<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10938
SEMICONDUCTOR PACKAGING MATERIALS CO., INC.
(Name of Small Business Issuer in its charter)
Delaware 13-3584740
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
431 FAYETTE AVENUE, MAMARONECK, NEW YORK 10543
(Address of principal executive offices, including zip code)
(914) 698-5353
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes [X] No [ ]
(2) Yes [X] No [ ]
The number of shares outstanding of the Registrant's sole class of
common stock, as of September 30, 1996 was 5,979,266 shares.
1
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
INDEX TO FINANCIAL [ZW]
STATEMENTS PAGE
<S> [ZW]
<C>
Consolidated Balance Sheet at
September 30, 1996 and December 31, [ZW]
1995. 3
Consolidated Statement of Income
for the three and nine months ended
September 30, 1996 and [ZW]
1995. 4
Consolidated Statement of Cash Flows
for the three and nine months ended
September 30, 1996 and [ZW]
1995. 5
Consolidated Statement of Shareholders' Equity
for the nine months ended September 30, [ZW]
1996 6
Notes to Consolidated Financial [ZW]
Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of [ZW]
Operations 8-12
ITEM 2. PRO FORMA [ZW]
INFORMATION 13
Pro Forma Consolidated Statement of
Income for the three months ended
September 30, 1995 [ZW]
(Unaudited) 14
Notes to Unaudited Pro Forma Consolidated
Statement of Income for the three months
ended September 30, [ZW]
1995 15
Pro Forma Consolidated Statement of
Income for the nine months ended
September 30, 1995 [ZW]
(Unaudited) 16
Notes to Unaudited Pro Forma Consolidated
Statement of Income for the nine months
ended September 30, [ZW]
1995 17
PART II OTHER [ZW]
INFORMATION 18
SIGNATURE [ZW]
PAGE 19
EXHIBITS [ZW]
20
</TABLE>
2
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER [ZW]
30, DECEMBER 31,
ASSETS [ZW]
1996 1995
(UNAUDITED)
<S> [ZW]
<C> <C>
Current Assets: [ZW]
- - ----------- ------------
Cash and cash equivalents $ [ZW]
4,165,129 $ 4,244,075
Accounts receivable, less allowance for doubtful
accounts of $134,000 and $86,000, respectively [ZW]
6,558,774 3,580,791
Inventories [ZW]
8,311,597 4,735,967
Prepaid expenses and other current assets [ZW]
730,805 561,395
[ZW]
- - ----------- -----------
Total current assets [ZW]
19,766,305 13,122,228
[ZW]
- - ----------- -----------
Property and Equipment-at cost, net of accumulated
depreciation and amortization of $5,883,415
and $4,204,498, respectively [ZW]
14,651,917 11,042,546
[ZW]
- - ----------- -----------
Other Assets-net of accumulated amortization
Deferred financing costs [ZW]
7,506 30,007
Technology rights and intellectual property [ZW]
763,491 805,401
Goodwill [ZW]
14,637,507 10,724,346
Other [ZW]
1,701,353 346,253
[ZW]
- - ----------- ----------
Total other assets [ZW]
17,109,857 11,906,007
[ZW]
- - ----------- -----------
Total Assets $ [ZW]
51,528,079 $ 36,070,781
[ZW]
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ [ZW]
2,811,836 $ 1,478,946
Accrued expenses [ZW]
2,911,527 911,269
Current portion of obligations under capital leases [ZW]
1,093,959 588,351
Current portion of long-term debt [ZW]
1,365,000 343,333
Amounts due to related [ZW]
parties 625,000
[ZW]
- - ----------- -----------
Total current liabilities [ZW]
8,182,322 3,946,899
[ZW]
- - ----------- -----------
Deferred income taxes [ZW]
676,760 563,460
Long-term debt [ZW]
5,085,000 600,833
Obligations under capital leases [ZW]
3,466,966 1,698,328
[ZW]
- - ----------- -----------
Total Liabilities [ZW]
17,411,048 6,809,520
[ZW]
- - ----------- -----------
Minority Interest 984,202
[ZW]
- - ----------- -----------
Shareholders' Equity:
Preferred stock-$.10 par value; authorized 1,000,000
shares, none issued Common stock-$.10 par value;
authorized 10,000,000 shares, issued 6,279,266
and 6,190,066 shares, respectively [ZW]
627,927 619,007
