<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 14, 1995
KULICKE AND SOFFA INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 0-121 23-1498399
(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
2101 BLAIR MILL ROAD, WILLOW GROVE, PA 19090
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(215) 784-6000
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<PAGE>
This amendment to Form 8-K is being filed solely for the purpose of revising
certain financial statements filed with the original Form 8-K pursuant to Item
7(a) and (b) and adding Exhibit 10.2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<CAPTION>
PAGE
----
(a) Historical financial statements of Circle "S" Industries, Inc. are
attached hereto:
(i) Independent Auditors' Report................................... F-1
(ii) Consolidated Balance Sheets at December 31, 1993 and 1994...... F-2
(iii) Consolidated Statements of Income for the Years Ended December
31, 1992, 1993 and 1994........................................ F-3
(iv) Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1992, 1993 and 1994......................... F-4
(v) Consolidated Statements of Cash Flows for the Years Ended
December 31, 1992, 1993 and 1994............................... F-5
(vi) Notes to Consolidated Financial Statements..................... F-6
(vii) Unaudited Consolidated Balance Sheets at December 31, 1994 and
June 30, 1995.................................................. F-14
(viii) Unaudited Consolidated Statements of Income for the Six Months
Ended June 30, 1994 and 1995................................... F-15
(ix) Unaudited Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1994 and 1995............................ F-16
(x) Notes to Unaudited Consolidated Financial Statements........... F-17
<CAPTION>
PAGE
----
<S> <C>
(b) Unaudited Pro Forma Financial Information
(i) Basis of Presentation.......................................... F-18
(ii) Unaudited Pro Forma Balance Sheet at June 30, 1995............. F-19
(iii) Unaudited Pro Forma Statements of Operations for the Year Ended
September 30, 1994 and the Nine Months Ended June 30, 1995..... F-20
</TABLE>
(c)Exhibits
10.1 Restated Loan Agreement between Registrant and Midlantic Bank,
N.A. dated September 14, 1995
10.2 Gold Supply Agreement, as amended October 2, 1995 between American
Fine Wire Corporation, et al, and Rothschild Australia Limited
(the Company has applied for confidential treatment with
respect to portions of this Agreement)
99.1 Report of Independent Accountants, dated September 14, 1995
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KULICKE AND SOFFA INDUSTRIES, INC.
By: /s/ Clifford G. Sprague
---------------------------------
CLIFFORD G. SPRAGUE,
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: October 26, 1995
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
of Circle "S" Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Circle "S"
Industries, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Circle "S" Industries, Inc. and
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
We have not audited any financial statements of the Company for any periods
subsequent to December 31, 1994, nor have we performed a review of interim
financial statements in conformity with the standards set forth by the American
Institute of Certified Public Accountants. However, as discussed in Note 12 to
the consolidated financial statements, on July 20, 1995 the Company signed a
letter of intent to sell its bonding wire manufacturing operations. Pursuant to
signing the letter of intent, the Company adopted a formal plan to discontinue
its contracting and real estate operations on July 24, 1995.
/s/ Deloitte & Touche LLP
Birmingham, Alabama
March 29, 1995, except for Note 11, as to
which the date is April 10, 1995 and Note 12,
as to which the date is July 24, 1995
F-1
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1993 1994
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1)........................... $ 8,241 $11,267
Accounts receivable, net of allowance for doubtful accounts
of $115 (1993) and $173 (1994).............................. 6,577 8,049
Inventories (Note 3)......................................... 1,387 1,625
Prepaid expenses and other................................... 262 331
Deferred income tax benefit (Note 7)......................... 135 108
Net assets of discontinued operations (Note 12).............. 2,262 2,726
------- -------
Total.................................................... 18,864 24,106
------- -------
PROPERTY, PLANT AND EQUIPMENT, Net (Note 4).................. 3,835 3,528
------- -------
INTANGIBLE AND OTHER ASSETS:
Goodwill, net of accumulated amortization of $458 (1993)
and $531 (1994)........................................... 1,585 1,212
Other...................................................... 192 94
------- -------
Total.................................................... 1,777 1,306
------- -------
TOTAL (Note 5)........................................... $24,476 $28,940
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease obligations and notes pay-
able (Note 5)............................................... $ 7,536 $11,932
Accounts payable............................................. 674 798
Accrued liabilities.......................................... 908 1,313
Income taxes payable......................................... 849 905
------- -------
Total.................................................... 9,967 14,948
------- -------
LONG-TERM LIABILITIES:
Long-term portion of capital lease obligations and notes
payable (Note 5).......................................... 2,711 --
Deferred income taxes (Note 7)............................... 595 1,331
------- -------
Total.................................................... 3,306 1,331
------- -------
Total Liabilities........................................ 13,273 16,279
------- -------
STOCKHOLDERS' EQUITY (Notes 3, 5 and 8):
Common stock, par value $.10 per share, authorized 1,100,000
shares, issued 570,804 shares............................... 57 57
Additional paid-in capital................................... 1,140 1,258
Retained earnings............................................ 15,362 17,929
Treasury stock, at cost...................................... (5,376) (6,701)
Accumulated translation adjustment........................... 20 118
------- -------
Total stockholders' equity............................... 11,203 12,661
------- -------
TOTAL.................................................... $24,476 $28,940
======= =======
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
REVENUES (Note 2)................................... $50,824 $55,609 $68,764
COST OF SALES....................................... 46,532 48,256 58,898
------- ------- -------
GROSS PROFIT........................................ 4,292 7,353 9,866
SELLING, GENERAL AND ADMINISTRATIVE................. 4,223 3,627 5,004
------- ------- -------
OPERATING INCOME.................................... 69 3,726 4,862
------- ------- -------
OTHER INCOME (EXPENSE):
Interest income................................... 81 13 28
Interest expense (Note 5)......................... (722) (522) (457)
Other, net........................................ (62) (316) (191)
------- ------- -------
Total other expense, net........................ (703) (825) (620)
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES................... (634) 2,901 4,242
INCOME TAX PROVISION (BENEFIT) (Note 7)............. (671) 1,064 1,629
------- ------- -------
INCOME FROM CONTINUING OPERATIONS................... 37 1,837 2,613
DISCONTINUED OPERATIONS (Note 12)--income (loss)
from operations of contracting and real estate
operations to be disposed of [net of income tax
(benefit) of $(45) (1992), $165 (1993) and $(13)
(1994)]............................................ (81) 298 (46)
------- ------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES........................ (44) 2,135 2,567
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES (Note 1)..................................... 103 -- --
------- ------- -------
NET INCOME.......................................... $ 59 $ 2,135 $ 2,567
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993, AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------- ADDITIONAL ------------------ ACCUMULATED TOTAL
NUMBER PAID-IN RETAINED NUMBER TRANSLATION STOCKHOLDERS'
OF SHARES AMOUNT CAPITAL EARNINGS OF SHARES AMOUNT ADJUSTMENT EQUITY
--------- ------ ---------- -------- --------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1992........ 570,804 $57 $1,140 $13,168 (259,165) $(5,376) $ 53 $ 9,042
Net Income.............. 59 59
Foreign currency
translation
adjustment............. (22) (22)
------- --- ------ ------- -------- ------- ---- -------
BALANCE AT
DECEMBER 31, 1992...... 570,804 57 1,140 13,227 (259,165) (5,376) 31 9,079
Net Income.............. 2,135 2,135
Foreign currency
translation
adjustment............. (11) (11)
------- --- ------ ------- -------- ------- ---- -------
BALANCE AT
DECEMBER 31, 1993...... 570,804 57 1,140 15,362 (259,165) (5,376) 20 11,203
Net Income.............. 2,567 2,567
Purchases of treasury
stock.................. (56,256) (1,547) (1,547)
Exercise of stock op-
tions.................. 118 10,000 222 340
Foreign currency
translation
adjustment............. 98 98
------- --- ------ ------- -------- ------- ---- -------
BALANCE AT
DECEMBER 31, 1994...... 570,804 $57 $1,258 $17,929 (305,421) $(6,701) $118 $12,661
======= === ====== ======= ======== ======= ==== =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income...................................... $ 59 $ 2,135 $ 2,567
Adjustments to reconcile net income to net cash
provided by continuing operations:
Discontinued operations........................ 81 (298) 46
Cumulative effect of change in accounting meth-
od............................................ (103) -- --
Depreciation and amortization................. 822 779 850
Provision for doubtful accounts............... 15 84 48
(Gain) loss on sale of property, plant and
equipment.................................... 8 (666) 2
Deferred income tax provision (benefit)....... (795) 347 699
Changes in assets and liabilities provided
(used) cash:
Accounts receivable.......................... (1,027) 172 (1,667)
Inventories and prepaid expenses............. 384 (511) (565)
Accounts payable and accrued liabilities..... 434 (993) 621
Income taxes payable......................... 411 813 58
Other, net................................... (39) 73 133
-------- -------- --------
Net cash provided by continuing operations.. 250 1,935 2,792
Net cash provided by discontinued opera-
tions...................................... 50 541 570
-------- -------- --------
Net cash provided by operating activities... 300 2,476 3,362
-------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures............................ (369) (289) (412)
Proceeds from retirement of assets.............. -- 1,514 300
Net cash provided by (used in) investing activ-
ities......................................... (369) 1,225 (112)
-------- -------- --------
FINANCING ACTIVITIES:
New borrowings.................................. 10,993 13,770 15,402
Principal payments on debt and capital lease ob-
ligations...................................... (14,103) (12,467) (14,464)
Purchases of treasury stock..................... -- -- (1,547)
Proceeds from exercise of stock options......... -- -- 340
-------- -------- --------
Net cash provided by (used in) financing activ-
ities......................................... (3,110) 1,303 (269)
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.......... (22) (11) 45
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... (3,201) 4,993 3,026
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR... 6,449 3,248 8,241
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR......... $ 3,248 $ 8,241 $ 11,267
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMA-
TION:
Cash paid during the year for:
Interest....................................... $ 772 $ 792 $ 468
======== ======== ========
Income taxes................................... $ 331 $ 169 $ 849
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the
accounts of Circle "S" Industries, Inc. and its wholly-owned subsidiaries
(collectively, the "Company"). All significant intercompany transactions and
account balances are eliminated in consolidation.
Operating Subsidiary--
American Fine Wire Corporation ("AFW"), including its wholly-owned
subsidiaries, American Fine Wire, Ltd. ("AFW, Ltd.") and Muller Feindraht
AG ("MFD")
Discontinued Operations:
Nelson-Brantley Glass Contractors, Inc.
Clearview Properties, Inc.
Luminar Corporation ("Luminar") (formerly DISCO Aluminum Products Company,
Inc.)
NATURE OF BUSINESS--The Company, through American Fine Wire Corporation and
its subsidiaries, manufactures gold and aluminum bonding wire for the
electronics industry; Nelson-Brantley Glass Contractors, Inc. contracts for
the installation of glass doors, windows and panels in commercial buildings;
and Clearview Properties, Inc. owns commercial buildings which are leased to
others under long-term leases. On July 24, 1995 the Company adopted a formal
plan to sell its contracting and real estate operations (see Note 12).
Luminar has been a non-operating subsidiary of the Company since November
1985. In December 1993 the Company sold the former manufacturing facility of
Luminar for $1,408 in cash. The sale resulted in a pretax gain of $562. The
remaining assets and liabilities of Luminar were reclassified into real estate
operations.
CASH EQUIVALENTS--For the purposes of the consolidated statements of cash
flows, the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
As of December 31, 1993 and 1994, the Company had obtained short-term bank
loans totaling $13,020 and $15,402, respectively, (including $7,655 and
$6,931, respectively, related to discontinued operations) the proceeds of
which were used to purchase approximately the same amount of U.S. Treasury
Bills which were pledged as collateral for the short-term bank loans. The
Bills were sold and the bank loans paid off in early January of the year
following their purchase.
INVENTORIES--Manufacturing and certain contracting inventories are stated at
the lower of cost or market on the first-in, first-out (FIFO) method. The
majority of contracting inventories are stated at the lower of cost or market
on the last-in, first-out (LIFO) method.
REVENUE RECOGNITION--Revenue from manufactured products is recognized in
accordance with terms of the contract at the time the product is shipped.
Revenue from long-term, fixed price contracts of the discontinued contracting
operations is recognized on the percentage-of-completion method, measured by
the percentage of cost incurred to date to the projected total cost for each
contract. The effect on revenue of revisions in the total projected cost is
recorded in the period in which the revised projection is determined.
Projected losses are provided for when determined.
F-6
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment is carried at
cost, reduced by permanent impairments in value. Major additions and
improvements which extend the capabilities or the life of an asset are
capitalized and depreciated. Maintenance and repair expenditures are expensed
as incurred. Upon sale, retirement or other disposal of these assets, the cost
and the related accumulated depreciation or amortization are removed from the
accounts and any gain or loss is included in income.
For financial reporting purposes, the Company provides for depreciation using
the straight-line method over the following lives:
<TABLE>
<S> <C>
Building and leasehold improvements............................ 8-15 years
Buildings...................................................... 15-40 years
Machinery and equipment........................................ 5-12 years
Automotive vehicles............................................ 3 years
</TABLE>
Property, plant and equipment acquired under capital lease agreements is
valued at inception at the lower of the present value of minimum lease
payments or the fair value of the leased asset. These assets are amortized on
a straight-line basis in a manner consistent with the Company's depreciation
policy for similar purchased assets. Leasehold improvements are amortized on a
straight-line basis over the shorter of the asset's economic life or the term
of the lease.
INCOME TAXES--During 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109") which requires
deferred income taxes be recorded for differences in book and tax bases of
assets and liabilities based on the tax rates and laws enacted as of the
balance sheet date. The effects of future changes in tax laws or rates are not
anticipated. Such deferred income taxes are classified according to the
classification of the related asset or liability for financial reporting. The
Company elected to present the adoption of SFAS No. 109 through a cumulative
effect of change in accounting for income taxes in the consolidated statement
of income for the year ended December 31, 1992 (see Note 7).
FOREIGN CURRENCY TRANSLATION--The functional currency of AFW, Ltd. (located in
Singapore) is the U.S. dollar since substantially all sales, purchasing and
financing transactions are denominated as such. Gains and losses resulting
from foreign currency transactions are therefore included in the consolidated
statements of income and such amounts are insignificant.
Gains and losses resulting from translation of the accounts of MFD (located in
Switzerland) into U.S. dollars at current exchange rates for assets and
liabilities and at average rates of exchange for the year for revenues and
expenses are accumulated in a separate account, "Accumulated Translation
Adjustment," included in stockholders' equity.
GOODWILL--Cost in excess of net assets acquired (goodwill) is being amortized
on a straight-line basis generally over a period of forty years. The Company
periodically reviews goodwill to assess recoverability, and impairments would
be recognized in operating results if permanent diminution in value were to
occur.
ACCOUNTING STANDARDS YET TO BE ADOPTED--The Company has not yet adopted the
provisions of SFAS No. 107 regarding disclosure of the fair value of financial
instruments. Adoption of the Statement is expected in 1995 and will result in
only increased disclosure regarding the affected instruments.
RECLASSIFICATION--Certain reclassifications have been made to prior years
balances to conform to current year presentation.
F-7
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. MAJOR CUSTOMERS
A significant portion of the Company's revenue is derived from sales to a
limited number of customers in the semiconductor industry.
During 1992, 1993 and 1994 the Company's four largest customers each
represented over 10% of the Company's total revenues. These customers and their
percentages of total revenues are:
<TABLE>
<CAPTION>
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Customer 1.................................................. 20% 18% 15%
Customer 2.................................................. 15% 17% 16%
Customer 3.................................................. 13% 15% 13%
Customer 4.................................................. 12% 15% 13%
</TABLE>
At December 31, 1993 and 1994, approximately $4,254 and $4,748, respectively,
of the Company's trade receivables were due from its five major customers.
These receivables represent normal trade receivables which arose from the sale
of bonding wire. Generally, these accounts receivable are unsecured. Management
believes these accounts receivable are collectible and that each of these
customers are credit worthy.
3. INVENTORIES
Inventories at December 31, 1993 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1993 1994
------ ------
<S> <C> <C>
Finished goods............................................... $ 323 $ 379
Work in process.............................................. 39 90
Raw materials................................................ 1,025 1,156
------ ------
Total inventories.......................................... $1,387 $1,625
====== ======
</TABLE>
The Company uses a significant amount of gold in its manufacturing process.
