------------------ ---------------------
1993 1994 1995 1996 1997 1996 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............. $13,395 $27,787 $35,115 $54,944 $57,594 $25,614 $34,033
Gross profit.......... 4,051 11,327 7,522 21,013 24,918 10,899 15,057
Income from
operations........... 2,199 7,759 3,104 12,334 15,990 6,565 9,608
Net income............ 1,518 7,457 2,741 11,490 13,517 5,527 9,109
Dividends paid........ -- 1,941 -- 9,719 1,294 1,294 --
Earnings per Share.... $ 0.15 $ 0.71 $ 0.26 $ 1.10 $ 1.29 $ 0.53 $ 0.74
======= ======= ======= ======= ======= ======= =======
<CAPTION>
Shares
outstanding(3)....... 10,461,538 10,461,538 10,461,538 10,461,538 10,461,538 10,461,538 12,239,067
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1997
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................... $17,484
Total assets................................................... 74,967
Short-term debt(4)............................................. 355
Long-term debt................................................. --
Shareholders' equity........................................... 66,324
</TABLE>
- -------------------
(1) Prior to October 31, 1997, the Shares traded on Nasdaq under the symbol
"PITLF."
(2) The consolidated financial data have been presented as if the Company,
which was incorporated on January 3, 1997, had been in existence for all
periods presented and 100% of Peak (HK) and other subsidiaries of the
Company had been transferred to the Company and that they had been
consolidated for Fiscal 1993 and subsequent years.
(3) Shares outstanding for each period presented (except for the six months
ended September 30, 1997) is based on 10,461,538 Shares outstanding prior
to the Company's initial public offering in June 1997, after giving effect
to the Restructuring. Shares outstanding during the six months ended
September 30, 1997 is based on the weighted average number of Shares and
common stock equivalents outstanding during such period.
(4) Short-term debt represents bank borrowings.
5
<PAGE>
RISK FACTORS
In evaluating the Company's business, prospective investors should consider
carefully the following factors in addition to the other information presented
herein. The Company is a holding company and its major operating asset is its
ownership interest in Peak (HK). The Company's only sources of cash flow are
its share of the dividends, if any, paid by Peak (HK) and other subsidiaries
of the Company.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Except for the historical information
contained in this Prospectus, the matters discussed herein are forward-looking
statements, including, without limitation, statements concerning the Company's
expectations, beliefs, intentions or strategies regarding the future. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance, or achievements
of the Company, or industry results, to be materially different from any
future results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the risk
factors set forth below as well as the following: general economic and
business conditions; industry capacity and trends; competition; expansion; the
loss of major customers; changes in demand for the Company's products; cost
and availability of raw materials; changes in business strategy or development
plans; changes in the laws of the PRC, Hong Kong or other jurisdictions;
quality of management; and availability, terms and deployment of capital.
Special attention should be paid to such forward-looking statements including,
but not limited to, statements relating to the Company's ability to obtain
sufficient financial resources to meet its capital expenditure and working
capital needs and the benefits expected to be derived from the planned
expansion of the Company's manufacturing facilities.
VARIABILITY OF OPERATING RESULTS
The Company's operating results are affected by a wide variety of factors
that could materially affect revenues and profitability or lead to significant
variability of quarterly or annual operating results. These factors include,
among others, the price of raw materials, factors relating to conditions in
the semiconductor and electronics industries such as lower demand for
products, increased price competition, downturns and deterioration of business
conditions; technological changes and changes in production processes in the
semiconductor and electronics industries which could require changes in
packaging products; capital requirements and the availability of funding; the
Company's expansion plan and possible disruptions caused by the installation
of new equipment or the construction of new facilities; the lack of long-term
purchase or supply agreements with customers; the loss of key personnel or the
shortage of available skilled employees; international political or economic
events or developments, including those relating to Hong Kong and the PRC; and
currency fluctuations. Unfavorable changes in the above or other factors could
materially and adversely affect the Company's results of operations or
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DEPENDENCE ON SEMICONDUCTOR AND ELECTRONICS INDUSTRIES
The global semiconductor industry in recent periods has experienced pricing
pressure for semiconductor products, as supply has been increasing. Any
deterioration of business conditions in the semiconductor industry, including
lower demand for semiconductor products, decreased unit volume of
semiconductor products shipped or other factors resulting in decreased demand
for packaging products, and increased price competition in the semiconductor
industry could result in increased price pressure on suppliers to the
semiconductor industry, and could have a material adverse effect on the
Company's results of operations and financial condition. The semiconductor
industry is characterized by rapid technological change leading to more
complex products, evolving industry standards, intense competition and
fluctuations in demand. From time to time, the industry has experienced
significant downturns which in some cases have been prolonged. These downturns
have been characterized by diminished product demand, product overcapacity and
accelerated erosion of average selling prices. No assurance can be given that
any future downturn in the semiconductor industry will not be severe or that
the Company's results of operations or financial condition will not be
materially and adversely affected by such downturns or other developments. In
addition, the Company's growth depends on increased demand from manufacturers
of electronic components such as electronic connectors, resistors and
capacitors. As a result, any deterioration of business conditions in the
electronics industry could have a material adverse effect on the Company's
results of operations and financial condition. The electronics industry is
subject to intense competition, is highly volatile and is subject to
significant shifts in demand.
6
<PAGE>
MANAGEMENT OF EXPANSION
The Company has expanded its production capacity significantly in recent
years and expects to continue to expand capacity in future periods. See
"Business--Production Facilities." To manage its growth, the Company must
continue to implement and improve its operational, financial and quality
assurance and process control systems and to expand, train and manage its
employee base. Further, the Company will be required to continue to manage
multiple relationships with various customers and other third parties. While
the Company believes it has effectively managed its expansion in recent years,
there can be no assurance that the Company will be able in the future to
manage its expansion effectively. The implementation by the Company of its
expansion program is expected to place additional demands on the Company's
managerial, financial, logistical and other resources, which could adversely
affect its existing operations. In particular, the failure of the Company to
implement its expansion plan in a timely manner could adversely affect its
ability to maintain, expand and diversify its customer base. See "Business--
Production Facilities." In addition, there can be no assurance that the
implementation by the Company of its expansion plan will not adversely affect
its existing operations.
DEPENDENCE ON SIGNIFICANT CUSTOMERS
In the aggregate, the top ten customers accounted for 34.6%, 51.7%, 51.2%
and 62.0% of the Company's net sales in Fiscal 1995, Fiscal 1996, Fiscal 1997
and the six months ended September 30, 1997, respectively. A significant
portion of the Company's net sales has historically been and is expected to
continue to be derived from ASAT Limited ("ASAT"), a subcontract assembly and
test company, and QPL Limited ("QPL"), a leadframe manufacturer, and other
companies in the QPL International Holdings Limited ("QPL Holdings") group,
which together accounted for approximately 2.2%, 20.9%, 16.1% and 14.8% of the
Company's net sales in Fiscal 1995, Fiscal 1996, Fiscal 1997 and the six
months ended September 30, 1997, respectively. See "Management" and "Certain
Transactions." The ability of the Company to maintain close, mutually
beneficial relationships with such customers is important to the ongoing
growth and profitability of its business. Although the Company's sales to
specific customers have varied from year to year, the Company's results of
operations have been dependent on a number of significant customers and the
conditions of their respective industries. As a result of the amount of time
required to develop working relationships with new customers, the Company's
results of operations have been dependent on its existing customers and the
conditions of their respective industries. All of the Company's customers
operate in the global semiconductor industry which has historically been
highly cyclical. As a result of the concentration of the Company's customer
base, the loss or cancellation of business from, or significant changes in
scheduled deliveries or decreases in the prices of products or services
provided to, any of these customers could materially and adversely affect the
Company's results of operations and financial condition. The Company's sales
are made pursuant to purchase orders and therefore the Company generally has
no agreements with or commitments from its customers for the purchase of
products. Although customers typically provide the Company with forecasts of
their requirements, such forecasts are not binding. No assurance can be given
that the Company's customers will maintain or increase their sales volumes or
orders for the Company's products or that the Company will be able to maintain
or add to its existing customer base.
COMPETITION
The markets for the Company's products and services are highly competitive.
The Company's products compete with similar products manufactured by other
companies, some of which have substantially greater financial resources than
the Company. See "Business--Competition." The Company's competitors
continually evaluate plans to increase their manufacturing capacity, to
improve their production processes or to invest in new facilities. In
addition, the Company's competitors may have plans to establish recycling
programs and operations similar to those of the Company's and other companies
may have plans to enter the packaging products business. Any such increased
capacity could result in excess capacity and more intense competition and
could have a material adverse effect on the Company's results of operations
and financial condition. The Company's results of operations have benefitted
in recent years from the operations of its recycling programs. There can be no
assurance that the Company's results in the future will benefit to the same
extent from the operations of its recycling programs. While the Company is not
currently aware that any of its major competitors operate comparable recycling
programs, there is no assurance that the Company's competitors will not
commence operations of such recycling programs or that any such recycling
programs, if commenced, will not compete successfully with the Company's
programs or that the Company's financial condition and results of operations
would not be materially and adversely affected as a result.
7
<PAGE>
While the Company has sought patent protection in instances in which it
believes that a patent will provide sufficiently broad coverage and protection
for certain of its new product features, the Company has chosen not to attempt
to obtain patents for its processes and production techniques. Instead, the
Company intends to rely on certain unpatented proprietary processes and
production techniques to maintain and develop its competitive position. There
can be no assurance that others will not independently develop similar
processes or production techniques or obtain access to the Company's
unpatented proprietary processes or production techniques.
FLUCTUATIONS IN THE PRICES OF RAW MATERIALS
Although the Company believes that supplies of raw materials used in the
Company's production processes currently are adequate, increases in the prices
of various critical materials could occur in the future due to interruption of
supply or increased industry demand. Any such increases would result in higher
costs, which would have a material adverse effect on the Company's results of
operations and financial condition. See "Business--Raw Materials." In recent
periods, volatility in the price of PVC resin has had a material adverse
effect on the Company's results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
CURRENCY EXCHANGE RATE FLUCTUATIONS
The Company's net sales are generally denominated in US Dollars, Singapore
Dollars and Malaysian Ringgit, while its costs of goods sold are generally
incurred in US Dollars, Hong Kong Dollars and Renminbi, and its operating
expenses are generally denominated in Renminbi, Hong Kong Dollars, US Dollars
and Malaysian Ringgit. In addition, a substantial portion of the Company's
capital expenditures, primarily for the purchase of equipment, has been and is
expected to continue to be denominated in US Dollars, Japanese Yen and
Malaysian Ringgit. Consequently, a portion of the Company's costs and
operating margins may be affected by fluctuations in exchange rates, primarily
between the US Dollar and other currencies. The Company's results of
operations and financial condition could be adversely affected by fluctuations
in currency exchange rates or the imposition of new or additional currency
controls in the jurisdictions in which it operates. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Primarily in response to recent developments in the Southeast Asian currency
markets, the Company from time to time engages in derivative trading
activities, such as entering into forward contracts, to hedge its currency
exchange exposure.
CONCENTRATION OF OPERATIONS IN THE PRC
As of September 30, 1997, substantially all of the Company's fixed assets
and inventories were located in Shenzhen, China. The Company's main production
facilities are located in Shenzhen, China and are operated by an unaffiliated
PRC company under a processing agreement, pursuant to which such company
provides all of the personnel for the operation of the Company's facilities
and renders assistance in dealing with matters relating to the import of raw
materials and the export of the Company's products. The Company's additional
production facilities will be operated under similar arrangements. The
Company's existing production facilities in Shenzhen, China are, and the
Company's additional facilities in Shenzhen, China will be, located on land
leased from the PRC government by a wholly-owned subsidiary of the Company
under land use certificates and agreements with terms of fifty years. The
Company's assets and facilities located in the PRC and the PRC company's
operation of such facilities are subject to the laws and regulations of the
PRC and the Company's results of operations in the PRC are subject to the
economic and political situation in the PRC.
The operations of the Company's production facilities in Shenzhen, China may
be adversely affected by changes in the laws and regulations of the PRC (or
the interpretation thereof), such as those relating to taxation, import and
export tariffs, environmental regulations, land use rights, property and other
matters. The Company currently exports all the products manufactured at its
production facilities in Shenzhen, China. Accordingly, the Company is not
subject to certain PRC taxes and is exempt from customs duties on imported raw
materials and exported products. There is no assurance, however, that the
Company will not become subject to PRC taxes or will not be required to pay
customs duties in the future. In the event that the Company is required to pay
PRC taxes or customs duties, the Company's results of operations could be
materially and adversely affected. The Company believes that its operations in
Shenzhen, China are in compliance with applicable PRC legal and regulatory
requirements. However, there can be no assurance that the central or local
governments of the PRC will not impose new, stricter regulations or
interpretations of existing regulations which would require additional
expenditures.
The economy of the PRC differs from the economies of many countries in such
respects as structure, government involvement, level of development, growth
rate, capital reinvestment, allocation of resources, self- sufficiency, rate
of
8
<PAGE>
inflation and balance of payments position, among others. In the past, the
economy of the PRC has been primarily a planned economy subject to State
plans. Since 1978, the PRC government has been reforming the PRC's economic
and political systems. Such reforms have resulted in significant economic
growth and social change. There can be no assurance, however, that the PRC
government's policies for economic reforms will be consistent or effective.
The Company's results of operations and financial position may be adversely
affected by changes in the PRC's political, economic or social conditions.
CONSIDERATIONS RELATING TO HONG KONG
The Company maintains its principal executive offices, a sales office and
JIT warehouse in Hong Kong and its general invoicing and accounting functions
are centralized at its offices in Hong Kong. On July 1, 1997, sovereignty over
Hong Kong reverted from the United Kingdom to the PRC, and Hong Kong has
become a Special Administrative Region ("SAR") of the PRC. The Joint
Declaration signed by the PRC government and the government of the United
Kingdom on December 19, 1984 (the "Joint Declaration") provides that the basic
policies of the PRC regarding Hong Kong will be stipulated in the basic law of
Hong Kong which was enacted by the National People's Congress of the PRC on
April 4, 1990 (the "Basic Law"). Although the Basic Law provides that Hong
Kong will have a high degree of legislative, judicial and economic autonomy,
there can be no assurance that the general economic position of Hong Kong, and
the Company's results of operations and financial condition, will not be
adversely affected as a consequence of the exercise of PRC sovereignty over
Hong Kong.
Under the Hong Kong tax authority's Departmental Interpretation and Practice
Notes, a company based in Hong Kong but with substantially all of its
manufacturing operations located in the PRC conducted pursuant to a processing
agreement entered into with a PRC company can enjoy profit apportionment
through which only 50% of its manufacturing profit is subject to Hong Kong
profits tax. Substantially all of the Company's manufacturing operations are
located in Shenzhen, China and conducted pursuant to a processing agreement
entered into with a PRC company. See "Business--Employees." The current
profits tax rate in Hong Kong is 16.5%. Under profits apportionment, only 50%
of the profits of the Company is subject to Hong Kong profits tax and as a
result, the Company enjoys a lower effective tax rate than would otherwise be
the case. Such tax concession has been granted based on an annual application
by the Company and there can be no assurance that the Hong Kong tax authority
will continue to grant such tax concession to the Company and other Hong Kong
companies with manufacturing operations in China, or that the Company will not
lose such concession in the future as a result of changes in Hong Kong tax law
or the interpretation of such law. In the event that such tax concessions are
unavailable to the Company, the Company's results of operations could be
materially and adversely affected.
RELATIONSHIP WITH PRINCIPAL SHAREHOLDER AND POTENTIAL CONFLICTS OF INTERESTS
Upon completion of the Offering, Mr. T.L. Li will, through his ownership of
all of the outstanding shares of Luckygold 18A Limited ("Luckygold"), a
company incorporated in the British Virgin Islands ("BVI"), own approximately
58.6% of the outstanding Shares (55.8% if the Underwriters' over-allotment
option is exercised in full). Accordingly, after the Offering, Mr. T.L. Li
will continue to be in a position to control actions that require
shareholders' approval, including the timing and payment of dividends and
certain other actions to be taken by the Company, and the election of the
entire Board of Directors of the Company. In addition, certain members of the
Company's Board of Directors serve as directors of companies in the QPL
Holdings group. See "Management" and "Certain Transactions."
A significant portion of the Company's net sales has historically been and
is expected to continue to be derived from ASAT, QPL and other companies in
the QPL Holdings group of companies, which together accounted for
approximately 2.2%, 20.9%, 16.1% and 14.8% of the Company's net sales in
Fiscal 1995, Fiscal 1996, Fiscal 1997 and the six months ended September 30,
1997, respectively. Accordingly, any adverse development in the operations,
competitive position or customer base of ASAT, QPL or such other companies
could have a material adverse effect on the results of operations and
financial condition of the Company. See "Business--Customers" and "Certain
Transactions." EEMS Italia S.p.A. ("EEMS"), a memory IC assembly and test
company, has acted as the Company's sales agent in Europe since 1995. After
the Offering, Mr. T.L. Li will continue to be the controlling shareholder and
Chairman of QPL Holdings (the parent holding company of QPL and ASAT) and of
EEMS, as well as the controlling shareholder of the Company and will not,
under Bermuda law, owe any fiduciary obligation towards the Company or its
minority shareholders in his capacity as a shareholder of the Company.
Accordingly, Mr. T.L. Li may take actions as the controlling shareholder of
QPL Holdings and as the controlling shareholder of EEMS that are not in the
best interests of the Company or its minority shareholders.
9
<PAGE>
After the Offering, QPL and ASAT will continue to be customers of the
Company and may engage in transactions from time to time with the Company that
are material to the Company. See "Certain Transactions."
POTENTIAL DIFFICULTIES IN PROTECTING SHAREHOLDER RIGHTS
The Company's corporate affairs are governed by its Memorandum of
Association and Bye-laws and by the laws governing corporations incorporated
in Bermuda. The rights of shareholders of the Company and the responsibilities
of members of the Company's Board of Directors under Bermuda law are different
from those applicable to a corporation incorporated in the United States and,
therefore, the shareholders of the Company may have more difficulty in
protecting their interests in connection with actions by the management,
members of the Company's Board of Directors or controlling shareholders of the
Company than they would as shareholders of a corporation incorporated in the
United States. See "Description of the Shares."
PRICE VOLATILITY
The market price of the Shares has been highly volatile and may continue to
be subject to wide fluctuations in response to quarterly variations in
operating results, changes in financial estimates by securities analysts, or
other events or factors. In addition, the equity markets in the United States
have experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many high
technology companies and that often have been unrelated to the operating
performance of such companies. These broad market fluctuations may adversely
affect the market price of the Shares. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Shares in the public market following the
Offering could adversely affect the market price of the Shares. The Company
has approximately 13.5 million Shares outstanding. Of these Shares,
approximately 5.6 million Shares (approximately 5.9 million Shares if the
Underwriters' over-allotment option is exercised in full), including the
Shares sold in the Offering, will be freely tradeable within the United States
without restriction or further registration under the Securities Act by
persons other than "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act. See "Shares Eligible for Future Sale."
Upon completion of the Offering, Mr. T.L. Li will control approximately
58.6% of the outstanding Shares (55.8% if the Underwriters' over-allotment
option is exercised in full). The Company, Mr. Li and the executive officers
and directors of the Company have agreed they will not offer, sell, contract
to sell, grant any option to purchase, or otherwise dispose of any Shares or
any securities convertible into or exercisable or exchangeable for such Shares
or in any other manner transfer all or a portion of the economic consequences
associated with the ownership of any such Shares, except to the Underwriters,
for a period of 90 days from the date hereof, subject to certain exceptions,
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. However, Donaldson, Lufkin & Jenrette Securities Corporation may,
in its sole discretion and at any time without notice, release all or any
portion of the securities subject to lock-up agreements. Following such
respective lock-up periods, such Shares will be eligible for resale, subject
to the registration requirements under the Securities Act. See "Shares
Eligible for Future Sale." In addition, the Company intends to file one or
more registration statements on Form S-8 under the Securities Act to register
the Shares issuable pursuant to its share option plan. See "Management--Share
Option Plan." To the extent outstanding options to purchase the Company's
Shares are exercised, such Shares will be available for sale in the open
market, subject to certain restrictions. See "Shares Eligible for Future
Sale."
10
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the Shares
offered hereby, nor will any such proceeds be available for use by the Company
or otherwise for the Company's benefit.
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
capitalization of the Company as of September 30, 1997.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1997
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
Short-term debt (l).............................................. $ 355
=======
Long-term debt................................................... $ --
Shareholders' equity
Common stock................................................... 135
Additional paid-in-capital..................................... 34,034
Retained earnings.............................................. 32,632
Other reserves................................................. (477)
-------
Total shareholders' equity................................... 66,324
-------
Total capitalization............................................. $66,324
=======
</TABLE>
- -------------------
(1) Short-term debt represents bank borrowings.
PRICE RANGE OF SHARES
Effective October 31, 1997, the Shares began to trade on Nasdaq under the
symbol "PEAKF." Prior to October 31, 1997, the Shares traded on Nasdaq under
the symbol "PITLF." Public trading of the Shares commenced on June 20, 1997.
Prior to that time, there was no public market for the Shares. The following
table sets forth the high and low sale prices for the Shares as reported by
Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
---------------
HIGH LOW
<S> <C> <C>
Year Ending March 31, 1998:
1st Quarter (from June 20, 1997).......................... $12 3/4 $11 7/8
2nd Quarter............................................... 26 1/8 10 7/8
3rd Quarter (through November 3, 1997).................... 31 1/2 22 1/2
</TABLE>
On November 3, 1997, the last reported sale price of the Shares on Nasdaq
was $22 3/4 per Share. As of November 3, 1997, there were seven holders of
record of the Shares.
DIVIDEND POLICY
The Company intends to retain its earnings to finance the development and
expansion of its business operations and does not intend to pay dividends for
the foreseeable future.
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated income statement data for the six months ended
September 30, 1996 and 1997, and the selected consolidated balance sheet data
as of September 30, 1996 and 1997 set forth below are derived from the
Company's unaudited consolidated financial statements included elsewhere in
this Prospectus and should be read in conjunction with, and are qualified in
their entirety by reference to, such consolidated financial statements,
including the notes thereto. Such selected consolidated income statement data
and balance sheet data are unaudited but, in the Company's opinion, include
all adjustments necessary for a fair presentation of such data. Results for
the six months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1998. The selected
consolidated income statement data for the years ended March 31, 1995, 1996
and 1997 and the selected consolidated balance sheet data as of March 31,
1995, 1996 and 1997 set forth below are derived from the Company's audited
financial statements included elsewhere herein and should be read in
conjunction with, and are qualified in their entirety by reference to, such
financial statements, including the notes thereto. The selected consolidated
income statement data for the years ended March 31, 1993 and 1994 and the
selected consolidated balance sheet data as of March 31, 1993 and 1994 set
forth below are derived from the Company's audited financial statements not
included herein. The consolidated financial statements have been prepared and
presented in accordance with U.S. GAAP.
The consolidated financial data set forth below have been presented as if
the Company, which was incorporated on January 31, 1997, had been in existence
for all periods presented and 100% of Peak (HK) and other subsidiaries of the
Company had been transferred to the Company and that they had been
consolidated for Fiscal 1993 and subsequent years. The consolidated financial
data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes thereto, included
elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1996 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $13,395 $27,787 $35,115 $54,944 $57,594 $25,614 $34,033
Cost of goods sold........ (9,344) (16,460) (27,593) (33,931) (32,676) (14,715) (18,976)
------- ------- ------- ------- ------- ------- -------
Gross profit.............. 4,051 11,327 7,522 21,013 24,918 10,899 15,057
Operating expenses:
General and
administrative and
research and
development............ (1,281) (2,632) (2,616) (5,385) (4,730) (2,502) (2,811)
Selling and marketing... (571) (936) (1,802) (3,294) (4,198) (1,832) (2,638)
------- ------- ------- ------- ------- ------- -------
Income from operations.... 2,199 7,759 3,104 12,334 15,990 6,565 9,608
Other income.............. 17 276 234 1,133 83 -- 415
Net interest expense...... (181) (80) (405) (750) (1,320) (464) (137)
------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................... 2,035 7,955 2,933 12,717 14,753 6,101 9,886
Provision for income
taxes.................... (517) (498) (192) (1,227) (1,236) (574) (777)
------- ------- ------- ------- ------- ------- -------
Net income................ $ 1,518 $ 7,457 $ 2,741 $11,490 $13,517 $ 5,527 $ 9,109
======= ======= ======= ======= ======= ======= =======
Dividends paid............ $ -- $ 1,941 $ -- $ 9,719 $ 1,294 $ 1,294 $ --
Earnings per Share........ $ 0.15 $ 0.71 $ 0.26 $ 1.10 $ 1.29 $ 0.53 $ 0.74
======= ======= ======= ======= ======= ======= =======
<CAPTION>
Shares outstanding(1)..... 10,461,538 10,461,538 10,461,538 10,461,538 10,461,538 10,461,538 12,239,067
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF
--------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (IN THOUSANDS)
Cash and cash
equivalents.......... $ 287 $ 1,180 $ 1,828 $ 924 $ 1,814 $17,484
Total assets.......... 13,278 24,288 35,210 38,423 53,795 74,967
Short-term debt(2).... 5,142 11,868 13,879 19,156 21,170 355
Long-term debt........ 10 1 -- -- -- --
Shareholders' equity.. 3,861 9,255 11,701 13,960 26,272 66,324
</TABLE>
- -------------------
(1) Shares outstanding for each period presented (except for the six months
ended September 30, 1997) is based on 10,461,538 Shares outstanding prior
to the Company's initial public offering in June 1997, after giving effect
to the Restructuring. Shares outstanding during the six months ended
September 30, 1997 is based on the weighted average number of Shares and
common stock equivalents outstanding during such period.
(2) Short-term debt consists of bank borrowings, amount due to shareholder and
current portion of long-term debt.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following information is based on, and should be read in conjunction
with, the consolidated financial statements of the Company and the related
notes thereto included elsewhere herein.
GENERAL
The Company produces matrix trays, shipping tubes, reels and carrier tape
for the storage, transportation and automatic handling of semiconductor
devices and other electronic components. The Company also produces leadframe
boxes and interleaves used in the storage and transportation of leadframes. In
addition, the Company sells recycled matrix trays and reels under the trade
name "SemiCycle." In Fiscal 1997, approximately 63.9% of the Company's net
sales related to the Company's tray products, 14.9% to tube products, 3.7% to
reels and 9.3% to other products. In the six months ended September 30, 1997,
approximately 60.4% of the Company's net sales related to its tray products,
14.4% to tube products, 4.9% to reels and 13.8% to other products, compared to
63.0% to tray products, 16.6% to tube products, 3.7% to reels and 9.7% to
other products in the six months ended September 30, 1996. In Fiscal 1997 and
the six months ended September 30, 1997, all of the Company's sales were made
to customers located in Asia, North America and Europe. See "Business--Sales
and Marketing."
In recent years, the Company has experienced a significant increase in
demand for its products as a result of growth in the global semiconductor
industry. The Company's consolidated net sales increased by 32.9% to $34.0
million for the six months ended September 30, 1997, compared to $25.6 million
for the six months ended September 30, 1996, and its consolidated net income
increased by 64.8% to $9.1 million for the six months ended September 30,
1997, compared to $5.5 million for the six months ended September 30, 1996.
During the last three years, the Company's consolidated net sales have
increased from $35.1 million in Fiscal 1995 to $54.9 million in Fiscal 1996
and to $57.6 million in Fiscal 1997, and its consolidated net income has
increased from $2.7 million in Fiscal 1995 to $11.5 million in Fiscal 1996 and
to $13.5 million in Fiscal 1997. The Company believes that its growth has
largely been attributable to the implementation of its business strategy. The
Company's results of operations in Fiscal 1995 were adversely affected by
increases in the price of PVC resin, the principal raw material in the
manufacture of tubes. In Fiscal 1995, gross margin decreased to 21.4%,
compared to 40.8% for the year ended March 31, 1994 and operating margin
decreased to 8.8%, compared to 27.9% for the year ended March 31, 1994. In
response to such changes, the Company raised the prices of its tube products
and implemented procedures intended to improve its inventory management and
purchasing systems. The Company also increased the proportion of its product
mix represented by its higher-margin products such as tape and reel products.
In Fiscal 1997, the Company's gross margin increased to 43.3%, compared to
38.2% in Fiscal 1996, and the Company's operating margin increased to 27.8%,
compared to 22.4% in Fiscal 1996.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain income
statement items for the Company as a percentage of net sales.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------- --------------
1995 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C>
Net sales........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................. (78.6) (61.8) (56.7) (57.4) (55.8)
------- ------- ------- ------ ------
Gross profit........................ 21.4 38.2 43.3 42.6 44.2
Operating expenses:
General and administrative and
research and development......... (7.4) (9.8) (8.2) (9.8) (8.3)
Selling and marketing............. (5.1) (6.0) (7.3) (7.2) (7.8)
------- ------- ------- ------ ------
Income from operations.............. 8.8 22.4 27.8 25.6 28.1
------- ------- ------- ------ ------
Income before income taxes.......... 8.3 23.1 25.6 23.8 29.0
Provision for income taxes.......... (0.5) (2.2) (2.1) (2.2) (2.3)
------- ------- ------- ------ ------
Net income.......................... 7.8% 20.9% 23.5% 21.6% 26.7%
======= ======= ======= ====== ======
</TABLE>
14
<PAGE>
The table below sets forth, for the periods indicated, the net sales of each
of the Company's principal product categories, and the percentage of the
Company's net sales accounted for by each such category. In the table below as
well as in the following discussion of the Company's results of operations in
the periods indicated, the net sales of tray products, tube products and reels
do not include the sales mark-up on such products sold by the Company's sales
offices located in the United States, Singapore and Malaysia. Revenue from
such sales mark-up is included in "other revenues."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
----------------------------------------------- -------------------------------
1995 1996 1997 1996 1997
--------------- --------------- --------------- --------------- ---------------
SALES PERCENT SALES PERCENT SALES PERCENT SALES PERCENT SALES PERCENT
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tray products........... $22,437 63.9% $35,595 64.8% $36,815 63.9% $16,149 63.0% $20,559 60.4%
Tube products........... 8,286 23.6 10,525 19.2 8,579 14.9 4,251 16.6 4,910 14.4
Reels................... 638 1.8 1,392 2.5 2,126 3.7 938 3.7 1,649 4.9
Other products(1)....... 3,339 9.5 4,684 8.5 5,348 9.3 2,491 9.7 4,687 13.8
Other revenues(2)....... 415 1.2 2,748 5.0 4,726 8.2 1,785 7.0 2,228 6.5
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total.................. $35,115 100.0% $54,944 100.0% $57,594 100.0% $25,614 100.0% $34,033 100.0%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- -------------------
(1) Includes leadframe boxes, leadframe interleaves, carrier tape and other
products. The sale of carrier tape accounted for 4.0% of the Company's net
sales in the six months ended September 30, 1997.