Additional paid-in-capital [ZW]
27,550,796 27,214,097
Retained Earnings [ZW]
4,954,106 1,428,157
[ZW]
- - ----------- -----------
[ZW]
33,132,829 29,261,261
Less: Treasury stock: 300,000 shares, at cost
[ZW]
- - ----------- -----------
Shareholders' Equity [ZW]
33,132,829 29,261,261
[ZW]
- - ----------- -----------
Total Liabilities And Shareholders' Equity $ [ZW]
51,528,079 $ 36,070,781
[ZW]
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1996 1995 1996 1995
----------- ----------- ----------- [ZW]
- - -----------
<S> <C> <C> <C> [ZW]
<C>
Net Sales $ 8,665,927 $ 5,217,345 $24,862,210 [ZW]
$14,728,768
Service Revenue 3,280,446 1,785,110 10,574,227 [ZW]
5,393,105
----------- ----------- ----------- [ZW]
- - -----------
Total Revenue 11,946,373 7,002,455 35,436,437 [ZW]
20,121,873
Cost of Goods Sold 5,835,571 3,432,422 17,691,894 [ZW]
9,753,908
Cost of Services Performed 1,899,562 902,280 5,515,298 [ZW]
2,491,558
----------- ----------- ----------- [ZW]
- - -----------
Cost of Goods Sold and
Services Performed 7,735,133 4,334,702 23,207,192 [ZW]
12,245,466
----------- ----------- ----------- [ZW]
- - -----------
Gross Profit 4,211,240 2,667,75 12,229,245 [ZW]
7,876,407
Selling, General and
Administrative Expenses 1,995,643 1,605,361 5,816,359 [ZW]
4,800,518
----------- ----------- ----------- [ZW]
- - -----------
Operating Income 2,215,597 1,062,392 6,412,886 [ZW]
3,075,889
Interest Expense (Net) 234,331 159,074 653,536 [ZW]
929,529
----------- ----------- ----------- [ZW]
- - -----------
Income Before Provision for
Income Taxes 1,981,266 903,318 5,759,350 [ZW]
2,146,360
Provision for Income Taxes 717,470 206,912 2,233,401 [ZW]
456,763
----------- ----------- ----------- [ZW]
- - -----------
Net Income $ 1,263,796 $ 696,406 $ 3,525,949 $ [ZW]
1,689,597
=========== =========== =========== [ZW]
===========
Income per Common Share $ .21 $ .13 $ .57 $ [ZW]
.36
=========== =========== =========== [ZW]
===========
Weighted Average Number of
Common Shares Outstanding 6,156,671 5,529,272 6,145,586 [ZW]
4,745,754
=========== =========== =========== [ZW]
===========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE [ZW]
THREE MONTHS FOR THE NINE MONTHS
ENDED [ZW]
SEPTEMBER 30, ENDED SEPTEMBER 30,
[ZW]
1996 1995 1996 1995
<S> [ZW]
<C> <C> <C> <C>
Cash Flows From Operating Activities: ----------[ZW]
- - -- ------------ ------------ ------------
Net Income $ [ZW]
1,263,796 $ 696,406 $ 3,525,949 $ 1,689,597
Adjustments To Reconcile Net Income To Net
Cash Provided By Operating Activities:
Depreciation And Amortization Of Property And Equipment [ZW]
605,526 434,339 1,679,447 1,141,357
Other Amortization [ZW]
169,746 119,133 509,238 353,157
Deferred Income [ZW]
Taxes [ZW]
113,300
Changes In Operating Assets And Liabilities:
Increase In Accounts Receivable [ZW]
(588,444) (126,971) (1,872,179) (562,843)
Increase In Inventories [ZW]
(831,320) (347,516) (1,817,318) (1,063,967)
(Increase) Decrease In Prepaid Expenses And
Other Current Assets [ZW]
(109,114) 442,270 (166,645) 153,116
Increase (Decrease) In Accounts Payable [ZW]
764,310 (1,088,827) 558,960 (307,477)
Increase In Accrued Expenses [ZW]
783,039 203,127 1,958,530 120,496
[ZW]
- - ------------ ------------ ------------ ------------
Net Cash Provided By Operating Activities [ZW]
2,057,539 331,961 4,489,282 1,523,436
[ZW]
- - ------------ ------------ ------------ ------------
Cash Flows From Investing Activities:
Purchase Of Property And Equipment [ZW]
(119,009) (1,945,534) (1,914,496) (4,382,090)
(Increase) Decrease In Other Assets [ZW]
(695,042) 172,943 (1,365,438) 36,561
Acquisition of [ZW]
Subsidiary [ZW]
(6,556,440)
[ZW]
- - ------------ ------------ ------------ ------------
Net Cash Used In Investing Activities [ZW]
(814,051) (1,772,591) (9,836,374) (4,345,529)
[ZW]
- - ------------ ------------ ------------ ------------