Most of this gold is held on consignment from the supplier under the terms of a
gold supply agreement. The agreement requires payment for the gold used in the
manufacturing process two days after the finished product is shipped to the
customer. The agreement also (a) requires stockholders' equity to be maintained
at certain levels, (b) requires that certain financial ratios be maintained and
(c) grants a security interest in related accounts receivable. In addition, the
Company's majority stockholder has guaranteed the value of gold on consignment
and is paid a monthly guarantee fee of 1/2% per annum of the consignment
balance. Such fee was $43 and $57 for the years ended December 31, 1993 and
1994, respectively. No fee was paid in 1992 as the agreement was not yet in
place.
4. PROPERTY, PLANT AND EQUIPMENT
Components of property, plant and equipment and accumulated depreciation and
amortization at December 31, 1993 and 1994 were as follows:
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Land..................................................... $ 56 $ 56
Building and improvements................................ 1,556 1,577
Manufacturing equipment.................................. 5,553 5,824
Furniture and equipment.................................. 781 853
------- -------
7,946 8,310
Accumulated depreciation and amortization................ (4,111) (4,782)
------- -------
Total.................................................. $ 3,835 $ 3,528
======= =======
</TABLE>
F-8
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of the property, plant and equipment under capital
leases which is included in the previous summary:
<TABLE>
<CAPTION>
1993 1994
----- -----
<S> <C> <C>
Land......................................................... $ 15 $ 15
Building and improvements.................................... 392 392
Manufacturing equipment...................................... 370 370
----- -----
Total...................................................... 777 777
Accumulated amortization..................................... (530) (551)
----- -----
Net property under capital leases.......................... $ 247 $ 226
===== =====
</TABLE>
5. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable and capital lease obligations at December 31, 1993 and 1994
consisted of:
<TABLE>
<CAPTION>
1993 1994
------- --------
<S> <C> <C>
Notes payable:
U.S. Treasury Bill purchases (Note 1)................. $ 5,365 $ 8,471
Note payable to a bank, due on December 31, 1995, with
interest at 6.13%.................................... 2,500 2,500
Credit facility payable to a bank is as follows:
Working capital portion, paid in full during 1994..... 1,000 --
Working capital portion, with interest at the Singa-
pore Interbank Offered Rate plus 2.0% (7.5% at Decem-
ber 1, 1994)......................................... 750 750
Term portion, with quarterly principal installments of
$105 plus interest at prime plus 1%.................. 632 211
------- --------
Total................................................... 10,247 11,932
Current maturities:
Callable.............................................. (1,000) --
Scheduled............................................. (6,536) (11,932)
------- --------
Total noncurrent portion of notes payable and capital
lease obligations...................................... $ 2,711 $ --
======= ========
</TABLE>
The Company's note payable to a bank is with the same bank which serves as the
primary supplier of gold used in the manufacturing process. Prior to March 21,
1995, the note payable contained convertible features whereby the lender could
convert up to $1,875 of the principal amount into an amount not greater than
20% of the common stock of AFW which is outstanding on the date of conversion,
on a fully-diluted basis.
On March 21, 1995, the Company negotiated amendments to the note payable which,
(i) eliminated the convertible feature of the note in exchange for payment of
$1,000 to the bank and (ii) granted the bank an option to purchase 12,350
shares of the Company's common stock for $1 prior to January 1, 1996. Payment
of the $1,000 was arranged through an increase of $1,000 in the note payable.
In the event that prior to January 1, 1996 the Company consummates the sale
discussed in Note 12, at a price in excess of $37,000, the Company is obligated
to repurchase, at the bank's election, any shares held by the bank which were
obtained through the option for $1,606.
Substantially all property, plant and equipment is pledged as collateral to the
Company's debt. In addition, a security interest in substantially all other
assets has been granted as collateral to secure the
F-9
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's debt and contractual obligations. The Company's working capital loan
and notes payable contain restrictions on dividends, capital expenditures, new
debt and purchases of treasury stock as well as covenants to maintain certain
financial ratios. At December 31, 1992, 1993 and 1994, the Company was in
violation of the covenant which requires maintenance of a current ratio of at
least 1.5 to 1.0 (see Note 11).
Included above is debt totaling $3,460 at December 31, 1994, which is
guaranteed by the Company's majority shareholder. A guarantee fee of 1 1/2%
per annum of the outstanding principal balance is paid monthly to such
shareholder. Such fee was $91, $87 and $67 for the years ended December 31,
1992, 1993 and 1994, respectively.
6. OPERATING LEASES AND OTHER
Total rental expense for all operating leases approximated $386, $342 and $401
for the years ended December 31, 1992, 1993, and 1994, respectively. Most of
these operating leases are short-term, expiring in 1995, with renewal options.
In 1993 the Company paid a commission of $75 to its majority shareholder as
compensation for serving as the agent relating to the sale of a former
manufacturing facility.
7. INCOME TAXES
The components of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
1992 1993 1994
------- ------ ------
<S> <C> <C> <C>
Foreign............................................ $ 775 $3,451 $4,079
Domestic........................................... (1,409) (550) 163
------- ------ ------
Total.............................................. $ (634) $2,901 $4,242
======= ====== ======
</TABLE>
The components of the income tax provision (benefit) from continuing
operations are as follows:
<TABLE>
<CAPTION>
1992 1993 1994
----- ------ ------
<S> <C> <C> <C>
Current provision..................................... $ 60 $ 878 $ 905
Deferred provision.................................... (731) 186 724
----- ------ ------
Total................................................. $(671) $1,064 $1,629
===== ====== ======
</TABLE>
The income tax provision (benefit) differs from amounts computed by applying
the U.S. Federal statutory rate to income before provision for income taxes
due to the following reasons:
<TABLE>
<CAPTION>
1992 1993 1994
----- ------ ------
<S> <C> <C> <C>
Tax at statutory rate of 35% (34% for 1992).......... $(216) $1,015 $1,485
Tax effect of permanent differences.................. 38 52 51
Reversal of prior year overaccruals.................. (481) -- --
Other, net........................................... (12) (3) 93
----- ------ ------
Total................................................ $(671) $1,064 $1,629
===== ====== ======
</TABLE>
F-10
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
1992 1993 1994
----- ----- ----
<S> <C> <C> <C>
Taxable loss.......................................... $(500) $(204)
Tax over (under) book depreciation.................... 38 21 $ (2)
Book/tax gain on sale of assets....................... -- 6 --
Income from foreign subsidiaries...................... 274 349 571
Changes in expense reserves not deducted for tax
purposes, net........................................ (4) 26 (11)
Net operating loss carryforward....................... -- -- 71
Reversal of prior year overaccruals................... (481) -- --
Other, net............................................ (58) (12) 95
----- ----- ----
Total................................................. $(731) $ 186 $724
===== ===== ====
</TABLE>
The approximate tax effects of temporary differences are as follows:
<TABLE>
<CAPTION>
ASSETS (LIABILITIES)
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Current differences:
Bad debt reserve................................ $ 8 $ 12
Accrued expenses................................ 127 96
---------- ----------
Total............................................. $ 135 $ 108
========== ==========
Long-term differences:
Net operating loss carryforward................. $ 704 $ 585
Foreign subsidiaries............................ (1,121) (1,743)
Tax over book depreciation...................... (188) (183)
Other........................................... 10 10
---------- ----------
Total............................................. $ (595) $ (1,331)
========== ==========
</TABLE>
F-11
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCK REPURCHASE PROVISIONS AND INCENTIVE COMPENSATION PLANS
The Company's stockholders have entered into various agreements whereby the
stock owned by each stockholder will, under certain circumstances, first be
offered to the Company for purchase by the Company prior to disposition by the
stockholder.
The Company has outstanding stock options issued to key employees and certain
directors. The plan under which these options were issued expired on March 29,
1995; therefore, no additional options are available to be granted.
Transactions involving stock options for 1993 and 1994 were as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES AT
---------------------------------------------------------
TOTAL $23.50 $29.13 $30.63 $33.63 $33.79 $ 47.71
------- ------- ------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1992................... 80,000 10,000 20,000 20,000 30,000
Expired............... (30,000) (10,000) (20,000)
Granted............... 10,000 10,000
------- ------- ------ ------- ------ ------- ------
Balance, December 31,
1993................... 60,000 -- 10,000 -- 20,000 30,000 --
Expired............... (20,000) (20,000)
Granted............... 30,000 30,000
Exercised............. (10,000) (10,000)
------- ------- ------ ------- ------ ------- ------
Balance, December 31,
1994................... 60,000 -- 10,000 -- 20,000 -- 30,000
======= ======= ====== ======= ====== ======= ======
Exercisable at December
31, 1994............... 35,999
=======
</TABLE>
Included in the 35,999 options exercisable at December 31, 1994 are 26,000
options repurchased by the Company on January 12, 1995 for $260.
In addition, at December 31, 1994 the Company had an Equity Appreciation
Rights Incentive Compensation Plan (the "EARs Plan") for key employees. During
1993, 5,000 of these rights were canceled through their exchange for $63. At
December 31, 1994, 51,000 rights were available for future grants; however, on
March 29, 1995, the EARs Plan expired with no rights having been issued.
9. OPERATIONS BY GEOGRAPHIC AREA
The Company operates primarily in one industry segment, the manufacture and
sale of bonding wire to the semiconductor industry. The Company's market is
worldwide. As indicated below, sales to foreign customers of bonding wire are
substantial:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Domestic with foreign destination(1)........... $14,259 $ 7,756 $ 5,603
Foreign subsidiaries........................... 31,342 44,051 57,937
------- ------- -------
Total foreign destination...................... 45,601 51,807 63,540
Domestic destination........................... 5,223 3,802 5,224
------- ------- -------
Total sales to unaffiliated customers.......... $50,824 $55,609 $68,764
======= ======= =======
Sales to foreign customers as a percentage of
total sales................................... 90% 93% 92%
</TABLE>
- --------
(1) Represents United States sales to unaffiliated customers that were either
sales to customers in foreign countries or shipments to the freight forwarding
agents of domestic companies for shipments to their foreign operating
facilities.
F-12
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Additional information by geographic area for years ended December 31 is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993 1994
------- ------- -------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Europe.......................................... $ 2,991 $ 2,991 $ 3,967
Asia/Pacific.................................... 42,610 48,817 59,572
------- ------- -------
Total foreign................................... 45,601 51,808 63,539
United States................................... 5,223 3,801 5,225
Eliminations.................................... 0 0 0
------- ------- -------
Total............................................. $50,824 $55,609 $68,764
======= ======= =======
Intercompany sales:
Europe.......................................... $ 31 $ 33 $ 67
Asia/Pacific.................................... 356 917 1,719
------- ------- -------
Total foreign................................... 387 950 1,786
United States................................... 0 0 0
Eliminations.................................... (387) (950) (1,786)
------- ------- -------
Total............................................. $ 0 $ 0 $ 0
======= ======= =======
Total sales:
Europe.......................................... $ 3,022 $ 3,024 $ 4,034
Asia/Pacific.................................... 42,966 49,734 61,291
------- ------- -------
Total foreign................................... 45,988 52,758 65,325
United States................................... 5,223 3,801 5,225
Eliminations.................................... (387) (950) (1,786)
------- ------- -------
Total............................................. $50,824 $55,609 $68,764
======= ======= =======
Operating income:
Europe.......................................... $ 74 $ 67 $ 167
Asia/Pacific.................................... 1,046 3,662 4,026
------- ------- -------
Total foreign................................... 1,120 3,729 4,193
United States................................... (1,039) (3) 669
Eliminations.................................... (12) 0 0
------- ------- -------
Total............................................. $ 69 $ 3,726 $ 4,862
======= ======= =======
Income before income taxes:
Europe.......................................... $53 $60 $189
Asia/Pacific.................................... 722 3,391 3,890
------- ------- -------
Total foreign................................... 775 3,451 4,079
United States................................... (1,409) (550) 163
Eliminations.................................... 0 0 0
------- ------- -------
Total............................................. $ (634) $ 2,901 $ 4,242
======= ======= =======
</TABLE>
F-13
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Total Assets:
Europe.......................................... $ 591 $ 723 $ 1,017
Asia/Pacific.................................... 8,148 10,662 11,425
-------- -------- --------
Total foreign................................... 8,739 11,385 12,442
United States................................... 26,223 33,487 42,092
Eliminations.................................... (14,682) (20,396) (25,594)
-------- -------- --------
Total............................................. $ 20,280 $ 24,476 $ 28,940
======== ======== ========
</TABLE>
Financial information pertaining to the consolidated foreign operations
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
Working Capital........................................... $2,780 $4,308 $7,719
Property, plant and equipment, less accumulated deprecia-
tion..................................................... 2,551 2,263 2,084
Total liabilities......................................... 5,977 6,089 4,446
Shareholders' equity including retained earnings of
$1,480, $4,003 and $6,606 for the fiscal years ended
1992, 1993 and 1994, respectively........................ 2,783 5,296 7,996
Net income for the year................................... $501 $2,524 $2,671
</TABLE>
10. RETIREMENT SAVINGS PLAN
The Company maintains a retirement savings incentive plan established under
Internal Revenue Code Section 401(k). Substantially all domestic employees are
eligible to participate in the Plan. Under the 401(k) Plan, the Company is
required to match 50% of amounts contributed by each participant up to a
maximum of 6% of each participant's eligible compensation. Contributions by the
Company to the 401(k) Plan approximated $33, $34 and $37 for the years ended
December 31, 1992, 1993 and 1994, respectively.
11. WAIVER OF DEBT COVENANT VIOLATION
On April 29, 1993, May 9, 1994 and April 10, 1995, the Company's bank waived
the covenant violation discussed in Note 5.
12. SALE OF BUSINESS AND DISCONTINUED OPERATIONS
On July 20, 1995, the Company signed a letter of intent to sell its bonding
wire manufacturing operations to Kulicke and Soffa Industries, Inc. The sale is
anticipated to close by September 30, 1995.
Pursuant to the above, on July 24, 1995 the Company adopted a formal plan to
sell its contracting and real estate operations. The sale is expected to be
completed by September 30, 1995. The assets of the contracting operation
consist primarily of accounts receivable, inventories, prepaid expenses and
equipment used in the contracting business. Assets of the real estate operation
consist primarily of rental property.
The consolidated balance sheets at December 31, 1993 and 1994 and the
consolidated statements of income and cash flows for each of the three years in
the period ended December 31, 1994 have been restated to present the net
assets, operating results and cash flows of the contracting and real estate
operations separately.
F-14
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net revenues of the contracting operation for the years ended December 31,
1992, 1993 and 1994 were $3,387, $2,659 and $3,299, respectively, while net
revenues of the real estate operation were $444, $446 and $444 for the same
periods, respectively. These amounts are not included in revenues in the
accompanying consolidated income statements.
Assets and liabilities of the contracting and real estate operations to be
disposed of consisted of the following at December 31:
<TABLE>
<CAPTION>
1993 1994
-------------------------- --------------------------
REAL REAL
CONTRACTING ESTATE TOTAL CONTRACTING ESTATE TOTAL
----------- ------ ------ ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Accounts receivable,
net.................... $ 456 $ 23 $ 479 $ 610 $ 18 $ 628
Inventories............. 62 -- 62 141 -- 141
Prepaid and other, net.. 342 149 491 561 131 692
Property and equipment.. 183 1,518 1,701 223 1,471 1,694
------ ------ ------ ------ ------ ------
Total Assets............ 1,043 1,690 2,733 1,535 1,620 3,155
Accounts payable and
accrued liabilities.... (229) (81) (310) (246) (26) (272)
Deferred income taxes... -- (161) (161) -- (157) (157)
------ ------ ------ ------ ------ ------
$ 814 $1,448 $2,262 $1,289 $1,437 $2,726
====== ====== ====== ====== ====== ======
</TABLE>
Estimated results of discontinued operations from July 24, 1995 to the disposal
date are not expected to be significant. The net proceeds from disposition are
expected to exceed the current carrying value.