(2) Includes sales mark-up by the Company's sales offices located in the
United States, Singapore and Malaysia in respect of the Company's tray
products, tube products, reels and other products.
SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO SIX MONTHS ENDED SEPTEMBER
30, 1996
Net Sales. Net sales increased by 32.9% to $34.0 million for the six months
ended September 30, 1997 from $25.6 million for the six months ended September
30, 1996. Net sales of trays increased by 27.3% to $20.6 million for the six
months ended September 30, 1997 from $16.1 million for the six months ended
September 30, 1996, primarily as a result of an increase in the volume of low
temperature bakeable trays sold. Net sales of tape and reel products increased
to $3.1 million in the six months ended September 30, 1997 from $0.9 million
in the six months ended September 30, 1996. Net sales of tubes increased by
15.5% to $4.9 million in the six months ended September 30, 1997 from $4.3
million in the six months ended September 30, 1996.
Gross Profit. Gross profit increased by 38.2% to $15.1 million for the six
months ended September 30, 1997 from $10.9 million for the six months ended
September 30, 1996. Cost of goods sold increased by 29.0% to $19.0 million in
the six months ended September 30, 1997 from $14.7 million in the six months
ended September 30, 1996. The Company's gross margin improved to 44.2% in the
six months ended September 30, 1997 from 42.6% in the six months ended
September 30, 1996, primarily as a result of lower raw material costs and the
increased proportion of the Company's product mix represented by tape and reel
products, which tend to generate higher gross margins than tubes (which
represented a lower proportion of the Company's product mix in the six months
ended September 30, 1997, compared to the six months ended September 30,
1996).
Income from Operations. Operating income increased by 46.4% to $9.6 million
for the six months ended September 30, 1997 from $6.6 million for the six
months ended September 30, 1996. The Company's operating margin improved to
28.1% in the six months ended September 30, 1997 from 25.6% in the six months
ended September 30, 1996, primarily as a result of improvements in the
Company's gross margin, partially offset by an increase in selling and
marketing expenses.
General and Administrative and Research and Development Expenses. General
and administrative and research and development expenses increased by 12.4%
to $2.8 million for the six months ended September 30, 1997 from $2.5
million for the six months ended September 30, 1996 primarily is due to an
increase in research and development expenses incurred in connection with
the continuing development of the Company's tape and reel product line.
General and administrative and research and development expenses decreased
as a percentage of total sales to 8.3% for the six months ended September
30, 1997 from 9.8% for the six months ended September 30, 1996, primarily
due to an increase in sales.
Selling and Marketing Expenses. Selling and marketing expenses increased
by 44.0% to $2.6 million in the six months ended September 30, 1997 from
$1.8 million in the six months ended September 30, 1996, primarily as a
result of additional staff hired in connection with the expanded sales and
marketing of the Company's existing products as well as new products such
as tape and reel products.
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Net Income. Net income increased by 64.8% to $9.1 million for the six months
ended September 30, 1997 from $5.5 million for the six months ended September
30, 1996. Net income as a percentage of sales improved to 26.7% for the six
months ended September 30, 1997 from 21.6% for the six months ended September
30, 1996. This increase reflected the foregoing factors, as well as a decrease
in interest expense for short-term bank borrowings due to increased funds
available from the Company's initial public offering in June 1997.
FISCAL 1997 COMPARED TO FISCAL 1996
Net Sales. Net sales increased by 4.8% to $57.6 million in Fiscal 1997 from
$54.9 million in Fiscal 1996. Net sales of trays increased by $1.2 million
over the period reflecting the effects of a 16.3% increase in sales volume,
substantially offset by a 11.1% decrease in average realized sales price. The
increase in the aggregate sales volume of the Company's tray products
reflected principally an increase in sales volume of recycled, low temperature
and non-bakeable trays, partially offset by decreases in the sales volume of
high temperature trays. Average realized sales price for the Company's tray
products decreased in the period reflecting principally a decrease in the
average realized sales price for recycled trays and high temperature trays,
partially offset by increases in the average realized sales price for the
Company's other tray products. The average realized price for recycled trays
decreased primarily as a result of a change in the product mix of the
Company's recycled trays reflecting increased sales of lower-priced low
temperature trays, principally in Taiwan and Japan. Net sales of tubes
decreased 18.5% to $8.6 million in Fiscal 1997 from $10.5 million in Fiscal
1996, while net sales of reels increased by 52.7% to $2.1 million in Fiscal
1997 from $1.4 million in Fiscal 1996, reflecting an increase in the
proportion of the Company's product mix represented by newer products such as
reels.
Gross Profit. Gross profit increased 18.6% to $24.9 million in Fiscal 1997
from $21.0 million in Fiscal 1996. Cost of goods sold decreased 3.7% to $32.7
million in Fiscal 1997 from $33.9 million in Fiscal 1996. Such decrease
resulted primarily from lower raw material costs due principally to lower
volumes of raw materials purchased by the Company as a result of an increase
in the use of recycled materials in manufacturing using the Company's
proprietary processes and production techniques. In addition, raw material
costs were lower in Fiscal 1997 compared to Fiscal 1996 as a result of the
lower average price of PVC resin. The Company's gross margin improved to 43.3%
in Fiscal 1997 from 38.2% in Fiscal 1996 primarily as a result of lower raw
material costs and the increased proportion of the Company's product mix
represented by reels, which tend to generate higher gross margin than tubes
(which represented a lower proportion of the Company's product mix in Fiscal
1997 compared to Fiscal 1996).
Income from Operations. Income from operations increased by 29.6% to $16.0
million in Fiscal 1997 from $12.3 million in Fiscal 1996. The Company's
operating margin improved to 27.8% in Fiscal 1997 from 22.4% in Fiscal 1996
primarily as a result of improvements in the Company's gross margin, partially
offset by an increase in selling and marketing expenses.
General and Administrative and Research and Development Expenses. General
and administrative and research and development expenses decreased 12.2% to
$4.7 million in Fiscal 1997 from $5.4 million in Fiscal 1996 primarily as a
result of reduced collection and administrative expenses relating to the
Company's recycling operations in the United States as the Company began
purchasing recycled trays collected by the SemiCycle Foundation instead of
collecting such trays itself. See "Certain Transactions."
Selling and Marketing Expenses. Selling and marketing expenses increased
27.4% to $4.2 million in Fiscal 1997 from $3.3 million in Fiscal 1996
primarily as a result of additional staff hired in connection with the
sales and marketing of new products such as tape and reel products.
Net Income. Net income increased 17.6% to $13.5 million in Fiscal 1997 from
$11.5 million in Fiscal 1996. This increase reflected the foregoing factors,
as well as a decrease in the Company's effective tax rate to 8.4% in Fiscal
1997 compared to 9.6% in Fiscal 1996, partially offset by an increase in
interest expense to $1.4 million in Fiscal 1997 from $0.8 million in Fiscal
1996. The decrease in the effective tax rate was due primarily to the effects
of a lower proportion of the Company's profits in Fiscal 1997 accounted for by
its operations located in the United States, which have higher applicable tax
rates. The increase in interest expense was due to the increase in bank
borrowings incurred for working capital purposes.
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales. Net sales increased 56.5% to $54.9 million in Fiscal 1996 from
$35.1 million in Fiscal 1995. Most of the increase was attributable to the
growth in net sales from trays. Net sales of the Company's tray products
increased
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58.6% to $35.6 million in Fiscal 1996 from $22.4 million in Fiscal 1995
primarily as a result of a 64.0% increase in sales volume, partially offset by
a 3.2% decrease in average realized sales price. The increase in the aggregate
sales volume of the Company's tray products in Fiscal 1996 reflected an
increase in sales volume for all categories of the Company's tray products, in
particular low temperature trays. Such increase in sales volume reflected
increases in the Company's recycling and production capacity in response to
increased demand from existing customers as well as demand from new customers.
Average realized sales price for the Company's tray products decreased in
Fiscal 1996 compared to Fiscal 1995, reflecting a decrease in average realized
sales prices for all categories of the Company's tray products. Such decrease
was partially offset by an increase in the proportion of the Company's tray
product mix represented by higher priced tray products such as low temperature
trays and high temperature trays. With the exception of the sales volume of
the Company's tube products, which decreased 5.7% in Fiscal 1996 from Fiscal
1995, the sales volume of the Company's principal products increased in Fiscal
1996 compared to Fiscal 1995.
Gross Profit. Gross profit increased 179.4% to $21.0 million in Fiscal 1996
from $7.5 million in Fiscal 1995. Cost of goods sold increased 23.0% to $33.9
million in Fiscal 1996 from $27.6 million in Fiscal 1995, primarily as a
result of increases in sales, partially offset by lower raw material costs.
The costs of raw materials decreased primarily as a result of decreases in the
prices of the principal raw materials used in the Company's production
processes, as well as decreases in the volumes of raw materials purchased by
the Company as a result of an increase in the use of recycled materials in
manufacturing using the Company's proprietary processes and production
techniques. The unit costs of raw materials were high in Fiscal 1995 primarily
as a result of increases in such period in the prices of PVC resin, which is
the principal raw material in the manufacture of the Company's tube products,
as well as the prices of certain additives used in such manufacture. The
Company's gross margin improved to 38.2% in Fiscal 1996 compared to 21.4% in
Fiscal 1995, primarily as a result of lower raw material costs, higher
manufacturing efficiency realized from higher volume production and the
increased proportion of net sales attributable to newer models of trays and
recycled trays, which tend to generate higher gross margins.
Income from Operations. Income from operations increased to $12.3 million in
Fiscal 1996 from $3.1 million in Fiscal 1995. Operating expenses increased
96.4% to $8.7 million in Fiscal 1996 from $4.4 million in Fiscal 1995. The
Company's operating margin improved to 22.4% in Fiscal 1996 from 8.8% in
Fiscal 1995, primarily as a result of economies of scale and improved
operating efficiencies realized as the Company's operations expanded.
General and Administrative and Research and Development Expenses. General
and administrative and research and development expenses increased 105.8%
to $5.4 million in Fiscal 1996 from $2.6 million in Fiscal 1995. As a
percentage of net sales, general and administrative expenses increased to
9.8% of net sales in Fiscal 1996 from 7.4% in Fiscal 1995. The increase was
primarily due to expenses incurred in Fiscal 1996 in connection with the
planned establishment of the Company's sales offices located in Singapore
and Penang, Malaysia and the establishment of JIT warehouses located in
Hong Kong, Kaohsiung, Taiwan and Malaysia.
Selling and Marketing Expenses. Selling and marketing expenses increased
82.8% to $3.3 million in Fiscal 1996 from $1.8 million in Fiscal 1995. As a
percentage of net sales, selling and marketing expenses increased to 6.0%
of net sales in Fiscal 1996 from 5.1% in Fiscal 1995. The increase was
primarily due to increased sales volume and the hiring of additional sales
and marketing staff principally in connection with such products as carrier
tape and certain types of trays.
Net Income. Net income increased to $11.5 million in Fiscal 1996 from $2.7
million in Fiscal 1995. This increase reflected the foregoing factors,
partially offset by an increase in the Company's effective tax rate to 9.6% in
Fiscal 1996, compared to 6.5% in Fiscal 1995. The increase in the effective
tax rate was due primarily to the write-back in Fiscal 1995 of an over-
provision made in prior years for Hong Kong profits tax.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met a significant portion of its cash
requirements from cash flow from operations and, prior to its initial public
offering in June 1997, shareholder loans, generally at no interest, from Mr.
T.L. Li as well as short-term bank loans guaranteed by Mr. T.L. Li. The
Company's primary uses of cash have been to fund capital expenditures related
to the expansion of its facilities and operations, dividend payments and
working capital requirements. The Company intends to continue to retain its
earnings to finance the development and expansion of its business operations
and does not intend to pay dividends for the foreseeable future. The Company's
net cash provided by operating activities was $4.4 million in the six months
ended September 30, 1997, compared to $5.2 million in the six months ended
September 30, 1996, and $9.5 million in Fiscal 1997, compared to $6.8 million
in Fiscal 1996 and $7.8 million in Fiscal 1995.
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The Company incurred capital expenditures of $6.3 million during the six
months ended September 30, 1997, $7.2 million in Fiscal 1997, $4.6 million in
Fiscal 1996 and $6.9 million in Fiscal 1995, primarily for the acquisition of
new equipment. See Note 15 of Notes to Consolidated Financial Statements. As
of September 30, 1997, the Company had commitments for capital expenditures of
$2.5 million. The Company has budgeted aggregate capital expenditures of
approximately $33.0 million for Fiscal 1998 and Fiscal 1999, primarily for the
acquisition of additional equipment and the construction of its additional
plant in Shenzhen, China, which is expected to be completed in 1999. To date,
the Company has expended approximately $2.0 million of such budgeted amount.
The actual amounts of capital expenditures may vary substantially from those
budgeted or estimated for a variety of reasons, including changes in market
conditions, unavailability or changes in scheduled delivery of specific
equipment, changes in interest rates and other factors. In addition, the
Company plans to continue to expand capacity in future periods from cash on
hand, including the proceeds of its June 1997 initial public offering, cash
flow from operations and new bank borrowings as required.
As of September 30, 1997, the Company had total outstanding indebtedness of
$0.4 million, representing unsecured bank borrowings. These bank borrowings
are at floating interest rates which, as of September 30, 1997, had a weighted
average of 9.25%. Mr. T.L. Li no longer guarantees any of the Company's bank
loans or overdrafts. Neither the Company's ability to obtain bank financing
nor its cost of funds has been materially affected. As of September 30, 1997,
the Company had available certain unused short-term lines of credit. See Note
7 of Notes to Consolidated Financial Statements.
From time to time, the Company may evaluate possible investments or
acquisitions and may, if a suitable opportunity arises, make such an
investment or acquisition. The Company currently has no commitments to make
any material investments or acquisitions.
PVC RESIN PRICE
PVC resin, the principal raw material used in the manufacture of tubes,
together with additives used in the manufacture of tubes accounted for 40.9%,
22.2%, 24.2% and 19.8% of the Company's total raw material costs in Fiscal
1995, Fiscal 1996, Fiscal 1997 and the six months ended September 30, 1997,
respectively. The Company's results of operations in Fiscal 1995 were
adversely affected by increases in the price of PVC resin, reflecting a
worldwide shortage in the supply of such commodity. While the Company believes
that, principally as a result of increased production capacity by suppliers, a
severe shortage in the supply of PVC resin is unlikely to occur in the
foreseeable future, there can be no assurance that such shortage will not
occur. Any price increases would result in higher costs, which could have a
material adverse effect on the Company's results of operations and financial
condition. In response to the increases in the price of PVC resin in Fiscal
1995, the Company raised the prices of its tube products and implemented
procedures intended to improve its inventory management and purchasing
systems. The Company currently maintains approximately two to three months
stock of PVC resin and other raw materials used in its production processes,
and increases such stock when it believes prices are favorable. The Company
does not, and does not intend to, enter into futures contracts or use any
financial instruments to hedge its exposure to fluctuations in the price of
PVC resin or other raw materials used in its production processes.
CURRENCY EXCHANGE RATE FLUCTUATIONS
The Company's net sales are generally denominated in US Dollars, Singapore
Dollars and Malaysian Ringgit, while its costs of goods sold are generally
incurred in US Dollars, Hong Kong Dollars and Renminbi, and its operating
expenses are generally denominated in Renminbi, Hong Kong Dollars, US Dollars
and Malaysian Ringgit. In addition, a substantial portion of the Company's
capital expenditures, primarily for the purchase of equipment, has been and is
expected to continue to be denominated in US Dollars, Japanese Yen and
Malaysian Ringgit. Consequently, a portion of the Company's costs and
operating margins may be affected by fluctuations in exchange rates, primarily
between the US Dollar and other currencies. The Company's results of
operations and financial condition could be adversely affected by fluctuations
in currency exchange rates or the imposition of new or additional currency
controls in the jurisdictions in which it operates. Primarily in response to
recent developments in the Southeast Asian currency markets, the Company from
time to time engages in derivatives trading activities, such as entering into
forward contracts, to hedge its currency exchange exposure.
HONG KONG PROFITS TAX
Under the Hong Kong tax authority's Departmental Interpretation and Practice
Notes, a company based in Hong Kong but with substantially all of its
manufacturing operations located in the PRC conducted pursuant to a processing
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agreement entered into with a PRC company can enjoy profit apportionment
through which only 50% of its manufacturing profit is subject to Hong Kong
profits tax. Substantially all of the Company's manufacturing operations are
located in Shenzhen, China and conducted pursuant to a processing agreement
entered into with a PRC company. See "Business--Employees." The current
profits tax rate in Hong Kong is 16.5% Under profits apportionment, only 50%
of the profits of the Company is subject to Hong Kong profits tax and, as a
result, the Company enjoys a lower effective tax rate than would otherwise be
the case. Such tax concession has been granted based on an annual application
by the Company and there can be no assurance that the Hong Kong tax authority
will continue to grant such tax concession to the Company and other Hong Kong
companies with manufacturing operations in China, or that the Company will not
lose such concession in the future as a result of changes in Hong Kong tax law
or the interpretation of such law. In the event that such tax concessions are
unavailable to the Company, the Company's results of operations could be
materially and adversely affected.
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BUSINESS
GENERAL
The Company is a leading supplier of precision engineered packaging products
for the storage, transportation and automated handling of semiconductor
devices and other electronic components. The Company's products are designed
to interface with automated handling equipment used in the production and
testing of semiconductor and electronic products. The Company's customers
include semiconductor companies such as Texas Instruments, SGS-Thomson,
Philips and Motorola, as well as subcontract assembly and test companies such
as ASAT and ASE. The Company's products are designed to ensure that
semiconductor devices and electronic components, which are often delicate and
may have significant value, are protected from mechanical and electrical
damage during storage, transportation and automated handling.
The Company produces principally matrix trays, shipping tubes, reels and
carrier tape. The Company also produces leadframe boxes and interleaves used
in the storage and transportation of leadframes. In addition, the Company
sells recycled matrix trays and reels under the name "SemiCycle." The Company
believes that its recycling programs, whereby the Company collects and
recycles both products manufactured by itself and products manufactured by
others, enable it to expand its customer base by providing it with
opportunities to supply both newly-manufactured and recycled products to
customers.
The Company's principal production facilities, located in Shenzhen, China
are equipped with injection molding machines, extruders, carrier tape
machines, mixing machines, ultra sonic welding machines and other machinery
and equipment. The Company maintains in-house tooling facilities capable of
producing the molds used for production, dies and tooling for sale and spare
parts for machines used in its production processes. The Company also has in-
house compounding capabilities for the mixing, blending and pelletizing of raw
materials used in its production processes. In addition, the Company maintains
computer aided design ("CAD") stations which are linked electronically to the
Company's sales offices to enable the sharing of design information. Finalized
designs are transmitted electronically to the Company's in-house tooling
facilities for the production of molds, dies and tooling.
The Company maintains recycling programs through which used trays and reels,
both those manufactured by the Company and those manufactured by others, are
collected from end users, such as SMT companies and other types of assemblers
of circuit boards and manufacturers of computers and other end products, at
approximately 550 locations in Asia, North America and Europe by the Company
and its agents. The trays and reels collected are then transported principally
to the Company's production facilities in Shenzhen, China where they undergo
processing, including inspection, cleaning and anti-static coating, if
appropriate. They are placed into inventory in the Company's warehousing
facilities pending sale to customers. Recycled trays and reels that do not
meet the Company's quality requirements are ground and reused in the
manufacturing processes for new products. Currently, approximately 2.5 million
units, largely trays, are collected each month for recycling by the Company.
The Company maintains five sales offices, located in Hong Kong; Singapore;
Penang, Malaysia; Milpitas, California; and Austin, Texas whereby direct sales
are made to customers. The Company also sells its products through eight sales
agents located in Japan (four): Seoul, South Korea; Taipei, Taiwan; Rieti,
Italy; and Shanghai, China. The Company maintains, either directly or through
its local sales representatives, a network of JIT warehouses located near the
production facilities of its customers.
The Company's principal executive offices are located in Units 3, 4, 5 and
7, 37th Floor, Wharf Cable Tower, 9 Hoi Shing Road, Tsuen Wan, N.T., Hong Kong
and its telephone number is (852) 2402-5100.
STRATEGY
The Company's objective is to increase its market presence in serving the
growing semiconductor and electronics industries by providing top quality
service, precision engineered packaging solutions and recycling alternatives
to manufacturers of semiconductor devices and electronic components through
its integrated manufacturing capability and its recycling programs, with
collection points in Asia, North America and Europe. The key elements of the
Company's business strategy are as follows:
Leverage Industry Expertise of Senior Management. Members of the Company's
senior management team have extensive experience in the semiconductor industry
which provides them with a first hand understanding of customer and market
requirements. The Company believes that the industry experience and close
customer relationships of its
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senior management enable the Company to identify and evaluate potential
markets for future product development. The Company intends to maintain and
further develop relationships with appropriate senior executive officers of
its customers.
Maintain Close Customer Relationships. The Company's strategy is to maintain
close relationships with its customers through an extensive network of
strategically located sales, customer service and product distribution sites
and by working closely with its customers in developing precision engineered
packaging solutions for the storage, transportation and automated handling of
their products. The Company believes that its ability to distribute its
products to customers located in Asia, North America and Europe allows the
Company to compete effectively with other suppliers of packaging products to
the semiconductor and electronics industries, a number of which distribute
only within certain geographic regions. Customer reliance on quick delivery
drives the Company's product strategy with respect to both new and recycled
products. The Company believes that its recycling programs, whereby the
Company collects and recycles both products manufactured by itself and
products manufactured by others, enable it to expand its customer base by
providing it with opportunities to supply both newly-manufactured and recycled
products to customers. In addition, the Company's recycling programs provide
it with opportunities to monitor changes in particular customer requirements.
Shorten Delivery Time. The Company's strategy is to attract and retain
customers on the basis of its ability to deliver large quantities of products
on short notice to meet customer demand. The Company believes that short
delivery time is of particular importance to its customers in the
semiconductor and electronics industries where requirements for packaging
products are sometimes difficult to forecast accurately. The Company believes
that stocking certain key products in its network of JIT warehouses,
maintained either by the Company's local sales representatives or the Company,
reduces the amount of time required for the delivery of its products to its
customers, thereby improving its responsiveness to customer requirements for
flexibility in delivery and generally facilities the improvement of inventory
management by its customers. In addition, the Company believes that its
inhouse tooling facilities and raw material compounding capabilities obviate
the necessity of working with sub-contractors and enable the Company to
achieve shorter production cycles.
Offer a Broad Range of Products. The Company's strategy is to increase the
range of its products, both new and recycled, in order to meet customer
requirements. The Company's current product offerings, which include matrix
trays, tubes, tape-and-reel and other carrier products, allow it to service a
broad range of customers which often have needs across multiple product
categories. In recent years, the Company has expanded its product offerings
from tubes to include matrix trays, recycled matrix trays and tape-and-reel
products. The Company's production facilities have been qualified by a number
of its customers across its product categories. The Company believes that its
customers value the range of its product offerings and that its ability to
offer a broad range of products allows the Company to compete effectively with
other suppliers of packaging products to the semiconductor and electronics
industries, a number of which are single-product suppliers. The Company's in-
house design and tooling capabilities reduce the cycle time needed for the
development of new products and product features by the Company and facilitate
the development of "custom" products by the Company, which typically requires
different prototype stages during product development. The Company's in-house
design and tooling capabilities have also facilitated the Company's
development of new product features such as the "enhanced pocket strength,"
"anti-reflective wall" and "high strength ring pedestal" features for the
Company's carrier tape products, for which the Company has patent applications
pending. In addition, the Company's in-house raw material compounding
capabilities enable the Company to better control the quality of its products
to meet customer specifications with respect to characteristics such as color,
transparency and hardness. The Company believes that its recycling programs,
with a monthly collection of approximately 2.5 million units, enable it to
supply a broad range of recycled trays and reels to its customers.
Increase Volume Supply Capabilities. The Company's strategy is to expand its
production and tooling capacities and its recycling programs so as to increase
its high volume supply capabilities. Since 1992, the Company has expanded the
production capacity of its facilities in Shenzhen, China in order to meet
growing demand for its products. The Company has commenced the construction of
an additional plant to be located approximately three miles from the existing
production facilities, which would double the Company's production capacity.
In addition to increasing production volume, the Company believes that such
expansion will enable the Company to maintain equipment utilization rates
which give it the flexibility to meet high volume requirements from customers
with short lead time. In addition, the Company believes that its inventory of
recycled products enables it to supply recycled tray and reel products in
large quantities on short notice.
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Emphasize Quality Assurance and Process Control. The Company's strategy is
to attract and retain customers, and price its products, principally on the
basis of the quality of its products and services. The Company maintains a
quality assurance and process control department consisting of approximately
30 engineers and 200 on-line process controllers. Quality assurance and
process control procedures are performed at each major stage of production.
These include the inspection of incoming raw materials, statistical process
control at the injection molding (for trays and reels) and extrusion (for
tubes) stages of production and the inspection and testing of finished
products. The Company's production facilities in Shenzhen, China obtained ISO
9002 certification in October 1994 and are subject to follow-up surveillance
audits conducted semi-annually thereafter in accordance with normal ISO
procedures. In addition, customers generally require the Company to undergo a
one- to two-month "qualification" process before purchasing in volume from the
Company. Such qualification processes often include on-site certification of
the Company's production facilities by members of the customer's engineering
and quality control staff. The Company's production facilities in Shenzhen,
China have been qualified by such customers as Intel, Texas Instruments,
Motorola, NEC, Toshiba and others. The Company believes that in addition to
its quality assurance and process control department, its in-house design and
tooling facilities and raw material compounding capabilities have enabled it
to better control the quality of its products.
HISTORY
The Company commenced operations in 1975, principally as a manufacturer of
integrated circuit ("IC") shipping tubes, with production facilities located
in Tsuen Wan, Hong Kong. In 1987, the Company relocated its production
facilities to Shenzhen, China. In 1992, the Company was acquired by Mr. T.L.
Li, a semiconductor industry entrepreneur and investor. See "Management." In
the same year, the Company's in-house tooling capability was substantially
augmented. In 1992, the Company commenced the production and sale of matrix
trays. At the same time, the Company commenced the establishment of a
distribution network of JIT warehousing facilities located near areas of
semiconductor manufacturing activity. Additionally, the Company commenced the
operation of its recycling programs through subsidiaries doing business under
the trade name "SemiCycle." In 1994, the Company commenced the sale of the
reels used in tape-and-reel IC carriers and in 1996 the Company commenced the
sale of the tape used in such carriers. Since 1992, the Company has expanded
the production capacity of its facilities in Shenzhen, China in order to meet
growing demand.
MARKETS SERVED BY THE COMPANY
The Company's products are used for the storage and transportation of
semiconductor devices and other electronic components such as connectors,
resistors and capacitors. The Company's products are designed to interface
with automated handling equipment used in the production and testing of
semiconductor and electronics products.
SEMICONDUCTORS
Semiconductors are the basic building blocks used to create a variety of
electronic products and systems. Continual improvements in semiconductor
process and design technologies have enabled the production of complex, highly
integrated circuits which provide faster execution, increased functionality
and greater reliability. As a result, semiconductor demand has experienced
growth in markets for such products as computers, communications, consumer
electronic devices, automotive products and industrial automation and control
systems.
Semiconductors are often classified as either discrete devices (such as
individual diodes or transistors) or IC's. In ICs, thousands of functions are
combined on a single "chip" of silicon to form a more complex circuit, which
is then encapsulated in plastic, ceramic or other materials (forming a
"module") for connection to a circuit board.
In pin-through-hole ("PTH") technology, modules are attached by pins, also
called I/O (for input/output) "leads," inserted through or soldered to plated
holes in the printed circuit board. PTH is one of the earliest technologies in
the assembly of printed circuit boards. PTH semiconductor devices, such as
PDIP (Plastic Dual In-Line Package) modules, are typically sorted and
transported in IC shipping tubes such as those produced by the Company.
In the technologically more advanced SMT, the leads on ICs and other
electronic components are soldered to the surface of the printed circuit board
rather than inserted into holes. SMT can accommodate a substantially higher
number of leads than PTH, thereby permitting the board to interconnect a
greater number of integrated circuits. This, in turn, allows tighter component
spacing which permits a reduction in the dimensions of the printed circuit
board. Because of their high lead counts, most very large scale integrated
circuits are configured for surface mounting.
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Additionally, SMT allows components to be placed on both sides of the board
thereby permitting even greater density. The substantially higher number of
leads and finer lead-to-lead spacing or "pitch" in SMT products requires
packaging solutions which are more exacting than for PTH products. In
addition, certain SMT products are sensitive to moisture absorption and
typically undergo a baking process before surface mounting, and consequently
require robust packaging solutions which are resistant to high temperature.