Cash Flows From Financing Activities:
Proceeds From Redemption Of Warrants [ZW]
2,400 2,400 1,133,884
Proceeds From Exercise Of Stock Options [ZW]
9,038 196,840 196,969 271,170
Proceeds From Public Stock [ZW]
Offering [ZW]
16,861,538 16,861,538
Proceeds From Long-Term [ZW]
Debt [ZW]
6,000,000
Payment Under Revolving [ZW]
Credit [ZW]
(2,000,000) (1,565,000)
Payments Under Capital Leases [ZW]
(265,405) (108,955) (644,259) (284,354)
Payment Under Term Loan Agreements [ZW]
(60,000) (8,585,833) (646,166) (9,007,500)
Borrowing Under Equipment Line Of [ZW]
Credit [ZW]
70,374 348,158
Decrease In Amounts Due Related [ZW]
Parties (188,332) [ZW]
(625,000) (500,887)
Minority Interest Contribution [ZW]
984,202 984,202
[ZW]
- - ------------ ------------ ------------ ------------
Net Cash Provided By Financing Activities [ZW]
670,235 6,245,632 5,268,146 7,257,009
[ZW]
- - ------------ ------------ ------------ ------------
Net Increase (Decrease) In Cash [ZW]
1,913,723 4,805,002 (78,946) 4,434,916
Cash At Beginning Of Period [ZW]
2,251,406 197,628 4,244,075 567,714
[ZW]
- - ------------ ------------ ------------ ------------
Cash At End Of Period $ [ZW]
4,165,129 $ 5,002,630 $ 4,165,129 $ 5,002,630
[ZW]
============ ============ ============ ============
Supplemental schedule of noncash investing and financing activity:
Machinery and equipment acquired under capital leases $ [ZW]
1,606,627 225,032 $ 2,916,355 $ 243,881
</TABLE>
See Notes To Consolidated Financial Statements
5
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK [ZW]
ADDITIONAL TREASURY STOCK TOTAL
------------------- ------------------ [ZW]
PAID-IN RETAINED ----------------- SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT [ZW]
CAPITAL EARNINGS SHARES AMOUNT EQUITY
------ ------ ------ ------ [ZW]
- - ---------- -------- ------ ------ -------------
<S> <C> <C> <C> <C> [ZW]
<C> <C> <C> <C> <C>
Balance at
January 1, 1996 0 $0 6,190,066 $619,007 [ZW]
$27,214,097 $1,428,157 300,000 $0 $29,261,261
Issuance Of
Common Stock
Through The
Exercise Of Stock
Warrants 1,200 120 [ZW]
2,280 2,400
Issuance Of
Common Stock
Through The
Exercise Of Stock
Options 73,000 7,300 [ZW]
189,669 196,969
Issuance Of
Common Stock In
Connection With
The Acquisition Of
A Subsidiary 15,000 1,500 [ZW]
144,750 146,250
Net [ZW]
Income [ZW]
3,525,949 3,525,949
--------- ---------- --------- -------- [ZW]
- - ----------- ---------- ------- -- -----------
Balance at
September 30, 1996 0 $0 6,279,266 $627,927 [ZW]
$27,550,796 $4,954,106 300,000 $0 $33,132,829
========= ========== ========= ======== [ZW]
=========== ========== ======= == ===========
</TABLE>
See Notes To Consolidated Financial Statements
6
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and its majority owned subsidiary. The
consolidated balance sheet as of September 30, 1996, the consolidated
statement of income for the three and nine months ended September 30, 1996
and 1995, the consolidated statement of cash flows for the three and nine
months ended September 30, 1996 and 1995 and the consolidated statement of
shareholders' equity for nine months ended September 30, 1996, have been
prepared by the Company and are unaudited. In the opinion of management,
all adjustments necessary to present fairly the financial position, results
of operations and cash flows at September 30, 1996 and for all periods
presented have been made.
2. Earnings per share - Earnings per share are computed using the weighted
average number of common shares actually outstanding plus the shares that
would be outstanding assuming the exercise of employee stock options and
stock warrants during the periods presented.
3. See the Company's Annual Report on Form 10-KSB for the year ended December
31, 1995 for additional disclosures relating to the Company's financial
statements.