* * * * *
F-15
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ --------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................ $11,267 $ 2,427
Accounts receivable, net of allowance for doubtful ac-
counts of $173 (1994) and $196 (1995)................... 8,049 8,902
Inventories (Note 2)..................................... 1,625 2,134
Prepaid expenses and other............................... 331 346
Deferred income tax benefit.............................. 108 109
Net assets of discontinued operations.................... 2,726 2,618
------- -------
Total................................................ 24,106 16,536
PROPERTY, PLANT AND EQUIPMENT, Net....................... 3,528 3,633
INTANGIBLE AND OTHER ASSETS:
Goodwill, net of accumulated amortization of $531 (1994)
and $568 (1995)......................................... 1,212 1,175
Other.................................................... 94 45
------- -------
TOTAL................................................ $28,940 $21,389
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of capital lease obligations and notes
payable (Note 3)........................................ $11,932 $ 3,750
Accounts payable......................................... 798 1,517
Accrued liabilities...................................... 1,313 1,473
Income taxes payable..................................... 905 593
------- -------
Total................................................ 14,948 7,333
Deferred income taxes.................................... 1,331 1,558
------- -------
Total liabilities.................................... 16,279 8,891
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 per share, authorized
1,100,000 shares issued 570,804 shares.................. 57 57
Additional paid-in capital............................... 1,258 2,863
Retained earnings........................................ 17,929 16,211
Treasury stock, at cost.................................. (6,701) (6,787)
Accumulated translation adjustment....................... 118 154
------- -------
Total stockholders' equity........................... 12,661 12,498
------- -------
TOTAL ............................................... $28,940 $21,389
======= =======
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1994 1995
-------- --------
<S> <C> <C>
REVENUES................................................... $ 34,564 $ 35,639
COST OF SALES.............................................. 29,600 30,542
-------- --------
GROSS PROFIT............................................... 4,964 5,097
SELLING, GENERAL AND ADMINISTRATIVE........................ 2,398 2,982
-------- --------
OPERATING INCOME........................................... 2,566 2,115
OTHER INCOME (EXPENSE):
Interest income.......................................... 10 29
Interest expense......................................... (233) (182)
Other expense, net....................................... (128) (423)
-------- --------
Total other expense, net............................... (351) (576)
-------- --------
INCOME BEFORE INCOME TAXES................................. 2,215 1,539
INCOME TAX PROVISION....................................... 850 580
-------- --------
INCOME FROM CONTINUING OPERATIONS.......................... 1,365 959
DISCONTINUED OPERATIONS
Income (loss) from operations of contracting and real
estate operations to be disposed of [net of income tax of
$18 (1994) and $(40) (1995)].............................. 8 (72)
-------- --------
INCOME BEFORE EXTRAORDINARY LOSS........................... 1,373 887
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT (Note
3)........................................................ -- (2,605)
-------- --------
NET INCOME (LOSS).......................................... $ 1,373 $ (1,718)
======== ========
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1994 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $ 1,373 $ (1,718)
Adjustments to reconcile net income to net cash provided
by continuing operations:
Discontinued operations.................................. (8) 72
Depreciation and amortization............................ 466 518
Provision for doubtful accounts.......................... 17 23
Deferred income tax provision ........................... 81 186
Loss on early extinguishment of debt..................... -- 1,605
Changes in assets and liabilities provided (used) cash:
Accounts receivable..................................... (1,950) (709)
Inventories and prepaid expenses........................ (369) (586)
Accounts payable and accrued liabilities................ 886 836
Income taxes payable.................................... (86) (317)
Other, net.............................................. (1) 6
-------- --------
Net cash provided by (used in) continuing operations... 409 (84)
Net cash provided by discontinued operations........... 7,549 7,026
-------- --------
Net cash provided by operating activities.............. 7,958 6,942
-------- --------
INVESTING ACTIVITIES
Capital expenditures...................................... (257) (617)
Proceeds from retirement of assets........................ 300 --
-------- --------
Net cash provided by (used in) investing activities.... 43 (617)
-------- --------
FINANCING ACTIVITIES
New borrowings............................................ 750 3,750
Principal payments on debt and capital lease obligations:
Continuing operation..................................... (13,984) (11,932)
Discontinued operations.................................. -- (6,933)
Purchases of treasury stock............................... (1,545) (86)
-------- --------
Net cash used in financing activities.................. (14,779) (15,201)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................... 33 36
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS.................. (6,745) (8,840)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........... 8,241 11,267
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................. $ 1,496 $ 2,427
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the six month period for:
Interest................................................. $ 219 $ 156
======== ========
Income taxes............................................. $ 780 $ 753
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
CIRCLE "S" INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements reflect, in the opinion of
management, all adjustments necessary for a fair statement of the results for
the interim periods presented. Such adjustments are of a normal, recurring
nature.
2. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ --------
<S> <C> <C>
Finished goods......................................... $ 379 $ 638
Work in process........................................ 90 23
Raw materials and supplies............................. 1,156 1,473
------ ------
$1,625 $2,134
====== ======
</TABLE>
3. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
On March 21, 1995, the company negotiated amendments to the note payable
which, (i) eliminated the convertible feature of the note in exchange for
payment of $1,000 to the bank and (ii) granted the bank an option to purchase
12,350 shares of the company's common stock for $1 prior to January 1, 1996.
These amendments are reflected in the accompanying financial statements (i) as
though the original $2,500 convertible note was refinanced by issuing a new
$3,500 note for the same interest rate and maturity, (ii) by recording an
extraordinary loss on early extinguishment of debt for $2,605, representing
the $1,000 payment to the bank and the $1,605 excess of the fair value of the
common stock issuable under the options over the option price, and (iii) by
increasing additional paid in capital by $1,605. This loss is not deductible
for tax purposes.
On August 10, 1995 the bank exercised its option to purchase the 12,350
shares. Such shares were sold in connection with the sale of the Company to
Kulicke and Soffa Industries, Inc. on October 2, 1995.
F-19
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
BASIS OF PRESENTATION
The accompanying Unaudited Pro Forma Balance Sheet as of June 30, 1995 and
the Unaudited Pro Forma Statements of Operations for the year ended September
30, 1994 and for the nine months ended June 30, 1995 have been prepared to
give effect to the AFW Acquisition as if it had occurred on June 30, 1995, in
the case of the Unaudited Pro Forma Balance Sheet, and on October 1, 1993, in
the case of the Unaudited Pro Forma Statements of Operations.
The following Unaudited Pro Forma Balance Sheet is based on the unaudited
historical balance sheets of the Company and Circle "S" as of June 30, 1995,
adjusted as if the following transactions occurred on June 30, 1995: (i) the
borrowing of $15.0 million under the Bank Credit Facility and $34.4 million
under the AFW Notes, (ii) payment of $53.6 million in cash and principal
amount of AFW Notes as acquisition consideration, (iii) the repayment of
Circle "S" short-term borrowings totaling $3.8 million prior to closing, and
(iv) the accrual of approximately $1.0 million in costs incurred in connection
with the AFW Acquisition. Prior to the closing of the AFW Acquisition, Circle
"S" sold certain unrelated operations of Circle "S," which are reflected as
discontinued operations in the historical financial statements of Circle "S."
The preliminary purchase price for the AFW Acquisition totaled approximately
$53.6 million, subject to possible upward or downward adjustment based upon
completion and audit of the closing balance sheet. The Company does not
anticipate that any such adjustment to the purchase price will be material.
The Unaudited Pro Forma Statement of Operations for the 12-month period
ended September 30, 1994 is based on the historical audited statements of
operations of the Company for the year ended September 30, 1994 and of Circle
"S" for the year ended December 31, 1994, which audited financial statements
are presented or incorporated by reference herein. The Unaudited Pro Forma
Statement of Operations for the nine-month period ended June 30, 1995 is based
on the historical unaudited interim statements of operations of the Company
and on the unaudited interim statement of operations of Circle "S" for the six
months ended June 30, 1995, both of which are presented or incorporated by
reference herein, and on the Circle "S" unaudited statement of operations data
for the three months ended December 31, 1994. Circle "S" interim financial
data for such three month period reflect sales of $17.2 million and net income
of $622,000, and are not separately presented or incorporated by reference
herein.
Such unaudited pro forma financial data have been presented for
informational purposes only and do not purport to indicate what the Company's
results of operations or financial position would have been if the AFW
Acquisition actually had occurred at the beginning of such period or to
project the Company's results of operations for any future period or future
date.
The unaudited pro forma adjustments are based upon available information and
upon certain assumptions stated in the notes thereto that the Company believes
are reasonable. However, there can be no assurance that such assumptions will
be realized. The pro forma financial data should be read in conjunction with
the Consolidated Financial Statements and notes thereto of the Company for the
fiscal year ended September 30, 1994 and the nine months ended June 30, 1995
which are incorporated by reference herein from the Company's fiscal 1994
Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1995, and with the Consolidated Financial Statements and
notes thereto of Circle "S" for the year ended December 31, 1994 and the six
months ended June 30, 1995 included under Item 7(a) of this Form 8-K/A.
F-20
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
COMPANY CIRCLE "S"
JUNE 30, JUNE 30, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS FOR ACQUISITION
---------------------------- ----------- ---------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents.............. $ 22,234 $ 2,427 $(5,276)(a) $ 19,385
Short-term investments.... 9,808 9,808
Accounts and notes
receivable, net.......... 58,480 8,902 67,382
Inventories, net.......... 40,054 2,134 42,188
Prepaid expenses and other
current assets........... 3,395 346 3,741
Deferred income tax
benefit.................. 109 109
Net assets of discontinued
operations............... 2,618 (2,618)(b)
---------- ------- ------- --------
TOTAL CURRENT ASSETS.... 133,971 16,536 (7,894) 142,613
Long-term investments..... 4,301 4,301
Property, plant and
equipment, net........... 22,331 3,633 25,964
Intangible assets,
including goodwill....... 1,175 40,842 (c) 42,017
Other assets.............. 3,065 45 3,110
---------- ------- ------- --------
TOTAL ASSETS............ $ 163,668 $21,389 $32,948 $218,005
========== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt due within one year.. $ 60 $ 3,750 $45,679 (d) $ 49,489
Accounts payable to
suppliers and others..... 27,771 1,517 29,288
Accrued expenses.......... 10,674 1,473 1,000 (e) 13,147
Estimated income taxes
payable.................. 5,628 593 6,221
---------- ------- ------- --------
TOTAL CURRENT
LIABILITIES............ 44,133 7,333 46,679 98,145
Long-term debt, less
current portion.......... 1,519 1,519
Deferred income taxes..... 692 1,558 (1,233)(f) 1,017
Other liabilities......... 943 943
---------- ------- ------- --------
TOTAL LIABILITIES....... 47,287 8,891 45,446 101,624
---------- ------- ------- --------
SHAREHOLDERS' EQUITY:
Common stock.............. 44,219 2,920 (2,920)(g) 44,219
Retained earnings......... 72,427 16,211 (16,211)(g) 72,427
Treasury stock............ (6,787) 6,787 (g)
Cumulative translation
adjustment............... (223) 154 (154)(g) (223)
Unrealized loss on
investments, net of tax.. (42) (42)
---------- ------- ------- --------
TOTAL SHAREHOLDERS'
EQUITY................. 116,381 12,498 (12,498) 116,381
---------- ------- ------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY... $ 163,668 $21,389 $32,948 $218,005
========== ======= ======= ========
</TABLE>
- --------
(a) The estimated excess of the $53.6 million purchase price to be paid for
Circle "S" over the amount borrowed under the Bank Credit Facility ($15.0
million) and the AFW Notes ($34.4 million), and repayment of Circle "S"
short-term borrowings ($3.8 million), offset by assumed cash proceeds from
the sale of the discontinued operations ($2.6 million) which occurred
prior to closing.
(b) Sale of the net assets associated with Circle "S" discontinued operations
not acquired by the Company.
(c) The purchase price and estimated costs for the AFW Acquisition are
expected to exceed the estimated fair value of net tangible assets
acquired by approximately $40.8 million.
(d) Borrowings under the Bank Credit Facility and principal amount of AFW
Notes, offset by the Circle "S" short-term borrowings ($3.8 million)
repaid prior to closing.
(e) Accrual of transaction related costs associated with the AFW Acquisition.
(f) Adjustment to eliminate deferred tax liabilities related to undistributed
earnings of foreign subsidiaries which are intended to be indefinitely
reinvested in foreign operations, net of the amount of deferred tax assets
associated with Circle "S" net operating loss carryforwards not expected
to be realized.
(g) Elimination of Circle "S" equity account balances in connection with the
AFW Acquisition.
F-21
<PAGE>
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
COMPANY FISCAL CIRCLE "S"
YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, PRO FORMA PRO FORMA
1994 1994 ADJUSTMENTS FOR ACQUISITION
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Net sales............... $173,302 $68,764 $ -- $242,066
Cost of goods sold...... 101,334 58,898 -- 160,232
-------- ------- ------- --------
Gross profit............ 71,968 9,866 -- 81,834
-------- ------- ------- --------
Selling, general and
administrative......... 36,752 5,004 (505)(a) 41,251
Research and
development, net....... 21,286 -- 21,286
Amortization of
intangibles, including
goodwill............... -- -- 2,042 (b) 2,042
-------- ------- ------- --------
Total costs and
expenses............... 58,038 5,004 1,537 64,579
-------- ------- ------- --------
Operating income........ 13,930 4,862 (1,537) 17,255
Net interest and other
expense................ (907) (620) (3,228)(c) (4,755)
-------- ------- ------- --------
Income before income
taxes.................. 13,023 4,242 (4,765) 12,500
Income tax expense
(benefit).............. 2,605 1,629 (1,455)(d) 2,779
-------- ------- ------- --------
Net income from
continuing operations.. $ 10,418 $ 2,613 $(3,310) $ 9,721
======== ======= ======= ========
Net income per share:
Primary................ $ 0.63 $ 0.58
======== ========
Fully diluted.......... $ 0.63 $ 0.58
======== ========
Shares outstanding:
Primary................ 16,665 16,665
Fully diluted.......... 16,665 16,665
<CAPTION>
HISTORICAL
COMPANY CIRCLE "S"
NINE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS FOR ACQUISITION
-------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Net sales............... $203,540 $52,875 $ -- $256,415
Cost of goods sold...... 112,498 45,390 -- 157,888
-------- ------- ------- --------
Gross profit............ 91,042 7,485 -- 98,527
-------- ------- ------- --------
Selling, general and
administrative......... 35,476 4,336 (231)(a) 39,581
Research and
development, net....... 21,022 -- -- 21,022
Amortization of
intangibles, including
goodwill............... -- -- 1,532 (b) 1,532
-------- ------- ------- --------
Total costs and
expenses............... 56,498 4,336 1,301 62,135
-------- ------- ------- --------
Operating income........ 34,544 3,149 (1,301) 36,392
Net interest and other
expense................ (327) (600) (2,496)(c) (3,423)
-------- ------- ------- --------
Income before income
taxes.................. 34,217 2,549 (3,797) 32,969
Income tax expense
(benefit).............. 8,206 968 (996)(d) 8,178
-------- ------- ------- --------
Net income from
continuing operations.. $ 26,011 $ 1,581 $(2,801) $ 24,791
======== ======= ======= ========
Net income per share:
Primary................ $ 1.50 $ 1.43
======== ========
Fully diluted.......... $ 1.37 $ 1.31
======== ========
Shares outstanding:
Primary................ 17,381 17,381
Fully diluted.......... 19,668 19,668
</TABLE>
- --------
(a) Elimination of non-recurring costs associated with the management of
Circle "S" and the discontinued operations, totaling $705 for the annual
period ($381 for the nine-month period), net of the $200 annual payment
($150 for the nine-month period) to be incurred pursuant to a 1990
employment and non-competition agreement between Circle "S" and Larry D.
Striplin, Jr. which provides for post-employment payments for five years
following closing of the AFW Acquisition.
(b) Amortization of intangible assets, including goodwill, arising from the
AFW Acquisition over an estimated 20-year life.
(c) Assumed interest expense on the Bank Credit Facility used to finance the
AFW Acquisition and the AFW Promissory Notes, with interest at LIBOR plus
50 basis points for the initial 90 days (which is assumed to be 6.4375%
per annum) and LIBOR plus 100 basis points upon conversion to the term
loan (assumed to be 6.9375% per annum), reduction of investment income on
$4.1 million of cash used for the AFW Acquisition and elimination of
interest expense incurred by Circle "S" in connection with the short-term
indebtedness assumed to be repaid at the beginning of the periods
presented. An increase of 1/8 of 1% in the interest rate applicable to the
Bank Credit Facility would result in increased interest expense of $51 and
$36 for the annual and nine month periods, respectively.
(d) Adjustment to provide income taxes (benefit) on the pro forma adjustments
and pro forma combined taxable income at the estimated combined effective
income tax rate giving effect to pro forma goodwill amortization which is
not tax deductible, and to Circle "S" historical income tax expense
provided on undistributed earnings of foreign subsidiaries which the
Company intends to indefinitely reinvest in foreign operations.