SMT semiconductor devices, such as QFP (Quad Flat Package), TQFP (Thin Quad
Flat Package), TSOP (Thin Small Outline Package) and BGA (Ball Grid Array)
modules, are typically stored and transported in matrix trays or tape-and-reel
carriers such as those produced by the Company.
In recent years, the Company has experienced a significant increase in
demand for its products as a result of unit volume growth and other
developments in the global semiconductor industry. First, the increasing
complexity of semiconductor devices and use of automated production equipment
has shifted the use of packaging products by semiconductor companies away from
traditional products, such as tubes, in favor of products such as trays and
carrier tapes which require higher precision engineering. Second, with the
advent of SMT and increasing lead-count and finer lead-to-lead spacing,
semiconductor devices have become more susceptible to mechanical damage during
shipment. As a result, the use of higher precision engineered packaging
products such as matrix trays has increased. Third, the Company believes that
the recent trend in the global semiconductor industry towards increased out-
sourcing of various steps of the IC production process, such as assembly and
testing, will also benefit the Company as semiconductor companies increasingly
look for suppliers of packaging products with the ability to supply large
quantities of a wide range of products on short notice to different
subcontractor assembly and test companies at various locations.
In recent years, the total available market ("TAM") for semiconductor
devices has grown significantly and industry sources estimate that such growth
is likely to continue. The growth in the market for the Company's products,
however, is related to the growth in unit volume, namely the number of
semiconductor devices produced, which may differ from the growth in the TAM
for semiconductor devices, as a result of variation over time in the average
selling price per semiconductor device. See "Risk Factors--Dependence on
Semiconductor and Electronics Industries."
ELECTRONIC COMPONENTS
Electronic connectors are electro-mechanical devices that allow an
electronic signal to pass from one device to another. They are used to connect
wires, cables, printed circuit boards, flat cable and other electronic
components to each other and to related equipment. Connectors are found in
virtually every electronic product including computers, printers, disk drives,
modems, VCRs, radios, medical instruments, airplanes, appliances, cellular
telephones, pagers and automobiles. Original equipment manufacturers in the
electronics industry generally use connectors to complete the design and
manufacture of their products.
Resistors are basic components used in all forms of electronic circuitry to
adjust and regulate levels of voltage and current. They vary widely in
precision and cost, and are manufactured in numerous materials and forms.
Resistive components may be either fixed or variable, depending on whether the
resistance is adjustable (variable) or not (fixed). Resistors can also be used
as measuring devices, such as resistive sensors. Resistive sensors or strain
gages are used in experimental stress analysis systems as well as in
transducers for electronic measurement of loads (scales), acceleration and
fluid pressure.
Capacitors perform energy storage, frequency control, timing and filtering
functions in most types of electronic equipment. The more important
applications for capacitors are electronic filtering for linear and switching
power supplies, decoupling and bypassing of electronic signals for ICs and
circuit boards, and frequency control, timing and conditioning of electronic
signals for a broad range of applications.
In recent years, the TAMs for electronic components such as electronic
connectors, capacitors and resistors have grown significantly and industry
sources estimate that such growth is likely to continue. The growth in the
market for the Company's products, however, is related to the growth in unit
volume, namely the number of electronic components produced, which may differ
from the growth in the TAMs for electronic components, as a result of
variation over time in the average selling price per electronic component. In
addition, the Company's products serve only portions of the TAMs for various
electronic components, principally those for SMT components such as SMT
ceramic chip capacitors and SMT chip resistors. See "Risk Factors--Dependence
on Semiconductor and Electronics Industries."
23
<PAGE>
PRODUCTS AND PRODUCTION PROCESSES
The Company produces matrix trays, tubes and tape-and-reel products such as
reels and carrier tape. The Company also sells recycled matrix trays and
reels. In addition, the Company produces leadframe boxes and leadframe
interleaves used in the storage and transportation of leadframes.
The Company's products are typically categorized by their dimensions and
configurations, the type and size of semiconductor devices they carry, and
their physical characteristics, in particular their resistance to deformation
(called "warpage") at various temperatures. The Company's products are also
categorized by their electrostatic properties as "conductive," "dissipative"
or "anti-static." Conductive and dissipative products are manufactured by
adding carbon fibre or carbon powder to the plastic compound. Anti-static
characteristics are achieved by applying a coating to the surface of the
product to prevent the accumulation of surface electrostatic charges.
TRAY PRODUCTS
The Company's tray products may be used for the storage and transportation
of SMT semiconductor devices such as QFP, TQFP, PQFP (Plastic Quad Flat
Package), TSOP, PGA (Pin Grid Array) and BGA modules. The outer dimensions of
matrix trays are generally fixed by industry standards prescribed by
electronics industry associations such as JEDEC in the United States and EIAJ
in Japan. The Company sells high temperature trays (which may be baked to a
temperature of 150(degrees)C and above), low temperature trays (which may be
baked to a temperature of up to 150(degrees)C), non-bakeable trays and lots
consisting solely of recycled trays. The sale of tray products, including
recycled trays, accounted for 63.9%, 64.8%, 63.9% and 60.4% of the Company's
net sales in Fiscal 1995, Fiscal 1996, Fiscal 1997 and the six months ended
September 30, 1997, respectively.
At the beginning of the tray production process, samples of incoming raw
materials, largely polyarysulphon, polysulphon, polypropylene and others, are
inspected and tested for key material properties. Raw materials are mixed and
blended with other materials in accordance with the Company's proprietary
processes and production techniques and formed by injection molding machines
into trays. The formed trays are then cleaned of surface contaminants. Trays
that require anti-static coating are subsequently dipped in anti-static
solution and then dried. Trays made from heat resistant materials undergo a
baking process. Thereafter, samples of new trays from each manufactured lot
are inspected for visible defects and warpage and tested for electrostatic
discharge characteristics, and have their dimensions checked, prior to
shipment.
TUBE PRODUCTS
The Company's tube products may be used for the storage and transportation
of SMT semiconductor devices such as PLCC (Plastic Leaded Chip Carrier) and
SOIC (Small Outline Integrated Circuit) modules and PTH semiconductor devices
such as PDIP modules, as well as other products used in the electronics
industry, such as connectors and sockets. The sale of tube products accounted
for 23.6%, 19.2%, 14.9% and 14.4% of the Company's net sales in Fiscal 1995,
Fiscal 1996, Fiscal 1997 and the six months ended September 30, 1997,
respectively.
At the beginning of the tube production process, samples of incoming raw
materials largely PVC resin and various additives, are inspected for
conformity to specifications. Raw materials are mixed and blended and made
into pellets, based on compounding formulae which vary depending on the
characteristics, such as color, transparency and hardness, required for the
product. The pellets are extruded into tubes, which undergo further processing
such as hole punching, silk screen marking and anti-static coating, before
samples of the new tubes are inspected for visible defects and tested for
electrostatic discharge prior to shipment.
TAPE-AND-REEL PRODUCTS
The Company's tape-and-reel products may be used for the storage and
transportation of SMT semiconductor devices such as TQFP, BGA, PLCC, SOJ
(Small Outline Plastic "J" Bend), SOIC and other modules, as well as other
products used in the electronics industry, such as connectors and sockets.
Tape-and-reel carriers comprise three parts: reel, carrier tape and cover
tape. The semiconductor devices and other products to be carried are placed in
pockets formed in the carrier tape, which is sealed with cover tape and wound
around reels for storage and transportation. The sale of reels, including
recycled reels, accounted for 1.8%, 2.5%, 3.7% and 4.9% of the Company's net
sales in Fiscal 1995, Fiscal 1996, Fiscal 1997 and the six months ended
September 30, 1997, respectively. The Company commenced sales of carrier tape
in October 1996 and expects carrier tape, and reels in general, to represent
an increasing proportion of the Company's product mix. The sale of carrier
tape accounted for 4.0% of the Company's net sales in the six months ended
September 30, 1997.
24
<PAGE>
The production process for reels is similar to that for trays except that
the raw material used in the production of reels is principally polystrene and
that an additional process of ultrasonic welding is required following the
injection molding process to weld two parts of the reel together. In the
production of carrier tape, polystyrene, polyester or polycarbonate tape is
purchased from suppliers in large rolls and slit to desired widths in-house.
The carrier tape is formed by a combination of thermal, air pressure and hole
punching processes, and thereafter the new carrier tape is inspected for
visible defects prior to shipment. The Company purchases and then resells
cover tape to its customers.
OTHER PRODUCTS
In addition to standard products in its three principal product lines, the
Company also produces an array of "custom" products which include customer-
specific designs of trays, tubes, reels, carrier tape and an assortment of
other carriers. The Company also produces leadframe boxes and leadframe
interleaves which are sold to leadframe suppliers for use in the storage and
shipping of their products. Leadframes are sheets of metal, etched or stamped
with various patterns of I/O leads which allow for interconnections between
silicon chips and printed circuit boards. Leadframes are generally stored and
transported in stacks, with individual leadframes separated by plastic or
paper interleaves and the stack housed in plastic boxes. The sale of other
products accounted for 9.5%, 8.5%, 9.3% and 13.8% of the Company's net sales
in Fiscal 1995, Fiscal 1996, Fiscal 1997 and the six months ended September
30, 1997, respectively.
NEW PRODUCT DEVELOPMENT
The Company is currently engaged in the study and development of new product
lines, with an emphasis on packaging products designed for the carriage of
high-value contents. The Company undertakes on-going research and development
efforts which emphasize the development of products and features that require
precision engineering in order to better serve its customer base. The Company
expanded its product lines from tubes to include matrix trays in 1992, reels
in 1994 and carrier tape in 1996. The Company has developed new product
features for its carrier tape products, such as the "enhanced pocket
strength," "anti-reflective wall" and "high strength ring pedestal" features,
for which the Company has patent applications pending. The "enhanced pocket
strength" feature improves the vertical crush resistance of the pockets in the
carrier tape by corrugating the vertical sidewalls of the pockets. The "high
strength ring pedestal" feature improves the lateral crush resistance of the
pockets in the carrier tape by means of a trapezoidal shaped pedestal and an
annular ring at the bottom of the pocket. The "anti-reflective wall" feature
enables the Company's customers to utilize more effectively their automated
optical inspection equipment to inspect the semiconductor or electronic
components placed in the carrier tape manufactured by the Company. By placing
a chamfered corner in the carrier tape pocket, the feature reduces the amount
of reflection which could interfere with the workings of the automated optical
inspection equipment.
RECYCLING PROGRAMS
The Company conducts its collection and recycling operations through
subsidiaries and agents doing business under the trade name "SemiCycle." The
Company recycles trays and reels collected from end users at approximately 550
locations in Asia, North America and Europe by the Company and its agents.
Tube products, made largely of PVC, and carrier tape products, made largely of
polystyrene, polyester and polycarbonate, are generally not recycled.
Currently, approximately 2.5 million units, largely trays, are collected each
month for recycling by the Company.
The Company maintains recycling programs through which used trays and reels,
both those manufactured by the Company and those manufactured by others, are
collected from end users. Typical end users include SMT and other types of
assemblers of circuit boards and manufacturers of computers and other end
products. The trays and reels collected are then transported principally to
the Company's production facilities in Shenzhen, China where they undergo
processing, including sorting, inspection, cleaning and anti-static coating,
if appropriate. They are placed into inventory in the Company's warehousing
facilities pending sale to customers. Recycled trays and reels that do not
meet industry quality requirements or the Company's requirements are ground
and reused in the manufacturing processes for new products using the Company's
proprietary processes and production techniques.
In some jurisdictions in which the Company's packaging products are sold or
used, laws and regulations have been adopted or proposed with a view to
promote, among other things, the recycling of packaging materials. In
addition, the International Standard Organization (the "ISO") has incorporated
environmental considerations in
25
<PAGE>
formulating its new ISO 14000 quality standards. The Company's recycling
programs provide its customers with opportunities to select the packaging
products that best meet their requirements in terms of cost and environmental
preferences. The Company's recycling programs help its customers comply with
environmental regulations and meet ISO standards in the area of environmental
protection, principally in two ways. First, the Company provides a recycling
alternative to the traditional disposal methods of landfill and incineration.
Second, the Company's offerings of recycled products assist its customers in
complying with or meeting "recycle-content" and "green product" regulations,
standards or goals.
CUSTOMERS
The Company had an average of approximately 142 customers in each of the
twelve months in Fiscal 1997, including semiconductor companies as well as
subcontract assembly and test companies. The Company also sells it products to
manufacturers of connectors, sockets, passive components such as chip
resistors and capacitors and other types of electronic components. In Fiscal
1997, the Company's top customers were ASAT, Texas Instruments, Silicon
Systems, QPL, ASE, Symbios, Philips, Amkor-Anam, Analog Devices and IBM. ASAT,
Texas Instruments, Silicon Systems and QPL were the only customers which
individually accounted for more than 5% of the Company's net sales in Fiscal
1997. In the aggregate, the top ten customers accounted for 34.6%, 51.7%,
51.2% and 62.0% of the Company's net sales in Fiscal 1995, Fiscal 1996, Fiscal
1997 and the six months ended September 30, 1997, respectively. The Company
has received awards from customers such as Texas Instruments, Motorola,
Hewlett-Packard, GEC Plessey and Lucent Technologies in recognition of the
quality of its products and services.
A significant portion of the Company's net sales have historically been and
are expected to continue to be derived from ASAT, QPL and other companies in
the QPL Holdings group. ASAT, QPL and other companies in the QPL Holdings
group together accounted for approximately 2.2%, 20.9%, 16.1% and 14.8% of the
Company's net sales in Fiscal 1995, Fiscal 1996, Fiscal 1997 and the six
months ended September 30, 1997, respectively. EEMS has acted as the Company's
sales agent in Europe since 1995. See "Risk Factors--Relationship with
Principal Shareholder and Potential Conflicts of Interest."
PRICING
The Company provides price quotations which contemplate the delivery of
products within two weeks of the receipt of purchase orders. Higher prices are
charged for shorter delivery time and any additional services required, such
as local warehousing, special packaging provisions or special markings on the
product. As a general policy, the Company prices its recycled products at a
discount with respect to the price of corresponding new products.
SALES AND MARKETING
The Company maintains five sales offices, located in Hong Kong; Singapore;
Penang, Malaysia; Milpitas, California; and Austin, Texas, whereby direct
sales are made to customers. In addition, the Company sells its products
through eight sales agents located in Japan (four); Seoul, South Korea;
Taipei, Taiwan; Rieti, Italy; and Shanghai, China.
The Company's sales are generally made pursuant to purchase orders received
from its customers. Therefore, the Company generally has no long-term
agreements with or commitments from its customers for the purchase of
products. While customers typically provide the Company with one- to two-month
forecasts of their requirements, such forecasts are not binding.
26
<PAGE>
The following table sets forth the geographic distribution, by percentage,
of the Company's net sales for the periods indicated. See Note 15 of Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------- ------------------
1995 1996 1997 1996 1997
<S> <C> <C> <C> <C> <C>
North America................. 17.4% 20.1% 19.9% 19.2% 22.2%
Hong Kong..................... 33.6 27.0 20.8 28.7 26.1
Singapore..................... 10.5 10.8 15.2 10.6 8.5
Malaysia...................... 6.6 7.9 8.9 10.6 5.1
Philippines................... 10.3 12.4 11.6 8.0 13.0
Taiwan........................ 1.7 3.8 8.9 6.9 9.0
Japan......................... 4.9 4.5 5.7 6.0 6.6
Thailand...................... 5.6 4.7 5.3 5.6 5.0
Korea......................... 3.9 1.5 -- -- --
Others........................ 5.5 7.3 3.7 4.4 4.5
------- ------- ------- -------- --------
100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======== ========
</TABLE>
DISTRIBUTION
The Company maintains, either directly or through its sales representatives,
a network of JIT warehouses located near the production facilities of its
customers. The following table sets forth the locations of JIT warehouses
maintained by the Company's local sales representatives or by the Company.
<TABLE>
<CAPTION>
ASIA NORTH AMERICA EUROPE
<S> <C> <C>
Japan (seven) Milpitas, California Rieti, Italy
Malaysia (five) Austin, Texas Dublin, Ireland
Shenzhen, China
Shanghai, China
Hong Kong
Keelung, Taiwan
Kaohsiung, Taiwan
Bangkok, Thailand
Manila, Philippines
Singapore
Seoul, South Korea
</TABLE>
The Company also offers drop shipment services for its products, which
provide for the shipment of the Company's packaging products directly to end-
users designated by the Company's customers. Since drop shipment eliminates
the additional step of inspection by the customer prior to shipment to the end
user, quality of service is an important consideration for the customers.
Customers generally place purchase orders with the Company's sales office or
sales agent near their location. The orders are then forwarded together with
the requested shipping date to the Company's production facilities in
Shenzhen, China via electronic mail, with a copy to the Company's Hong Kong
office for invoicing and accounting purposes. Employees at the Company's
production facilities in Shenzhen, China generally respond to the local sales
office upon receipt of the order with a committed shipping date. Full
container sea freight, which includes most shipments to JIT warehouses
maintained by the Company's local sales representatives or by the Company, is
generally shipped from the Yantian port located near Shenzhen, China, while
loose cargoes and air freight are generally transported to a warehouse in Hong
Kong by trucks for onward shipment.
The Company's office in Hong Kong is responsible for invoicing local sales
offices and sales agents who in turn are responsible for the invoicing of
customers and for the collection of payment.
RAW MATERIALS
The raw materials used in the Company's production of trays and reels are
polyarysulphone, polysulphone, polypropylene, high impact polystyrene and
others. The principal raw material used in its production of tubes is PVC
resin. The Company purchases rolls of polystyrene, polyester and polycarbonate
tape for formation into carrier tape and purchases rolls of cover tape for
resale to its customers.
27
<PAGE>
The raw materials used in the Company's production of trays and reels are
generally available from various sources worldwide at similar prices. The
Company purchases such materials principally from two suppliers located in the
United States and Malaysia. Raw materials are mixed and blended with other
materials in accordance with the Company's proprietary processes and
production techniques and formed by injection molding machines into trays. PVC
resin is generally available from various sources worldwide at similar prices.
The Company purchases PVC resin and certain additives used in the production
of tubes principally from three suppliers located in Singapore, Japan and
Germany. PVC resin is mixed and blended with various additives and made into
pellets, based on compounding formulae which vary depending on the
characteristics, such as color, transparency and hardness, required for the
product. The Company purchases the polystyrene tape and polycarbonate tape
used in its carrier tape production process, as well as cover tape, from two
suppliers located in Japan and the United States.
The Company generally purchases the various raw materials used in its
production processes pursuant to purchase orders issued to suppliers one and a
half months before the materials are delivered to the Company. The Company
tries to maintain in Shenzhen, China inventories of raw materials for
approximately two to three months of estimated production requirements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." From time to time, the Company makes strategic purchases of raw
materials when it believes the prices are favorable. Recycled trays collected
by the Company or by its agents and sold to the Company are initially
accounted for as part of the Company's inventories of raw materials. Following
sorting and processing, recycled trays are subsequently accounted for as part
of the Company's inventories of finished products.
QUALITY ASSURANCE AND PROCESS CONTROL
The Company maintains a quality assurance and process control department.
Quality assurance and statistical process control procedures are performed at
each major stage of production and include the inspection of raw materials,
statistical process control at the injection molding (for trays and reels) and
extrusion (for tubes) stages of production and the inspection and testing of
finished products. The Company also conducts "qualification" procedures for
its raw material suppliers. The Company believes that, in addition to its
quality assurance and process control department, its in-house design and
tooling facilities and compounding capabilities have enabled it to control the
quality of its products and that such integrated quality assurance system
enables the Company to ensure end-product integrity and maximize customer
value.
The Company's production facilities in Shenzhen, China were certified as
meeting the ISO 9002 quality standards by the ISO in October 1994, and are
subject to follow-up surveillance audits conducted semi-annually thereafter in
accordance with normal ISO procedures. The ISO is an organization formed by
delegates from member countries to establish international quality assurance
standards for products and manufacturing processes. The certification process
involves subjecting the Company's production processes and the quality
management systems to review and surveillance for periods as long as nine
months. The ISO 9002 certification is required by certain European countries
in connection with sales of industrial products in such countries. In
addition, such certification provides independent verification to the
Company's customers as to the quality control in the Company's manufacturing
processes and many of the Company's customers require ISO certification as a
prerequisite for purchasing from the Company.
The Company's production facilities are generally required to undergo a one-
to two-month "qualification" process conducted by prospective customers before
purchasing in volume from the Company. Such qualification processes often
include on-site certification of the Company's production facilities by
members of the customer's engineering and quality control staff. The Company's
production facilities in Shenzhen, China have been qualified by customers such
as Intel, Texas Instruments, Motorola and Toshiba.
COMPETITION
The markets for the Company's products and services are highly competitive.
The Company's products compete with similar products manufactured by other
companies, some of which have substantially greater financial resources than
the Company. See "Risk Factors--Competition."
The Company competes in the markets for tray products, tube products and
tape-and-reel products. The Company classifies its competitors as large
diversified manufacturers, large single-product manufacturers and small local
job-shop style manufacturers. Large diversified manufacturers are typically
divisions of large multinational companies
28
<PAGE>
which compete with the Company in markets for more than one product. Large
single-product manufacturers typically have international operations similar
to those of the Company. Small local job-shop style manufacturers typically
operate only within certain geographic regions, such as Taiwan and Singapore.
The Company is not aware that any of its major competitors offers the range of
products and services offered by the Company. The Company believes that it
competes with large diversified manufacturers through its focus on serving the
semiconductor and electronics industries, with large single-product
manufacturers through its broad range of product offerings and with smaller
local job-shop style manufacturers through its international organization
which enables the Company to meet the requirements of multinational customers
with several production facilities at various locations.
The Company believes that the principal competitive factors in the markets
for the Company's products and services are responsiveness and flexibility
(including short delivery cycles and the ability to supply large quantities on
short notice), price, product quality and range of products and services
available.
PRODUCTION FACILITIES
The Company's main production facilities are located in Shenzhen, China in a
plant with a total floor space of approximately 305,000 square feet. The plant
is equipped with injection molding machines, extruders, carrier tape machines,
mixing machines, ultra-sonic welding machines and other machinery and
equipment.
In addition to its production facilities in Shenzhen, China, the Company
also maintains production facilities located in Penang, Malaysia, with a total
floor space of approximately 3,500 square feet, which process tubes extruded
at the Company's Shenzhen facilities.
The Company is planning further expansion of its production capacity in
Shenzhen, China and has commenced the construction of an additional plant to
be located approximately three miles from the existing production facilities.
The new plant is expected to be completed in 1999 and has a planned floor
space of approximately 400,000 square feet. See "Risk Factors--Management of
Expansion."
The Company maintains a tooling shop on the premises of its production
facilities in Shenzhen, China which is capable of producing the molds used in
the Company's production, dies and tooling for sale, and spare parts for
equipment used in its production process. The in-house tooling machinery and
equipment (including computer numeric control ("CNC") electronic discharge
machines ("EDMs"), CNC wire cut machines, milling machines and miscellaneous
lathes, planers, surface grinders and drill presses) account for approximately
half of the Company's capital investment in its facilities in Shenzhen, China.
The tooling shop, with a total floor space of approximately 80,000 square
feet, employs 175 tool makers.
The Company's existing facilities in Shenzhen, China are, and the Company's
additional facilities in Shenzhen, China will be, operated pursuant to
processing agreements with unaffiliated PRC companies. Such facilities are, or
will be, located on land which is leased from the PRC government by Warden
Development Ltd. ("Warden"), a wholly-owned subsidiary of the Company, under
land use certificates and agreements with terms of fifty years. The buildings
comprising the facilities are owned by Warden. The land and the buildings are
in turn leased by Peak (HK) from Warden under a two-year lease commencing
April 1995, renewable for up to another two years on the same terms at the
option of Peak (HK). The machinery and equipment in the facilities are owned
by Peak (HK). Under current PRC law, all land belongs to the government, and
individuals and enterprises may only lease land from the government.
As of September 30, 1997, substantially all of the Company's fixed assets
and inventories were located in the PRC. The operations of the Company's
production facilities in Shenzhen, China may be adversely affected by changes
in the laws and regulations of the PRC (or the interpretation thereof), such
as those relating to taxation, import and export tariffs, environmental
regulations, land use rights, property and other matters. The Company's
results of operations and financial condition may be adversely affected by
changes in the PRC's political, economic and social conditions. See "Risk
Factors--Concentration of Operations in the PRC."
ENVIRONMENTAL MATTERS
The Company is subject to various laws, rules and regulations in the PRC
regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment. The Company believes that it is
in substantial compliance with applicable laws, rules and regulations relating
to the protection of the environment.
29
<PAGE>
EMPLOYEES
As of September 30, 1997, the Company had 134 employees at its offices
located in Asia, North America and Europe. The Company's employees are not
covered by any collective bargaining agreements. The Company has not
experienced any strikes or work stoppages by its employees and believes that
its relationship with its employees is good.
Since June 1996, the Company has established defined contribution benefit
plans for its employees in Hong Kong, and has made contributions to such plans
based on 5% of the monthly base salaries of participating employees. The
assets of such plans are held under provident funds managed by independent
trustees. In addition, the Company makes contributions to employee retirement
schemes as required by local authorities in certain jurisdictions, such as
Singapore, in which the Company has operations. See Note 12 of Notes to
Consolidated Financial Statements.
The Company's existing production facilities in Shenzhen, China are operated
by an unaffiliated PRC company pursuant to a processing agreement initially
entered into in May 1987 and subsequently amended and renewed in May 1994 and
December 1996. The processing agreement was entered into by the Company and
the PRC company which was formed by the Shenzhen Municipal Longgang District
Foreign Economic Service Company, a company controlled by the local government
of the Longgang District of Shenzhen. The current term of the processing
agreement expires on May 28, 2016. Under the processing agreement, the PRC
company provides all of the personnel for the operation of the Company's
existing facilities in Shenzhen, China and renders assistance in dealing with
all matters relating to the import and export of raw materials and the
Company's products. Such personnel are not employees of the Company. The
Company agrees to pay each worker no less than a fixed sum each month, which
is revised every two years, in addition to an annual fee to the PRC company
(which has been waived for the current term of the agreement) based on the
quantity of products manufactured each year. In October 1995, the Company
entered into a similar processing agreement with another unaffiliated PRC
company, which has a term of fifty years, for the operation of the Company's
additional production facilities being constructed in Shenzhen, China. As of
September 30, 1997, the personnel at the Company's production facilities in
Shenzhen, China numbered approximately 1,500, including personnel in
production and quality assurance and process control, warehousing and
inventory control, tooling and molding, engineering and product development,
and purchasing, financing and other support functions.
LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings which the Company
believes would, individually or in the aggregate, have a material adverse
effect on its results of operations or financial condition.
INSURANCE
The Company maintains insurance policies covering risks of losses due to
fire, flood and other natural disasters. The Company's insurance policies
cover certain of its buildings, machinery and equipment, raw materials and
inventory. The Company also maintains business interruption insurance.
Significant damage to any of the Company's production facilities, whether as a
result of fire or other causes, would have a material adverse effect on the
Company's results of operations and financial condition. The Company is not
insured against the loss of its key personnel.
30
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Members of the Board of Directors of the Company are elected by the
shareholders of the Company. At each annual general meeting one-third of the
Directors for the time being shall retire from office by rotation provided
that the Chairman of the Board shall not, while holding such office, be
subject to retirement by rotation. A retiring Director shall be eligible for
re-election. The Board of Directors of the Company appoints the executive
officers of the Company.
The following table sets forth information with respect to the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Mr. T.L. Li................ 45 Chairman and Chief Executive Officer
Mr. Robin Nicholson........ 41 Director
Mr. Francis Leung.......... 43 Director
Mr. Hon Ying Ng............ 43 Director
Mr. Kong Chi Wong.......... 39 Director
Mr. Richard M. Brook....... 38 President and Chief Operating Officer; Director
Mr. Jerry Mo............... 38 Chief Financial Officer and Controller; Director
Mr. Mao Shi Khoo........... 36 Vice President
Mr. Steve R. Dezso......... 32 Vice President
</TABLE>
Mr. T.L. Li has served as Chairman and Chief Executive Officer of the
Company since 1990 and, through his ownership of all of the outstanding shares
of Luckygold, holds the majority of the Company's outstanding Shares. Mr. Li
holds a Bachelor of Science degree in chemical engineering from the University
of Wisconsin--Madison and has over 20 years of experience in the semiconductor
industry. Mr. Li is the controlling shareholder of, and since 1981 has served
as the Chairman of the Board of Directors of, QPL Holdings, a Hong Kong Stock
Exchange listed company. Mr. Li also owns 100% of EEMS, a memory IC assembly
and test business based in Italy. See "Certain Transactions." Mr. Li is the
brother-in-law of Mr. Jerry Mo.
Mr. Robin Nicholson is a senior partner of Richards Butler, a law firm
practising in Hong Kong and London. He is qualified as a solicitor in Hong
Kong and England and has over 15 years of securities law experience. He is
also director of a number of companies listed on The Stock Exchange of Hong
Kong Limited including QPL Holdings, The Mingly Corporation Limited and Evergo
China Holdings Limited. Mr. Nicholson has been a director of the Company since
January 1997.
Mr. Francis Leung is a co-founder and managing director of the Peregrine
group of investment banking and securities companies. Mr. Leung has over 16
years of experience in corporate finance and is a director of a number of
other companies listed on The Stock Exchange of Hong Kong Limited, including
QPL Holdings, Beijing Enterprises Holdings Limited, Guangzhou Investment
Company Limited, Shum Yip Investment Limited, Shanghai Industrial Holdings
Limited and International Bank of Asia Limited. He is currently a member of
The Takeovers Panel of the Securities and Futures Commission, the China
People's Political Consultative Committee (Beijing) and the International
Markets Advisory Board to the National Association of Securities Dealers, Inc.
(NASD). Mr. Leung has been a director of the Company since January 1997.
Mr. Hon Ying Ng is a partner of Ng and Fang, a Hong Kong law firm. Mr. Ng
holds a Bachelor of Arts degree from the University of Hong Kong. He was
admitted to practice in Hong Kong in 1981. He commenced his own practice in
1983 and has been a partner of Ng and Fang since 1985. Mr. Ng has been a
director of the Company since January 1997.
Mr. Kong Chi Wong is a fellow member of the Association of Chartered
Certified Accountants and an associated member of the Hong Kong Society of
Accountants. He is a director of a number of companies listed on The Stock
Exchange of Hong Kong Limited, including China Resources Beijing Land Limited,
Yip's Hang Cheung (Holdings) Limited, Le Saunda Holdings Limited, World
Houseware (Holdings) Limited and Kee Shing (Holdings) Limited. Mr. Wong holds
a Bachelor of Science degree in economics from the London School of Economics
and Political Science. Mr. Wong has been a director of the Company since
January 1997.
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Mr. Richard M. Brook has served as President and Chief Operating Officer of
the Company since 1995. He holds a Bachelor of Science degree in mechanical
engineering from the University of Saskatchewan and a Master of Science degree
in Engineering Management from Southern Methodist University. Before joining
the Company in 1991, Mr. Brook had over nine years of experience in the
semiconductor industry as an engineering manager at Texas Instruments. He
holds two patents on semiconductor packaging and wafer processing, and helped
develop palladium plated lead frames which allow for the elimination of solder
from the semiconductor assembly and test process.
Mr. Jerry Mo has served as the Chief Financial Officer and Controller of the
Company since 1996. He holds a Bachelor of Science degree in accounting and
data processing from Leeds University in the United Kingdom. He is a fellow
member of the Institute of Chartered Accountants in England & Wales and an
associated member of the Institute of Chartered Accountants in Australia and
the Hong Kong Society of Accountants. Mr. Mo joined the Company in November
1996. Prior to joining the Company, Mr. Mo worked as the Financial Controller
for the Group Administration Division of Pacific Dunlop Ltd., a major
industrial conglomerate in Australia, from 1992 to 1996. Mr. Mo is the
brother-in-law of Mr. T.L. Li.
Mr. Mao Shi Khoo has served as Vice President responsible for the
manufacturing operations of the Company since 1995. He holds a Bachelor of
Science degree in mechanical engineering from the University of Wisconsin. Mr.
Khoo joined the Company in 1987. Prior to joining the Company, he worked for
Advanced Micro Device and Thomson-CSF from 1982 to 1987 in various audit and
supervisory capacities.
Mr. Steve R. Dezso has served as Vice President responsible for the United
States operations of the Company since 1994. He holds a Bachelor of Science
degree in electrical engineering from the University of Texas. Mr. Dezso
joined the Company in 1992. Prior to joining the Company, Mr. Dezso worked as
an electronics design engineer for E-Systems, as a design consultant and as a
marketing manager for NVE.
BOARD COMMITTEES
The Board of Directors formed a Compensation Committee and an Audit
Committee in February 1997. The Compensation Committee makes recommendations
to the Board of Directors relating to salaries and other compensation for the
Company's directors, officers and employees and administers the Share Option
Plan. The members of the Compensation Committee are Messrs. Nicholson, Leung,
Ng and Wong.
The Audit Committee reviews the results and scope of the annual audit and
other services provided by the Company's independent auditors, reviews and
evaluates the Company's internal audit and control functions, and monitors
transactions between the Company and its directors, officers, employees and
other related parties. The members of the Audit Committee are Messrs. Ng and
Wong.
COMPENSATION
The aggregate compensation paid or accrued in Fiscal 1997 and the six months
ended September 30, 1997 to individuals serving as directors and executive
officers of the Company, including bonuses and pension, retirement or similar
benefits, was approximately $1.0 million and $0.5 million, respectively. Such
compensation does not include dividends paid to Mr. T.L. Li in Fiscal 1997.
In Fiscal 1997, none of the Company's directors and none of its executive
officers received pension benefits as part of his compensation. The Company's
contributions to such pension plans in Fiscal 1997 and the six months ended
September 30, 1997 amounted to $5,407 and $6,665, respectively.
SHARE OPTION PLAN
The Company's executive share option plan (the "Share Option Plan") was
adopted by the Board of Directors on March 18, 1997 and approved by the then
sole shareholder on March 18, 1997.
An aggregate of 700,000 Shares has been reserved for issuance under the
Share Option Plan. Under the Share Option Plan, directors, officers, employees
of, and advisors and consultants to, the Company or its affiliates may, at the
discretion of the Compensation Committee of the Board of Directors which is
responsible for administering the plan (the "Committee"), be granted options
to purchase Shares at an exercise price determined by the Committee. The
Committee has the discretion to determine which eligible individuals are to
receive option grants, the number of shares subject to each such grant and
vesting restrictions and other terms and conditions applicable to the exercise
of
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any option. No participant in the Share Option Plan, however, may receive
grants under the Share Option Plan in any calendar year which relate to more
than 150,000 Shares. Under the Share Option Plan, the Committee may grant
incentive stock options ("Incentive Stock Options"), non-qualified stock
options, or both types of options. In the case of Incentive Stock Options, the
terms and conditions of grants of such options comply with rules prescribed by
Section 422 of the United States Internal Revenue Code of 1986, as amended,
and the regulations implementing such statute. Options granted under the Share
Option Plan which are not Incentive Stock Options are non-qualified stock
options. The Committee has the discretion to establish the exercise price per
Share at the time each option is granted, which will not be less than the par
value of a Share, except that in the case of an Incentive Stock Option, the
exercise price will not be less than the fair market value of the underlying
Shares on the date such option is granted. As of September 30, 1997, options
relating to an aggregate of 542,298 Shares (150,314 of which Shares relate to
options held by directors and officers of the Company) have been granted under
the Share Option Plan at an exercise price equal to $12.00 per Share. Such
options, if not exercised, will expire on March 17, 2007.
The Board of Directors may amend or modify the Share Option Plan at any
time. The Share Option Plan will terminate on March 17, 2007 unless sooner
terminated by the Board of Directors.
SELLING SHAREHOLDER
The following table sets forth certain information regarding the ownership
of Shares as of October 29, 1997 by (i) each person who is known by the
Company to own more than 10% of its Shares, both prior to and immediately
following the completion of the Offering, and (ii) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES OWNED PRIOR TO SHARES OWNED AFTER
OFFERING OFFERING
---------------------------------------------
IDENTITY OF PERSON OR GROUP NUMBER PERCENT NUMBER PERCENT
<S> <C> <C> <C> <C>
Mr. T.L. Li..................... 10,388,038 77.2% 7,888,038 58.6%
All directors and executive
officers as a group (9
persons)....................... 10,388,038 77.2 7,888,038 58.6
</TABLE>
As of the date of this Prospectus, 77.2% of the Shares were owned by Mr.
T.L. Li, the Selling Shareholder, through his ownership of all of the
outstanding shares of Luckygold. Mr. T.L. Li is the Chairman and Chief
Executive Officer of the Company. Mr. T.L. Li has granted to the Underwriters
an option, exercisable within 30 days of the date of this Prospectus, to
purchase up to 375,000 additional Shares solely to cover over-allotments, if
any. See "Underwriting." Mr. T.L. Li is also the controlling shareholder of,
and since 1981 has served as the Chairman of the Board of Directors of, QPL
Holdings. A significant portion of the Company's product sales has
historically been and is expected to continue to be derived from transactions
with subsidiaries of QPL Holdings. See "Management--Directors and Executive
Officers" and "Certain Transactions." After the completion of the Offering,
Mr. T.L. Li will own approximately 58.6% of the Shares of the Company (or
55.8% if the over-allotment option is exercised in full).
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<PAGE>
CERTAIN TRANSACTIONS
Mr. T.L. Li, the Selling Shareholder, through his ownership of all of the
outstanding shares of Luckygold, is the majority shareholder of the Company.
Mr. T.L. Li owns approximately 35% of the outstanding shares of QPL Holdings,
a company incorporated under Bermuda law and listed on The Stock Exchange of
Hong Kong Limited. QPL Holdings is a holding company of a group of
semiconductor companies which includes QPL, ASAT, Newport Wafer-Fab Limited,
Worltek International Limited and Talent Focus Industries Limited and provides
a wide range of outsourcing services, including leadframe manufacturing, IC
assembly and testing and silicon wafer fabrication. In the leadframe
manufacturing area, QPL Holdings manufactures both etched leadframes through
QPL as well as stamped leadframes through Talent Focus Industries Limited,
both based in Hong Kong. In the IC assembly and test area, QPL Holdings
acquired ASAT in Hong Kong in 1989 and ASAT S.A. in France in 1993, and
founded ASAT (U.K.) Ltd. in the United Kingdom in 1993. In addition, Worltek
International Limited, a United States subsidiary of QPL Holdings, acts as
sales agent for both QPL and ASAT, and provides IC testing services. In the
wafer foundry area, QPL Holdings acquired Newport Wafer-Fab Limited in the
United Kingdom through a two-step acquisition in 1992 and 1995. Mr. T.L. Li
also owns 100% of the outstanding shares of EEMS, a memory IC assembly and
test business based in Italy which acts as the Company's sales agent in
Europe. See "Management."
A significant portion of the Company's product sales has historically been
and is expected to continue to be derived from transactions with QPL, ASAT and
other subsidiaries of QPL Holdings. Product sales of the Company to the
subsidiaries of QPL Holdings totaled approximately $0.8 million, $11.5
million, $9.3 million and $5.0 million in Fiscal 1995, Fiscal 1996, Fiscal
1997 and the six months ended September 30, 1997, respectively, which
represented approximately 2.2%, 20.9%, 16.1% and 14.8% of the Company's net
sales in the respective periods. QPL and ASAT are customers of the Company and
may engage in transactions from time to time with the Company that are
material to the Company.
In January 1995 and February 1995, the Company purchased certain fixed
assets from ASAT at a total net book value of $0.6 million, which it resold to
EEMS at the same net book value in February 1995. In November 1995, the
Company purchased certain fixed assets from ASAT at a net book value of $0.3
million, which it resold to EEMS at the same net book value in November 1995.
In the United States, the Company purchases used trays and reels collected
by The SemiCycle Foundation, a Texas non-profit corporation which is a
publicly supported organization exempt from federal income tax, as part of its
recycling program. The Company leases office space and provides certain
administrative and accounting services to The SemiCycle Foundation and has in
the past advanced loans to such foundation to help meet its cash requirements.
See Note 14 of Notes to Consolidated Financial Statements. Mr. Richard M.
Brook, President and Chief Operating Officer of the Company, and Mr. Steve R.
Dezso, Vice President of the Company responsible for United States operations,
served as directors of The SemiCycle Foundation when it was organized in
October 1995. Mr. Brook resigned as a director of The SemiCycle Foundation in
December 1996.
Before the Company's initial public offering in June 1997, Mr. T.L. Li, the
Selling Shareholder, advanced short-term shareholder loans to the Company upon
request to help meet its cash requirements, both in his personal capacity and
through companies owned by him, such as Six Sigma Finance Limited, a Hong Kong
company. See Note 14 of Notes to Consolidated Financial Statements. As of
March 31, 1995, 1996 and 1997, the amount of such loans outstanding was $6.5
million, $10.5 million and nil, respectively. Mr. T.L. Li no longer makes
shareholder loans to the Company. In addition, before the Company's initial
public offering in June 1997, Mr. T.L. Li guaranteed bank loans and overdrafts
for the benefit of the Company. As of March 31, 1995, 1996 and 1997, the
aggregate amount of such bank loans and overdrafts was $8.7 million, $8.7
million and $21.2 million, respectively. Mr. T.L. Li no longer guarantees such
bank loans or overdrafts. Neither the Company's ability to obtain bank
financing nor its cost of funds has been materially affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 7 and 14 of Notes to Consolidated Financial Statements.
The Company conducts a review of related party transactions on an ongoing
basis and utilizes the Audit Committee of its Board of Directors for the
review of potential conflicts of interest where appropriate.
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DESCRIPTION OF THE SHARES
The authorized share capital of the Company consists of 100,000,000 Shares.
As of the date of this Prospectus, there are 13,461,538 Shares outstanding,
and such number will remain unchanged upon completion of the Offering. Set
forth below is a description of the Shares, including summaries of material
relevant provisions of the Company's Memorandum of Association, Bye-laws and
the Companies Act 1981 of Bermuda. These summaries do not purport to be
complete and are qualified in their entirety by reference to the full
Memorandum of Association and Bye-laws which have been filed (or incorporated
by reference) as exhibits to the Registration Statement of which this
Prospectus forms a part.
GENERAL
As of the date of this Prospectus, all the issued Shares are fully paid and
non-assessable. Authorized but unissued Shares may be issued at any time and
at the discretion of the Board of Directors without the approval of the
shareholders of the Company with such rights, preferences and limitations as
the Board may determine. Certificates representing Shares are issued in
registered form. Shareholders of the Company who are non-residents of Bermuda
for exchange control purposes may freely hold and vote their Shares. The
shareholders are not entitled to any preemptive, sinking fund or redemption
rights.
VOTING RIGHTS
Subject to any special rights or restrictions as to voting for the time
being attached to any Shares by or in accordance with the Bye-laws, at any
general meeting on a show of hands, every shareholder who is present in person
by proxy shall have one vote and on a poll every shareholder present in person
or by proxy shall have one vote for every fully paid Share of which he is the
holder. Most matters to be approved by holders of Shares require approval by a
simple majority vote of the Shares represented at the shareholders meeting. A
resolution passed by a majority of not less than three-fourths of votes cast
by the holders of the Shares as, being entitled so to do, vote in person or by
proxy at a general meeting is required to approve a merger or amalgamation
with another company. Shareholders do not have cumulative voting rights.
Shareholders have the power to elect directors, appoint auditors and make
changes in the amount of authorized share capital of the Company. Any change
in the rights relating to the Shares requires the adoption of a resolution by
the holders of a majority of the Shares at a duly held meeting of the
shareholders of the Company or, if by written consent, by the holders of at
least 75% of the Shares. Voting at any meeting of shareholders is by show of
hands unless a poll is demanded. A poll may be demanded by the chairman of the
meeting, by at least three shareholders who are present in person or by proxy
for the time being entitled to vote at the meeting, or by shareholders who are
present in person or by proxy and who hold an aggregate amount of Shares (a)
which represent at least 10% of the voting right of Shares entitled to vote at
the meeting or (b) as to which the total paid up sum on such Shares is equal
to at least 10% of the total paid up sum on all Shares entitled to vote at the
meeting.
A quorum required for a meeting of shareholders consists of at least two
shareholders present in person or by proxy representing not less than one-
third in nominal value of the total issued Shares. Shareholders' meetings are
convened upon advance notice of at least 14 days.
DIVIDENDS
The shareholders are entitled to receive on a pro rata basis such dividends
when, as and if declared by the Board of Directors of the Company or
shareholders in a general meeting. Dividends may be paid only in accordance
with the Companies Act 1981 of Bermuda which provides that dividends and other
distributions to shareholders may not be paid if there are reasonable grounds
for believing that (a) the Company is, or would after the dividend payment be,
unable to pay its liabilities as they become due or (b) the realizable value
of the Company's assets after such payment would be less than the aggregate of
its liabilities and its issued share capital and share premium accounts.
Rights to dividends and distributions that have not been claimed within six
years after the date on which they were declared revert to the Company.
WINDING UP
If the Company is wound up, the liquidator may, with the sanction of a
resolution of shareholders, divide among the shareholders in specie or in kind
the whole or any part of the assets of the Company and may, with the like
sanction, vest the whole or any part of the assets in trustees upon such
trusts for the benefit of the shareholders as the liquidator thinks fit,
provided that a shareholder shall not be compelled to accept any Shares or
other securities which would subject such shareholder to liability.
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<PAGE>
MISCELLANEOUS
Certificates for Shares registered in the names of two or more persons may
be delivered to any one of them named in the share register, and if two or
more such persons tender a vote, the votes of the person whose name first
appears in the share register will be accepted to the exclusion of any other.
All notices to joint shareholders and, save as otherwise directed by the joint
holders of Shares, all checks or warrants for dividend payments, will be sent
to the joint holder whose name stands first in the registrar of members. Under
Bermuda law and the Company's Memorandum of Association and Bye-laws,
shareholders do not have preemptive rights.
The Transfer Agent and Registrar for the Shares is ChaseMellon Shareholder
Services, L.L.C.
LISTING
Effective October 31, 1997, the Shares began to trade on the Nasdaq National
Market under the symbol "PEAKF." Prior to October 31, 1997, the Shares traded
on Nasdaq under the symbol "PITLF."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial numbers of Shares in the public market could adversely
affect market prices prevailing from time to time. Upon completion of the
Offering, the Company will continue to have approximately 13.5 million Shares
outstanding. Of these Shares, approximately 5.6 million Shares (approximately
5.9 million Shares if the Underwriters' over-allotment option is exercised in
full), including the Shares sold in the Offering, will be freely tradeable
within the United States without restriction or further registration under the
Securities Act by persons other than "affiliates" of the Company as that term
is defined in Rule 144 under the Securities Act ("Affiliates"). The remaining
Shares are "restricted securities" as that term is defined in Rule 144 under
the Securities Act ("Restricted Shares"). Restricted Shares may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rule 144 or 701 promulgated under the Securities Act, which
rules are summarized below. As a result of contractual restrictions described
below and provisions of Rules 144 and 701, additional Shares will be available
for sale in the public market by the Selling Shareholder and certain officers
and directors of the Company upon expiration of the lock-up agreements 180
days after the date hereof. See "Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year (including the holding period of any prior owner except an
Affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of: (i) one percent of the number of
Shares then outstanding (which will equal 134,615 Shares immediately after the
Offering), or (ii) the average weekly trading volume of the Shares on the
Nasdaq National Market during the four calendar weeks preceding the filing of
notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to
the availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an Affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned
the Shares proposed to be sold for at least two years (including the holding
period of any prior owner except an Affiliate), is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
In addition, any employee, officer or director of or consultant to the
Company who purchased Shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits an Affiliate to sell Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-Affiliates may sell such shares in reliance on Rule 144
without having to comply with the public information, volume limitation or
notice provisions of Rule 144. In both cases, a holder of Rule 701 shares is
required to wait until 90 days after the date hereof before selling such
shares.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all Shares issued or issuable pursuant to
the Share Option Plan. See "Management--Share Option Plan." Accordingly,
Shares registered under such registration statements will, subject to Rule 144
volume limitations applicable to an Affiliate, be available for sale in the
open market, except to the extent that such Shares are subject to vesting
restrictions with the Company or the contractual restrictions described above.
As of September 30, 1997, options relating to an aggregate of 542,298 Shares
have been granted under the Company's Share Option Plan at an exercise price
equal to $12.00 per Share.
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TAXATION
The following discussion is a summary of the material Bermuda and United
States federal income tax considerations relevant to an investment decision by
a U.S. Holder (as defined below) with respect to Shares. This discussion does
not purport to deal with the tax consequences of owning Shares to all
categories of investors, some of which (such as dealers in securities, banks,
tax-exempt organizations, life insurance companies, U.S. Holders who hold
Shares that are part of a hedging, straddle, constructive sale or conversion
transaction or U.S. Holders whose functional currency is not the U.S. Dollar)
may be subject to special rules. This discussion is not exhaustive of all
possible tax considerations and potential investors are advised to satisfy
themselves as to the overall tax consequences, including, specifically, the
consequences under United States federal, state, local and other laws, of the
acquisition, ownership and disposition of Shares.
BERMUDA TAXATION
In the opinion of Conyers Dill & Pearman, Bermuda counsel of the Company,
the following discussion correctly describes certain tax consequences of the
ownership of Shares under Bermuda law.
The Company is incorporated in Bermuda. Under current Bermuda law, the
Company is not subject to tax on income or capital gains, and no Bermuda
withholding tax will be imposed upon payments of dividends by the Company to
its shareholders. Furthermore, the Company has received from the Minister of
Finance of Bermuda under the Exempted Undertakings Tax Protection Act of 1966
an assurance that, in the event that Bermuda enacts any legislation imposing
any tax computed on profits or income or on any capital asset, gain or
appreciation, or any tax in the nature of an estate duty or inheritance tax,
the imposition of such tax shall not be applicable to the Company or any of
its operations, nor to the shares, debentures or other obligations of the
Company until March 28, 2016. This assurance does not, however, prevent the
imposition of any Bermuda tax payable in relation to any land in Bermuda
leased to the Company or to persons ordinarily resident in Bermuda.
As an exempted company, the Company is liable to pay to the Bermuda
government an annual registration fee not exceeding Bermuda dollars 25,000 per
annum calculated on a sliding scale basis by reference to its authorized share
capital plus any share premium.
UNITED STATES TAXATION
In the opinion of Davis Polk & Wardwell, the following discussion is a
summary of certain United States federal income tax consequences to U.S.
Holders, as defined below, of acquiring, owning and disposing of Shares. The
following discussion of United States federal income tax matters is based on
the Internal Revenue Code of 1986, as amended (the "Code"), judicial
decisions, administrative pronouncements and Treasury regulations, changes to
any of which after the date hereof could apply on a retroactive basis and
affect the tax consequences described herein.
This discussion is not exhaustive of all possible tax considerations and
potential investors are advised to satisfy themselves as to the overall tax
consequences, including, specifically, the consequences under United States
federal, state, local and other laws, of the acquisition, ownership and
disposition of Shares.
As used herein, the term "U.S. Holder" means a beneficial owner of Shares
that (i) is a citizen or resident of the United States, a corporation
organized under the laws of the United States or any State or the District of
Columbia, or an estate or trust the income of which is subject to United
States federal income taxation on a net income basis, (ii) owns Shares as
capital assets and (iii) owns less than 10% of the voting stock of the
Company.
TAXATION OF DIVIDENDS
The amount of any distributions to U.S. Holders of Shares (other than
certain pro rata distributions of Shares or rights to acquire Shares) will
constitute dividend income for United States federal income tax purposes to
the extent such distributions are made from the current or accumulated
earnings and profits of the Company, as determined in accordance with United
States federal income tax principles. Such dividends will not be eligible for
the dividends received deduction otherwise allowed to corporations. To the
extent, if any, that the amount of any such distribution exceeds the Company's
current and accumulated earnings and profits as so computed, it will be
treated first as a tax-free return of the U.S. Holder's tax basis in its
Shares to the extent thereof, and then, to the extent in excess of such tax
basis, as a sale or exchange of property. The amount of any distribution of
property other than cash will be the fair market value of such property on the
date of distribution.
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Dividends paid by the Company will constitute foreign source dividend income
for United States federal income tax purposes, which may be relevant to a U.S.
Holder in calculating such holder's foreign tax credit limitation with respect
to other foreign taxes paid or accrued by such U.S. Holder. Under the Code,
the limitation on foreign taxes eligible for credit is calculated separately
with respect to specific classes of income. For this purpose, dividends paid
by the Company will generally be "passive" income or, in the case of certain
holders, "financial services" income.
TAXATION OF CAPITAL GAINS
A U.S. Holder will recognize capital gain or loss for U.S. federal income
tax purposes on the sale or other disposition of Shares in the same manner as
on the sale or other disposition of any other shares held as capital assets.
Gain, if any, generally will be U.S. source gain. Prospective investors should
consult their own tax advisors regarding the tax treatment of capital gains
and losses.
FOREIGN PERSONAL HOLDING COMPANY RULES
The Company would be a foreign personal holding company ("FPHC") for any
taxable year in which, at any time during the year, more than 50% of the
voting power or value of the Company's stock is owned, directly or pursuant to
rules of attribution, by or for five or fewer individuals who are citizens or
residents of the United States ("U.S. Group").
Upon completion of the Offering, Mr. T.L. Li will be treated as owning 58.6%
of the outstanding Shares (55.8% if the Underwriters' over-allotment option is
exercised in full) for purposes of the FPHC rules. If Mr. Li or his spouse
were to become a U.S. citizen or resident, Shares owned by Mr. Li would be
taken into account in determining the existence of a U.S. Group. Moreover, if
a member of Mr. Li's family, or any individual partner of any partnership of
which if Mr. Li is a partner, were to own one or more Shares and were or were
to become a U.S. citizen or resident, Shares considered owned by Mr. Li would
be considered owned by such family member or partner in determining the
existence of a U.S. Group. Although the Company believes that no U.S. Group
presently exists, there can be no assurance that a U.S. Group will not exist
in the future. The Company does not intend to assess whether a U.S. Group
exists in any taxable year.
If the Company were a FPHC, each U.S. Holder who, or that, owned Shares on
the last day of the Company's taxable year, or, if earlier, the last day of
its taxable year on which a U.S. Group existed with respect to the Company,
would be required to include in gross income, as a dividend, such U.S.
Holder's pro rata share of the Company's undistributed taxable income, subject
to certain adjustments. In addition, an individual U.S. Holder who acquires
Shares from a decedent would be denied the step-up of tax basis of such Shares
to fair market value on the decedent's date of death which would otherwise be
available and instead would have a tax basis equal to the lower of fair market
value or the decedent's basis.
BACKUP WITHHOLDING
A U.S. Holder of Shares may, under certain circumstances, be subject to
"backup withholding" at the rate of 31% with respect to dividends paid on the
Shares or the proceeds of sale, exchange or redemption of Shares unless such
U.S. Holder (i) is a corporation or comes within certain other exempt
categories, and, when required, demonstrates this fact or (ii) provides a
correct taxpayer identification number, certifies that such holder is not
subject to backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. Any amount withheld under these
rules will be creditable against the U.S. Holder's United States federal
income tax liability. A U.S. Holder who does not provide a correct taxpayer
identification number may be subject to penalties imposed by the U.S. Internal
Revenue Service.
39
<PAGE>
CERTAIN FOREIGN ISSUER CONSIDERATIONS
The Company has been designated as non-resident of Bermuda for exchange
control purposes by the Bermuda Monetary Authority, whose permission for the
free transferability of the Shares has been obtained subject to the Shares
being listed on the Nasdaq National Market.
IT MUST BE DISTINCTLY UNDERSTOOD THAT, IN GRANTING SUCH PERMISSION, THE
BERMUDA MONETARY AUTHORITY WILL ACCEPT NO RESPONSIBILITY FOR THE FINANCIAL
SOUNDNESS OF ANY SCHEMES OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE
OR OPINIONS EXPRESSED HEREIN.
The transfer of Shares between persons regarded as resident outside Bermuda
for exchange control purposes and the issue of Shares within the current
authorized share capital of the Company after the completion of the Offering
to or by such persons may be effected without specific consent under the
Exchange Control Act 1972 and regulations thereunder subject to such Shares
being listed on the Nasdaq National Market. Issues and transfers of Shares
involving any person regarded as resident in Bermuda for exchange control
purposes require specific prior approval under the Exchange Control Act 1972.
There are no limitations on the rights of holders of the Shares who are non-
resident in Bermuda for exchange control purposes to hold or vote their
Shares. Because the Company has been designated as a non-resident for Bermuda
exchange control purposes, there are no restrictions on its ability to
transfer funds in and out of Bermuda or to pay dividends to United States
residents who are holders of the Shares, other than in respect of local
Bermuda currency. The Company does not anticipate that it will transact
business or make payments of dividends or other distributions in the local
Bermuda currency.
In accordance with Bermuda law, share certificates are only issued in the
names of corporations, partnerships or individuals. In the case of an
applicant acting in a special capacity (for example, as trustee), certificates
may, at the request of the applicant, record the capacity in which the
applicant is acting. Notwithstanding the recording of any such special
capacity, the Company is not bound to investigate or incur any responsibility
in respect to the proper administration of any such trust.
The Company will take no notice of any trust applicable to any of its Shares
whether or not it has notice of such trust.
As an exempted company, the Company is exempted from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudans,
but as an exempted company the Company may not participate in certain business
transactions including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years), (2) the taking of mortgages on land in
Bermuda to secure an amount in excess of 50,000 Bermuda dollars without the
consent of the Minister of Finance of Bermuda, (3) the acquisition of any
bonds or debentures secured on any land in Bermuda except bonds or debentures
issued by the Bermuda government or a public authority or (4) the carrying on
of business of any kind in Bermuda, except in furtherance of the business of
the Company carried on outside Bermuda or under a license granted by the
Minister of Finance of Bermuda.
40
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") and BancAmerica Robertson Stephens are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Selling
Shareholder, and the Selling Shareholder has agreed to sell to each of the
Underwriters, the number of Shares set forth opposite each Underwriter's name
in the table below, at the public offering price per share less the
underwriting discounts and commissions set forth on the cover hereof.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...................
BancAmerica Robertson Stephens........................................
---------
Total............................................................... 2,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligation of the several
Underwriters to purchase and accept delivery of the Shares offered hereby are
subject to approval of certain legal matters by counsel and to certain other
conditions. If any of the Shares are purchased by the Underwriters pursuant to
the Underwriting Agreement, the Underwriters are obligated to purchase all
such Shares (other than the Shares covered by the over-allotment option
described below).
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholder against certain
liabilities, including liabilities under the Securities Act.
The Underwriters have advised the Company and the Selling Shareholder that
they propose to offer the Shares to the public initially at the price to the
public set forth on the cover page of this Prospectus and to certain dealers
(who may include the Underwriters) at such price, less a concession not to
exceed $ per Share. The Underwriters may allow, and such dealers may re-
allow, discounts not in excess of $ per Share to any other Underwriter and
certain other dealers. After the Offering, the offering price and other
selling terms may be changed by the Underwriters.
Pursuant to the Underwriting Agreement, the Selling Shareholder has granted
to the Underwriters an option to purchase up to an aggregate of 375,000
additional Shares at the public offering price net of underwriting discounts
and commissions, solely to cover over-allotments, if any. Such option may be
exercised at any time within 30 days after the date of this Prospectus. To the
extent that the Underwriters exercise such option, each of the Underwriters
will be committed, subject to certain conditions, to purchase a number of
option Shares proportionate to such Underwriter's initial commitment as
indicated in the above table. To the extent that such option is exercised in
part, the Underwriters will severally purchase additional Shares ratably from
the Selling Shareholder. If purchased, the Underwriters will sell such 375,000
additional Shares on the same terms as those on which the 2,500,000 Shares are
being offered.