F-22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- ------- ---
<C> <S> <C>
10.2 Gold Supply Agreement, as amended October 2, 1995 between
American Fine Wire Corporation et al, and Rothschild Australia
Limited (the Company has applied for confidential treatment
with respect to portions of this Agreement)
</TABLE>
<PAGE>
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND ARE THE SUBJECT OF
A CONFIDENTIAL TREATMENT REQUEST FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE OMITTED PORTIONS ARE DESIGNATED AS "XXXXX".
DATED THE 2ND DAY OF OCTOBER 1995
---------------------------------
Between
(1) AMERICAN FINE WIRE LIMITED
(2) AMERICAN FINE WIRE CORPORATION
(3) DR MULLER FEINDRAHT AG
(as Purchasers)
And
(4) ROTHSCHILD AUSTRALIA LIMITED
(as Supplier)
=================================
AMENDMENT AGREEMENT
=================================
DREW & NAPIER,
20, Raffles Place, #17-00,
Ocean Towers,
Singapore 048820
<PAGE>
THIS AMENDMENT AGREEMENT is made on the 2nd day of October 1995 BETWEEN:
------------------------ --------
(1) AMERICAN FINE WIRE LIMITED ("AFW Ltd"), a corporation established under the
--------------------------
laws of the Cayman Islands acting through its Singapore branch at 15,
Senoko Avenue, Woodlands East, Singapore 758305;
(2) AMERICAN FINE WIRE CORPORATION ("AFW Corp"), a corporation established
------------------------------
under the laws of the State of Alabama, United States of America with its
principal place of business at 907 Ravenwood Drive, P.O. Box 966, Selma,
Alabama 36701, United States of America;
(3) DR MULLER FEINDRAHT AG ("Muller"), a corporation established under the laws
----------------------
of Switzerland with its principal place of business at Zuercharatrasse 73,
CH-8800 Thalwil Zurich, Switzerland;
(collectively referred to as the "Purchasers" and individually referred to as a
"Purchaser"); and
(4) ROTHSCHILD AUSTRALIA LIMITED (the "Supplier"), a corporation established
----------------------------
under the laws of Australia with its registered office at 5th floor, 37 St.
Georges Terrace, Perth 6000, Western Australia.
WHEREAS:
-------
(A) On 31 December 1992, the parties entered into an agreement (the "Gold
Supply Agreement") whereby the Supplier agreed to supply Gold to each of the
Purchasers, and each of the Purchasers agreed to purchase Gold from the
Supplier, on a consignment basis upon the terms and conditions set out in the
Gold Supply Agreement.
(B) The Purchasers wish to amend the Gold Supply Agreement and have requested
the Supplier to agree to the amendments, which the Supplier has agreed to do on
the terms and subject to the conditions of this Amendment Agreement.
(C) This Amendment Agreement is supplemental to the Gold Supply Agreement.
IT IS HEREBY AGREED as follows:
-------------------
1. INTERPRETATION
--------------
1
<PAGE>
(A) All terms and references used in the Gold Supply Agreement and which are
defined or construed in the Gold Supply Agreement but are not defined or
construed in this Amendment Agreement shall have the same meaning and
construction in this Amendment Agreement.
(B) The headings in this Amendment Agreement are inserted for convenience only
and shall be ignored in construing this Amendment Agreement.
2. CONDITIONAL AGREEMENT
---------------------
(A) The provisions of this Amendment Agreement are conditional upon the
Supplier receiving n(in form and substance satisfactory to the Supplier) from:
(i) each Purchaser (as the case may be), certified copies of all actions
required to be taken by such Purchaser (as the case may be) to approve this
Amendment Agreement and/or the Security Documents and to authorize the
persons specified therein to sign this Amendment Agreement and/or the
Security Documents and (where applicable) the affixation of the corporate
seals thereto, and take any action required under or in connection with
this Amendment Agreement and/or the Security Documents on such Purchaser's
behalf;
(ii) AFW Ltd., a duly executed copy of a further debenture (in form and
substance acceptable to the Supplier) which is supplemental to the
Debenture executed by AFW Ltd. on 31 December 1992 in favour of the
Supplier;
(iii) the Purchasers or such other party as the Supplier may specify, a
duly executed copy or copies of such agreement(s), security document(S) or
other document(s) as the Supplier may require, necessary to secure the
liabilities and obligations of the Purchasers under the Gold Supply
Agreement as so amended; and
(iv) from each Purchaser and the Holding Company, the documents referred
to in Part II of Schedule 1.
(B) The Amendment Agreement is also subject to the further conditions precedent
that as at the data hereof:
(i) the warranties contained in Clause 13 of the Gold Supply Agreement
(up-dated mutatis mutandis to the date hereof) are true and correct save
that (a) references in such warranties to the Gold Supply Agreement shall
be construed as references to the Gold Supply Agreement as amended by this
Amendment Agreement and (b) references to the accounts and consolidated
accounts of any of the Purchasers shall refer to the latest accounts and
2
<PAGE>
consolidated accounts delivered to the Supplier by the Purchaser;
(ii) no Event of Default or Potential Event of Default has occurred or
will occur as a result of the entry into by any Purchaser of this Amendment
Agreement.
(C) The above conditions are for the protection of the Supplier and may be
waived by it in its sole discretion. Any such waiver shall only be effective if
in writing.
3. AMENDMENTS TO GOLD SUPPLY AGREEMENT
-----------------------------------
The Gold Supply Agreement is hereby amended so that it reads as set forth
in the documented appended hereto as Schedule 2.
4. ADDITIONAL PROVISIONS
---------------------
(A) AFW Corp. confirms that it agrees to the amendments made by this Amendment
Agreement and that the security agreement dated 31 December 1992 (the "Security
Agreement") between AFW Corp. and the Supplier continues to apply to the Gold
Supply Agreement as so amended and references in the Security Agreement to any
particular provision contained in the Gold Supply Agreement shall be to such
provision as so amended.
(B) Each Purchaser confirms that it agrees to the amendments made by this
Amendment Agreement and that the respective Guarantee and Indemnity executed by
it in favour of the Supplier (and which is described more particularly in Part I
of Schedule 1) continues to apply to the Gold Supply Agreement as so amended and
references in such Guarantee and indemnity to any particular provision in the
Gold Supply Agreement shall be to such provision as so amended.
5. INCORPORATION
-------------
(A) This Amendment Agreement shall be construed as one with the Gold Supply
Agreement. Accordingly, the term "Gold Supply Agreement" as used in the Gold
Supply Agreement and all other instruments and agreements executed thereunder or
pursuant thereto shall for all purposes refer to the Gold Supply Agreement as
amended by this Amendment Agreement.
(B) Except to the extent each is expressly amended by the terms of this
Amendment Agreement, the Gold Supply Agreement and all other instruments and
agreements executed thereunder or pursuant thereto shall remain in full force
and effect.
6. GOVERNING LAW
-------------
3
<PAGE>
This Amendment Agreement shall be governed by and construed in accordance
with the laws of Singapore and the parties hereby submit to the non-exclusive
jurisdiction of the courts of Singapore in relation to any legal action or
proceedings arising out of or in connection with this Amendment Agreement.
4
<PAGE>
SCHEDULE 1
----------
Part I
GUARANTEES AND INDEMNITIES
- --------------------------
(a) Guarantee and Indemnity dated 31 December 1992 executed by AFW Ltd. in
favour of the Supplier.
(b) Guarantee and Indemnity dated 31 December 1992 executed by AFW Corp. in
favour of the Supplier.
(c) Guarantee and Indemnity dated 31 December 1992 executed by Muller in favour
of the Supplier.
Part II
DOCUMENTS
- ---------
1. Memoranda and Articles of Association or their equivalents in their
respective jurisdictions of each of the Purchasers and the Holding Company.
2. Certified copies of all forms and documents necessary for the registration
and lodgment (if necessary) of the Security Documents in any appropriate
registry duly signed by the Purchasers and evidence of such registration and
lodgment having been duly completed.
3. Legal opinion of legal counsels from Alabama and the Cayman Islands which
are satisfactory to the Supplier as to the validity and enforceability of the
Gold Supply Agreement as amended by this Amendment Agreement and the Security
Documents according to their terms and of the choice of governing law.
5
<PAGE>
SCHEDULE 2
----------
GOLD SUPPLY AGREEMENT INCORPORATING AGREED AMENDMENTS
(As appended)
6
<PAGE>
DATED 31 DECEMBER 1992
----------------------------------
Between
ROTHSCHILD AUSTRALIA LIMITED
AMERICAN FINE WIRE LIMITED
AMERICAN FINE WIRE CORPORATION
And
DR MULLER FEINDRAHT AG
==============================
GOLD SUPPLY AGREEMENT
==============================
DREW & NAPIER,
20, Raffles Place, #17-00,
Ocean Towers,
Singapore 048620
7
<PAGE>
THIS AGREEMENT is made on 31st December 1992 AMONG:
-------------- -----
(1) ROTHSCHILD AUSTRALIA LIMITED (the "Supplier"), a corporation established
----------------------------
under the laws of Australia with its registered office at 5th Floor, 37 St
Georges Terrace, Perth 6000, Western Australia;
(2) AMERICAN FINE WIRE LIMITED ("AFW Ltd"), a corporation established under the
--------------------------
laws of the Cayman Islands acting through its Singapore branch at 15,
Senoko Avenue, Woodlands East, Singapore 758305;
(3) AMERICAN FINE WIRE CORPORATION ("AFW Corp"), a corporation established
------------------------------
under the laws of the State of Alabama, United States of America with its
principal place of business at 907 Ravenwood Drive, P.O. Box 966, Selma,
Alabama 36701; and
(4) DR MULLER FEINDRAHT AG ("Muller"), a corporation established under the laws
----------------------
of Switzerland with its principal place of business at Zuercherstrasse 73,
CH-8800 Thalwil Zurich, Switzerland.
WHEREAS:
-------
(A) Each of the Purchasers (as defined below) are in the business of
manufacturing and selling gold fine wire and require Gold (as defined below) for
the purposes of the said business.
(B) The Supplier is desirous of supplying to each of the Purchasers and each of
the Purchasers is desirous of purchasing the Gold from the Supplier on a
consignment basis on the terms and subject to the conditions set out in this
Agreement.
IT IS HEREBY AGREED as follows:
-------------------
1. DEFINITIONS AND INTERPRETATION
------------------------------
(A) Definitions: In this Agreement, unless the subject or context otherwise
-----------
requires, the following words and expressions shall have the following meanings:
"AFW Group" means the Purchasers;
---------
"Agreed Suppliers" means the sources as agreed by the parties hereto in
----------------
writing which will supply Gold to the Purchasers on behalf of the Supplier;
-1-
<PAGE>
"Approved Locations" means the addresses of the Purchasers as set out at
------------------
the beginning of this Agreement or such other locations as are approved in
writing by the Supplier;
"Business Day" means a day on which banks are open in Sydney and Singapore
------------
(but excluding Saturdays and Sundays);
"Completion Date" means 4th January 1993 or such other date as the parties
---------------
may agree in writing;
"Consignment Fee Period" means the period for which the consignment fee is
-----------------------
calculated;
"Consolidated Net Worth" has the meaning ascribed to it in Schedule 1 to
----------------------
this Agreement;
"Cost of Gold" means LIBOR less GOFO plus XXXXX per cent per annum provided
------------
that if GOFO is greater than LIBOR the Cost of Gold shall be XXXXX per cent
per annum and provided further that if any of the LIBOR, GOFO or GOFP rates
cannot be determined in accordance with the foregoing procedures the rate
for the relevant date shall be the rate as is determined by the Supplier
having regard to comparable indices then available;
"Currency of Account" means in respect of obligations payable in Gold,
-------------------
ounces of Gold and in respect of obligations payable in currency, US
Dollars;
"Current Assets" means the amount for the time being, equal to the
--------------
aggregate of:
(i) the value of stock in trade and work in progress valued at the
lower of cost or market value (except to the extent that any part
thereof is beneficially owned by any other person);
(ii) the value of debts owed and arising in the ordinary course of
business (including prepayments) after making proper provisions for
bad and doubtful debts;
(iii) the amount (if any) by which cash held at bank exceeds an
amount equivalent to all current liabilities (whether for the time
being due or not) to any such bank;
(iv) cash in hand; and
(v) all other assets classified as current under generally accepted
accounting principles applicable to the Purchasers in their respective
jurisdictions;
-2-
<PAGE>
where all those amounts and values are computed in the same manner and
on the same accounting principles as they were computed for the
purposes of the audited or unaudited consolidated accounts of the AFW
Group last delivered to the Supplier;
"Current Liabilities" means the amount for the time being, equal to the
-------------------
aggregate of the following:
(i) bank overdrafts less the amount of any cash not included as an
asset pursuant to paragraph (iii) of the definition of Current Assets;
(ii) any part of any other borrowings maturing within 12 months;
(iii) current creditors;
(iv) proposed dividends;
(v) taxation; and
(vi) all other liabilities classified as current under generally
accepted accounting principles;
where all such amounts and values are computed in the same manner and
on the same accounting principles as they were computed for the
purposes of the then latest audited or unaudited consolidated accounts
of the AFW Group last delivered to the Supplier;
"Delivered Gold" means all the Gold delivered to the Purchasers pursuant to
--------------
this Agreement whether directly by the Supplier or indirectly through an
Agreed Supplier; and products (whether in completed form or semi-completed
form or otherwise) which are derived or manufactured from Gold delivered to
the Purchasers pursuant to this Agreement (including but not limited to
work in progress, finished goods, semi-finished goods, inventories, raw
materials and scrap) and wherever located;
"Delivery Charges" means, in relation to each Purchaser, the Delivery
----------------
Charges set out against its name in Schedule 2 to this Agreement or such
other charges as notified by the Supplier to the respective Purchaser in
writing from time to time;
"Event of Default" means any of the events of default described in Clause
----------------
15;
"Fair Market Value" means the price determined by each day's Second London
------------------
Gold Fixing (or if no such price is available
-3-
<PAGE>
for any day, the previous available Second London Gold Fixing shall be
substituted in lieu);
"Fixing Charges" means, in relation to each Purchaser, the fixing charges
--------------
set out against its name in Schedule 2 to this Agreement or such other
charges as notified by the Supplier to the respective Purchaser in writing
from time to time;
"GOFO" means the average of mean offered quotations for the Consignment Fee
----
Period as at 10.00 a.m. GMT for each of the 3 Business Days which
immediately precede the commencement of that Consignment Fee Period for
London Interbank Forward Bullion Rates quoted on Reuters Monitor System
pages GOFO and GOFP for US Dollars for that Consignment Fee Period;
"Gold" means Gold Bullion 99.99 per cent fine in large bar or kilo bar or
----
anodes from the Agreed Suppliers;
"Guarantors" means the Purchasers;
----------
"Holding Company" means Kulicke and Soffa Industries, Inc.;
---------------
"K&S Group" means the Holding Company and its subsidiaries;
---------
"LIBOR" means in relation to any Consignment Fee Period the average of mean
-----
offered quotations for US Dollars deposits in an amount comparable to the
Outstanding Balance of the Delivered Gold for that Consignment Fee Period
which appear on page LIBO of the Router Monitor Money Rates Service (or
such other page as may replace the LIBO page for the purpose of displaying
London Inter-bank US Dollars offered rates of leading reference banks) as
at 11.00 a.m. London time for each of the 3 Business Days immediately
preceding the commencement of that Consignment Fee Period;
"Outstanding Balance" means all the Delivered Gold which has not been
-------------------
purchased by the Purchasers pursuant to Clause 6;
"Permitted Security" means such security as may be given by AFW Ltd. to a
------------------
financial institution to secure borrowing by AFW Ltd. from that financial
institution in an amount not exceeding US$4,000,000 and insofar as the
Permitted Security affects property or assets of the Purchasers over which
a similar security interest has been or will be created by or pursuant to
any of the Security Documents, then the arrangements between the Supplier
and that financial institution in relation to the priority of their
respective security interests shall be of substantially similar effect to
that which applies between the Supplier and Citibank N.A. under the Deed of
Priority entered into on 31 December 1992 between Citibank N.A., AFW Ltd.
and the Supplier.
-4-
<PAGE>
"Potential Event of Default" means any event or circumstances which, if it
--------------------------
continued after the giving of any notice or the expiry of any grace period,
would become an Event of Default and in respect of which, in the reasonable
opinion of the Supplier, appropriate steps have not been or will not be
taken to prevent such event or circumstance from becoming an Event of
Default;
"Price" means the sum of the Second London Gold Fixing; and the Fixing
-----
Charges;
"Purchasers" means AFW Ltd, AFW Corp and Muller (and "Purchaser" means any
---------- ---------
of them);
"Security Documents" means the documents as set out in Schedule 3 to this
------------------
Agreement in form and substance satisfactory to the Supplier including all
amendments, modifications or supplemental agreements relating thereto and
any and every other document from time to time executed to secure the
obligations and liabilities of the Purchasers or any of them under this
Agreement;
"Settlement Limit" means the maximum amount of the Price outstanding and
----------------
unpaid by all of the Purchasers to the Supplier hereunder at any one time
being US $1,000,000 or such other amount as the parties may agree in
writing;
"Supplier's Account" means the Supplier's account with such bank in
------------------
Australia as the Supplier shall specify to each Purchaser from time to
time;
"Supply Limit" means the maximum amount of Gold which the Supplier is at
------------
any particular time obliged to supply to the Purchasers hereunder being the
lesser of (i) Delivered Gold (but not including Gold the Price of which has
been paid to the Supplier) the Fair Market Value of which does not exceed
US $16,000,000 and (ii) 36,000 troy ounces of Delivered Gold (but not
including Gold the Price of which has been paid to the Supplier); and
"US Dollars" and the symbol "US $" mean the lawful currency of the United
---------- ----
States of America;
and the expression "subsidiary" and "related company" shall bear the
meaning assigned thereto in sections 5 and 6 respectively of the Singapore
Companies Act (Cap. 50).
(B) Interpretation:
--------------
(v) Any reference to a statutory provision shall include such provision as
from time to time modified or re-enacted so far as such modification or re-
enactment applies or is
-5-
<PAGE>
capable of applying to any transactions entered into hereunder.
(vi) References to Clauses and Schedules are to Clauses of and Schedules
to, this Agreement.
(vii) The headings are for convenience only and shall not affect the
interpretation hereof.
(viii) Unless the context otherwise requires, references to the singular
number shall include references to the plural number and vice versa and
references to natural persons shall include bodies corporate.
2. CONDITIONS PRECEDENT
--------------------
(A) Conditional Agreement: The obligations of the Supplier under this
---------------------
Agreement are conditional upon:
(i) the Supplier receiving on or before the Completion Date, the duly
executed Security Documents listed in Schedule 3;
(ii) the completion by the Purchasers, of all filings, recordings or other
actions necessary to perfect and make enforceable the charges, liens,
encumbrances and security interests created by the Security Documents and
presentation by the Purchasers to the Supplier of reasonable evidence
thereof;
(iii) the Supplier receiving the documents set out in Schedule 4 to this
Agreement in form and substance satisfactory to it;
(iv) completion, on or before the Completion Date, by the Supplier of an
inventory audit, safety procedure audit and technical due diligence and the
results of such an audit being satisfactory to the Supplier; and
(v) all representations, undertakings and warranties of each of the
Purchasers under this Agreement having been complied with and are true,
accurate and correct at and as if made on the Completion Date.
(B) Best Endeavors: Each party shall use its best endeavors to procure the
--------------
fulfillment of the conditions precedent set out in sub-Clause (A) above, on or
before the Completion Date and with respect to the conditions precedent in (ii)
above, on or before the date specified therein, and in particular shall furnish
such information, supply such documents as should be in their possession and do
all such acts and things as may be required to
-6-
<PAGE>
enable such conditions to be fulfilled insofar as it is the responsibility or
obligation of any such party so to do. PROVIDED that nothing herein contained
shall prevent the Supplier from conducting further inventory audits, safety
procedures and technical due diligence after the fulfillment of the condition
set out in Clause 2(A)(iv) above.
(C) Non-fulfillment of Conditions: If any of the above conditions is not
-----------------------------
fulfilled and is not waived by the Supplier, this Agreement shall ipso facto
cease and determine and all the parties hereto shall be released from their
obligations under this Agreement and none of the parties hereto shall have any
claim against the others for costs, damages, compensation or otherwise except
(i) in respect of any breach by any party of sub-Clause (B) above and (ii) that
if the non-fulfillment of Clause 2(A)(iv) was caused by the Supplier's default,
each party shall bear its own costs and expenses, otherwise the Purchasers shall
remain liable to pay the costs and expenses referred to in Clause 25.
3. SUPPLY OF GOLD
--------------
Provided that no Event of Default or Potential Event of Default has
occurred hereunder, the Supplier agrees to deliver to the Purchasers upon the
request of any of the Purchasers from time to time, quantities of Gold subject
to availability of Gold and to the terms and conditions of this Agreement,
provided however, that in no event shall the Supplier be obliged to deliver to
any Purchaser Gold in excess of the Supply Limit or in the event that the
Settlement Limit is exceeded. The maximum amount of Gold which the Supplier
shall be required to deliver to any particular Purchaser shall not exceed the
sub-limit set out against that Purchaser's name in Schedule 5 to this Agreement.
4. DELIVERY OF GOLD
----------------
(A) Subject to events of force majeure, all deliveries of Gold by the Supplier
shall be made to the Purchasers at the Approved Locations and within 2 usiness
Days of notice or request by the Purchasers. Upon delivery of the Gold, each
Purchaser shall pay to the Supplier the Delivery Charges as set out against its
name in Schedule 2 to this Agreement.
(B) It shall be a condition of this Agreement that all Gold shall be delivered
by the Agreed Suppliers, subject to availability and Clause 23. If for any
reason the gold delivered is not 99.99% fine gold, the Purchasers' sole remedy
is to reject the gold delivered and return the gold to the Supplier with all
transportation and insurance costs borne by the Supplier and the
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<PAGE>
Supplier shall, subject to availability and Clause 23, deliver suitable
replacement from other Agreed Suppliers.
(C) The Supplier disclaims all other express or implied warranties with respect
to Gold delivered to any Purchaser hereunder, and in particular disclaims any
express or implied warranties of merchantability or fitness for a particular
purpose of the Gold delivered to any Purchaser hereunder.
5. RISK AND TITLE
--------------
(A) The Gold shall be at the Purchasers' risk as from delivery. Upon delivery
of the Gold to such location as designated by the Purchaser, the Gold shall be
deemed delivered to the Purchaser.
(B) In spite of delivery having been made, title in the Delivered Gold shall
not pass from the Supplier until the Delivered Gold is purchased from the
Supplier in accordance with Clause 6. Notwithstanding any provision herein
contained, no title in any Delivered Gold (whether or not purchase has taken
place pursuant to Clause 6) shall pass from the Supplier after the occurrence of
an Event of Default or Potential Event of Default, except for Delivered Gold the
Price for which has actually been paid by the Purchaser(s) and received by the
Supplier, or in respect of which the Supplier has expressly agreed in writing
that title shall pass.
(C) Until title in the Delivered Gold passes to the Purchasers in accordance
with sub-Clause (B) the Purchaser shall hold the Delivered Gold on a fiduciary
basis as bailee for the Supplier. In this respect, each Purchaser undertakes to
the Supplier that:
(i) prior to the processing of any Delivered Gold, it shall store
such Delivered Gold on its premises separately from its own Gold or
those of any other person and in a manner which makes them readily
identifiable as the Gold of the Supplier; and
(ii) in respect of any Delivered Gold that has been processed it
shall maintain records sufficiently detailed to determine the specific
amount of any Delivered Gold by weight utilised for such purpose.
(D) Subject as provided in sub-Clause (E) below, where any Delivered Gold has
been worked on in any way by any Purchaser, the work in progress thereof shall
become and/or shall be deemed to be for all purposes to be the property of the
Supplier.
(E) Where any Delivered Gold is admixed or united in any way with those of any
Purchaser, the product thereof shall become and/or shall be deemed to be for all
purposes to be the property
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<PAGE>
of the Supplier to be held on trust on behalf of the Supplier and the Purchaser
in the proportion of their respective contributions. If any Delivered Gold is
admixed or united in any way with the property of any person or persons other
than the Purchasers or are processed with or incorporated therein, the product
thereof shall become and shall be deemed for all purposes to be owned in common
with that other person or those other persons.
(F) Upon the occurrence of an Event of Default and until such time as title in
any Delivered Gold passes from the Supplier, the Purchasers shall forthwith upon
request deliver up such of that Delivered Gold is the Supplier may request. If
any Purchaser fails to do so the Supplier may enter upon any premises owned,
occupied or controlled by that Purchaser where the Delivered Gold are or
believed to be situated and repossess the Delivered Gold.
(G) Except for the Permitted Security, the Purchasers shall not pledge, charge,
or create any encumbrance or security interest over any Delivered Gold whether
admixed or united in any way with those of any Purchaser or other persons,
within their possession or control.
(H) It is understood between the parties hereto that in any sale of Delivered
Gold by any Purchaser to its customers, nothing in this Agreement shall
constitute or be deemed to constitute the Purchaser as agent of the Supplier for
any purpose whatsoever.
(I) If any of the Approved Locations are located in premises not owned but
rented by the Purchasers, the Purchasers shall notify the lessor of the
respective premises on or before the Completion Date that, unless title in the
Delivered Gold has passed to the Purchasers pursuant to this Clause 5, all
Delivered Gold under this Agreement stored in the respective Approved Locations
is kept by the Purchasers on a fiduciary bailee as bailee for the Supplier.
(J) In the case of a transfer of ownership of any premises of which any
Approved Location is located:
(i) the Purchasers shall promptly notify the Supplier of the name and
address of the new owner of such premises; and
(ii) the Purchasers shall promptly notify the new owner of the premises in
the way described in sub-Clause (1) above.
(K) Notwithstanding the provisions contained in sub-Clauses (I) and (J) above,
the Supplier shall be at liberty to notify any owner of the Approved
Location promises regarding title of the Delivered Gold.
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<PAGE>
6. PURCHASE
--------
(A) The Purchasers shall purchase and be obligated to pay the Price for all
Delivered Gold upon the transfer of custody thereof or of any product containing
it to any person or entity other than a Purchaser or agent thereof. The
Purchasers shall pay the Price for the Delivered Gold so purchased in accordance
with the provisions of this Clause 6.
(B) Within 24 hours of any transfer of custody of Delivered Gold, each
Purchaser shall give the Supplier written notice thereof in the form of telex,
letter or facsimile transmission (and where the notice is in the form of a
facsimile transmission, with a hard copy to follow immediately by post) which
shall contain a sufficiently detailed description of the Delivered Gold so
transferred and purchased, the quantity thereof and such details as the Supplier
may require (the "Notice"). Upon receipt of the Notice, the Supplier shall
promptly acknowledge receipt by written notice in the form of telex or facsimile
transmission to such Purchaser.
(C) In order to fix the Price of the Delivered Gold so purchased, the Purchaser
shall submit the Notice before 7 p.m. Singapore time in respect of Delivered
Gold shipped out by Muller & AFW Corp the previous Business Day and in respect
of Delivered Gold shipped out by AFW Ltd in the same Business Day. In the event
there is no Second London Gold Fixing on the same Business Day in London, or the
Purchaser submits the Notice to the Supplier after the above specified time, the
Price shall be based on the Second London Gold Fixing on the following Business
Day.
(D) The Supplier shall, prior to 9 a.m. Singapore time on the next Business Day
after fixing of the Price, invoice the Purchasers by way of written notice in
the form of telex or facsimile transmission to AFW Ltd.
(E) The Purchasers shall pay the Price payable for each purchase made hereunder
to the Supplier in US Dollars and in immediately available funds to the
Supplier's Account not later than 11 a.m. Singapore time on the date falling two
Business Days from the date of the invoice.
(F) Notwithstanding any provision in this Agreement, the Purchasers shall not
at any time purchase and the Supplier shall be under no obligation to sell the
Delivered Gold to any Purchaser if at that time the aggregate sums payable to
the Supplier by the Purchasers as described in the definition of Settlement
Limit exceeds, or would as a result of such purchase exceed, the Settlement
Limit. The Settlement Limit shall be subject to review by the Supplier at the
expiration of every 6-month period commencing on the Delivery Date.
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<PAGE>
7. FEE
---
(A) The Purchasers hereby agree to pay the Supplier a monthly consignment fee
payable in arrears in ounces of Gold at the rate of the sum of Cost of Gold
and XXXXX per cent per annum of the daily Outstanding Balance of Delivered
Gold.
(B) The Purchasers shall pay the fees referred to in this Clause by 5 p.m.
Singapore time on the Business Day following the date of invoice in immediately
available funds.
8. INTEREST AND PAYMENT
--------------------
(A) If any sum in respect of the Price, the consignment fee or otherwise
payable hereunder is not paid on the due date, the Purchasers shall pay interest
payable in ounces of Gold or in US Dollars at Cost of Gold plus XXXXX per cent
per annum until the total amount is paid in full. Such interest is to be
calculated on the basis of the actual number of days elapsed and a 360-day year.
(B) If any sum becomes due for payment under or pursuant to this Agreement on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day.
9. UNDERTAKINGS RELATING TO THE GOLD
---------------------------------
Each of the Purchasers hereby jointly and severally warrants and undertakes
that:
(i) it shall riot use, convert, or otherwise deal with Delivered Gold or
any part thereof except in the ordinary course of its business as now being
conducted, and each Purchaser may move the Gold from one Approved Location
to another Approved Location as necessary for its normal course of business
provided that (a) the amount of Gold at any Approved Location does not
exceed the maximum values or quantities listed in Schedule 5 to this
Agreement in respect of that Approved Location and (b) the Supplier is
given notice in writing of any such movement within the same day of such
movement;
(ii) the Supplier (through the Agreed Suppliers) shall be each Purchaser's
sole supplier of gold other than gold provided by such Purchaser's
customers for the purpose of processing;
(iii) it will maintain security procedures, measures, safeguards, records
and controls at the premises in which the Delivered Gold is stored to the
satisfaction of the
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<PAGE>
insurers referred to in Clause 11 and as the Supplier may reasonably
require;
(iv) it shall at all reasonable times upon reasonable notice (except in
the case of emergency), allow the Supplier, its agents, officers and
employees access to such portions of its books, records, and documents as
they relate to the Supplier's security under the Security Documents
(including books of accounts) and allow the Supplier to make copies (at the
Supplier's cost) of such portions of its books, records and documents;
(v) it shall and it shall procure that its employees shall provide the
Supplier, its agents, officers and employees with any and all information
requested by the Supplier for the purposes of matters relating to the
Supplier's security under the Security Documents; and
(vi) it shall not use the Delivered Gold in violation of any law, statute,
ordinance, regulation or order.
10. INVENTORY AUDIT
---------------
(A) An annual gold inventory audit of each Purchaser shall be conducted at the
end of every calendar year by the Purchaser in the manner in which they are
presently conducted and shall be observed by an independent third party
satisfactory to the Supplier at the cost and expense of that Purchaser. Such
audits shall be co-ordinated by AFW Ltd with the Supplier. The results of such
audit shall be provided to the Supplier in the form in which they are currently
presented or in such other form as may be agreed by the parties.
(B) In addition to the annual gold inventory audit, the Supplier may arrange
for an independent third party satisfactory to the Purchasers to conduct further
gold inventory audits as the Supplier deems necessary. In respect of these
additional audits, the Supplier shall give due consideration to the possibility
of production interruptions that may be caused by such audits.
(C) The reasonable costs and expenses incurred in carrying out the additional
audits referred to in sub-Clause (B) shall be borne by the Supplier provided
that the reasonable cost of such audits which are conducted following an Event
of Default or Potential Event of Default shall be to the account of the
Purchasers.
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<PAGE>
11. INSURANCE
---------
(A) Each Purchaser, at its sole cost and expense, shall procure and maintain an
"all risk" insurance policy and such other insurance as the Supplier may
reasonably require with respect to Delivered Gold in an amount exceeding the
Fair Market Value of the Delivered Gold at any time and other insurance with
respect to its assets other than the Delivered Gold, with the Supplier as one of
the named insured. All insurance provided for in this paragraph shall be
effected under valid and enforceable policies, in such forms and in such amounts
as may from time to time be reasonably required by Supplier, with insurance
companies which are authorized to do business in the jurisdiction in which the
Delivered Gold is located and acceptable to Supplier.