The Shares have not been and must not be offered or sold in the United
Kingdom, by means of any document, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise in
circumstances which do not constitute an offering to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995. This document may only be issued or passed on to a person who is of a
kind described in Article 11(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on under the
Financial Services Act of 1986.
Subject to certain exceptions, each of the Company, the Selling Shareholder
and the executive officers and directors of the Company has agreed not to
offer, sell, contract to sell, grant any option to purchase, or otherwise
41
<PAGE>
dispose of any Common Stock of the Company or any securities convertible into
or exercisable or exchangeable for such Common Stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of any such Common Stock, except to the Underwriters pursuant to the
Underwriting Agreement, for a period of 90 days after the date hereof without
the prior written consent of DLJ.
Other than in the United States, no action has been taken by the Company,
the Selling Shareholder or the Underwriters that would permit a public
offering of the Shares offered hereby in any jurisdiction where action for
that purpose is required. The Shares offered hereby may not be offered or
sold, directly or indirectly, nor may this Prospectus or any other offering
material or advertisements in connection with the offer and sale of any such
Shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this
Prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the Offering and the distribution of this Prospectus.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any Shares offered hereby in any jurisdiction in which such an
offer or a solicitation is unlawful.
The Underwriters and dealers may engage in passive market making
transactions in the Shares in accordance with Rule 103 of Regulation M
promulgated by the Commission. In general, a passive market maker may not bid
for or purchase Shares at a price that exceeds the highest independent bid. In
addition, the net daily purchases made by any passive market maker generally
may not exceed 30% of its average daily trading volume in the Shares during a
specified two month prior period, or 200 shares, whichever is greater. A
passive market maker must identify passive market making bids as such on the
Nasdaq electronic inter-dealer reporting system. Passive market making may
stabilize or maintain the market price of the Shares above independent market
levels. Underwriters and dealers are not required to engage in passive market
making and may end passive market making activities at any time.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Shares.
Specifically, the Underwriters may over-allot the Offering, creating a
syndicate short position. The Underwriters may bid for and purchase Shares in
the open market to cover syndicate short positions or to stabilize the price
of the Shares. Any of these activities may stabilize or maintain the market
price of the Shares above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
Effective October 31, 1997, the Shares began to trade on Nasdaq under the
symbol "PEAKF." Prior to October 31, 1997, the Shares traded on Nasdaq under
the symbol "PITLF."
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed upon
for the Company by Davis Polk & Wardwell, Hong Kong and New York, New York,
Conyers Dill and Pearman, Bermuda, and Richards Butler, Hong Kong. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriters by Paul, Weiss, Rifkind, Wharton & Garrison, Hong Kong and New
York, New York. In rendering such opinions, Davis Polk & Wardwell and Paul,
Weiss, Rifkind, Wharton & Garrison may rely with respect to certain matters of
Bermuda law on the opinion of Conyers Dill and Pearman and, with respect to
certain matters of Hong Kong law, on the opinion of Richards Butler. Mr. Robin
Nicholson, a partner of Richards Butler, is also a director of the Company.
EXPERTS
The consolidated financial statements as of March 31, 1997 and for the year
then ended included in this Prospectus have been audited by Deloitte Touche
Tohmatsu, independent auditors, as stated in their report appearing herein,
and have been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements as of March 31, 1995 and 1996 and for
each of the two years in the period ended March 31, 1996 included in this
Prospectus have been audited by BDO Binder, independent auditors, as stated in
their report appearing herein, and are included herein in reliance upon such
report given upon the authority of said firm as experts in accounting and
auditing.
42
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report on the Consolidated Financial Statements for
the year ended March 31, 1997 .......................................... F-2
Independent Auditors' Report on the Consolidated Financial Statements for
the years ended March 31, 1995 and 1996 ................................ F-3
Consolidated Balance Sheets at March 31, 1995, 1996 and 1997 and
(unaudited) September 30, 1997 ......................................... F-4
Consolidated Statements of Income for the years ended March 31, 1995,
1996 and 1997 and (unaudited) the six months ended September 30, 1996
and 1997 ............................................................... F-5
Consolidated Statements of Shareholders' Equity for the years ended March
31, 1995, 1996 and 1997 and (unaudited) the six months ended September
30, 1997 ............................................................... F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1995,
1996 and 1997 and (unaudited) the six months ended September 30, 1996
and 1997 ............................................................... F-7
Notes to Consolidated Financial Statements............................... F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Peak International Limited
We have audited the accompanying consolidated balance sheet of Peak
International Limited and subsidiaries as of March 31, 1997 and the related
consolidated statements of income, shareholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Peak International Limited
and subsidiaries at March 31, 1997 and the results of their operations and
their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.
Deloitte Touche Tohmatsu
Hong Kong
May 26, 1997
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Peak International Limited
We have audited the accompanying consolidated balance sheets of Peak
International Limited and subsidiaries as of March 31, 1995 and 1996 and the
related consolidated statements of income, shareholder's equity and cash flows
for each of the years in the two-year period ended March 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards applicable in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statements presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Peak
International Limited and subsidiaries as of March 31, 1995 and 1996 and its
consolidated results of operations and consolidated cash flows for each of the
years in the two-year period ended March 31, 1996 in conformity with
accounting principles generally accepted in the United States of America.
BDO Binder
Hong Kong
March 19, 1997
F-3
<PAGE>
PEAK INTERNATIONAL LIMITED
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
------------------------- SEPTEMBER 30,
NOTE 1995 1996 1997 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 1,828 $ 924 $ 1,814 $17,484
Investment in certificate of
deposit........................ -- 100 100 --
Short-term marketable
securities..................... 3 -- -- 1,129 --
Accounts receivable--trade...... 6,823 8,531 10,251 9,571
Inventories..................... 4 11,245 14,609 22,053 24,635
Other receivables, deposits and
prepayments.................... 1,962 1,082 1,348 1,620
Amounts due from related
companies...................... 14 714 1,058 1,356 1,817
Prepaid income taxes............ 252 -- -- --
------- ------- ------- -------
Total current assets........ 22,824 26,304 38,051 55,127
Deposits for acquisition of
property, plant and equipment.... 99 -- -- --
Property, plant and equipment,
net.............................. 5 11,453 12,119 15,744 19,840
Long-term marketable securities... 6 834 -- -- --
------- ------- ------- -------
Total assets................ $35,210 $38,423 $53,795 $74,967
======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Bank borrowings: 7
--overdrafts and invoice
financing.................... $ 1,990 $ 3,482 $ 9,208 $ 355
--bills payable............... 6,743 5,183 5,489 --
--other short-term loans...... -- -- 6,473 --
------- ------- ------- -------
8,733 8,665 21,170 355
Accounts payable:
--trade....................... 1,691 1,200 1,767 2,211
--property, plant and
equipment.................... 3,486 922 70 473
Accrued liabilities and
deposits....................... 1,883 1,910 1,356 1,804
Income taxes payable............ -- 811 2,477 3,229
Amounts due to related
companies...................... 14 2,140 23 309 197
Amount due to shareholder....... 14 5,146 10,491 -- --
------- ------- ------- -------
Total current liabilities... 23,079 24,022 27,149 8,269
Deferred income taxes............. 11 430 441 374 374
Commitments and contingencies 13
Shareholders' equity:
Common stock, $0.01 par value;
100,000,000 shares authorized,
10,461,538 shares issued and
outstanding at March 31, 1995,
1996 and 1997, and (unaudited)
13,461,538 shares issued and
outstanding at September 30,
1997........................... 105 105 105 135
Additional paid-in capital...... 2,564 2,564 2,564 34,034
Retained earnings............... 9,529 11,300 23,523 32,632
Cumulative translation
adjustment..................... (9) (9) 21 (477)
Unrealized holding
(losses)/gains on marketable
securities..................... 3&6 (488) -- 59 --
------- ------- ------- -------
Total shareholders' equity.. 11,701 13,960 26,272 66,324
------- ------- ------- -------
Total liabilities and
shareholders' equity....... $35,210 $38,423 $53,795 $74,967
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PEAK INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------- ----------------------
NOTE 1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales:
--third parties......... $34,339 $43,467 $47,910 $20,768 $28,694
--related companies..... 14 776 11,477 9,684 4,846 5,339
------- ------- ------- ------- -------
35,115 54,944 57,594 25,614 34,033
Cost of goods sold........ (27,593) (33,931) (32,676) (14,715) (18,976)
------- ------- ------- ------- -------
Gross profit.............. 7,522 21,013 24,918 10,899 15,057
Operating expenses:
General and
administrative and
research and
development............ (2,616) (5,385) (4,730) (2,502) (2,811)
Selling and marketing... (1,802) (3,294) (4,198) (1,832) (2,638)
------- ------- ------- ------- -------
Income from operations.... 3,104 12,334 15,990 6,565 9,608
Other income, net......... 8 234 1,133 83 -- 415
Interest income........... 9 4 15 105 35 251
Interest expense.......... 10 (409) (765) (1,425) (499) (388)
------- ------- ------- ------- -------
Income before income
taxes.................... 11 2,933 12,717 14,753 6,101 9,886
Provision for income
taxes.................... 11 (192) (1,227) (1,236) (574) (777)
------- ------- ------- ------- -------
Net income................ $ 2,741 $11,490 $13,517 $ 5,527 $ 9,109
======= ======= ======= ======= =======
Earnings per share........ $ 0.26 $ 1.10 $ 1.29 $ 0.53 $ 0.74
======= ======= ======= ======= =======
<CAPTION>
Weighted average number of
shares outstanding....... 10,461,538 10,461,538 10,461,538 10,461,538 12,239,067
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
PEAK INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
CUMULATIVE HOLDING
COMMON STOCK ADDITIONAL TRANSLATION GAINS/(LOSSES)
----------------- PAID-IN RETAINED ADJUSTMENT ON MARKETABLE
SHARES AMOUNT CAPITAL EARNINGS ACCOUNT SECURITIES TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1994................... 10,461,538 $105 $ 2,564 $ 6,788 $ 4 $(206) $ 9,255
Net income for the
year................... -- -- -- 2,741 -- -- 2,741
Foreign currency
translation............ -- -- -- -- (13) -- (13)
Increase in unrealized
holding losses for
the year............... -- -- -- -- -- (282) (282)
---------- ---- ------- ------- ----- ----- -------
Balance at March 31,
1995................... 10,461,538 105 2,564 9,529 (9) (488) 11,701
Net income for the
year................... -- -- -- 11,490 -- -- 11,490
Dividend of $0.93 per
share.................. -- -- -- (9,719) -- -- (9,719)
Holding losses realized
during the year upon
disposal............... -- -- -- -- -- 488 488
---------- ---- ------- ------- ----- ----- -------
Balance at March 31,
1996................... 10,461,538 105 2,564 11,300 (9) -- 13,960
Net income for the
year................... -- -- -- 13,517 -- -- 13,517
Dividend of $0.12 per
share.................. -- -- -- (1,294) -- -- (1,294)
Foreign currency
translation............ -- -- -- -- 30 -- 30
Increase in unrealized
holding gain for
the year............... -- -- -- -- -- 59 59
---------- ---- ------- ------- ----- ----- -------
Balance at March 31,
1997................... 10,461,538 105 2,564 23,523 21 59 26,272
Net income for the six
months ended September
30, 1997 (Unaudited)... -- -- -- 9,109 -- -- 9,109
Issue of common stock
(Unaudited)............ 3,000,000 30 31,470 -- -- -- 31,500
Foreign currency
translation
(Unaudited)............ -- -- -- -- (498) -- (498)
Holding gain realized
for the six months
ended September 30,
1997 upon disposal
(Unaudited)............ -- -- -- -- -- (59) (59)
---------- ---- ------- ------- ----- ----- -------
Balance at September 30,
1997 (Unaudited)....... 13,461,538 $135 $34,034 $32,632 $(477) $ -- $66,324
========== ==== ======= ======= ===== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PEAK INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
--------------------------- ------------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income................... $ 2,741 $ 11,490 $ 13,517 $ 5,527 $ 9,109
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization.............. 2,261 2,963 3,570 1,671 2,229
Deferred income taxes...... 177 11 (67) -- --
Gain on disposal of long-
term marketable
securities................ -- (949) -- -- --
Loss/(gain) on
disposal/write-off of
plant and equipment....... (4) 891 3 -- --
Gain on sale of short-term
marketable securities..... -- -- (90) -- (346)
Changes in operating assets
and liabilities:
Accounts receivable--trade.. (528) (1,708) (1,720) 1,963 680
Inventories................. (2,699) (3,364) (7,444) (5,481) (2,582)
Other receivables, deposits
and prepayments ........... (1,849) 880 (266) (29) (272)
Bills payable............... 5,465 (1,560) 306 (736) (5,489)
Accounts payable--trade..... 557 (491) 567 785 444
Accrued liabilities and
deposits................... 1,479 27 (554) 646 448
Amounts due from/to related
companies.................. 1,140 (2,461) (12) (214) (573)
Income taxes payable........ (901) 1,063 1,666 1,018 752
------- -------- -------- -------- --------
Net cash provided by
operating activities...... 7,839 6,792 9,476 5,150 4,400
------- -------- -------- -------- --------
Investing activities:
Purchase of marketable
securities.................. -- (328) (1,592) (297) --
Proceeds on sale of plant and
equipment................... 30 72 -- -- --
Acquisition of property,
plant and equipment......... (3,689) (7,156) (8,050) (3,579) (5,922)
(Increase)/decrease in
deposits for acquisition of
property, plant and
equipment................... (64) 99 -- -- --
Proceeds from sale of short-
term marketable securities.. -- -- 612 -- 1,416
(Investment in)/sale of
certificate of deposit...... -- (100) -- -- 100
------- -------- -------- -------- --------
Net cash used in investing
activities................ (3,723) (7,413) (9,030) (3,876) (4,406)
------- -------- -------- -------- --------
Financing activities:
Proceeds from/(repayment of)
short-term bank loans....... -- -- 6,473 2,310 (6,473)
Increase/(decrease) in bank
overdrafts and invoice
financing, net.............. 1,012 1,492 5,726 5,187 (8,853)
Payments on long-term debt... (10) -- -- -- --
Dividends paid............... -- (7,120) (1,294) (1,294) --
Proceeds from the issue of
common stock................ -- -- -- -- 31,500
Advances from shareholder.... 2,284 13,564 1,570 -- --
Repayment of amount due to
shareholder................. (6,741) (8,219) (12,061) (6,431) --
------- -------- -------- -------- --------
Net cash provided by/(used
in) financing activities.. (3,455) (283) 414 (228) 16,174
------- -------- -------- -------- --------
Net increase/(decrease) in
cash and cash equivalents.... 661 (904) 860 1,046 16,168
Cash and cash equivalents at
beginning of year/period..... 1,180 1,828 924 924 1,814
Effects of exchange rate
changes on cash.............. (13) -- 30 19 (498)
------- -------- -------- -------- --------
Cash and cash equivalents at
end of year/period........... $ 1,828 $ 924 $ 1,814 $ 1,989 $17,484
======= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
Peak International Limited (the "Company") was incorporated as an exempted
company with limited liability in Bermuda under the Companies Act 1981 of
Bermuda (as amended) on January 3, 1997.
Pursuant to a group restructuring (the "Restructuring"), the interest in
Peak Plastic & Metal Products (International) Limited ("Peak (HK)") and other
companies in the packaging products business held by Mr. T.L. Li, the
shareholder of the Company (the "Shareholder"), were restructured whereby the
Company became the holding company of Peak (HK) and the Company's other
subsidiaries. Prior to the Restructuring, the Shareholder owned, in the
aggregate, all 200,000 of the outstanding ordinary shares of Peak (HK). Prior
to the Restructuring, the Shareholder also directly owned all of the
outstanding shares of Luckygold 18A Limited ("Luckygold") and, through
Luckygold, indirectly held all of the outstanding shares of each of Success
Gold 8 Limited ("Success Gold") and Peakgold 3 Limited ("Peakgold") and each
of their respective subsidiaries. Luckygold, Success Gold and Peakgold are
incorporated in the British Virgin Islands.
On January 14, 1997, 1,200,000 shares of the Company were allotted nil paid
to Luckygold. On February 28, 1997, Luckygold transferred to the Company all
the outstanding shares of Peakgold and Success Gold in consideration for (i)
crediting as fully paid the existing 1,200,000 shares allotted to Luckygold
and (ii) the issue of 8,800,000 additional shares to Luckygold. As part of the
Restructuring, on March 18, 1997, the Company issued 461,538 shares to
Luckygold, credited as fully paid, by way of capitalization of the sum of
$4,615 standing to the credit of the additional paid-in capital account of the
Company.
On February 13, 1997, Peakgold subscribed for at par and was allotted two
ordinary shares of Peak (HK). Following the acquisition of those two shares,
the 200,000 ordinary shares of Peak (HK) owned by the Shareholder prior to the
Restructuring were, on February 17, 1997, converted into non-voting deferred
shares. The deferred shares have effectively no rights to dividends and
limited rights to return of capital upon any dissolution or liquidation of
Peak (HK). In addition, Peakgold was granted an option to purchase all of the
deferred shares within the five-year period following the grant of the option
for a total consideration of one Hong Kong dollar. As a result, the voting and
economic rights relating to the common stock of Peak (HK) became effectively
wholly-owned by Peakgold and, accordingly, the value of the Shareholder's 100%
interest in Luckygold increased by the value of Peak (HK).
The Restructuring has been accounted for as a reorganization of entities
under common control similar to a pooling of interests. The financial
statements present the results of the Company and its subsidiaries as if the
companies had been combined for all periods presented.
In June 1997, the Company issued 3,000,000 shares of common stock in an
initial public offering and received net proceeds of approximately $31,500.
The subsidiaries of the Company are principally engaged in the manufacture
and sale of precision engineered packaging products, such as matrix trays,
shipping tubes, reels and carrier tape, leadframe boxes and interleaves used
in the storage and transportation of semiconductor devices and other
electronic components. The Company's principal production facilities are
located in the People's Republic of China (the "PRC") and the Company
maintains sales offices in Hong Kong, the United States, Singapore and
Malaysia.
The consolidated financial statements of the Company and its subsidiaries
have been prepared in accordance with generally accepted accounting principles
in the United States of America ("U.S. GAAP") which differ from those used in
the statutory accounts of most of its subsidiaries. There are no material
differences between the U.S. GAAP amounts and the amounts used in the
statutory accounts of the subsidiaries.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
F-8
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
(B) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out method. Cost of work-in-progress and finished goods
include costs of direct materials, direct labor and an appropriate proportion
of production overheads. The production overheads are absorbed in work-in-
progress and finished goods based on units of production.
(C) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation.
Depreciation and amortization is provided using the straight-line method so
as to allocate the cost of depreciable assets in use to operations based upon
the following estimated useful lives:
<TABLE>
<CAPTION>
CATEGORY OF ASSETS ESTIMATED USEFUL LIVES
<S> <C>
Land use rights............................. Over the unexpired lease term
Buildings................................... Over the unexpired lease term
Other property, plant and equipment......... 5 years
</TABLE>
Costs incurred in constructing the new factory, including progress payments,
interest costs and other costs relating to the construction are capitalized.
These costs will be transferred to property, plant and equipment on completion
and depreciated from that time. At March 31, 1997 and (unaudited) September
30, 1997, capitalized interest included in factory under construction amounted
to $11 and $45, respectively.
(D) INVESTMENT IN MARKETABLE SECURITIES
Management determines the appropriate classification of investment
securities at the time they are acquired and reevaluates the appropriateness
of such classifications at the balance sheet date. At each balance sheet date,
the investment securities presented have been classified as "Available for
Sale Securities." This type of security is stated at fair market value and
unrealized holding gains and losses, net of deferred tax, are reported as a
separate component of shareholders' equity.
Dividends on investment securities, if any, are recognized as income when
declared. Realized gains and losses will be included in income and will be
based upon the actual cost of the security.
(E) FOREIGN CURRENCY TRANSLATION
The Company uses the United States dollar as its reporting currency.
Monetary assets and liabilities denominated in currencies other than United
States dollars are translated into United States dollars at the rates of
exchange ruling at the balance sheet date. Transactions in currencies other
than United States dollars during the year are converted into United States
dollars at the rates of exchange ruling at the transaction dates. Exchange
differences are recognized in the statements of income.
F-9
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
On consolidation, balance sheets of subsidiaries denominated in currencies
other than United States dollars are translated into United States dollars at
the rates of exchange ruling at the balance sheet date. Statements of income
of subsidiaries denominated in currencies other than United States dollars are
translated into United States dollars at average exchange rates. Exchange
differences are recorded to a cumulative translation adjustment account within
shareholders' equity.
(F) INCOME TAXES
Income taxes are calculated under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Deferred income
taxes include the effects of temporary differences between financial and
taxable amounts of assets and liabilities.
(G) RECOGNITION OF REVENUE
Revenue arising from sale of goods is recognized at the time when the goods
are shipped and title to the goods passes to customers.
(H) EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of shares
outstanding during the year.
(I) CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity of
ninety days or less at the time of acquisition to be cash equivalents.
(J) CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments and trade accounts receivable.
The Company places its temporary cash investments with various financial
institutions and, by policy, limits the amount of credit exposure to any one
financial institution. The Company believes that no significant credit risk
exists as these investments are made with high-credit, quality financial
institutions.
The Company's business activities and accounts receivable are with customers
in the semiconductor industries, the majority of which are located throughout
Asia and the United States. The Company performs ongoing credit evaluations of
its customers. The Company believes that no significant credit risk exists as
credit losses, when realized, have been within the range of management's
expectations. During the years, the Company has not experienced any
significant bad debts and did not maintain any allowances for doubtful
accounts.
(K) FINANCIAL INSTRUMENTS
The carrying value of financial instruments, which consist of cash and cash
equivalents, certificate of deposit, accounts receivable, other receivables,
amounts due from related companies, short-term bank borrowings, accounts
payable and bills payable, approximates to fair value due to the short-term
nature of these instruments.
(L) INTERIM PERIODS
The financial statements and related notes thereof as of September 30, 1997
and for the six months ended September 30, 1996 and 1997 are unaudited and
have been prepared on the same basis as the audited financial statements
included herein. In the opinion of management, such unaudited financial
statements include all adjustments necessary to present fairly the information
set forth therein. These adjustments consist solely of normal recurring
accruals. The interim results are not necessarily indicative of the results
for any future period.
F-10
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(M) NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. Results of operations and financial position will be
unaffected by implementation of these new standards.
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which supersedes SFAS No. 14, Financial Reporting for Segments of
a Business Enterprise, establishes standards for the way that public
enterprises report information about operating segments in interim financial
statements issued to the public. It also establishes standards for disclosures
regarding products and services, geographic areas and major customers. SFAS
No. 131 defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. Due to the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any,
they may have on future financial statement disclosures.
(3) SHORT-TERM MARKETABLE SECURITIES
<TABLE>
<CAPTION>
MARCH 31,
------------------------- SEPTEMBER 30,
1995 1996 1997 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
Equity securities listed in the
United States:
Cost........................... $ -- $ -- $ 1,070 $ --
Unrealized holding gain........ -- -- 59 --
------- ------- ------- -------
Market value................... $ -- $ -- $ 1,129 $ --
======= ======= ======= =======
(4) INVENTORIES
The components of inventories, net of the related reductions to the lower of
cost or market, were as follows:
<CAPTION>
MARCH 31,
------------------------- SEPTEMBER 30,
1995 1996 1997 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
Raw materials.................... $ 8,506 $11,564 $15,374 $12,144
Finished products................ 2,907 3,627 6,808 12,556
------- ------- ------- -------
11,413 15,191 22,182 24,700
Less: Inventory reserve.......... (168) (582) (129) (65)
------- ------- ------- -------
$11,245 $14,609 $22,053 $24,635
======= ======= ======= =======
</TABLE>
F-11
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The inventory reserve represents provision for slow moving inventory
determined after periodic review by management.
Movements in inventory reserve are as follows:
<TABLE>
<S> <C>
Balance at April 1, 1994............................................ $ --
Provision for slow moving inventory charged to income............... 168
-----
Balance at March 31, 1995........................................... 168
Provision for slow moving inventory charged to income............... 414
-----
Balance at March 31, 1996........................................... 582
Provision for slow moving inventory written back to income.......... (453)
-----
Balance at March 31, 1997........................................... 129
Provision for slow moving inventory written back to income
(unaudited)........................................................ (64)
-----
Balance at September 30, 1997 (unaudited)........................... $ 65
=====
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
Land use rights and building..... $ 2,424 $ 2,424 $ 2,424 $ 3,111
Factory under construction....... -- -- 1,426 2,640
Plant, machinery, moulds and
equipment....................... 10,849 12,572 12,923 15,540
Leasehold improvements,
furniture, fixtures and motor
vehicles........................ 2,964 4,006 9,476 11,281
------- ------- -------- --------
16,237 19,002 26,249 32,572
Less: Accumulated depreciation
and amortization................ (4,784) (6,883) (10,505) (12,732)
------- ------- -------- --------
$11,453 $12,119 $ 15,744 $ 19,840
======= ======= ======== ========
A subsidiary of the Company operating in Shenzhen in the PRC acquired
factory buildings on certain state-owned land in the PRC. Pursuant to land use
rights agreements entered into between the subsidiary and the local land
bureau on March 27, 1995 and January 31, 1996, the subsidiary was legally
assigned the land use rights for a period of 50 years after payment of an
additional land premium.
(6) LONG-TERM MARKETABLE SECURITIES
<CAPTION>
MARCH 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
Shares listed in Hong Kong:
Cost........................... $ 1,322 $ -- $ -- $ --
Unrealized holding losses...... (488) -- -- --
------- ------- -------- --------
Market value................... $ 834 $ -- $ -- $ --
======= ======= ======== ========
</TABLE>
F-12
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(7) BANK BORROWINGS
These represent borrowings in the form of bills payable, invoice financing,
bank overdrafts and other short-term loans with certain commercial banks.
<TABLE>
<CAPTION>
MARCH 31,
------------------------- SEPTEMBER 30,
1995 1996 1997 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
Total unsecured credit facilities
available........................ $11,780 $25,113 $54,450 $52,432
======= ======= ======= =======
Total utilized unsecured facili-
ties............................. $ 8,733 $ 8,665 $21,170 $ 355
======= ======= ======= =======
Weighted average interest rate on
borrowings at end of year........ 10.1% 8.97% 8.27% 9.25%
======= ======= ======= =======
</TABLE>
All the above credit facilities were guaranteed at no cost by Mr. T.L. Li
throughout the relevant years. Following the Company's initial public offering
in June 1997, these guarantees were released by the banks (unaudited).
Interest rates in respect of such facilities are generally based on the banks'
prime lending rates and the credit lines are normally subject to annual
review.
(8) OTHER INCOME, NET
Other income/(expense) consisted of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------ -----------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Market value of long-term mar-
ketable securities distrib-
uted as dividend............. $ -- $ 2,599 $ -- $ -- $ --
Proceeds on sale of short-term
marketable securities........ -- -- 612 -- 1,416
Cost of marketable securi-
ties......................... -- (1,650) (522) -- (1,070)
------ -------- ------ ------- ---------
Realized gain on marketable
securities................... -- 949 90 -- 346
Dividend income............... 16 164 -- -- --
Foreign currency exchange
gain/(loss), net............. 218 20 (7) -- 69
------ -------- ------ ------- ---------
$ 234 $ 1,133 $ 83 $ -- $ 415
====== ======== ====== ======= =========
</TABLE>
(9) INTEREST INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
----------------------- ----------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income from:
--third parties................ $ 4 $ 15 $ 74 $ 18 $ 246
--an affiliated party (note
14)........................... -- -- 31 17 5
------- ------- ------- ------- --------
$ 4 $ 15 $ 105 $ 35 $ 251
======= ======= ======= ======= ========
</TABLE>
F-13
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(10) INTEREST EXPENSE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------- ----------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest expense to:
--third parties.................. $ 374 $ 738 $ 1,425 $499 $388
--a related company (note 14).... 35 27 -- -- --
------ ------ -------- -------- --------
$ 409 $ 765 $ 1,425 $499 $388
====== ====== ======== ======== ========
</TABLE>
(11) PROVISION FOR INCOME TAXES
Income is subject to taxation in the various countries in which the Company
and its subsidiaries operate. The components of income before income taxes are
as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------- ------------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Hong Kong........................ $2,928 $12,184 $14,678 $6,307 $8,964
Other countries.................. 5 533 75 (206) 922
------ ------- ------- -------- --------
$2,933 $12,717 $14,753 $6,101 $9,886
====== ======= ======= ======== ========
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------- ------------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income tax:
Current year:
Hong Kong.................... $ 88 $ 1,114 $ 1,223 $478 $718
United States................ 7 98 22 4 29
Malaysia..................... -- 4 27 (11) 4
Singapore.................... -- -- 31 103 26
Prior year's overprovision:
Hong Kong.................... (80) -- -- -- --
Deferred income tax:
Hong Kong...................... 177 11 (28) -- --
Malaysia....................... -- -- (26) -- --
Singapore...................... -- -- (13) -- --
----- ------- ------- -------- --------
$ 192 $1,227 $1,236 $574 $777
===== ======= ======= ======== ========
</TABLE>
F-14
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The components of the net deferred tax liabilities as of March 31, 1995,
1996 and 1997 and as of September 30, 1997 are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------- SEPTEMBER 30,
1995 1996 1997 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Depreciation................................. $430 $441 $447 $447
Other temporary difference................... -- -- (73) (73)
---- ---- ---- ----
$430 $441 $374 $374
==== ==== ==== ====
</TABLE>
As of both March 31, 1997 and (unaudited) September 30, 1997, a subsidiary
of the Company in the United States had approximately $550 and $400, of
Federal and State net operating loss carryforwards, respectively, available to
offset future taxable income. These net operating loss carryforwards expire in
various years through 2009. Based upon the operating history of the
subsidiary, it is uncertain whether these carryforwards will be utilized
before their expiration. As a result, the deferred tax asset arising from
these net operating losses has been fully reserved.
The effective tax rate of the Company varied from the Hong Kong profits tax
rate for the following reasons:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------- ------------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Hong Kong profits tax rate.. 16.5% 16.5% 16.5% 16.5% 16.5%
Hong Kong profits tax relief
for the PRC operations..... (8.3) (8.3) (8.3) (8.3) (8.3)
Overprovision in prior
year....................... (3.0) -- -- -- --
Taxation elsewhere.......... 1.3 1.4 0.3 1.6 0.6
Other items................. -- -- (0.1) (0.4) (0.9)
------- ------- ------- -------- --------
Effective tax rate.......... 6.5% 9.6% 8.4% 9.4% 7.9%
======= ======= ======= ======== ========
</TABLE>
Under the Hong Kong tax authority's Departmental Interpretation and Practice
Notes, a company based in Hong Kong, but with substantially all of its
manufacturing operations located in the PRC conducted pursuant to a processing
agreement entered into with a PRC company, can enjoy profit apportionment
through which only 50% of its manufacturing profit is subject to Hong Kong
profits tax. Substantially all of the Company's manufacturing operations are
located in Shenzhen, the PRC and conducted pursuant to a processing agreement
entered into with a PRC company. The current profits tax rate in Hong Kong is
16.5%. Under profits apportionment, only 50% of the profits of the Company is
subject to Hong Kong profits tax. Such tax concession is granted based on
annual application by the Company and there can be no assurance that the Hong
Kong tax authority will continue to grant such tax concession to the Company
and other Hong Kong companies with manufacturing operations in the PRC, or
that the Company will not lose such concession in the future as a result of
changes in Hong Kong tax law or the interpretation of such law.
(12) EMPLOYEE BENEFIT PLAN
Since June 1, 1996, the Company has established defined contribution benefit
plans for its Hong Kong employees. The assets of the plans are held under
provident funds managed by independent trustees. The employees can elect not
to make contributions to the plans or they can elect to contribute a fixed
percentage from 1% to 5% (in 1% increments) of individual employee's monthly
basic salary. The employer's contributions are based on 5% of individual
employees' monthly basic salaries. The employees are entitled to the whole of
the employer's contributions and accrued interest thereon after 10 years of
complete service or at a reduced scale of 90% to 30%, after completion of 9 to
3 years' service, respectively.
In addition, certain subsidiaries of the Company are required to contribute
amounts based on respective employee's salaries to the retirement schemes as
stipulated by relevant local authorities. The employees are entitled to the
employer's contributions subject to the regulations of the relevant local
authorities.
F-15
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The aggregate employers' contributions which have been made are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
MARCH 31, SEPTEMBER 30,
-------------- ------------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Employers' contributions.................. $-- $28 $143 $ 66 $ 98
==== === ==== ======== ========
</TABLE>
(13) COMMITMENTS AND CONTINGENCIES
As of March 31, 1997 and (unaudited) September 30, 1997, the Company had
commitments as follows:
(a) Capital expenditure
At March 31, 1997 and (unaudited) September 30, 1997, the Company and
its subsidiaries had contracted for capital expenditure on property,
plant and equipment of $3,448 and $2,467, respectively.
(b) Operating leases
The Company and its subsidiaries lease certain land and buildings
under operating leases, most of which do not contain renewal options and
escalation clauses, which expire through October 2005. Total rental
expenses associated with operating leases for the years ended March 31,
1995, 1996, 1997 and (unaudited) for the six months ended September 30,
1997, amounted to $650, $595, $1,048 and $878, respectively.
The aggregate annual minimum operating lease commitments under all non-
cancellable leases at March 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
<S> <C>
1998................................................................ $1,005
1999................................................................ 748
2000................................................................ 484
2001................................................................ 355
2002................................................................ 162
Thereafter.......................................................... 450
------
$3,204
======
</TABLE>
The aggregate annual minimum operating lease commitments under all non-
cancellable leases at September 30, 1997 are as follows (unaudited):
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
<S> <C>
1998............................................................... $1,242
1999............................................................... 684
2000............................................................... 409
2001............................................................... 290
2002............................................................... 157
Thereafter......................................................... 481
------
$3,263
======
</TABLE>
F-16
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(14) RELATED AND AFFILIATED PARTY TRANSACTIONS
The Company had the following significant transactions with certain related
and affiliated parties during the relevant periods:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
MARCH 31, SEPTEMBER 30,
------------------- -----------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales to related companies:
Certain subsidiaries of QPL
International Holdings Limited
("QPL")............................. $776 $11,477 $9,315 $4,685 $5,032
EEMS Italia S.P.A. ("EEMS")........... -- -- 369 161 307
---- ------- ------ -------- --------
$776 $11,477 $9,684 $4,846 $5,339
==== ======= ====== ======== ========
Acquisition of plant and equipment from
a subsidiary of QPL.................... 595 290 -- -- --
Disposal of plant and equipment to
EEMS................................... 595 290 -- -- --
Commission expense to EEMS.............. -- -- 212 59 56
Interest expense to Six Sigma Finance
Limited ("SS Finance")................. 35 27 -- -- --
Management fee from SemiCycle Founda-
tion................................... -- 74 252 120 131
Purchases from SemiCycle Foundation..... -- 438 1,735 739 324
Rental income from SemiCycle Founda-
tion................................... -- -- 91 46 46
Interest income from SemiCycle Founda-
tion................................... -- -- 31 17 5
Management fee from EEMS, Inc........... -- -- 144 81 81
</TABLE>
The amounts due from/to related companies and amount due to shareholder as
of the end of each relevant period were as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------------------- SEPTEMBER 30,
1995 1996 1997 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
Amounts due from:
Certain subsidiaries of QPL.............. $ 178 $ 562 $ 991 $1,509
EEMS, Inc................................ -- 2 13 --
EEMS..................................... 536 -- 91 160
SemiCycle Foundation..................... -- 494 261 148
------ ------- ------ ------
$ 714 $ 1,058 $1,356 $1,817
====== ======= ====== ======
Amounts due to:
EEMS..................................... $ -- $ 23 $ -- $ 19
SS Finance............................... 1,318 -- -- --
C. Land Industrial Company Limited ("C.
Land").................................. 78 -- -- --
Peak Plastic & Metal Products (S) Pte
Limited ("Peak (S)").................... 3 -- -- --
A subsidiary of QPL...................... 741 -- -- --
SemiCycle Foundation..................... -- -- 309 178
------ ------- ------ ------
$2,140 $ 23 $ 309 $ 197
====== ======= ====== ======
Amount due to shareholder.................. $5,146 $10,491 $ -- $ --
====== ======= ====== ======
</TABLE>
The above advances are unsecured, interest free and are repayable on demand
except:
(a) Amount due to SS Finance carried interest at 8.75% to 11% per annum.
(b) As of (unaudited) September 30, 1997, amount due from SemiCycle
Foundation included unsecured notes totalling $120 (March 31, 1996: $440
and March 31, 1997: $220), all of which bear interest at 8% per annum. The
notes may be repaid in full at the option of the borrower, without penalty
and without discount.
F-17
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Mr. T.L. Li, who is a director of and majority shareholder of the Company,
is a director of and has substantial equity interests in QPL, EEMS, SS
Finance, C. Land, and Peak (S). Messrs. Steve Dezso, a corporate officer of
the Company, and Richard M. Brook, an officer and director of the Company, are
corporate officers of EEMS Inc. Mr. Steve Dezso is a director of SemiCycle
Foundation and Mr. Richard M. Brook was until December 21, 1996 a director of
SemiCycle Foundation.
(15) SEGMENT INFORMATION
The Company and its subsidiaries operate in one business segment, which is
to manufacture and sell plastic tubes, trays and other related products.
An analysis of net sales, operating profit and identifiable assets by
geographic location is as follows:
<TABLE>
<CAPTION>
OTHER SOUTHEAST
HONG KONG UNITED ASIAN
& PRC STATES COUNTRIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Year Ended March 31,
1995
Net sales to third
parties................ $28,318 $ 6,021 $ -- $ -- $34,339
Net sales to related
companies.............. 776 -- -- -- 776
Transfer between
geographic areas....... 5,526 1,107 -- (6,633) --
------- ------- ------- -------- -------
Total net sales....... $34,620 $ 7,128 $ -- $ (6,633) $35,115
------- ------- ------- -------- -------
Depreciation and
amortization........... $ 2,226 $ 35 $ -- $ -- $ 2,261
------- ------- ------- -------- -------
Operating
profit/(loss).......... $ 3,098 $ 10 $ (4) $ -- $ 3,104
------- ------- ------- -------- -------
Capital expenditure..... $ 6,814 $ 101 $ -- $ -- $ 6,915
------- ------- ------- -------- -------
Identifiable assets..... $30,496 $ 2,016 $ 36 $ -- $32,548
Corporate assets........ 2,662
-------
Total assets.......... $35,210
-------
Year Ended March 31,
1996
Net sales to third
parties................ $30,877 $10,911 $ 1,679 $ -- $43,467
Net sales to related
companies.............. 11,477 -- -- -- 11,477
Transfer between
geographic areas....... 10,196 1,937 -- (12,133) --
------- ------- ------- -------- -------
Total net sales....... $52,550 $12,848 $ 1,679 $(12,133) $54,944
------- ------- ------- -------- -------
Depreciation and
amortization........... $ 2,865 $ 47 $ 51 $ -- $ 2,963
------- ------- ------- -------- -------
Operating
profit/(loss).......... $11,801 $ 857 $ 29 $ (353) $12,334
------- ------- ------- -------- -------
Capital expenditure..... $ 4,084 $ 149 $ 359 $ -- $ 4,592
------- ------- ------- -------- -------
Identifiable assets..... $33,964 $ 2,076 $ 1,272 $ (353) $36,959
Corporate assets........ 1,464
-------
Total assets.......... $38,423
-------
Year Ended March 31,
1997
Net sales to third
parties................ $22,098 $10,488 $15,324 $ -- $47,910
Net sales to related
companies.............. 9,684 -- -- -- 9,684
Transfer between
geographic areas....... 21,095 496 2,806 (24,397) --
------- ------- ------- -------- -------
Total net sales....... $52,877 $10,984 $18,130 $(24,397) $57,594
------- ------- ------- -------- -------
Depreciation and
amortization........... $ 3,383 $ 42 $ 145 $ -- $ 3,570
------- ------- ------- -------- -------
Operating
profit/(loss).......... $16,100 $ 138 $ 197 $ (445) $15,990
------- ------- ------- -------- -------
Capital expenditure..... $ 6,718 $ 144 $ 334 $ -- $ 7,196
------- ------- ------- -------- -------
Identifiable assets..... $43,427 $ 3,056 $ 4,847 $ (798) $50,532
Corporate assets........ 3,263
-------
Total assets.......... $53,795
-------
</TABLE>
F-18
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER SOUTHEAST
HONG KONG UNITED ASIAN
& PRC STATES COUNTRIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Six months ended
September 30, 1996
(unaudited)
Net sales to third
parties................ $ 9,997 $ 4,570 $ 6,201 $ -- $20,768
Net sales to related
companies.............. 4,846 -- -- -- 4,846
Transfer between
geographical areas..... 8,985 496 1,408 (10,889) --
------- ------- ------- -------- -------
Total net sales....... $23,828 $ 5,066 $ 7,609 $(10,889) $25,614
------- ------- ------- -------- -------
Depreciation and
amortization........... $ 1,573 $ 19 $ 79 $ -- $ 1,671
------- ------- ------- -------- -------
Operating
profit/(loss).......... $ 6,763 $ 6 $ 255 $ (459) $ 6,565
------- ------- ------- -------- -------
Capital expenditure..... $ 2,279 $ 94 $ 284 $ -- $ 2,657
------- ------- ------- -------- -------
Identifiable assets..... $36,043 $ 2,279 $ 4,796 $ (812) $42,306
Corporate assets........ 2,448
-------
Total assets.......... $44,754
-------
Six months ended
September 30, 1997
(unaudited)
Net sales to third
parties................ $13,987 $ 6,991 $ 7,716 $ -- $28,694
Net sales to related
companies.............. 5,339 -- -- -- 5,339
Transfer between
geographical areas..... 12,478 -- 1,231 (13,709) --
------- ------- ------- -------- -------
Total net sales....... $31,804 $ 6,991 $ 8,947 $(13,709) $34,033
------- ------- ------- -------- -------
Depreciation and
amortization........... $ 2,160 $ 38 $ 31 $ -- $ 2,229
------- ------- ------- -------- -------
Operating profit........ $ 9,187 $ 50 $ 330 $ 41 $ 9,608
------- ------- ------- -------- -------
Capital expenditure..... $ 6,256 $ 69 $ -- $ -- $ 6,325
------- ------- ------- -------- -------
Identifiable assets..... $51,060 $ 3,162 $ 3,898 $ (757) $57,363
------- ------- ------- --------
Corporate assets........ 17,604
-------
Total assets.......... $74,967
=======
</TABLE>
Intercompany sales between geographic areas are recorded at cost plus a
mark-up. Such transfers are eliminated on consolidation.
Identifiable assets are those assets used in the Company's operations in
each geographic area. Corporate assets represent cash and cash equivalents,
investment in certificate of deposit, notes receivable from SemiCycle
Foundation (note 14) and marketable securities.
An analysis of sales by geographic destinations for the relevant years is as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------- ------------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
North America.................... 17.4% 20.1% 19.9% 19.2% 22.2%
Hong Kong........................ 33.6 27.0 20.8 28.7 26.1
Singapore........................ 10.5 10.8 15.2 10.6 8.5
Malaysia......................... 6.6 7.9 8.9 10.6 5.1
Philippines...................... 10.3 12.4 11.6 8.0 13.0
Taiwan........................... 1.7 3.8 8.9 6.9 9.0
Japan............................ 4.9 4.5 5.7 6.0 6.6
Thailand......................... 5.6 4.7 5.3 5.6 5.0
Korea............................ 3.9 1.5 -- -- --
Others........................... 5.5 7.3 3.7 4.4 4.5
------- ------- ------- -------- --------
100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======== ========
</TABLE>
F-19
<PAGE>
PEAK INTERNATIONAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
(16) MAJOR CUSTOMERS
One customer, representing QPL International Holdings Limited group of
companies, accounted for 2.2%, 20.9%, 16.1% and 14.8% of the Company's net
sales during the fiscal years ended March 31, 1995, 1996, and 1997 and
(unaudited) the six months ended September 30, 1997, respectively.
(17) SUPPLEMENTAL CASH FLOW INFORMATION
(a) Cash inflow/(outflow) for interest and income taxes:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------ ------------------
1995 1996 1997 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid for interest........... $ (409) $ (765) $ (1,425) $(499) $(388)
Cash paid for income taxes....... $ (916) $ (153) $ (138) -- $ (25)
Cash refunded on income taxes.... $ -- $ -- $ 501 $ -- $ --
====== ====== ======== ======== ========
</TABLE>
(b) Major non-cash transaction
During the year ended March 31, 1996, the Company distributed marketable
securities with a market value of $2,599 as an interim dividend.
(18) STOCK OPTION PLAN
An executive share option plan (the "Share Option Plan") was adopted by the
Board of Directors and approved by the sole shareholder on March 18, 1997. An
aggregate of 700,000 shares has been reserved for issuance under the plan.
Under the Share Option Plan, directors, officers, employees of, and advisors
and consultants to, the Company or its affiliates may, at the discretion of a
committee of the Board of Directors administering the plan, be granted options
to purchase shares at an exercise price per share of no less than the par
value of a share. As of September 30, 1997, options relating to an aggregate
of (unaudited) 542,298 shares have been granted under the Share Option Plan at
$12.00 per share, all of which were granted during the previous six months.
One-third of the options vest annually commencing in April 1998. No options
are currently exercisable. The grant-date fair value of the options is
estimated to be (unaudited) $3.60 per share using the Black-Scholes option
pricing model with the following assumptions: (a) risk-free interest rate--
6.1%; (b) expected life--3 years; (c) expected volatility--0.33; expected
dividend yield--0. The Company has accounted for the stock options using the
intrinsic value method. Had the Company adopted the fair value based method of
accounting for stock options, net income and earnings per share (unaudited)
for the six months ended September 30, 1997 would have been $8,784 and $0.72,
respectively.
F-20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFERING BEING
MADE HEREBY NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDER, THE UNDERWRITERS OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY, ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIR-
CUMSTANCES CREATE AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.................................................... 2
Enforcement of Civil Liabilities......................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 11
Capitalization........................................................... 11
Price Range of Shares.................................................... 11
Dividend Policy.......................................................... 11
Selected Consolidated Financial Data..................................... 12
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 14
Business................................................................. 20
Management............................................................... 31
Selling Shareholder...................................................... 33
Certain Transactions..................................................... 34
Description of the Shares................................................ 35
Shares Eligible for Future Sale.......................................... 37
Taxation................................................................. 38
Certain Foreign Issuer Considerations.................................... 40
Underwriting............................................................. 41
Legal Matters............................................................ 42
Experts.................................................................. 42
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,500,000 SHARES
[PEAK INTERNATIONAL LIMITED LOGO APPEARS HERE]
PEAK INTERNATIONAL LIMITED
COMMON STOCK
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA ROBERTSON STEPHENS
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
----------------
PROSPECTUS
----------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION
The following table sets forth the estimated expenses, other than the
underwriting discounts and commissions, all of which are payable by the
Selling Shareholder of the Offering:
<TABLE>
<S> <C>
Securities and Exchange Commission.................................. $ 24,000
NASD Filing Fee..................................................... 8,200
Blue Sky Fees and Expenses.......................................... 5,000
Printing Costs...................................................... 100,000
Legal Fees and Expenses............................................. 500,000
Accounting Fees and Expenses........................................ 200,000
Miscellaneous....................................................... 162,800
----------
Total Expenses.................................................... $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 98 of the Companies Act 1981 of Bermuda (the "Act") provides
generally that a Bermuda company may indemnify its directors, officers and
auditors against any liability which by virtue of Bermuda law otherwise would
be imposed on them, except in cases where such liability arises from fraud or
dishonesty of which such officer, director, or auditor may be guilty in
relation to the Company. Section 98 further provides that a Bermuda company
may indemnify its directors, officers, and auditors against any liability
incurred by them in defending any proceedings, whether civil or criminal, in
which judgment is awarded in their favor or in which they are acquitted or
when granted relief by the Supreme Court of Bermuda in certain proceedings
arising under Section 281 of the Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The only securities of the Registrant that were issued or sold by the
Registrant within the past three years and not registered with the Commission
under the Securities Act were those issued on the dates and for the
consideration described below. Such securities were offered and issued outside
the United States to individuals who or entities that were not citizens or
residents of the United States in reliance upon Regulation S. Accordingly, the
offering and issuance of such securities were not subject to the registration
requirements of the Securities Act.
<TABLE>
<CAPTION>
PURCHASERS DATE OF ISSUANCE NUMBER OF SHARES CONSIDERATION
---------- ----------------- ---------------- -------------
<C> <C> <C> <S>
Luckygold..... January 14, 1997 1,200,000 The Shares were issued as
part consideration for the
outstanding shares of
Peakgold and Success Gold.
Luckygold..... February 28, 1997 8,800,000 The Shares were issued as
part consideration for the
outstanding shares of
Peakgold and Success Gold.
Luckygold..... March 18, 1997 461,538 The Shares were issued in a
bonus issue of Shares to
the sole shareholder of the
Company by way of
capitalization of $4,615
standing to the credit of
the additional paid-in
capital account of the
Company.
</TABLE>
II-1
<PAGE>
ITEM 16. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement
+3.1 --Memorandum of Association and Bye-Laws (as currently in effect) of
the Registrant
+4.1 --Specimen of Share Certificate for the Shares of the Registrant
*5.1 --Opinion of Conyers Dill & Pearman, Bermuda counsel to the
Registrant, as to the validity of the Shares
*8.1 --U.S. Tax Opinion of Davis Polk & Wardwell
*8.2 --Bermuda Tax Opinion of Conyers Dill & Pearman
+10.1 --Processing Agreement dated May 28, 1987 and renewed and amended on
May 24, 1994 and December 12, 1996
+10.2 --Processing Agreement dated October 8, 1995
+10.3 --Land Use Certificate relating to the Company's existing production
facilities
+10.4 --Land Use Certificate relating to the Company's planned additional
production facilities
+10.5 --Land Use Right Granting Contract relating to the Company's existing
production facilities
+10.6 --Land Use Right Granting Contract relating to the Company's planned
additional production facilities
+10.7 --Lease between Warden and Peak (HK) relating to the Company's
existing production facilities
+10.8 --Form of Share Option Plan
+10.9 --Deed of Undertaking by T.L. Li dated May 29, 1997 relating to non-
competition and referral
+10.10 --Option Agreement dated February 17, 1997 relating to the non-voting
deferred shares of Peak (HK)
+10.11 --Restructuring Agreement dated February 28, 1997 for the acquisition
of the entire issued share capital of Peakgold and Success Gold
*21.1 --Subsidiaries of the Registrant
*23.1 --Consent of Davis Polk & Wardwell (included in Exhibit 8.1)
*23.2 --Consent of Conyers Dill & Pearman (included in Exhibit 5.1 and
Exhibit 8.2)
23.3 --Consent of BDO Binder
23.4 --Consent of Deloitte Touche Tohmatsu
23.5 --Consent of Richards Butler
*24.1 --Power of Attorney
*27.1 --Financial Data Schedule
</TABLE>
- ---------------------
* Previously filed.
+ Incorporated by reference from the Registration Statement on Form F-1 of Peak
International Limited, Registration No.333-6652, declared effective by the
Commission on June 20, 1997.
(b) Consolidated Financial Statement Schedules
All supplemental schedules are omitted because of the absence of conditions
under which they are required or because the information is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
II-2
<PAGE>
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM F-1 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT OR AMENDMENT THERETO TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN HONG KONG, ON NOVEMBER 4, 1997.
Peak International Limited
By: /s/ JERRY MO
----------------------------------
Name: Jerry Mo
Title: Principal Financial Officer
and Principal Accounting
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED ON NOVEMBER 4,
1997 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
SIGNATURE TITLE
/s/ T. L. LI* (Principal Executive
- ------------------------------------- Officer)
T. L. LI
/s/ JERRY MO* (Principal Financial
- ------------------------------------- Officer and
JERRY MO Principal
Accounting Officer)
/s/ RICHARD M. BROOK* Director
- -------------------------------------
RICHARD M. BROOK
/s/ ROBIN NICHOLSON* Director
- -------------------------------------
ROBIN NICHOLSON
Director
- -------------------------------------
FRANCIS LEUNG
/s/ HON YING NG* Director
- -------------------------------------
HON YING NG
/s/ KONG CHI WONG* Director
- -------------------------------------
KONG CHI WONG
*By: /s/ JERRY MO
------------------------------
Name: Jerry Mo
Attorney-in-fact
II-4
<PAGE>
SIGNATURE OF AUTHORIZED REPRESENTATIVE OF THE REGISTRANT
Pursuant to the Securities Act of 1933, the undersigned, the duly authorized
representative in the United States of Peak International Limited, has signed
this Registration Statement or amendment thereto in Austin, Texas, on November
4, 1997.
Peak International, Inc.
By /s/ RICHARD M. BROOK*
-----------------------------------
RICHARD M. BROOK
PRESIDENT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement
+3.1 --Memorandum of Association and Bye-Laws (as currently in effect) of
the Registrant
+4.1 --Specimen of Share Certificate for the Shares of the Registrant
*5.1 --Opinion of Conyers Dill & Pearman, Bermuda counsel to the
Registrant, as to the validity of the Shares
*8.1 --U.S. Tax Opinion of Davis Polk & Wardwell
*8.2 --Bermuda Tax Opinion of Conyers Dill & Pearman
+10.1 --Processing Agreement dated May 28, 1987 and renewed and amended on
May 24, 1994 and December 12, 1996
+10.2 --Processing Agreement dated October 8, 1995
+10.3 --Land Use Certificate relating to the Company's existing production
facilities
+10.4 --Land Use Certificate relating to the Company's planned additional
production facilities
+10.5 --Land Use Right Granting Contract relating to the Company's existing
production facilities
+10.6 --Land Use Right Granting Contract relating to the Company's planned
additional production facilities
+10.7 --Lease between Warden and Peak (HK) relating to the Company's
existing production facilities
+10.8 --Form of Share Option Plan
+10.9 --Deed of Undertaking by T.L. Li dated May 29, 1997 relating to non-
competition and referral
+10.10 --Option Agreement dated February 17, 1997 relating to the non-voting
deferred shares of Peak (HK)
+10.11 --Restructuring Agreement dated February 28, 1997 for the acquisition
of the entire issued share capital of Peakgold and Success Gold
*21.1 --Subsidiaries of the Registrant
*23.1 --Consent of Davis Polk & Wardwell (included in Exhibit 8.1)
*23.2 --Consent of Conyers Dill & Pearman (included in Exhibit 5.1 and
Exhibit 8.2)
23.3 --Consent of BDO Binder
23.4 --Consent of Deloitte Touche Tohmatsu
23.5 --Consent of Richards Butler
*24.1 --Power of Attorney
*27.1 --Financial Data Schedule
</TABLE>
- ---------------------
* Previously filed.
+ Incorporated by reference from the Registration Statement on Form F-1 of
Peak International Limited, Registration No. 333-6652, declared effective by
the Commission on June 20, 1997.
<PAGE>
Exhibit 1.1
2,500,000 Shares
PEAK INTERNATIONAL LIMITED
Common Stock
UNDERWRITING AGREEMENT
----------------------
November __, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA ROBERTSON STEPHENS
As representatives of the
several underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Mr. T.L. Li ("Mr. Li"), the owner of all of the issued share capital
of Luckygold 18A Limited, a British Virgin Islands company ("Luckygold"), and
Luckygold, the direct holder of a majority of the issued shares of Peak
International Limited, a company organized under the laws of Bermuda (the
"Company"), on the date hereof, propose to sell an aggregate of 2,500,000 shares
of Common Stock, par value US$.01 per share, of the Company (the "Firm Shares")
to the several underwriters named in Schedule I hereto (the "Underwriters"). Mr.
Li and Luckygold also propose to sell to the several Underwriters not more than
375,000 additional shares of Common Stock, par value US$.01 per share, of the
Company (the "Additional Shares") if requested by the Underwriters as provided
in Section 2 hereof. The Firm Shares and the Additional Shares are herein
collectively called the Shares. The shares
<PAGE>
2
of Common Stock, par value US$.01 per share, of the Company to be outstanding
after giving effect to the sales contemplated hereby are herein referred to as
the Common Stock. Mr. Li and Luckygold are herein collectively called the
"Selling Stockholder" and shall be jointly and severally responsible for the
obligations of the Selling Stockholder hereunder.
1. Registration Statement and Prospectus. The Company has prepared
-------------------------------------
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form F-1 including a prospectus relating to
the Shares, which may be amended. The registration statement as amended at the
time when it becomes effective, including a registration statement (if any)
filed pursuant to Rule 462(b) under the Act increasing the size of the offering
registered under the Act and information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the Registration Statement; and the
prospectus in the form first used to confirm sales of Shares is hereinafter
referred to as the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the
-------------------------------
representations and warranties contained in this Agreement, and subject to its
terms and conditions, (i) the Selling Stockholder agrees to sell 2,500,000 Firm
Shares and (ii) each Underwriter agrees, severally and not jointly, to purchase
from the Selling Stockholder, at a price per share of US$___ (the "Purchase
Price"), the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) which bears the same proportion to the
total number of Firm Shares to be sold by the Selling Stockholder as the number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) the Selling Stockholder
agrees to sell up to 375,000 Additional Shares and (ii) the Underwriters shall
have the right to purchase, severally and not jointly, up to an aggregate of
375,000 Additional Shares from the Selling Stockholder at the Purchase Price.
Additional Shares may be purchased solely for the purpose of covering over-
allotments made in connection with the offering of the Firm Shares. The
Underwriters may exercise their right to purchase Additional Shares in whole or
in part from time to time by giving written notice thereof to the Selling
Stockholder within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof. The date specified in any such
notice shall be a business day (i) no earlier than the Closing Date
<PAGE>
3
(as hereinafter defined), (ii) no later than ten business days after such notice
has been given and (iii) no earlier than two business days after such notice has
been given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Selling Stockholder the
number of Additional Shares (subject to such adjustments to eliminate fractional
shares as you may determine) which bears the same proportion to the total number
of Additional Shares to be purchased from the Selling Stockholder as the number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
bears to the total number of Firm Shares.
The Company and the Selling Stockholder hereby agree, severally and
not jointly, and the Company shall, concurrently with the execution of this
Agreement, deliver an agreement executed by each of the directors and executive
officers of the Company, pursuant to which each such person agrees, not to
offer, sell, contract to sell, grant any option to purchase, or otherwise
dispose of any common stock of the Company or any securities convertible into or
exercisable or exchangeable for such common stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of any such common stock, except to the Underwriters pursuant to this
Agreement, for a period of 90 days after the date of the Prospectus without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Notwithstanding the foregoing, during such period the Company may grant stock
options pursuant to the Peak International Limited 1997 Share Option Plan (and
may issue shares of Common Stock upon the exercise thereof, which shares will be
subject to the restrictions contained in the foregoing sentence).