(B) All policies of insurance provided for in this Agreement shall contain
clauses or endorsements to the effect that:
(i) no act or omission of any relevant Purchaser, or anyone acting for and
on behalf of the Purchaser which might otherwise result in a forfeiture or
defence to payment of such insurance or any claim thereunder, or any part
thereof, shall in any way affect the validity or enforceability of such
insurance or any claim thereunder insofar as Supplier is concerned;
(ii) such policies shall not be amended or cancelled in any respect
affecting coverage on Delivered Gold or its other assets without any least
14 days prior written notice to the Supplier;
(iii) the Supplier shall not be liable for any premium thereon or subject
to any assessment thereunder;
(iv) the insurers shall promptly advise the Supplier of any default in the
payment by the respective Purchasers of any premium or call or failure to
renew any such insurance at least 14 days prior to the date of renewal
thereof; and
(v) the insurers shall promptly advise the Supplier of any act or omission
or of any event of which they have knowledge and which might invalidate or
render unenforceable in whole or in part any such insurance.
(C) Each Purchaser shall at all times duly and punctually pay all premiums and
other moneys payable under all such insurances as aforesaid and all similar
insurances effected by the Supplier and promptly upon request by the Supplier
produce to the Supplier the premium receipts or other evidence of payment
thereof.
(D) If at any time any Purchaser shall fail to comply with any of the
provisions herein, without prejudice to its other rights
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<PAGE>
hereunder, the Supplier shall be entitled to procure such insurance in
accordance with the aforesaid provisions, at that Purchaser's expense. All
reasonable costs incurred by the Supplier in connection with such insurance
shall be paid to the Supplier by that Purchaser on demand.
(E) No Purchaser shall at any time commit to any act or omission which might
otherwise result in a forfeiture or defence to payment of such insurance
effected by the Purchaser or the Supplier or any claim thereunder, or any part
thereof, or which might in any way affect the validity or enforceability of such
insurance or any claim thereunder.
(F) In the event of any loss or damage, proceeds in respect of such loss or
damage shall be adjusted with the insurers and paid directly to the Supplier
without deduction, other than to the extent required by law and the policies
shall be endorsed accordingly.
12. PURCHASER'S COVENANTS
---------------------
Each of the Purchasers agree:
(i) to provide the Supplier if and when applicable with the Purchaser's
Sales Tax Exemption Certification Number exempting the Purchaser from
payment of all personal, inventory, property or any other tax on Delivered
Gold. Additionally, each Purchaser warrants that the Delivered Gold is
being purchased for resale or to be used as a constituent of goods to be
produced or manufactured for resale;
(ii) to give the Supplier prompt written notice of any material
litigation, arbitration or administrative proceeding initiated against it
in any court, or by or before any arbitral tribunal or governmental
regulatory body;
(iii) to notify the Supplier immediately of any loss, theft or destruction
of any Delivered Gold including process losses and other losses in the
ordinary course of business involving an amount exceeding 50 ounces of Gold
at any one time. This shall be without prejudice and in addition to the
obligations (if any) of the Purchaser to report such losses under any
insurance policy maintained under Clause 11;
(iv) to do or cause to be done all material things necessary to preserve,
renew and keep in full force and effect its corporate existence and comply
with all laws and regulations applicable to it; provided that any breach of
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<PAGE>
law and/or regulations that does not materially affect the Purchaser's
solvency and/or ability to continue to conduct its business as contemplated
by this Agreement and to fully perform and/or comply with its obligations
as set out in this Agreement and the Security Documents to which it is a
party, shall not constitute a breach of this Clause 12(iv);
(v) to provide the Supplier with accurate and current information
regarding its financial condition. Such information shall include, but not
be limited to:
(a) the financial and management statements as set out in Schedule 8
within the time period stated in that Schedule; and
(b) weekly summary sheets detailing Gold inventory in the form as set
out in Schedule 8 to be received by the Supplier within 2 Business
Days of the end of every week. Such weekly summary sheets will detail
all losses of any Delivered Gold, including process losses and other
losses in the ordinary course of business;
(vi) that it will not (and will not agree, conditionally or
unconditionally: (to) sell, assign, transfer or otherwise encumber all or
any part of its right, title and interest in and to the Delivered Gold
until full payment therefor has been received by the Supplier, if after
such sale, assignment, transfer or encumbrance, the Settlement Limit would
be exceeded;
(vii) that, from time to time on the request of the Supplier, it will
execute and deliver promptly and duly to the Supplier any such further
instruments or documents as the Supplier may reasonably require or which
are required by law, for the purpose of obtaining the full benefit of the
security under this Agreement and the Security Documents and/or of the
rights and powers hereby granted;
(viii) that it will promptly notify the Supplier of the occurrence of any
Event of Default or Potential Event of Default, and will from time to time
on request deliver to the Supplier a certificate confirming that no Event
of Default or Potential Event of Default has occurred and is continuing or
setting out details of any Event of Default or Potential Event of Default
(as the case may be) and the action taken or proposed to be taken to remedy
it;
(ix) that it will cause AFW Corp not to change its principal place of
business and chief executive offices from the address set forth in the
paragraph (3) on page 1 of this Agreement without at least thirty days
prior written notice to the Supplier;
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<PAGE>
(x) that it will punctually pay or caused to be paid all rents, rates,
taxes, duties, assessments and other outgoing payable in respect of its
assets or any part thereof;
(xi) to keep proper books of account and records so as to comply with the
law applicable to it and to enable it to comply with its obligations
hereunder;
(xii) that each Employee Plan (as hereinafter defined), the administrators
and fiduciaries of each Employee Plan and each Purchaser shall at all times
comply with all applicable requirements of the United States Employee
Retirement Income Security Act of 1974, as amended from time to time
("ERISA"), and any other applicable law (including regulations and rulings
thereunder) governing each Employee Plan, and each Employee Plan shall at
all times be properly administered in accordance with all such requirements
of law and in accordance with its terms to the extent consistent with all
requirements of law. For the purposes of this sub-Clause (xii), "Employee
Plan" includes all pension, retirement, disability, medical, dental or
other health insurance plans, life insurance or other death benefit plans,
profit sharing, deferred compensation, stock option, bonus or other
incentive plans, vacation benefit plans, severance plans, or other employee
benefit plans or arrangements, including (without limitation) any pension
plan (within the meaning of section 3(2) of ERISA) and any welfare plan
(within the meaning of section 3(1) of ERISA), whether or not funded,
covering any Subject Employee (as hereinafter defined) or to which
Purchaser is a party or bound or by which Purchaser otherwise may have any
liability to any Subject Employee. For purposes of this sub-Clause (xii),
the term "Subject Employee" includes all current or former officers,
directors, employees of consultants who are or were employed or otherwise
compensated by the Purchaser; and
(xiii) that it shall give the Supplier at least 90 days' prior written
notice of any impending material change in the shareholding of any
Purchaser or the beneficial ownership thereof, or any impending change of
which it has knowledge in the beneficial ownership of the Holding Company
as provided in Clause 15(A)(x), and it is further agreed that the Supplier
will notify the Purchasers within 30 days thereafter if the approval of the
Supplier for such change in shareholding or beneficial ownership is
forthcoming (which approval shall not be unreasonably withheld). In the
event that the approval of the Supplier is not given, then all outstanding
amounts from the Purchasers under this Agreement must be paid, and all
Delivered Gold which remains in the form of Gold that has not been
purchased and paid for in US Dollars shall be returned, to the Suppler at
least 30
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<PAGE>
days before such change in shareholding or beneficial ownership shall take
place. For the purpose of this Clause, a material change in shareholding
of any Purchaser refers to the acquisition by any person (other than the
Holding Company or any of its subsidiaries) of more than 10% of the voting
shares of that Purchaser or the beneficial ownership thereof.
13. WARRANTIES
----------
Each of the Purchasers represents and warrants to and for the benefit of
the Supplier that:
(i) it has the power to enter into, exercise its rights (if any) and
perform and comply with its obligations under and to create the security to
be created under this Agreement and the Security Documents;
(ii) all action, conditions and things required to be taken, fulfilled and
done (including the obtaining of any necessary consents) in order (a) to
enable it lawfully to enter into, exercise its rights (if any) and perform
and comply with its obligations under this Agreement (including the
creation of the security expressed to be created under this Agreement and
the Security Documents), (b) to ensure that those obligations and such
security are valid, legally binding and enforceable and in the case of such
security, will have the ranking which it is expressed to have, (c) to make
this Agreement admissible in evidence in the courts of Singapore and (d) to
make each Security Document admissible in the courts of the jurisdiction
the laws of which govern that Security Document have been or will be taken,
fulfilled and done;
(iii) neither its entry into, exercise of its rights (if any) and/or
performance of or compliance with its obligations under this Agreement
(including the creation of the security expressed to be created by this
Agreement and the Security Documents) does or will violate, or exceed any
powers or restrictions granted or imposed under or pursuant to, (a) any law
to which it is subject, (b) its Memorandum or Articles of Association or
its equivalent in its respective jurisdiction and (c) any agreement to
which it is a party or which is binding on it or on its assets;
(iv) its obligations under this Agreement, the Security Documents and the
security expressed to be created under this Agreement are valid, binding
and enforceable;
(v) no material litigation, arbitration or administrative proceeding is
current or pending or, so far as it is aware,
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<PAGE>
threatened to restrain the entry into, exercise of its rights (if any)
under and/or performance or enforcement of or compliance with its
obligations under, or the creation of the security expressed to be
constituted under this Agreement and the Security Documents;
(vi) (a) no petition has been presented, no meeting has been convened, and
no other step has been taken, for its winding-up except for such petition
or step which, in the reasonable opinion of the Supplier, is mala fides;
(b) so far as it is aware after diligent enquiry, (1) no such step is
intended by it or any other person and (2) no petition is outstanding
for any such winding-up except for such petition or step which, in the
reasonable opinion of the Supplier, is mala fides; and
(c) no step has been taken for the appointment of a receiver,
liquidator, judicial manager or similar officer of it or any of its
assets except for such step which, in the reasonable opinion of the
Supplier, is mala fides;
(vii) neither it nor any of its assets is entitled to immunity from suit,
execution, attachment or other legal process. Its entry into this
Agreement constitutes, and the exercise of their respective rights and
performance of and compliance with their respective obligations under this
Agreement will constitute, private and commercial acts done and performed
for private and commercial purpose;
(viii) no Event of Default or Potential Event of Default, has occurred and
it is not in breach of or default under any agreement relating to borrowed
money nor, to an extent or in a manner which has or could have a material
adverse effect on it, any other agreement;
(ix) it is duly established and existing under the laws of the
jurisdiction under which it is established and has the power and authority
to own its assets and conduct the business which it conducts;
(x) its accounts and consolidated accounts as at 31st December 1991 and
for the year then ended and as delivered to the Supplier (with copies of
the reports and approvals referred to in (b) below):
(a) include a balance sheet and profit and loss account and such other
financial statements (if any) as are required by the laws to which
they are respectively subject;
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<PAGE>
(b) save as stated in the notes thereto, were prepared in accordance
with accounting principles and practices generally accepted, in the
jurisdiction under which it is established and consistently applied
and have been prepared, examined, reported on and approved in
accordance with all procedures required by the documents constituting
it and/or the laws to which it is subject;
(c) together with those notes, give a true and fair view of its
financial condition and operations (or, in the case of the
consolidated accounts of the AFW Group, of its consolidated
financial condition and operations) as at that date and for the year
then ended; and
(d) together with those notes, disclose or reserve against all its
liabilities (contingent or otherwise) as at that date and all
unrealized or anticipated losses from any commitment entered into by
it and which existed on that date,
(xi) there has been no material adverse change in its financial condition
or operations since 31 December 1991; and
(xii) each Employee Plan, as defined in Clause 12(xii), the administrators
and fiduciaries of each Employee Plan and each Purchaser has at all times
complied with all applicable requirements of ERISA and any other applicable
law (including regulations and rulings thereunder) governing each Employee
Plan, and each Employee Plan has been at all times properly administered in
accordance with all such requirements of law and in accordance with its
terms to the extent consistent with all such requirements of law.
14. FINANCIAL COVENANTS
-------------------
Each of the Purchasers hereby undertakes to the Supplier that:
(i) it shall procure that the AFW Group maintains a current ratio exceeding
1.5: 1.0. For the purposes of this Clause "current ratio" shall be
determined by dividing the total Current Assets of the AFW Group by the
total Current Liabilities of the AFW Group;
(ii) until such a time as the Consolidated Net Worth of the AFW Group
exceeds US $7,000,000, it shall not declare or pay any dividend (whether
final or interim) or any other distribution without the prior written
consent of the
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<PAGE>
Supplier, which shall not be unreasonably withheld; provided that in the
event a dividend or other distribution is payable in accordance with the
terms herein, after payment of the proposed dividend or distribution, the
Net Worth of the AFW Group shall not be less than US $7,000,000;
(iii) it will procure that the AFW Group maintains a minimum Consolidated
Net Worth of US $1,200,000; and
(iv) its intercompany debts (save for such debts as may be incurred in the
ordinary course of business of the Purchaser on arms' length commercial
terms) shall be subordinated to the Supplier to the Supplier's
satisfaction.