3. Terms of Public Offering. The Selling Stockholder is advised by
------------------------
you that the Underwriters propose (i) to make a public offering of their
respective portions of the Shares as soon after the effective date of the
Registration Statement as in your judgment is advisable and (ii) initially to
offer the Shares upon the terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and
--------------------
payment for the Firm Shares shall be made at 10:00 A.M., New York City time, on
the third business day unless otherwise permitted by the Commission pursuant to
Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (the "Closing Date"), following the date of the offering, at the offices
of counsel to the Underwriters, Paul, Weiss, Rifkind, Wharton & Garrison, 1285
Avenue of the Americas, New York, New York 10019. The Closing Date and the
location of delivery of and the form of payment for the Firm Shares may be
varied by agreement between you and the Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at such place as you shall
designate at 10:00 A.M., New York City time, on the date specified in the
applicable exercise
<PAGE>
4
notice given by you pursuant to Section 2 (an "Option Closing Date"). Any such
Option Closing Date and the location of delivery of and the form of payment for
such Additional Shares may be varied by agreement between you and the Selling
Stockholder.
Certificates for the Shares shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date or an Option Closing Date, as the
case may be. Such certificates shall be made available to you for inspection
not later than 9:30 A.M., New York City time, on the business day next preceding
the Closing Date or an Option Closing Date, as the case may be. Certificates in
definitive form evidencing the Shares shall be delivered to you on the Closing
Date or an Option Closing Date, as the case may be, with any transfer taxes
thereon duly paid by the Selling Stockholder for the respective accounts of the
several Underwriters, against payment of the Purchase Price therefor by wire
transfer of immediately available funds to the order of the Selling Stockholder.
5. Agreements of the Company. The Company agrees with you:
-------------------------
5.1 To use its best efforts to cause the Registration Statement
to become effective at the earliest possible time.
5.2 To advise you promptly and, if requested by you, to
confirm such advice in writing, (i) when the Registration Statement has become
effective and when any post-effective amendment to it becomes effective, (ii) of
any request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information, (iii)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of the suspension of qualification of the
Shares for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purposes, and (iv) of the happening of any event during the
period referred to in paragraph 5.5 below which makes any statement of a
material fact made in the Registration Statement or the Prospectus untrue or
which requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
5.3 To furnish to you, without charge, three signed copies of
the Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
<PAGE>
5
5.4 Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or to
make any amendment or supplement to the Prospectus of which you shall not
previously have been advised or to which you shall reasonably object; and to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or supplement to the Prospectus which
may be necessary or advisable in connection with the distribution of the Shares
by you, and to use its best efforts to cause the same to become promptly
effective.
5.5 Promptly after the Registration Statement becomes effective,
and from time to time thereafter for such period as in the opinion of counsel
for the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish to each
Underwriter and dealer as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as such Underwriter or dealer may reasonably
request.
5.6 If during the period specified in Section 5.5 any event
shall occur as a result of which, in the judgment of the Company or in the
opinion of counsel for the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the light
of the circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus to
comply with any law, forthwith to prepare and file with the Commission an
appropriate amendment or supplement to the Prospectus so that the statements in
the Prospectus, as so amended or supplemented, will not in the light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with law, and to furnish to each Underwriter and to such dealers as
you shall specify, such number of copies thereof as such Underwriter or dealers
may reasonably request.
5.7 Prior to any public offering of the Shares, to cooperate
with you and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such qualification in effect so long as required
for distribution of the Shares and to file such consents to service of process
or other documents as may be necessary in order to effect such registration or
qualification.
5.8 To mail and make generally available to its stockholders as
soon as reasonably practicable, but no later than when it is required by the
rules of the Commission, an earnings statement covering a period of at least 12
months after the effective date of the Registration Statement (but in no event
commencing later than 90 days after such date) which shall satisfy the
provisions of Section 11(a) of the Act, and to advise you in writing when such
statement has been so made available.
<PAGE>
6
5.9 During the period of five years after the date of this
Agreement, to furnish to the record holders of its Common Stock such financial
and other reports of the Company and its subsidiaries as are required to be so
furnished by the Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission promulgated
thereunder.
5.10 During the period referred to in Section 5.9, to furnish to
you as soon as available a copy of each report or other publicly available
information of the Company mailed to the holders of Common Stock or filed with
the Commission and such other publicly available information concerning the
Company and its subsidiaries as you may reasonably request.
5.11 To use its best efforts to maintain the inclusion of the
Common Stock in the Nasdaq National Market (or on a national securities
exchange) for a period of five years after the effective date of the
Registration Statement.
5.12 To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date or any Option Closing Date, as the case may
be, and to satisfy all conditions precedent to the delivery of the Shares.
6. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to each Underwriter that:
6.1 (i) Each part of the Registration Statement, as amended or
supplemented, if applicable, when such part becomes effective, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) the Registration Statement and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Act and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this Section 6.1 do
not apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter furnished to the
Company in writing by or on behalf of such Underwriter through you expressly for
use therein.
6.2 Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 424 under the Act, and each Registration Statement
filed pursuant to Rule 462(b) under the Act, if any, complied when so filed in
all material respects with the Act, and did not contain an untrue statement of a
material fact or omit to state a
<PAGE>
7
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
6.3 The Company and each of its subsidiaries listed on Annex 1
hereto (the "Material Subsidiaries") has been duly incorporated and otherwise
duly organized, is validly existing as a corporation in good standing (if
applicable) under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as it is currently being
conducted and as described in the Prospectus and to own, lease and operate its
properties, and each is duly qualified and is in good standing (if applicable)
as a foreign corporation authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
All of the Company's subsidiaries required to be listed on Exhibit 21.1 to the
Registration Statement are listed thereon.
6.4 All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's Material Subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable, and
are owned by the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
6.5 All the outstanding shares of capital stock of the Company
(including the Shares) have been duly authorized and validly issued and are
fully paid, non-assessable and not subject to any preemptive or similar rights.
6.6 The authorized capital stock of the Company, including the
Common Stock, conforms as to legal matters to the description thereof contained
in the Prospectus.
6.7 Neither the Company nor any of its Material Subsidiaries is
in violation of its respective memorandum of association or bye-laws (or
certificate of incorporation or by-laws or memorandum and articles of
association or other organizational documents, if applicable) or in default in
the performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any other agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of its subsidiaries or their respective property is
bound and which is material to the conduct of the business of the Company and
its subsidiaries taken as a whole.
6.8 The Company has full corporate power and authority to enter
into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid, binding agreement of the Company
<PAGE>
8
enforceable in accordance with its terms, except as rights to indemnification
and contribution hereunder may be limited by applicable law. Other than the
permission of the Bermuda Monetary Authority for the transfer of the Shares
which has been obtained and which is in full force and effect, the (i)
execution, delivery and performance of this Agreement, (ii) compliance by the
Company with all the provisions hereof and (iii) consummation of the
transactions contemplated hereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the
securities or Blue Sky laws of the various states) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the memorandum of association or bye-laws (or certificate of incorporation or
by-laws or memorandum and articles of association or other organizational
documents, if applicable) of the Company or any of its subsidiaries or any
agreement, indenture or other instrument to which it or any of its subsidiaries
is a party or by which it or any of its subsidiaries or their respective
property is bound, or violate or conflict with any laws, administrative
regulations or rulings or court decrees applicable to the Company, any of its
subsidiaries or their respective property.
6.9 Except as otherwise set forth in the Prospectus, there are
no material legal or governmental proceedings pending to which the Company or
any of its Material Subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated. No contract or document of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement is not so
described or filed as required.
6.10 Neither the Company nor any of its Material Subsidiaries
has violated any law or regulation relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), including Environmental Laws
of the People's Republic of China (the "PRC"), any law relating to
discrimination in the hiring, promotion or pay of employees nor any applicable
federal or state wages and hours laws, or any provisions of the Employee
Retirement Income Security Act or the rules and regulations promulgated
thereunder, which in each case could reasonably be expected to result in any
material adverse change in the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole.
6.11 The Company and each of its Material Subsidiaries has such
permits, licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease and operate its respective
properties and to conduct its business as it is currently conducted and as
described in the Prospectus; the Company and each of its Material Subsidiaries
has fulfilled and
<PAGE>
9
performed all of its material obligations with respect to such permits, and no
event has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment of
the rights of the holder of any such permit; and, except as described in the
Prospectus, such permits contain no restrictions that are materially burdensome
to the Company or any of its Material Subsidiaries.
6.12 In the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the course of
which it identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities and any
potential liabilities to third parties). On the basis of such review, the
Company has reasonably concluded that such associated costs and liabilities
would not, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
6.13 Except as otherwise set forth in the Prospectus or such as
are not material to the business, financial condition or results of operation of
the Company and its subsidiaries, taken as a whole, the Company and each of its
Material Subsidiaries has good and marketable title, free and clear of all
liens, claims, encumbrances and restrictions, except liens for taxes not yet due
and payable, to all property and assets described in the Registration Statement
as being owned by it. Except as described in the Prospectus, all leases to which
the Company or any of its Material Subsidiaries is a party are valid and binding
and no default has occurred or is continuing thereunder, which might result in
any material adverse change in the business, financial condition or results of
operation of the Company and its subsidiaries taken as a whole, and there are no
adverse possession or other claims with respect to any of such leases to which
the Company or any of its Material Subsidiaries is a party as lessee with such
exceptions as do not materially interfere with the use made by the Company or
such subsidiary.
6.14 The Company and each of its Material Subsidiaries maintains
reasonably adequate insurance with respect to events customarily insured
against by companies similar to the Company that are in the Company's industry
and operate in the same jurisdictions.
6.15 BDO Binder are independent public accountants with respect
to the Company within the meaning the Act and the rules and regulations
promulgated thereunder.
<PAGE>
10
6.16 Deloitte Touche Tohmatsu are independent public accountants
with respect to the Company within the meaning of the Act and the rules and
regulations promulgated thereunder.
6.17 The financial statements, together with related schedules
and notes forming part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its consolidated subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) is, in
all material respects, accurately presented and, to the extent derived from the
financial statements or the books and records of the Company, prepared on a
basis consistent with such financial statements and books and records.
6.18 The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
6.19 No holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company.
6.20 The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
6.21 There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens related to
or entitling any person to purchase or otherwise to acquire any shares of the
capital stock of, or other ownership interest in, the Company or any of its
subsidiaries, except as otherwise disclosed in the Registration Statement.
6.22 Except as disclosed in the Prospectus, there are no
business relationships or related party transactions required to be disclosed
therein by Form F-1 under the Act, and all material transactions between the
Company or any of its subsidiaries, on the one hand, and any shareholder or
affiliate of the Company, on the other hand, are on terms at least as favorable
to the Company or such subsidiary, as the case may be, as could be obtained with
an unaffiliated third party.
6.23 Neither the Company nor any of its Material Subsidiaries
(i) has experienced any labor disputes or any strikes or work stoppages by its
<PAGE>
11
employees, (ii) has any employees who are covered by a collective bargaining
agreement or (iii) has any unfair labor practice complaint pending against it
or, to the best knowledge of the Company, threatened against it, which has had
or could reasonably be expected to have a material adverse impact on the
business, financial condition or results of operation of the Company or any of
its Material Subsidiaries.
6.24 The Company and each of its Material Subsidiaries maintains
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
6.25 All material tax returns required to be filed by the Company
and each of its Material Subsidiaries in any jurisdiction have been filed, other
than those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due pursuant to such returns or pursuant to any assessment received by
the Company or any of its Material Subsidiaries have been paid, other than those
being contested in good faith and for which adequate reserves have been
provided.
6.26 The shares of Common Stock, including the Shares, are listed
on the Nasdaq National Market.
6.27 All aspects of the Restructuring, as described in the
Prospectus, have been completed, and the Restructuring was effected in
compliance with all applicable laws.
6.28 Except as described in the Prospectus, no taxes, imposts or
duties of any nature (including, without limitation, stamp or other issuance or
transfer taxes or duties and capital gains, income, withholding or other taxes)
are payable by or on behalf of the Underwriters or any of their respective
subsidiaries to any political subdivision or taxing authority of Bermuda or Hong
Kong in connection with (1) the allotment, issuance and initial sale of the
Shares; (2) the initial sale of the Shares to the Underwriters in the manner
contemplated herein; or (3) the resale and delivery of Shares by the
Underwriters in the manner contemplated in this Agreement or the Prospectus.
6.29 The Company is subject to civil and commercial law with
respect to its obligations under this Agreement. The execution and delivery by
the
<PAGE>
12
Company and the performance by the Company of its obligations hereunder
constitute private and commercial acts rather than governmental or public acts,
and neither the Company nor any of its properties enjoys any right of immunity
in any jurisdiction from suit, judgment, execution on a judgment or attachment
(whether before judgment or in aid of execution) in respect of such obligations.
6.30 The Company has full corporate power and authority to enter
into and perform its obligations of indemnification and contribution set forth
in Section 8 of this Agreement, and neither the indemnification nor the
contribution provisions of such Section 8 contravene Bermuda public policy or
law.
6.31 The Agreement, dated May 28, 1987, between the Baoan County
Shenzhen Foreign Trade Company in association with Henggang Peak General
Manufacturing Plant and Hong Kong Peak Technology Limited, as amended and
extended on May 24, 1994 and December 12, 1996, and the Agreement, dated October
8, 1995, between Shenzhen Longgang District Henggang Joint Stock Company and
Peak Plastic & Metal Products (International) Limited (collectively, the
"Processing Agreements"), are valid and binding and enforceable in accordance
with their terms. The Company has received all required permits, licenses or
other approvals in connection with the Processing Agreements and the operation
of its existing and planned production facilities (the "Facilities") in
Shenzhen, China as contemplated therein, and no default has occurred or is
continuing under either Processing Agreement. The Land Use Rights Granting
Contracts, copies of which are incorporated by reference as Exhibits 10.5 and
10.6, respectively, to the Registration Statement, relating to the Facilities
are valid, binding and enforceable in accordance with their terms, and no
default has occurred or is continuing under either of such contracts.
6.32 The Company has been designated as non-resident of Bermuda
for exchange control purposes by the Bermuda Monetary Authority, whose
permission for the issue and transfer of the Shares has been obtained and is in
full force and effect. The transfer of Shares between persons regarded by the
Bermuda Monetary Authority as non-resident of Bermuda for exchange control
purposes and the sale of the Shares after completion of the offering
contemplated by this Agreement to or by such persons may be effected without
specific consent under the Exchange Control Act 1972 for so long as the Shares
are listed on the Nasdaq National Market. The issue or transfer of Shares to
and between any person regarded as resident in Bermuda for exchange control
purposes requires specific prior approval of the Bermuda Monetary Authority
under the Exchange Control Act of 1972.
6.33 Under the current laws and regulations of Bermuda, any
dividends and other distributions declared and payable on the shares of capital
stock of the Company may be paid to the holders of the Shares in U.S. dollars,
and all such
<PAGE>
13
dividends and other distributions will not be subject to withholding or other
taxes under the laws and regulations of Bermuda and may be so paid without the
necessity of obtaining any consent, approval, authorization or other order of or
with any court, regulatory body, administrative agency or other governmental
body or other authority in Bermuda. No Material Subsidiary of the Company is
currently prohibited or otherwise restricted, directly or indirectly, from
paying dividends to the Company or to the subsidiary of the Company that is its
parent company, from making any other distribution on such Material Subsidiary's
capital stock, from repaying to the Company or any other subsidiary of the
Company or from transferring any of such Material Subsidiary's property or
assets to the Company or any other subsidiary of the Company, except as
described in the Prospectus.
6.34 The Company has validly and irrevocably submitted to the
jurisdiction of any New York State or Federal court sitting in the City of New
York, has validly and irrevocably waived any objection to the venue of a
proceeding in any such court, and has validly and irrevocably appointed CT
Corporation System as its authorized agent for service of process, in each case,
to the extent set forth in Section 12.
6.35 The Company has timely filed all reports and other documents
it is required to file pursuant to the Exchange Act and the rules and
regulations of the Commission promulgated thereunder.
7. Representations and Warranties of the Selling Stockholder. The
---------------------------------------------------------
Selling Stockholder represents and warrants to each Underwriter that:
7.1 The Selling Stockholder is the lawful owner of the Shares to
be sold pursuant to this Agreement and has, and on the Closing Date and the
Option Closing Date, if applicable, will have, good and clear title to such
Shares, free of all restrictions on transfer, liens, encumbrances, security
interests and claims whatsoever.
7.2 Upon delivery of and payment for the Shares (including any
Additional Shares, if applicable) pursuant to this Agreement, good and clear
title to such Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests and claims whatsoever.
7.3 The Selling Stockholder has, and on the Closing Date and the
Option Closing Date, if applicable, will have, full legal right, power and
authority to enter into this Agreement and to sell, assign, transfer and deliver
such Shares in the manner provided herein, and this Agreement has been duly
authorized, executed and delivered by the Selling Stockholder and is a valid and
binding agreement of the Selling Stockholder enforceable in accordance with its
terms, except as rights to indemnity and contribution hereunder may be limited
by applicable law.
<PAGE>
14
7.4 The Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might reasonably be
expected to, cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares
pursuant to the distribution contemplated by this Agreement, and other than as
permitted by the Act, the Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
7.5 The execution, delivery and performance of this Agreement by
the Selling Stockholder, compliance by the Selling Stockholder with all the
provisions hereof and the consummation by the Selling Stockholder of the
transactions contemplated hereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the Act,
state securities laws or Blue Sky laws) and will not conflict with or constitute
a breach of any of the terms or provisions of, or a default under, the articles
of association, memorandum of association or other organizational documents of
Luckygold, or any agreement, indenture or other instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder or property of the
Selling Stockholder is bound, or violate or conflict with any law,
administrative regulation or ruling or court decree applicable to the Selling
Stockholder or property of the Selling Stockholder.
7.6 The representations and warranties of the Company contained
in Section 6.1 and Section 6.2 of this Agreement are true and correct.
7.7 If any time during the period described in Section 5.5
hereof, there is any change in the information in the Registration Statement or
the Prospectus, the Selling Stockholder will immediately notify you of such
change.
7.8 Each of Mr. Li and Luckygold has validly and irrevocably
submitted to the jurisdiction of any New York State or Federal court sitting in
the City of New York, has validly and irrevocably waived any objection to the
venue of a proceeding in any such court, and has validly and irrevocably
appointed CT Corporation System as his or its authorized agent for service of
process, in each case, to the extent set forth in Section 12.
8. Indemnification.
---------------
8.1 The Company and the Selling Stockholder, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages, liabilities and judgments caused by any untrue statement or
alleged untrue statement of
<PAGE>
15
a material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or judgment as such expenses are incurred, except insofar as
such losses, claims, damages, liabilities or judgments are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company by
or on behalf of any Underwriter through you expressly for use therein; provided,
--------
however, that the aggregate liability of the Selling Stockholder pursuant to the
- -------
provisions of this paragraph shall be equal to the aggregate purchase price, if
any, received by the Selling Stockholder from the sale of Shares hereunder;
provided, further, that the foregoing indemnity agreement with respect to any
- -------- -------
preliminary prospectus shall not inure to any Underwriter from whom the person
asserting any such losses, claims, damages, liabilities and judgments purchased
Shares, or any person controlling such Underwriter, if a copy of the Prospectus
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of such
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of the Shares to such person, and
if the Prospectus (as so amended and supplemented) would have cured the defect
giving rise to such loss, claim, damage, liability or judgment.
8.2 In case any action shall be brought against any Underwriter
or any person controlling such Underwriter, based upon any preliminary
prospectus, the Registration Statement or the Prospectus or any amendment or
supplement thereto and with respect to which indemnity may be sought against the
Company and the Selling Stockholder, such Underwriter shall promptly notify the
Company and the Selling Stockholder in writing and the Company and the Selling
Stockholder shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such indemnified party, and payment of all
fees and expenses. Any Underwriter or any such controlling person shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or such controlling person unless (i) the employment
of such counsel has been specifically authorized in writing by the Company, (ii)
the Company and the Selling Stockholder shall have failed to assume the defense
and employ counsel or (iii) the named parties to any such action (including any
impleaded parties) include both such Underwriter or such controlling person and
the Company or the Selling Stockholder, as the case may be, and such Underwriter
or such controlling person shall have been advised by such counsel that there
may be one or more legal defenses available to it which are different
<PAGE>
16
from or additional to those available to the Company or the Selling Stockholder,
as the case may be (in which case the Company and the Selling Stockholder shall
not have the right to assume the defense of such action on behalf of such
Underwriter or such controlling person, it being understood, however, that the
Company and the Selling Stockholder shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Underwriters and controlling
persons, which firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation and that all such fees and expenses shall be
reimbursed as they are incurred). The Company and the Selling Stockholder shall
be liable for any settlement of any such action effected without the written
consent of the Company or the Selling Stockholder, but if settled with the
written consent of the Company or the Selling Stockholder, the Company and the
Selling Stockholder agree to indemnify and hold harmless any Underwriter and any
such controlling person from and against any loss or liability by reason of such
settlement. Notwithstanding the immediately preceding sentence, if in any case
where the fees and expenses of counsel are at the expense of the indemnifying
party and an indemnified party shall have requested the indemnifying party to
reimburse the indemnified party for such fees and expenses of counsel as
incurred, such indemnifying party agrees that it shall be liable for any
settlement of any action effected without its written consent if (i) such
settlement is entered into more than 30 days after the receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall have failed to reimburse the indemnified party in accordance with such
request for reimbursement prior to the date of such settlement. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
8.3 Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, any person controlling the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, the Selling
Stockholder and each person, if any, controlling the Selling Stockholder within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Company and the Selling
Stockholder to each Underwriter but only with reference to information relating
to such Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statement, the Prospectus or
any preliminary prospectus. In case any action shall be brought against the
Company, any of its directors, any such officer or any person controlling
<PAGE>
17
the Company or the Selling Stockholder or any person controlling the Selling
Stockholder based on the Registration Statement, the Prospectus or any
preliminary prospectus and in respect of which indemnity may be sought against
any Underwriter, the Underwriter shall have the rights and duties given to the
Company and the Selling Stockholder (except that if the Company or the Selling
Stockholder shall have assumed the defense thereof, such Underwriter shall not
be required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter), and the Company, its directors, any such officers
and any person controlling the Company and the Selling Stockholder and any
person controlling the Selling Stockholder shall have the rights and duties
given to the Underwriter, by Section 8.2 hereof.
8.4 If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholder on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Selling Stockholder on the one hand and
the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other hand shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Selling Stockholder, and the total underwriting discounts and commissions
received by the Underwriters, bear to the total price to the public of the
Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and the Selling Stockholder on
the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Company, the Selling Stockholder or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholder and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 8.4
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The
<PAGE>
18
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 8.4 are several in proportion to the respective number of Shares
purchased by each of the Underwriters hereunder and not joint.
9. Conditions of Underwriters' Obligations. The several obligations of
---------------------------------------
the Underwriters to purchase the Firm Shares under this Agreement are subject to
the satisfaction of each of the following conditions:
9.1 All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date.
9.2 The Registration Statement shall have become effective not
later than 5:00 P.M. (and in the case of a Registration Statement filed under
Rule 462(b) under the Act, not later than 10:00 P.M.), New York City time, on
the date of this Agreement or at such later date and time as you may approve in
writing, and (iii) at the Closing Date no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
9.3 (i) Since the date of the latest balance sheet included in
the Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or in the earnings,
affairs or business prospects, whether or not arising in the ordinary course of
business, of the Company and its subsidiaries, taken as a whole, (ii) since the
date of the latest balance sheet included in the Registration Statement and the
Prospectus, there shall not have been any change, or any development involving a
prospective material adverse change, in the capital stock or material increase
in the long-term debt of the Company from that set forth in the Registration
Statement and Prospectus, (iii) the Company and its subsidiaries shall have no
liability or obligation, direct or contingent, which is material
<PAGE>
19
to the Company and its subsidiaries, taken as a whole, other than those
reflected in the Registration Statement and the Prospectus and (iv) on the
Closing Date you shall have received a certificate dated the Closing Date,
signed by T.L. Li and Jerry Mo in their capacities as the Chairman and Chief
Executive Officer and the Chief Financial Officer and Controller, respectively,
of the Company, confirming the matters set forth in Section 9.1, Section 9.2 and
Section 9.3.
9.4 All the representations and warranties of the Selling
Stockholder contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing Date and
you shall have received a certificate to such effect, dated the Closing Date,
from the Selling Stockholder.
9.5 You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of (i) Davis Polk & Wardwell, United States counsel for the Company and the
Selling Stockholder, to the effect set forth in Exhibit A-1 hereto, (ii) Conyers
Dill & Pearman, Bermuda counsel for the Company and the Selling Stockholder, to
the effect set forth in Exhibit A-2 hereto, (iii) Richards Butler, Hong Kong
counsel for the Company and the Selling Stockholder, to the effect set forth in
Exhibit A-3 hereto, (iv) Conyers Dill & Pearman, British Virgin Islands counsel
for the Company and the Selling Stockholder, to the effect set forth in Exhibit
A-4 hereto, and (v) Shenzhen Jin Di Law Office, People's Republic of China
counsel for the Company and the Selling Stockholder, to the effect set forth in
Exhibit A-5 hereto.
9.6 You shall have received on the Closing Date an opinion,
dated the Closing Date, of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for
the Underwriters, as to the matters referred to in paragraphs 1 (but only with
respect to the Company), 2 (but only with respect to the statements under the
caption "Underwriting") and 6 of Exhibit A-1. In giving such opinion with
respect to the matters covered by paragraph 6 of Exhibit A-1, such counsel may
state that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but are
without independent check or verification except as specified.
9.7 You shall have received a letter on and as of the Closing
Date, in form and substance satisfactory to you, from each of BDO Binder and
Deloitte Touche Tohmatsu, independent public accountants, with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus and substantially in the form and
substance of the letters delivered to you by BDO Binder and Deloitte Touche
Tohmatsu, respectively, on the date of this Agreement.
<PAGE>
20
9.8 The Company and the Selling Stockholder shall not have
failed at or prior to the Closing Date to perform or comply with any of the
agreements herein contained and required to be performed or complied with by the
Company or the Selling Stockholder at or prior to the Closing Date.
9.9 The Company and the Selling Stockholder shall have furnished
to you such other documents and certificates as you may reasonably request,
including documents and certificates relating to the accuracy and completeness
of any statement in the Registration Statement or Prospectus.
The several obligations of the Underwriters to purchase any
Additional Shares hereunder are subject to the delivery to you on the applicable
Option Closing Date of such documents as you may reasonably request with respect
to the good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
10. Effective Date of Agreement and Termination. This Agreement shall
-------------------------------------------
become effective upon the later of (i) execution of this Agreement and (ii) when
notification of the effectiveness of the Registration Statement has been
released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Company and the Selling Stockholder if any of
the following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
material adverse change or development involving a prospective material adverse
change in the condition, financial or otherwise, of the Company and its
subsidiaries, taken as a whole, or the earnings, affairs, or business prospects
of the Company and its subsidiaries, taken as a whole, whether or not arising in
the ordinary course of business, which would, in your judgment, make it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus, (ii) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions or
in the financial markets of the United States or elsewhere that, in your
judgment, is material and adverse and would, in your judgment, make it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus, (iii) the suspension or material limitation of trading in
securities on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market or limitation on prices for securities on any such
exchange or National Market, (iv) the declaration of a banking moratorium by
either federal or New York State authorities or (v) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
<PAGE>
21
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase the
Firm Shares or Additional Shares, as the case may be, which it or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the total number of Shares to be
purchased on such date by all Underwriters, each non-defaulting Underwriter
shall be obligated severally, in the proportion which the number of Firm Shares
set forth opposite its name in Schedule I bears to the total number of Firm
Shares which all the non-defaulting Underwriters, as the case may be, have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Firm Shares
--------
or Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 10
by an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date or on an Option Closing Date, as the case may be, any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares, or
Additional Shares, as the case may be, and the aggregate number of Firm Shares
or Additional Shares, as the case may be, with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be purchased
on such date by all Underwriters and arrangements satisfactory to you and the
applicable Sellers for purchase of such Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter and the Selling Stockholder. In any such case
which does not result in termination of this Agreement, either you or the
Selling Stockholder shall have the right to postpone the Closing Date or the
applicable Option Closing Date, as the case may be, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
11. Agreements of the Selling Stockholder. The Selling Stockholder
-------------------------------------
agrees with you and the Company:
11.1 To pay or to cause to be paid all transfer taxes with
respect to the Shares to be sold by the Selling Stockholder;
11.2 To take all reasonable actions in cooperation with the
Company and the Underwriters to cause the Registration Statement to become
effective at the earliest possible time, do and perform all things to be done
and performed by the
<PAGE>
22
Selling Stockholder under this Agreement prior to the Closing Date and satisfy
all conditions precedent to the delivery of the Shares pursuant to this
Agreement; and
11.3 Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay all costs,
expenses, fees and taxes incident to (i) the preparation, printing, filing and
distribution under the Act of the Registration Statement (including financial
statements and exhibits), each preliminary prospectus and all amendments and
supplements to any of them prior to or during the period specified in Section
5.5, (ii) the printing and delivery of the Prospectus and all amendments or
supplements to it during the period specified in Section 5.5 but not exceeding
nine months after the effective date of the Registration Statement, (iii) the
printing and delivery of this Agreement, the Preliminary and Supplemental Blue
Sky Memoranda and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection with the offering of the Shares
(including in each case any disbursements of counsel for the Underwriters
relating to such printing and delivery), (iv) the registration or qualification
of the Shares for offer and sale under the securities or Blue Sky laws of the
several states (including in each case the reasonable fees and disbursements of
counsel for the Underwriters relating to such registration or qualification and
memoranda relating thereto), (v) filings and clearance with the National
Association of Securities Dealers, Inc. in connection with the offering, (vi)
the listing of the Shares on the Nasdaq National Market, (vii) furnishing such
copies of the Registration Statement, the Prospectus and all amendments and
supplements thereto as may be requested for use in connection with the offering
or sale of the Shares by the Underwriters or by dealers to whom Shares may be
sold and (viii) the performance by the Company and the Selling Stockholder of
their other obligations under this Agreement.
12. Judicial Proceedings.
--------------------
12.1 Each of the Company, Mr. Li and Luckygold irrevocably
submits to the non-exclusive jurisdiction of any New York State or Federal court
sitting in the City of New York over any suit, action or proceeding arising out
of or relating to this Agreement or the Shares. To the fullest extent each of
the Company, Luckygold and Mr. Li may effectively do so under applicable law,
each such person irrevocably waives and agrees not to assert, by way of motion,
as a defense or otherwise, any claim that such person is not subject to the
jurisdiction of any such court, any objection that such person may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
12.2 Each of the Company, Luckygold and Mr. Li agrees, to the
fullest extent such person may effectively do so under applicable law, that a
<PAGE>
23
judgment in any suit, action or proceeding of the nature referred to in Section
12.1 brought in any such court shall be conclusive and binding upon such person
subject to rights of appeal, as the case may be, and may be enforced in the
courts of the United States of America or the State of New York (or any other
court the jurisdiction of which such person is or may be subject) by a suit upon
such judgment.
12.3 Each of the Company, Luckygold and Mr. Li has irrevocably
designated and appointed CT Corporation System, 1633 Broadway, New York, New
York 10019, for a period of six years from the date hereof, as its or his
authorized agent, upon whom process may be served in any suit, action or
proceeding of the nature referred to in Section 12.1 by mailing a copy thereof
by registered or certified mail, postage prepaid, return receipt requested, to
the agent at the address of such person specified in Section 13. The Company,
Luckygold and Mr. Li each agrees that such service (i) shall be deemed in every
respect effective service of process upon it or him in any such suit, action or
proceeding and (ii) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon and personal delivery to such person.
Notices hereunder shall be conclusively presumed received as evidenced by a
delivery receipt furnished by the United States Postal Service or any commercial
delivery service.
12.4 Nothing in this Section 12 shall affect the right of any
Underwriter to serve process in any manner permitted by law, or limit any right
to bring proceedings against the Company or the Selling Stockholder in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
13. Judgment Currency. If for the purpose of obtaining judgment in
-----------------
any court it is necessary to convert a sum due hereunder into any currency other
than United States dollars, the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be the rate at
which in accordance with normal banking procedures an Underwriter could purchase
United States dollars with such other currency in New York City on the business
day preceding that on which final judgment is given. The obligation of the
Company or the Selling Stockholder, as the case may be, in respect of any sum
due from the Company or the Selling Stockholder to any Underwriter shall,
notwithstanding any judgment in a currency other than United States dollars, be
discharged only if and to the extent that on the first business day following
receipt by such Underwriter of any sum adjudged to be so due in such other
currency, such Underwriter may in accordance with normal banking procedures
purchase United States dollars with such other currency as it would have
purchased on the business day preceding that on which the final judgment is
rendered; if the United States dollars so purchased are less than the sum
originally due to such Underwriter hereunder, each of the Company and the
Selling Stockholder
<PAGE>
24
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify such Underwriter against such loss.
14. Payments Free and Clear of Withholding Tax. All amounts payable
------------------------------------------
by the Company and the Selling Stockholder to the Underwriters hereunder
(including payment of selling concessions and underwriting commissions to, and
reimbursement of expenses of, the Underwriters pursuant to this Agreement) shall
be made free and clear of, and without deduction for, any taxes, duties,
assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by any tax authority of Bermuda or Hong Kong
unless such withholding or deduction is required by law or by regulation or
governmental policy having the force of law.
In the event that any such withholding or deduction is so required,
the Company and the Selling Stockholder will pay such additional amounts as will
result in the receipt by the Underwriters of such amount as would have been
received by the Underwriters had no such withholding or deduction been required.
15. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if to the Company, to Peak
International Limited, Units 3, 4, 5 and 7, 37th Floor, Wharf Cable Tower, 9 Hoi
Shing Road, Tsuen Wan, New Territories, Hong Kong, (b) if to the Selling
Stockholder, to (i) Mr. T.L. Li, c/o Units 3, 4, 5 and 7, 37th Floor, Wharf
Cable Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong and to (ii)
Luckygold 18A Limited, c/o Peak International Limited, Units 3, 4, 5 and 7, 37th
Floor, Wharf Cable Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong
Kong, Attention: Mr. T.L. Li, and (c) if to any Underwriter or to you, to you
c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New
York, New York 10172, Attention: Syndicate Department, or in any case to such
other address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Selling Stockholder, the Company, its
officers and directors and of the several Underwriters set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the Shares, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any Underwriter or by or on behalf of the Company or the Selling Stockholder,
the officers or directors of the Company or any controlling person of the
Company or the Selling Stockholder, (ii) acceptance of the Shares and payment
for them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Company or the Selling Stockholder to
comply with
<PAGE>
25
the terms or to fulfill any of the conditions of this Agreement, the Company and
the Selling Stockholder agree to reimburse the several Underwriters for all out-
of-pocket expenses (including the fees and disbursements of counsel) reasonably
incurred by them.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Selling
Stockholder, the Underwriters, any controlling persons referred to herein and
their respective successors and assigns, all as and to the extent provided in
this Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Shares from any of the several Underwriters merely
because of such purchase.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY IN SUCH STATE.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Selling Stockholder and the several Underwriters.
Very truly yours,
PEAK INTERNATIONAL LIMITED
By
-----------------------------
Name:
Title:
-------------------------------
T.L. Li, as Selling Stockholder
<PAGE>
26
LUCKYGOLD 18A LIMITED
By
-----------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA ROBERTSON STEPHENS
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By
--------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriters to be Purchased
- ------------ ---------------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation
BancAmerica Robertson Stephens
---------------------
TOTAL 2,500,000
</TABLE>
<PAGE>
SCHEDULE II
-----------
Selling Stockholder
-------------------
<TABLE>
<CAPTION>
Number of Additional
Name Shares That May be Sold
- ---- -----------------------
<S> <C>
T.L. Li and Luckygold 375,000
18A Limited, jointly and
severally
</TABLE>
<PAGE>
Annex 1 to
-------
Underwriting Agreement
Material Subsidiaries
---------------------
Peak Plastic & Metal Products (International) Limited
AJMS Peak Sdn Bhd
Warden Development Limited
Peak Resources Singapore Pte. Limited
SemiCycle Hong Kong Limited
Peak International, Inc.
<PAGE>
Draft 10/31/97
Exhibit A-1 to
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Underwriting Agreement
Opinions to be Rendered by Davis Polk & Wardwell,
United States Counsel for the Company and the Selling Stockholder
1. Insofar as New York law governs its execution and delivery, this
Agreement has been duly executed and delivered by the Company and the Selling
Stockholder and, assuming due authorization, execution and delivery under
Bermuda law and the laws of the British Virgin Islands, is a valid and binding
agreement of the Company and the Selling Stockholder.
2. The statements under the captions "Shares Eligible for Future
Sale," "Taxation - United States Taxation" and "Underwriting" in the Prospectus,
insofar as such statements constitute a summary of United States legal matters,
documents or proceedings referred to therein, fairly present the information
called for with respect to such United States legal matters, documents and
proceedings.
3. The execution, delivery and performance of this Agreement by the
Company and the Selling Stockholder, compliance by the Company and the Selling
Stockholder with all the provisions hereof and the consummation of the
transactions contemplated hereby (including, without limitation, the issuance
and sale of the Shares) will not require any consent, approval, authorization or
other order of any United States court, regulatory body, administrative agency
or other governmental body (except such as may be required under the Act or
other securities or Blue Sky laws) or violate or conflict with any United States
Federal or New York laws, administrative regulations or rulings or court decrees
applicable to the Company or any of its subsidiaries or the Selling Stockholder
or their respective properties.
4. Immediately prior to the Closing Date (or the Option Closing
Date, if applicable), the Selling Stockholder has good and valid title to the
Shares to be delivered by it on such date, and upon delivery of such Shares by
the Selling Stockholder and payment therefor pursuant to this Agreement, good
and valid title to such Shares has passed to the Underwriters, severally, free
and clear of all restrictions on transfer, liens, encumbrances, security
interests and claims whatsoever, including any "adverse claim" within the
meaning of the Uniform Commercial Code in effect in the State of New York,
assuming the Underwriters purchased such Shares for value in good faith without
notice of any adverse claim.
<PAGE>
2
5. The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
6. (i) The Registration Statement (including any Registration
Statement filed under 462(b) of the Act, if any) and the Prospectus and any
supplement or amendment thereto (except for financial statements, as to which no
opinion will be expressed) comply as to form in all material respects with the
Act, and (ii) no facts have come to the attention of such counsel that lead such
counsel to believe that (except for financial statements, as to which no opinion
will be expressed) the Registration Statement and the prospectus included
therein at the time the Registration Statement became effective contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus, as amended or supplemented, if applicable (except for
financial statements, as to which no opinion will be expressed) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
7. Under the laws of the State of New York relating to submission to
jurisdiction, each of the Company, Luckygold and Mr. T.L. Li has validly and
irrevocably submitted to the personal jurisdiction of any New York State or
United States federal court sitting in the City of New York in any action, suit
or proceeding arising out of or relating to this Agreement, has validly and
irrevocably waived any objection to the venue of a proceeding in any such court
and has validly and irrevocably appointed CT Corporation System, 1633 Broadway,
New York, New York 10019, as its or his authorized agent for service of process,
in each case, to the extent set forth in Section 12 of this Agreement, and
service of process effected in the manner set forth in Section 12 of this
Agreement will be effective to confer valid personal jurisdiction over the
Company, Luckygold and Mr. T.L. Li in any such action.
Such counsel shall also confirm (i) that they have been informed by
the staff of the Commission that the Registration Statement has become effective
under the Act and (ii) that to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending before or
contemplated by the Commission. In addition, in giving such opinion with
respect to the matters covered by paragraph 6, such counsel may state that their
opinion and belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and discussion of the contents thereof,
but are without independent check or verification except as specified.
<PAGE>
3
Exhibit A-2 to
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Underwriting Agreement
Opinions to be Rendered by Conyers Dill and Pearman,
Bermuda Counsel for the Company and the Selling Stockholder
1. The Company has been duly incorporated as an exempted company
under the Companies Act 1981 and is validly existing as an exempted company and
in good standing (meaning that it has not failed to make any filing with any
Bermuda government authority or to pay any Bermuda government fee or tax which
might make it liable to be struck off the Register of Companies and thereby
cease to exist under the laws of Bermuda) and has the corporate power and
authority required to carry on its business as it is currently being conducted
and to own, lease and operate its properties as described in the Prospectus.
2. As an exempted company, the Company has the power and authority
to carry on business outside Bermuda from a place of business within Bermuda.
3. The Company has the authorized share capital set forth in the
Prospectus. All of the issued shares of the Company (including the Shares) have
been duly authorized and validly issued and are fully paid and non-assessable
(meaning that no further sums are payable to the Company on such shares) and not
subject to any preemptive or similar rights.
4. The Shares to be sold by the Selling Stockholder hereunder have
been duly authorized, validly issued, fully paid and non-assessable (meaning
that no further sums are payable to the Company on such Shares), and such Shares
are not subject to any preemptive or similar rights.
5. The Company has the necessary corporate power and authority to
enter into and perform its obligations under this Agreement. The Company has
taken all corporate action required to authorize its execution, delivery and
performance of this Agreement. This Agreement has been duly executed and
delivered by or on behalf of the Company, and constitutes the valid and binding
obligations of the Company enforceable in accordance with its terms.
6. The authorized share capital of the Company, including the shares
of the Company, conforms as to legal matters to the description thereof
contained in the Prospectus and each of the Underwriters will receive good and
valid
<PAGE>
4
title to the Shares being purchased by such Underwriter from the Selling
Stockholder hereunder, free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever.
7. The statements under the captions "Enforcement of Civil
Liabilities," "Risk Factors - Relationship with Principal Shareholder and
Potential Conflicts of Interest," "Potential Difficulties in Protecting
Shareholder Rights," "Taxation - Bermuda Taxation," "Certain Foreign Issuer
Considerations," "Description of Shares" and "Underwriting" in the Prospectus
and Item 14 of Part II of the Registration Statement, insofar and to the extent
that they constitute a summary or description of the laws and regulations of
Bermuda, or its respective agencies, authorities or other governmental bodies,
or documents, or proceedings or conclusions of Bermuda law, fairly present the
matters referred to therein.
8. To the best of such counsel's knowledge, the Company is not in
violation of its memorandum of association or bye-laws or in breach of any
Bermuda laws or regulations.
9. The execution, delivery and performance of this Agreement by the
Company and the Selling Stockholder, compliance by the Company and the Selling
Stockholder with all the provisions hereof and the consummation of the
transactions contemplated hereby (including, without limitation, the sale of the
Shares) will not require any consent, approval, authorization or other order of
any Bermuda court, regulatory body, administrative agency or other governmental
body (except for such approvals under the Companies Act 1981 and the Exchange
Control Act 1972 as have been duly obtained and are in full force and effect)
and will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the memorandum of association or bye-laws of
the Company, or violate or conflict with any Bermuda laws, administrative
regulations or rulings or court decrees applicable to the Company or its
properties.
10. To the best of such counsel's knowledge and based upon the
results of searches conducted at the Supreme Court Registry on November __,
1997, there are no legal or governmental proceedings pending in Bermuda to which
the Company is a party or to which any of its property is subject, and such
counsel has not been expressly notified that any such proceedings are threatened
or contemplated by any governmental agency or threatened by others in Bermuda.
11. The choice of the laws of New York to govern this Agreement is a
valid choice of law and will be recognized and upheld by the courts of Bermuda.
The Company has the legal capacity to sue and be sued in its own name under the
laws of Bermuda. The irrevocable submission by the Company to the non-exclusive
jurisdiction of any New York State or United States federal court sitting in the
City of
<PAGE>
5
New York in any action, suit or proceeding arising out of or relating to this
Agreement and the waivers by the Company of any immunity and any objection to
the venue of a proceeding in any such court are legal, valid and binding under
the laws of Bermuda and will be accepted by the courts of Bermuda provided such
submission and waivers are valid under the laws of New York. Under the laws of
Bermuda, the appointment by the Company of an agent for service of process in
any suit or proceeding based on or arising under this Agreement constitutes
legal, valid and binding obligations of the Company.
12. The Registration Statement and the filing of the Registration
Statement with the Commission have been duly authorized by and on behalf of the
Company, and the Registration Statement has been duly executed pursuant to such
authorization by and on behalf of the Company.
13. The Company has full power, authority and legal right to enter
into and perform its obligations of indemnification and contribution as set
forth in Section 8 of this Agreement, and neither the indemnification nor the
contribution provisions of such Section 8 contravene Bermuda public policy or
the laws of Bermuda.
14. Except as described in the Prospectus, no taxes, imposts or
duties of any nature (including, without limitation, stamp or other issuance or
transfer taxes or duties and capital gains, income, withholding or other taxes)
are payable in Bermuda in connection with (a) the allotment, issuance and
initial sale of the Shares; (b) the initial sale of the Shares to the
Underwriters in the manner contemplated herein; or (c) the resale and delivery
of Shares by the Underwriters in the manner contemplated in the Prospectus.
15. The courts of Bermuda would recognize as a valid judgment, a
final and conclusive judgment in personam obtained in the courts of New York
against the Company based upon this Agreement under which a sum of money is
payable (other than a sum of money payable in respect of multiple damages, taxes
or other charges of a like nature or in respect of a fine or other penalty) and
would give a judgment based thereon provided that (a) such courts had proper
jurisdiction over the parties subject to such judgment, (b) such courts did not
contravene the rules of natural justice of Bermuda, (c) such judgment was not
obtained by fraud, (d) the enforcement of the judgment would not be contrary to
the public policy of Bermuda, (e) no new admissible evidence relevant to the
action is submitted prior to the rendering of the judgment by the courts of
Bermuda and (f) the correct procedures under the laws of Bermuda are complied
with.
16. The Company is not entitled to any immunity under the laws of
Bermuda, whether characterized as sovereign immunity or otherwise, from any
legal proceedings, whether in Bermuda or elsewhere, to enforce or to collect
upon this
<PAGE>
6
Agreement (including, without limitation, immunity from service of process,
immunity from jurisdiction of any court or tribunal or immunity of any of its
property from attachment prior to entry of judgment or from attachment in aid of
execution upon a judgment) in respect of itself or its property.
17. The Company has been designated as a non-resident of Bermuda for
exchange control purposes by the Bermuda Monetary Authority, whose permission
for the issue and transfer of the Shares has been obtained and is in full force
and effect. The transfer of the Shares between persons regarded by the Bermuda
Monetary Authority as non-resident of Bermuda for exchange control purposes and
the sale of the Shares after completion of the offering contemplated by this
Agreement to or by such persons may be effected without specific consent under
the Exchange Control Act 1972 for so long as the Shares are listed on the Nasdaq
National Market. The issue or transfer of the Shares to and between any person
regarded as resident in Bermuda for exchange control purposes requires specific
prior approval of the Bermuda Monetary Authority under the Exchange Control Act
of 1972.
18. It is not necessary under the laws of Bermuda (i) to enable the
Underwriters to enforce their rights under this Agreement or (ii) solely by
reason of the execution, delivery or consummation of this Agreement, that any of
them should be licensed, qualified or entitled to carry on business in Bermuda.
19. The Prospectus, together with attachments, as filed with the
Registrar of Companies complies with the requirements of the Companies Act 1981.
20. No holder of any Shares outstanding after completion of the
offering contemplated by this Agreement is or will be subject to any liability
in Bermuda in respect of any liability of the Company by virtue of holding any
such Shares. There are no restrictions on the holders of the Shares on the
transfer of any of the Shares (except the restrictions on transfer which may
applicable to residents of Bermuda for exchange control purposes) for so long as
the Shares are listed on the Nasdaq National Market; there are no limitations on
the rights of any holders of the Shares to hold or vote such Shares in
accordance with the memorandum of association or bye-laws of the Company.
21. Any dividends and other distributions declared and payable on the
shares of the Company may under the current laws and regulations of Bermuda be
paid in United States dollars, and all such dividends or other distributions
will not be subject to withholding or other taxes under the laws and regulations
of Bermuda and may be so paid without the necessity of obtaining any order,
consent, approval, license, authorization or validation of or exemption by any
governmental or public body or authority of Bermuda or any sub-division thereof.
<PAGE>
7
22. As of the date of such counsel's opinion, and based solely on
such counsel's review of the register of members of the Company, Luckygold was
the registered owner of the Shares.
<PAGE>
8
Exhibit A-3 to
-----------
Underwriting Agreement
Opinions to be Rendered by Richards Butler, Hong Kong Counsel to
the Company and the Selling Stockholder
1. Each of Peak Plastic & Metal Products (International) Limited
("Peak (HK)"), Warden Development Limited ("Warden") and SemiCycle Hong Kong
Limited ("SemiCycle (HK)") (collectively, the "Hong Kong Subsidiaries") has been
duly incorporated, is validly existing as a company under the laws of Hong Kong
and has the corporate power and authority required to carry on its business as
it is currently being conducted and to own, lease and operate its properties as
described in the Prospectus.
2. All of the issued ordinary shares of each Hong Kong Subsidiary
are part of the authorized share capital of each of those companies and such
issued shares are recorded in the respective registers of members of each such
subsidiary as fully paid and the current registered holders of such shares are
those set forth on a schedule to such counsel's opinion.
3. The statements under the captions "Risk Factors - Considerations
Relating to Hong Kong" and "Business - Products and Production Processes" in the
Prospectus, insofar as they are statements as to the substance or effect of the
laws of Hong Kong, constitute a materially accurate description of such legal
matters (but not any other matters, including any matter of fact or opinion
contained or referred to under such captions, in respect of which matters we
express no opinion).
4. The execution, delivery and performance of this Agreement by the
Company and Luckygold and Mr. Li and the compliance by and each of those persons
with the provisions hereof and the consummation of the transactions contemplated
hereby (including, without limitation, the issuance and sale of the Shares) will
not require any consent, approval, authorization or other order of any Hong Kong
court, regulatory body, administrative agency or other governmental body and
will not conflict with or constitute a breach of any of the provisions of the
memorandum of association or articles of association of any of the Hong Kong
Subsidiaries, or be in breach of or conflict with any of the laws of Hong Kong
which are applicable to the Company, any of its subsidiaries or Luckygold or Mr.
Li or any of their respective properties.
<PAGE>
9
5. There are no laws of Hong Kong or provisions of the respective
memorandum and articles of association of the Hong Kong Subsidiaries
("Memorandum and Articles") which prohibit or restrict, save as set out in the
respective Memorandum and Articles of Peak (HK), Warden and Semicycle (HK), any
of Peak (HK), Warden or Semicycle (HK) from paying dividends out of profits
which are under the Companies Ordinance available for that purpose (as that
phrase is interpreted pursuant to Section 79B of the Companies Ordinance), to
the respective registered shareholders of Peak (HK), Warden and Semicycle (HK).
Section 79B of the Companies Ordinance provides that a company's profits
available for distribution are its accumulated, realized profits, so far as not
previously utilized by distribution or capitalization, less its accumulated,
realized losses, so far as not previously written off in a reduction or
reorganization of capital duly made.
6. Searches made on __ November, 1997 at the Hong Kong Companies
Registry, the Office of the Official Receiver in Hong Kong and at the Registry
of the Supreme Court of Hong Kong in respect of the period 1st July, 1996 to __
November, 1997 revealed (a) no order or resolution for the winding-up or order
for the receivership of any of the Hong Kong Subsidiaries; and (b) that no
proceedings had been filed in the High Court of Hong Kong against any of the
Hong Kong Subsidiaries during the period 1st July, 1996 to ___ November, 1997.
It should be noted that such searches are not capable of revealing whether or
not a winding-up petition or application for the appointment of a receiver has
been presented. Notice of a winding-up or receivership order made or winding-up
resolution passed may not be filed immediately.
<PAGE>
10
Exhibit A-4 to
-----------
Underwriting Agreement
Opinions to be Rendered by Conyers Dill & Pearman, British
Virgin Islands Counsel to the Company and the Selling Stockholder
1. Each of Luckygold 18A Limited ("Luckygold") and each of the
subsidiaries of the Company (the "BVI Subsidiaries" and, together with
Luckygold, the "BVI Affiliates") listed on Schedule 1 to such counsel's opinion
(which Schedule shall set forth all of the Company's British Virgin Islands
subsidiaries) has been duly incorporated and is validly existing as an
International Business Company and in good standing (meaning that it has not
failed to make any filing with any British Virgin Islands government authority
or to pay any British Virgin Islands government fee or tax which might make it
liable to be struck off the Register of Companies and thereby cease to exist)
under the laws of the British Virgin Islands (the "BVI") and has the corporate
power and authority required to carry on its business as it is currently being
conducted and to own, lease and operate its properties as described in the
Prospectus.
2. Luckygold has the necessary corporate power and authority to
enter into and perform its obligations under this Agreement.
3. Luckygold has taken all corporate action required to authorize
its execution, delivery and performance of this Agreement. This Agreement has
been duly executed and delivered by or on behalf of Luckygold, and constitutes
the valid and binding obligations of Luckygold enforceable in accordance with
its terms.
4. The execution, delivery and performance of this Agreement by the
Company and the Selling Stockholder, compliance by the Company and the Selling
Stockholder with all the provisions hereof and the consummation of the
transactions contemplated hereby (including, without limitation, the sale of the
Shares) will not require any consent, approval, authorization or other order of
any BVI court, regulatory body, administrative agency or other governmental body
and will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the Memorandum of Association or Articles of
Association of any BVI Affiliate or violate or conflict with any BVI laws,
administrative regulations or rulings or court decrees.
5. It is not necessary or desirable to ensure the enforceability in
the British Virgin Islands of this Agreement that it be registered in any
register kept by, or filed with, any governmental authority or regulatory body
in the BVI.
<PAGE>
11
6. Based solely on such counsel's review of the share register,
Memorandum of Association and Articles of Association of each of the BVI
Subsidiaries, all of the outstanding shares of capital stock of each of the BVI
Subsidiaries have been duly authorized and validly issued and are fully paid,
non-assessable (meaning that no further sums are payable to the relevant BVI
Subsidiary on such shares) and not subject to any preemptive or similar rights.
7. To the best of such counsel's knowledge, there are no legal or
governmental proceedings pending in the BVI to which the Company or any BVI
Affiliate is a party or to which any of their respective property is subject,
and such counsel has not been notified that any such proceedings are threatened
or contemplated by any governmental agency or threatened by others in the BVI.
8. Insofar as the laws of the BVI are concerned, the Restructuring,
as described in the Prospectus, has been completed and was effected in
compliance with all applicable BVI laws.
9. Under BVI law, no BVI Subsidiary is currently prohibited or
otherwise restricted, directly or indirectly, from paying dividends to the
Company or to the subsidiary of the Company that is its parent company, from
making any other distribution on such subsidiary's capital stock, from repaying
to the Company or any other subsidiary of the Company or from transferring any
of such subsidiary's property or assets to the Company or any other subsidiary
of the Company in accordance with the International Business Companies Ordinance
(the "Ordinance") except as described in the Prospectus. In particular, any BVI
Subsidiary declaring a dividend must comply with Section 36 of the Ordinance,
which provides, inter alia, that dividends shall only be declared and paid out
----- ----
of surplus and that "[n]o dividend shall be declared and paid unless the
directors determine immediately after payment of the dividend that (a) the
company will be able to satisfy its liabilities as they become due in the
ordinary course of its business; and (b) the realizable value of the assets of
the company will not be less than the sum of its total liabilities, other than
deferred taxes, as shown in the books of account and its capital; and, in the
absence of fraud, the decision of the directors as to the realizable value of
the assets of the company is conclusive, unless a question of law is involved."
Any sale, transfer, lease, exchange or other disposition of assets of a BVI
Subsidiary other than a mortgage, charge or other encumbrance or the enforcement
thereof of more than 50 percent of the assets of such BVI Subsidiary may have to
comply with the procedure set out in Section 80 of the Ordinance.
<PAGE>
12
Exhibit A-5 to
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Underwriting Agreement
Opinions to be Rendered by Shenzhen Jin Di Law Office,
PRC Counsel for the Company and the Selling Stockholder
1. The statements under the captions "Risk Factors - Concentration
of Operations in the PRC" and "Business - Production Facilities" in the
Prospectus, insofar as such statements constitute a summary of legal matters,
documents or proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and proceedings.
2. The execution, delivery and performance of this Agreement by the
Company and the Selling Stockholder, compliance by the Company and the Selling
Stockholder with all the provisions hereof, and the consummation of the
transactions contemplated hereby (including, without limitation, the sale of the
Shares) will not require any consent, approval, authorization or other order of
any PRC court, regulatory body, administrative agency or other governmental
body, except such as have been duly obtained, and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default under, or
conflict with any PRC laws, administrative regulations or rulings or court
decrees.
3. To the best of such counsel's knowledge, after due inquiry, there
are no legal or government proceedings pending or threatened in the PRC to which
the Company or any of its subsidiaries is a party or to which any of their
respective property is subject which individually or in the aggregate could
reasonably be expected to have a material adverse effect on the Company and its
subsidiaries taken as a whole.
4. To the best of such counsel's knowledge, after due inquiry,
neither the Company nor any of its subsidiaries has violated any PRC
Environmental Laws, or any PRC law relating to discrimination in the hiring,
promotion or pay of employees or any applicable wages and hours laws of the PRC,
which in each case might result in any material adverse change in the business,
prospects, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
5. The Agreement, dated May 28, 1987, between the Baoan County
Shenzhen Foreign Trade Company in association with Henggang Peak General
Manufacturing Plant and Hong Kong Peak Technology Limited, as amended and/or
extended on May 24, 1994 and December 12, 1996, and the Agreement, dated October
8, 1995, between Shenzhen Longgang District Henggang Joint Stock Company and
<PAGE>
13
Peak Plastic & Metal Products (International) Limited (collectively, the
"Processing Agreements"), are valid and binding and enforceable by the Company
in accordance with their terms. The Company has received all required permits,
licenses or other approvals in connection with the Processing Agreements and the
operation of its existing and planned production facilities (the "Facilities")
in Shenzhen, China as contemplated therein, and no default has occurred or is
continuing under either Processing Agreement. The Land Use Rights Granting
Contracts, copies of which are incorporated by reference as Exhibits 10.5 and
10.6, respectively, to the Registration Statement, relating to the Facilities
are valid, binding and enforceable in accordance with their terms, and no
default has occurred or is continuing under either of such contracts.
<PAGE>
Exhibit 23.3
4 November, 1997
Board of Directors
Peak International Limited
Re: CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting a part of Amendment
No. 1 to Registration Statement (Filing No.: 333-38991) of our report dated 29
October 1997 relating to the consolidated financial statements of Peak
International Limited for each of the two years ended March 31, 1995 and 1996,
which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Binder
BDO Binder
Hong Kong
<PAGE>
Exhibit 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No. 333-
38991 of Peak International Limited on Form F-1 of our report dated May 26,
1997, appearing in the Prospectus, which is part of such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte Touche Tohmatsu
Hong Kong
November 4, 1997
<PAGE>
Exhibit 23.5
4th November, 1997
BY HAND
- -------
Peak International Limited
Units 4,5 & 7, 37/F Wharf Cable Tower
9 Hoi Shing Road
Tsuen Wan, New Territories
Hong Kong
Attn: Mr. Jerry Mo
- ------------------
Dear Sirs,
Peak International Limited - Registration Statement - Consent
- -------------------------------------------------------------
We refer to the registration statement of Peak International Limited dated
4th November, 1997 (the "Registration Statement").
We hereby consent to the filing of this consent as an exhibit to the
Registration Statement and to the use of our name under the captions
"Enforcement of Civil Liabilities", and "Legal Matters" in the prospectus
contained in the Registration Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the United States Securities Act of 1933, as amended.
Yours faithfully,
/s/ Richards Butler
RICHARDS BUTLER