15. EVENTS OF DEFAULT
-----------------
(A) Events of Default: If at any time and for any reason, whether within
-----------------
or beyond the control of any party to this Agreement, any of the following
occurs, such an occurrence shall constitute an Event of Default under this
Agreement:
(i) Non-Payment: if any of the Purchasers or Guarantors shall fail to pay
-----------
when due sums of money whether principal, interest or any other sums
payable under this Agreement or any of the Security Documents and such
failure to pay is not remedied by payment in immediately available funds by
11 a.m. on the second Business Day following a written notice from the
Supplier; or
(ii) Breach of Other Obligations and Warranty:
----------------------------------------
(a) save in the case of
(i) Clauses 12(iv), (vii) and (xii) herein;
(ii) Clauses 8(A)(i) to (vi) and (viii) of the debenture
executed by AFW Ltd in favour of the Supplier dated the date
hereof; and
(iii) Sections 5(a)(i) to (vi) and (viii) of the security
agreement executed by AFW Corp in favour of the Supplier dated
the date hereof (collectively the "Excepted Warranties"),
if any of the Purchasers or Guarantors shall be in breach of any
representations or warranties herein (or such representations or
warranties are not correct and complied with in all respects at all
times during the continuance of this Agreement and the security
created by the Security Documents as if repeated then by reference to
the then existing circumstances) or in the
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Security Documents or default in the due performance of any covenants,
conditions or obligations on their part to be performed and observed
hereunder; and
(b) in the case of default or breach of any of the Excepted
Warranties, if the default or breach is not remedied within 10 days of
written notice from the Supplier; or
(iii) Cross Default: if any other indebtedness of any of the Purchasers
-------------
or Guarantors whether due to the Supplier or third parties shall not be
paid on its due date or becomes capable of being rendered due and payable
before its normal maturity by reason of a default or event of default
(however described) and, in the reasonable opinion of the Supplier, such
event has or could have a material adverse effect on the solvency or the
ability of any of the Purchasers or Guarantors to perform their obligations
under this Agreement and/or any of the Security Documents; or
(iv) Cessation of Business: if any of the Purchasers or Guarantors shall
---------------------
cease or threaten to cease to carry on all or a material part of their
respective businesses without the consent of the Supplier; or
(v) Enforcement Proceedings: if a distress attachment or other execution
-----------------------
is levied or sued out upon or against any material part of the property of
any of the Purchasers or Guarantors; or
(vi) Legal Proceedings: if criminal legal proceedings, suit or action of
-----------------
any kind whatsoever is instituted against any of the Purchasers or
Guarantors which in the reasonable opinion of the Supplier will materially
affect the ability of any of the Purchasers or Guarantors to perform
its/his respective obligations under this Agreement and the Security
Documents in any material respect, and in the case of civil legal
proceedings, suit or action of any kind whatsoever instituted against any
of the Purchasers or Guarantors which in the reasonable opinion of the
Supplier will materially affect the ability of any of the Purchasers or
Guarantors to perform its/his respective obligations under this Agreement
and the Security Documents and which are capable of settlement or remedy,
are not settled ore remedied within 10 days of written notice of the
Supplier; or
(vii) Security Enforceable: if the holder of any present or future
--------------------
security on or over the substantial assets of any of the Purchasers or
Guarantors becomes entitled to realize such security by foreclosure or
other action; or
-21-
<PAGE>
(viii) Illegality: if it is or will become unlawful for any of the
----------
Purchasers or Guarantors to perform or comply with any one or more of its
respective obligations under this Agreement or the Security Documents; or
(ix) Authorization and Consents: if any action, condition or thing of a
--------------------------
material nature (including the obtaining of any necessary consent) at any
time required to be taken, fulfilled or done for any of the purposes stated
in Clause 13(A)(ii) is not taken, fulfilled or done or such consent ceases
to be in full force and effect without modification or any condition in or
relating to any such consent is not complied with in any material respect;
or
(x) Change in Shareholding: if the beneficial ownership of a majority of
----------------------
the outstanding voting stock of the Holding Company is acquired by any
person or group within the meaning of the United States Securities Exchange
Act of 1934; or
(xi) Insolvency: if any of the Purchasers or Guarantors becomes
----------
insolvent, is unable to pay its debts as they fall due, stops, suspends or
threatens to stop or suspend payment of all or a material part of its
debts, begins negotiations or takes any proceeding or other step with a
view to readjustment, rescheduling or deferral of all of its/his
indebtedness (or of any part of its/his indebtedness which it/he will or
might otherwise be unable to pay when due) or proposes or makes a general
assignment or an arrangement or composition with or for the benefit of
its/his creditors or a moratorium is agreed or declared in respect of or
affecting all or a material part of its/his indebtedness; or
(xii) Receivership: if any of the Purchasers or Guarantors shall enter
------------
into liquidation or bankruptcy whether compulsorily or voluntarily
otherwise than in the course of a bona fide reorganization approved in
advance by the Supplier in writing which approval shall not be unreasonably
withheld; or if a receiver and/or manager or judicial manager shall be
appointed in respect of any Purchaser's or Guarantor's undertaking or
property or any part thereof, or a voluntary or involuntary proceeding in
liquidation or bankruptcy is commenced by or against any of the Purchasers
or Guarantors and in the case of an involuntary bankruptcy proceeding,
which in the opinion of the Supplier is frivolous, is not discharged within
thirty days; or
(xiii) Nationalization: if a notice or proposal for compulsory
---------------
acquisition of the assets of any of the Purchasers or Guarantors or any
material or substantial part thereof shall be issued or made under or by
virtue of an Act of Parliament or other statutory provision; or
-22-
<PAGE>
(xiv) Security Imperiled: if anything shall be done or suffered or
------------------
omitted to be done by any of the Purchasers or Guarantors, which in the
reasonable opinion of the Supplier, imperils or may imperil the security
created by this Agreement or any of the Security Documents respectively; or
(xv) Material Adverse Change: if there shall occur a material adverse
-----------------------
change in the business, assets, financial position, of any of the
Purchasers or Guarantors which in the opinion of the Supplier materially
affects the ability of any of the Purchasers or Guarantors to perform
its/his obligations under this Agreement or the Security Documents
respectively; or
(xvi) Cessation of Validity of Agreement/Security Documents: this
-----------------------------------------------------
Agreement or any of the Security Documents ceases for any reason (or is
claimed by any of the Purchasers or Guarantors not) to be the legal and
valid obligations of any of the Purchasers or any of the Guarantors,
binding upon it/him in accordance with its terms; or
(xvii) Taxes: the failure of the Purchaser or any of its related
-----
Companies to pay any material federal, state or local taxes, assessments
and/or other governmental charges when due and payable, other than those
payable without penalty or interest or those being contested in good faith
and by appropriate proceedings and for which adequate reserve shall have
been provided; or
(xviii) Loss: substantial loss, theft, destruction or damage to any
----
Delivered Gold which is not covered by insurance; or
(xix) Lien: failure of any Purchaser to discharge by way of payment or
----
bond any lien, attachment of encumbrance on any Delivered Gold; or
(xx) Excess shipment of Delivered Gold: shipment by any of the Purchasers
---------------------------------
of any Delivered Gold to any of their customers if at any time the sum of
the Price of such Delivered Gold as subsequently fixed and the aggregate
amount of the Price outstanding and unpaid by all the Purchasers to the
Supplier hereunder exceeds the Settlement Limit. For the avoidance of
doubt, the Event of Default hereunder shall be deemed to have occurred at
the time of shipment of such Delivered Gold notwithstanding the fact that
the Price has not been fixed; or
(xxi) Analogous Events: any event occurs which, under the laws of any
----------------
applicable jurisdiction, has an analogous or
-23-
<PAGE>
equivalent effect to any of the events referred to in this sub-Clause (A).
(B) Declaration of Acceleration of Payment: The Supplier may at any time after
--------------------------------------
the happening of an Event of Default (whether or not any notice pursuant to sub-
Clause (B) of this Clause shall have been given by the Purchaser), by notice in
writing to the Purchaser declare that all liabilities, indebtedness and
obligations shall become immediately due and payable whereupon:
(i) Repayment: all liabilities, indebtedness and obligations shall become
---------
immediately due and payable without any further demand or notice which is
hereby expressly waived;
(ii) Enforcement of Security Documents: the Supplier shall be entitled to
---------------------------------
exercise forthwith all or any rights, powers or remedies under this
Agreement and the Security Documents; and
(iii) Return of Gold: the Purchasers shall immediately return to the
--------------
Supplier, at the Purchasers' own cost and expense, all Delivered Gold which
remains in the form of Gold that has not been purchased and paid for in US
Dollars, or in the alternative, replacement ounces of gold in a physical
form acceptable to the Supplier in its sole and absolute discretion, in
either case at the locations as set out in Schedule 7 or such place or
places as the Supplier shall notify to the Purchasers in writing.
The Supplier's rights hereunder are cumulative and may be exercised concurrently
or in any order as the Supplier may in its absolute discretion think fit.
16. TERMINATION
-----------
(A) Unless otherwise terminated, this Agreement shall commence on the
Completion Date and continue until terminated as hereinafter provided:
(i) The Supplier may immediately terminate this Agreement at any time upon
the occurrence of any Event of Default.
(ii) Any of the parties hereto may terminate this Agreement by giving at
least 6 months' written notice to the other parties.
(iii) The Purchasers may immediately terminate this Agreement if this
Supplier fails to deliver the required quantity of Gold (subject to the
Supply Limit, the Settlement Limit and to events of force majeure as
provided
-24-
<PAGE>
in Clause 23) within 5 Business Days after notice or request by any
Purchaser.
(B) In the event of termination pursuant to subsection (A)(ii) and (A)(iii),
the Purchasers, may at their option, return to the Supplier at the Purchasers'
expense all Delivered Gold that has not been paid for to the Supplier's premises
at the locations as set out in Schedule 7, or to such place or places as the
Supplier shall notify to the Purchasers in writing or purchase such Delivered
Gold in accordance with Clause 6 of this Agreement.
17. NOTICES
-------
(A) Notices: All notices, demands or other communications required or
-------
permitted to be given or made hereunder to the Supplier or the Purchasers shall
be in writing and in the English Language and sent by telex or telefax (with a
hard copy to follow immediately by personal delivery or sent by prepaid
registered post (by air-mail if to or from an address outside Singapore) to the
intended recipient) addressed to the intended recipient thereof at his or its
address set out below or at his or its telex or telefax number set out below (or
to such other address or telex or telefax number as any party may from time to
time duly notify the others):
Supplier: 5th Floor
37 St Georges Terrace
Perth 6000
Western Australia
Telex no: 197319
Telefax no: (09) 2211094
AFW Ltd: 15 Senoko Avenue
Woodlands East
Singapore 758305
Telex no: RS 564272 AFW SBR
Telefax no: 7586573
AFW Corp: 907 Ravenwood Drive
P.O. Box 966
Selma, Alabama 36701
Telefax no: 1-334-874-7119
Muller: Zuercherstrasse 73
CH-8800 Thalwil Zurich
Switzerland
Telex no: 826899 SEP
-25-
<PAGE>
Telefax no: 41-1-7211 1492
(B) Copies of the notices, demands or other communications referred to in sub-
Clause (a) above to the Purchasers shall be sent or caused to be sent by the
Supplier to the Holding Company at the address, telex or telefax number set out
below:
the Holding Company 2101 Blair Mill Rd
Willow Grove, Pa 19090
United States of America
Attention: Chief Financial Officer
Telefax nos: 1-215-784-6258
1-215-657-8947
(C) Deemed Delivery: Any such notice, demand or communication shall be deemed
---------------
to have been duly served on the respective Purchaser (if given or made by telex)
immediately or (if given or made by telefax) when the telefax is received,
whether or not the same has been forwarded to receive by the Holding Company
pursuant to sub-Clause (B) above.
18. GENERAL INDEMNITY
-----------------
The Purchasers shall indemnify the Supplier from and against all actions,
losses, claims, proceedings, costs, demands and liabilities which may be
suffered by it in the execution or purported execution or enforcement of any of
the rights, powers, remedies, authorities or discretion vested in it under or
pursuant to this Agreement.
19. WITHHOLDING
-----------
(A) Payments to be free and clear: All sums payable by the Purchasers under
-----------------------------
this Agreement and the Security Documents ("Transaction Documents") shall be
paid free of any restriction or condition, and free and clear of and (except to
the extent required by law) without any deduction or withholding, whether for or
on account of tax, by way of set-off or withholding or otherwise.
(B) Grossing-up of Payments:
-----------------------
(i) If the Purchasers or any other person must at any time deduct or
withhold any tax or other amount from any sum paid or payable by, or
received or receivable from, the Purchasers under the Transaction
Documents, the Purchasers shall pay such additional amount as is necessary
to ensure that the Supplier receives on the due date and retains (free
-26-
<PAGE>
from any liability other than tax on its own Overall Net Income) a net sum
equal to what it would have received and so retained had no such deduction
or withholding been required or made.
(ii) If the Purchasers or any other person must at any time pay any tax or
other amount on, or calculated by reference to, any sum received or
receivable by the Supplier under the Transaction Documents (except for a
payment by the Supplier of tax on its own Overall Net Income), the
Purchasers shall pay or procure the payment of that tax or other amount
before any interest or penalty becomes payable or, if that tax or other
amount is payable and paid by the Supplier, shall reimburse it on demand
for the amount paid by it.
(iii) Within 30 days after paying any sum from which it is required by law
to make any deduction or withholding, and within 30 days after the due date
of payment of any tax or other amount which it is required by sub-Clause
(ii) above to pay, the Purchasers shall deliver to the Supplier evidence
satisfactory to the Supplier of that deduction, withholding or payment and
(where remittance is required) of the remittance thereof to the relevant
taxing or other authorities.
(iv) In this Clause "Tax on Overall Net Income" of a person shall be
construed as a reference to tax (other than tax deducted or withheld from
any payment) imposed on that person by the jurisdiction in which its
principal office (and/or, in the case of the Supplier, its office through
which it is acting in connection with the Transaction Documents) is located
on (1) the net income, profits or gains of that person worldwide or (2)
such of its net income, profits or gains as arise in or relate to that
jurisdiction.
20. CURRENCY INDEMNITY
------------------
(A) The Currency of Account is the sole currency of account and payment for all
Sums payable by the Purchasers under or in connection with this Agreement,
including damages.
(B) Any amount received or recovered in a currency other than the Currency of
Account (whether as a result of, or of the enforcement of, a judgment or order
of a court of any jurisdiction, in the winding-up of any Purchaser or otherwise)
by the Supplier in respect of any liability shall only constitute a discharge to
the Purchasers to the extent of the amount in the Currency of Account which the
Supplier is able, in accordance with its usual practice, to purchase with the
amount so received or recovered in that other currency on the date of that
receipt
-27-
<PAGE>
or recovery (or, if it is not practicable to make that purchase on that date, on
the first date on which it is practicable to do so).
(C) If that amount in the Currency of Account is less than the amount of the
liability in the Currency of Account the Purchasers shall indemnify the Supplier
against any loss sustained by it as a result. In any event, the Purchasers shall
indemnify the Supplier against the cost of making any such purchase. For the
purpose of this Clause 20(C), it will be sufficient for the Supplier to
demonstrate that it would have suffered a loss had an actual exchange or
purchase been made.
(D) The above indemnity constitutes a separate and independent obligation from
the other obligations in this Agreement, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by the Supplier and shall continue in full force and effect despite any
judgment, order, claim or proof for a liquidated amount in respect of any
liability or any other judgment or order.
(E) If the amount in the Currency of Account as referred to sub-Clause (B) is
more than the amount of the liability in the Currency of Account and any other
sum then due to the Supplier, the Supplier shall return to the Purchaser the
amount in excess of the liability in the Currency of Account.
21. SET-OFF
-------
Each Purchaser authorizes the Supplier to apply (without prior notice) any
credit balance (whether or not then due and whether it is monetary or in troy
ounces of Gold) to which the Purchaser is at any time beneficially entitled on
any account at, any sum held to its order by and/or any liability of, any office
of the Supplier in or towards satisfaction of all or any part of the
indebtedness of the Purchasers such as the Price, consignment and fee and
interest therein which are due and unpaid and, for that purpose, to convert one
currency into another. The Supplier shall not be obliged to exercise any of its
rights under this Clause, which shall be without prejudice and in addition to
any right of set-off, combination of accounts, lien or other right to which it
is at any time otherwise entitled (whether by operation of law, contract or
otherwise).
22. CONFIDENTIALITY
---------------
(A) All communications between the parties hereto or any of them and all
information and other material supplied to or received by any of them from any
of the others which is either marked "confidential" or is by its nature intended
to be exclusively for
-28-
<PAGE>
the knowledge of the recipient alone and any information concerning the business
transactions or the financial arrangements of the parties hereto or of any
person with whom any of them is in a confidential relationship with regard to
the matter in question coming to the knowledge of the recipient shall be kept
confidential by the recipient except in the event of enforcement by any party of
its rights under or in connection with this Agreement and/or any Security
Document or unless or until compelled to disclose by judicial or administrative
procedures or in the opinion of its counsel, by other requirements of law, or
the recipient can reasonably demonstrate (a) that it is or part of it is, in the
public domain, whereupon, to the extent that it is public, this obligation shall
cease but only to the extent required under the respective circumstances.
(B) The terms of this Agreement shall be kept confidential by each of the
parties hereto and shall not be disclosed to any third party without the prior
written consent of all the other parties hereto subject to the exceptions set
forth in sub-Clause (A) above.
(C) The parties hereto shall ensure that their agents, officers and
employees shall only be allowed access to such information to the extent
necessary for the purpose of performing their duties, and shall procure its
agents, officers and employees to comply with the confidentiality provisions of
this Clause 22.
(D) The obligations contained in this Clause shall endure, even after the
termination of this Agreement, without limit in point of time except and until
any confidential information enters the public domain as set out above.
23. FORCE MAJEURE
-------------
If the ability of the Supplier to perform its obligations under this
Agreement or any order hereunder is limited, delayed or prevented in whole or in
part by reason of any cause or event beyond the control of the Supplier
including but without limiting the foregoing, fire, storm, tempest, explosion,
accident, breakdown of plant or machinery, strike, industrial dispute, war,
civil strike or commotion, act of foreign enemy, hostilities (whether war be
declared or not), law or act of or authorised by a government, the Supplier
shall be excused, discharged or released without penalty or liability from its
obligations under this Agreement and/or such order to the extent and for the
period that such performance is so limited, delayed or prevented.
-29-
<PAGE>
24. GENERAL MATTERS
---------------
(A) Remedies: No remedy conferred by any of the provisions of this
--------
Agreement is intended to be exclusive of any other remedy which is otherwise
available at law, in equity, by statute or otherwise, and each and every other
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in equity, by statute or
otherwise. The election of any one or more of such remedies by any of the
parties hereto shall not constitute a waiver by such party of the right to
pursue any other available remedies.
(B) Assignment: The respective rights and obligations of the parties
----------
hereunder shall not be assignable or transferable in any way. Any attempted
assignment or transfer shall be void.
(C) Further Acts: Each of the parties hereto undertakes to each of the
------------
others to do all things reasonably within its power which are necessary or
desirable to give effect to the spirit and intention of this Agreement and the
Security Documents and shall execute and do and take such steps as may be in its
power to, procure that all other necessary persons, if any, execute and perform
all such further documents, agreements, deeds, acts, assurances and things as
may be required so that full effect may be given to the provisions of this
Agreement and the Security Documents.
(E) Severance: If any provision of this Agreement or part thereof is
---------
rendered void, illegal or unenforceable by any legislation to which it is
subject, it shall be rendered void, illegal or unenforceable to that extent and
no further and the parties hereto shall negotiate in good faith in order to
agree on the terms of a mutually satisfactory provision to be substituted for
the provision so found to be void, illegal or unenforceable.
(F) Non-waiver: No waiver of any provision of this Agreement nor consent
----------
to any departure therefrom by any of the parties hereto shall be effective
unless the same shall be in writing and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given. No default or delay on the part of any of the parties hereto in
exercising any rights, powers or privileges hereunder shall operate as a waiver
thereof or of any other right hereunder; nor shall a single or partial exercise
thereof preclude any other or further exercise or the exercise of any other
rights, power or privilege.
(G) Release and Indulgence: Any liability to any party hereunder may in
----------------------
whole or in part be released or compromised or time or indulgence given by any
other party hereto in its absolute discretion as regards any of the parties
under such liability without in any way prejudicing or affecting its rights
-30-
<PAGE>
against any other or others under the same or a like liability whether joint and
several or otherwise.
(H) Time of Essence: Any time, date or period mentioned in any provision
---------------
of this Agreement may be extended with the prior written consent of the Supplier
but as regards any time, date or period originally fixed and not extended or any
time, date or period so extended as aforesaid, time shall be of the essence.
25. COSTS AND EXPENSES
------------------
The Purchasers shall pay:
(i) on demand, all reasonable costs and expenses (including legal fees,
inventory audit fees, taxes and stamp duty) incurred by the Supplier in
connection with the preparation, negotiation, entry into or performance of
this Agreement and/or the Security Documents and/or any amendments of,
supplemented to or waiver in respect of this Agreement and/or the Security
Documents provided that the Purchaser shall have the right to request at
any reasonable time a budget for the legal costs to be incurred for and on
their behalf and provided that the Supplier shall provide AFW Ltd with a
weekly statement detailing all legal and other costs incurred up to a date
not more than 10 Business Days before the date on which the relevant
statement is given to AFW Ltd. It is AFW Ltd's responsibility to monitor
such costs. AFW Ltd may notify the Supplier at any time during the
preparation of the legal documents to halt the documentation. The
Purchasers shall be liable to pay all costs incurred up to and including
the date of such notification. After notification, no further costs shall
be incurred until the parties have discussed and agreed on a revised budget
or otherwise;
(ii) on demand, all costs and expenses (including legal fees) incurred by
the Supplier in protecting or enforcing any rights under this Agreement
and/or the Security Documents and/or any such amendment, supplement or
waiver; and
(iii) promptly, and in any event before any penalty becomes payable, any
stamp, documentary, registration or similar tax payable in connection with
the entry into, performance, enforcement or admissibility in evidence of
this Agreement and/or the Security Documents and/or any such amendment or
waiver, and shall indemnify the Supplier against any liability with respect
to or resulting from any delay in paying or omission to pay any such tax.
-31
<PAGE>
26. PREVIOUS AGREEMENTS
-------------------
(A) Previous Agreements superseded: This Agreement embodies all the terms and
------------------------------
conditions agreed between the parties hereto and supersedes, substitutes and
cancels all other previous agreements and undertakings, if any, between all or
any of the parties hereto with respect to the subject matter of this Agreement,
whether such be oral or written. All other documents, correspondences and
representations oral or otherwise not specifically set out herein shall be
deemed to be excluded.
(B) Amendment and Variation: No amendment or variation of this Agreement shall
-----------------------
be effective unless in writing and signed by or on behalf of each of the parties
hereto and expressly stated to be an amendment or variation of this Agreement.
27. COUNTERPARTS
------------
This Agreement may be signed in any number of counterparts, all of which
when taken together shall constitute one and the same instrument. Any of the
parties hereto may enter into this Agreement by signing any such counterpart.
28. JOINT AND SEVERAL LIABILITY
---------------------------
The liability of the Purchasers hereunder is joint and several and each of
them undertakes to procure that each of the other Purchasers will duly perform
its obligations hereunder.
29. GOVERNING LAW AND JURISDICTION
------------------------------
(A) Governing Law: This Agreement shall be governed by and construed in
-------------
accordance with the laws of Singapore.
(B) Jurisdiction: In relation to any legal action or proceedings arising out
------------
of or in connection with this Agreement ("Proceedings"), the parties hereto
hereby irrevocably submit to the jurisdiction of the courts of Singapore.
(C) Submission non-exclusive: That submission shall not affect the right of
------------------------
any party to take Proceedings in any other jurisdiction nor shall the taking of
Proceedings in any jurisdiction preclude any other party from taking Proceedings
in any other jurisdiction.
(D) Service of Process:
------------------
(i) Muller and AFW Corp each irrevocably appoints AFW Ltd, and its
permitted successors and assigns (the "process
-32-
<PAGE>
agent") to receive, for it and on its behalf and for and on the behalf of
its successors and/or assigns, service of process in any Proceedings in
Singapore. Such service shall be deemed completed on delivery to the
process agent at its address for communications pursuant to Clause 17
(whether or not it is forwarded to and received by Muller or AFW Corp (as
the case may be), its permitted successors or assigns. If for any reason
the process agent ceases to be able to act as such, each of Muller and AFW
Corp irrevocably agrees to appoint a substitute process agent acceptable to
the Supplier, and to deliver to the Supplier a copy of the new process
agent's acceptance of that appointment, within thirty (30) days of the
resignation of the previous process agent.
(ii) The Supplier irrevocably appoints N M Rothschild & Sons (Singapore)
Limited of 20 Cecil Street #09-00 The Exchange, Singapore 049705 (the
"process agent") to receive, for it and on its behalf and for and on the
behalf of its permitted successors and/or assigns, service of process in
any Proceedings in Singapore. Such service shall be deemed completed on
delivery to the process agent at its address for communications pursuant to
Clause 17 (whether or not it is forwarded to and received by the Supplier
(as the case may be), its permitted successors or assigns). If for any
reason the process agent ceases to be able to act as such, the Supplier
irrevocably agrees to appoint a substitute process agent acceptable to the
Purchasers, and to deliver to the Purchasers a copy of the new process
agent's acceptance of that appointment, within thirty (30) days of the
resignation of the previous process agent.
-33-
<PAGE>
SCHEDULE 1
----------
CONSOLIDATED NET WORTH
----------------------
Consolidated Net Worth: means the aggregate of:
(i) the nominal capital of AFW Corp for the time
being issued and paid up; and
(ii) the amounts standing to the credit of the capital
and revenue reserves (including share premium
account, capital redemption reserve fund and
profit and loss account) of AFW Corp and its
subsidiaries on a consolidated basis;
all as shown in the audited or unaudited consolidated
accounts of AFW Corp last delivered pursuant to Clause
12(v), in form and substance acceptable to the
Supplier, but after:
(a) making such adjustments as may be appropriate in
respect of any variations in the issued and paid
up share capital, the share premium account and
the capital redemption reserve fund of AFW Corp or
any of its subsidiaries since the date of the
audited or unaudited consolidated accounts of AFW
Corp and its subsidiaries last delivered pursuant
to Clause 12(v), in form and substance acceptable
to the Supplier;
(b) excluding any sums set aside for future taxation;
(c) deducting:
(1) an amount equal to any distribution by AFW
Corp or any of its subsidiaries out of
profits earned prior to the date of the
audited or unaudited consolidated accounts
last delivered pursuant to Clause 12(v) and
-34-
<PAGE>
in form and substance acceptable to the
Supplier, and which have been declared,
recommended or made since that date except
so far as provided for in such accounts;
(2) all goodwill and other intangible assets;
(3) any debit balance on profit and loss
account;
(4) any amounts arising from a writing-up after
the date of this Agreement of the book
values of any property of AFW Corp (any
increases in the book value of property
which results from its transfer being deemed
for this purpose to have arisen from a
writing-up); and
(d) leaving out of account sums attributable to
interests of shareholders other than AFW Corp or
any of its subsidiaries in any subsidiary of AFW
Corp.
-35-
<PAGE>
SCHEDULE 2
----------
PRICE
-----
<TABLE>
<CAPTION>
================================================================================
Purchaser Premium Rate
- --------------------------------------------------------------------------------
Fixing Charges
(US$ per Delivery Charges
troy ounce) (US$ per troy ounce)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
AFW Ltd XXXXX (i) Golden
(for delivery West Refinery
in Singapore) ("GWR");
Loco Singapore XXXXX
kilo bars
Loco Singapore XXXXX (but if the
anodes volume of GWR
anodes delivered
Loco Singapore
in any calendar
month exceeds
XXXXX kilograms,
the delivery
charge for each
additional troy
ounce will be
US$XXXXX per troy
ounce).
(ii) Degusse XXXXX
anodes Loco
Singapore
- --------------------------------------------------------------------------------
AFW Corp XXXXX XXXXX troy ounce XXXXX (subject to
(for delivery Large Bars a minimum
in Selma) Loco Selma commitment to
take at least
XXXXX troy ounces
per week. If
that volume is
not maintained,
then the
delivery charge
shall be US$XXXXX
per troy ounce).
================================================================================
</TABLE>
-36-
<PAGE>
SCHEDULE 3
----------
SECURITY DOCUMENTS
------------------
1. Debenture to be executed by AFW Ltd in favour of the Supplier.
2. Separate Guarantees and Indemnities to be executed by each of the
Purchasers in favour of the Supplier in respect of the obligations of the other
Purchasers.
3. All risk insurance policy covering the Delivered Gold with the Supplier
named as the insured and containing clauses providing that the insurer concerned
cannot terminate such insurance without giving the Supplier at least 14 days'
prior written notice of termination and complying with all other requirements of
Clause 11.
4. Security Agreement to be executed by the Supplier and AFW Corp.
5. Financing Statement to be executed by the Supplier and AFW Corp.
-37-
<PAGE>
SCHEDULE 4
----------
DOCUMENTS
---------
1. Memorandum and Articles of Association or their equivalents in their
respective jurisdictions of each of the Purchasers and the Holding Company.
2. Certified copies of all forms and documents necessary for the registration
and lodgment (if necessary) of the Security Documents in any appropriate
registry duly signed by the Purchasers and such registration and lodgment having
been duly completed.
3. A copy of the resolution of its Board of Directors of each of the
Purchasers and the Holding Company (and general meeting if the Supplier so
requires) approving and authorizing a person or persons to execute this
Agreement and the Security Documents and the affixation of the Common Seals
thereto.
4. Legal opinion of legal counsels from Alabama, Zurich & Cayman Islands which
are satisfactory to the Supplier as to the validity and enforceability of this
Agreement and the Security Documents according to their terms and of the choice
of governing law.
-38-
<PAGE>
SCHEDULE 5
----------
ALLOCATION OF GOLD
------------------
<TABLE>
<CAPTION>
Purchaser Amount of Gold
- ----------- --------------
(troy ounces)/(US $ representing the
aggregate Fair Market Value of Gold)
whichever is the lesser
<S> <C>
AFW Ltd 28,000/11,700,000
AFW Corp 11,000/4,850,000
Muller 3,100/1,395,000
</TABLE>
-39-
<PAGE>
SCHEDULE 6
----------
FINANCIAL AND MANAGEMENT STATEMENTS
-----------------------------------
Financial Statements
--------------------
Unless otherwise indicated, the following financial statements shall be
audited statements prepared in accordance with generally accepted accounting
principles, consistently applied and be provided to the Supplier within 120 days
of the financial year end of the respective companies.
Company/Group
-------------
Holding Company (audited consolidated)
AFW Corp (unaudited company and consolidated)
AFW Ltd
Muller (as currently audited and reported)
Management Statements
---------------------
The following companies shall submit quarterly Management Statements to the
Supplier within 45 days of the end of the financial year quarter:
Holding Company
AFW Corp (consolidated)
AFW Ltd
Muller (as currently audited and reported)
-40-
<PAGE>
SCHEDULE 7
----------
LOCATIONS FOR RETURN OF GOLD
----------------------------
<TABLE>
<CAPTION>
Purchaser Location to be returned to
- --------- --------------------------
<S> <C>
AFW Corp Royal Canadian Mint Johnson Matthey Inc
320 Sussex Drive 4601 West 2100 South
Ottawa Salt Lake City
Ontario Utah 84120
Canada K1A OG8 USA
Tel: 001116139933500 Tel: 001118019726468
Fax: 001116139930110 Fax: 001118019745928
Muller Pamp SA
Castel San Pietro
CH-6874
Switzerland
Tel: 00114191438041
Fax: 00114191436979
AFW Ltd N M Rothschild & Sons (Singapore) Limited
20 Cecil Street
#09-00 The Exchange
Singapore 049705
Tel: (85) 535-8311
Fax: (85) 535-8326
</TABLE>
-41-
<PAGE>
SCHEDULE 8
----------
FORM OF WEEKLY SUMMARY REPORT
-----------------------------
<TABLE>
<CAPTION>
===============================================================================================
OPERATION AFW AFW AFW TOTAL AS AT WORK WEEK
SING SELMA MUELLER DD/MM/YY GAIN/(LOSS)
(GRAMS) (GRAMS) (GRAMS) (GRAMS) (GRAMS)
===============================================================================================
<C> <S> <C> <C> <C> <C> <C>
1. RAW MATERIALS/VAULT
------------------------------------------------------------------------------------------
2. REFINERY
------------------------------------------------------------------------------------------
3. INDUCTION/BULK BLOCK/FOUNDRY
------------------------------------------------------------------------------------------
4. WIRE DRAWING
------------------------------------------------------------------------------------------
5. SPOOLING/ANNEALING
------------------------------------------------------------------------------------------
6. REWIND
------------------------------------------------------------------------------------------
7. FINISHED GOODS
------------------------------------------------------------------------------------------
8. SCRAP
------------------------------------------------------------------------------------------
9. CC/CA/SPECIALTY
------------------------------------------------------------------------------------------
10. ENGINEERING/R&D
------------------------------------------------------------------------------------------
11. AA LAB
------------------------------------------------------------------------------------------
12. CUSTOMERS' RETURNS
==========================================================================================
13. TOTAL PHYSICAL INVENTORY IN-PLANT
------------------------------------------------------------------------------------------
14. GOLD IN-TRANSIT
=============================================================================
15. TOTAL INVENTORY
LESS:
-----
------------------------------------------
16. AFW METAL PICK-UP
-----------------------------------------------------------------------------
17. CUSTOMERS' RETURNS
-----------------------------------------------------------------------------
18. T.L. CONSIGNED GOLD
-----------------------------------------------------------------------------
19. CONTRACT GOLD
-----------------------------------------------------------------------------
20. TOTAL CONSIGNED INVENTORY (GRAMS)
=============================================================================
21. TOTAL CONSIGNED INVENTORY (T.OZS)
=============================================================================
22. US $0.00 DD/MM/YY LGP PM FIX
==============================================================================================
==============================================================================================
BAL CONSIGNMENT INVENTORY OVERALL RECONCILIATION (TROY OZS)
==============================================================================================
OPENING BALANCE DD/MM/YY
- ----------------------------------------------------------------------------------------------
ADD: RECEIPTS
- ----------------------------------------------------------------------------------------------
GOLD IN-TRANSIT
- ----------------------------------------------------------------------------------------------
LESS: GOLD PURCHASED
- ----------------------------------------------------------------------------------------------
CLOSING BALANCE AS ABOVE (T.OZS)
==============================================================================================
</TABLE>
-42-
<PAGE>
IN WITNESS WHEREOF this Agreement has been entered into on the date stated
------------------
at the beginning.
Signed Sealed and Delivered by )
ROTHSCHILD AUSTRALIA LIMITED )
by its Attorneys GARY ALLEN PRYKE )
and YAP HAN YANG )
under a Power of Attorney )
dated the 22nd day of December 1992 )
in the presence of: )
Signed Sealed and Delivered by )
ROY KELLY PAYNE )
for and on behalf of )
AMERICAN FINE WIRE LIMITED )
in the presence of: )
Signed Sealed and Delivered by )
ROY KELLY PAYNE )
for and on behalf of )
AMERICAN FINE WIRE CORPORATION )
in the presence of: )
Signed Sealed and Delivered by )
ROY KELLY PAYNE )
for and on behalf of )
DR. MULLER FEINDRAHT AG )
in the presence of: )
-43-
<PAGE>
IN WITNESS WHEREOF this Amendment Agreement has been entered into on the
------------------
date stated at the beginning.
Signed Sealed and Delivered by )
)
as attorney for and on behalf of )
ROTHSCHILD AUSTRALIA LIMITED )
in the presence of: )
The Common or Corporate Seal of )
AMERICAN FINE WIRE LIMITED was )
hereunto affixedin the presence of: )
R. Kelly Payne, Director
Signed Sealed and Delivered by )
ROY KELLY PAYNE )
as attorney for and on behalf of )
AMERICAN FINE WIRE CORPORATION )
in the presence of: )
Signed Sealed and Delivered by )
ROY KELLY PAYNE )
as attorney for and on behalf of )
DR MULLER FEINDRAHT AG )
in the presence of: )
-44-