4. A provision for income taxes of $717,000 and $2,233,000 has been made for
the three and nine month periods ended September 30, 1996, respectively, as
compared to a $207,000 and $457,000 provision in the three and nine month
periods ended September 30, 1995, respectively. In the three month and nine
month periods ended September 30, 1996, the Company's earnings were taxed
at an effective tax rate of 36.2% and 38.7%, respectively, as compared to
an effective tax rate of 22.9% and 21.2% in the comparable three and nine
month 1995 periods, respectively. The effective tax rates in the 1995
periods were lower than the effective tax rates in the 1996 periods due to
the utilization of consolidated net operating loss carry forwards in the
1995 periods.
5. Effective January 2, 1996, the Company acquired all of the common stock of
Retconn Incorporated ("Retconn"), a manufacturer of coaxial contacts and
connectors for $5,750,000 in cash, subject to an adjustment of $192,000,
based on the closing net worth as defined in the stock purchase agreement.
This business combination was accounted for as a purchase. The Company also
issued 15,000 of its common shares, valued at $146,250, in conjunction with
the acquisition. In addition, the Company incurred approximately $618,000
in costs associated with the Retconn acquisition. The fair value of the
assets acquired, including approximately $4,336,000 allocated to goodwill,
which is being amortized over 25 years, amounted to $7,674,000 and
liabilities assumed amounted to $968,000.
6. Effective August 28, 1996, the Company entered into a joint venture
agreement to develop a silicon wafer polishing and reclaiming facility in
Singapore. The jointly owned Singapore corporation, International
Semiconductor Products Pte Ltd ("ISP"), is 50.1% owned by the Company and
49.9% owned by a holding company, Semiconductor Alliance Pte Ltd.
Accordingly, the Company's consolidated balance sheet at September 30, 1996
and consolidated statement of cash flows for the three and nine month
period ended September 30, 1996 reflect a $984,202 minority interest
contribution made by the Company's joint venture partner for the periods
presented. As of September 30, 1996, ISP did not have any revenues or
expenses.
7
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30,
1996 COMPARED TO THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995)
Total revenues for the three month period ended September 30, 1996 increased
$4,944,000, or 71%, over the comparable 1995 period. The increase was primarily
due to the inclusion of $2,939,000 of revenues from Retconn Incorporated
("Retconn"), which was acquired by the Company as of January 2, 1996, a 84%
increase in revenues at American Silicon Products ("ASP"), primarily as a result
of increased capacity; and a 31% increase in revenues at Polese Company, due to
increased sales of its copper/tungsten heat dissipation products. Revenues at
the parent company ("SPM")decreased 4% from prior year levels due to decreased
orders from certain microelectronic customers. Total revenues for the nine month
period ended September 30, 1996 increased $15,315,000, or 76%, over the
comparable 1995 period. The increase was primarily due to the inclusion of
$8,210,000 of revenues from Retconn; a 96% increase in revenues at ASP, a 29%
increase in revenues at Polese Company and a 3% increase in revenues at SPM. For
the nine month period ended September 30, 1996 and 1995, direct sales of the
Company's products into foreign markets accounted for approximately 9.9% and
5.3%, respectively, of consolidated revenues. The Company does not currently
maintain any foreign manufacturing operations. As of August 28, 1996, the
Company entered into a joint venture agreement to develop a silicon wafer
polishing and reclaiming facility in Singapore. Foreign sales are made through
seventeen foreign manufacturer's representatives and are priced and paid for in
U.S. dollars.
Gross profit for the three month period ended September 30, 1996 increased
$1,543,000, or 58%, from the comparable 1995 period. Approximately $1,124,000 of
this increase was attributable to the inclusion of Retconn's gross profit. ASP's
gross profit increased 56%, SPM's gross profit decreased 9% and Polese Company's
gross profit increased 6% from the comparable 1995 period. The decrease in gross
profit at SPM was attributable to lower sales volume. As a result of lower
margins at SPM, Polese Company and ASP, and the inclusion of Retconn's
operations in the 1996 period, (gross margins of Retconn are lower than
historical margins of the Company) gross margin decreased to 35% in the three
month period ended September 30, 1996 from 38% in the comparable 1995 period.
Gross profit for the nine month period ended September 30, 1996 increased
$4,353,000, or 55%, from the comparable 1995 period. Approximately $2,856,000 of
this increase was attributable to the inclusion of Retconn's gross profit. ASP's
gross profit increased 74%, SPM's gross profit decreased 7% and Polese Company's
gross profit decreased 26% from the comparable 1995 period. Gross profit at
Polese Company decreased primarily due to the temporary curtailment of
operations at its plating facility in February caused by production
difficulties, which difficulties have since been resolved. As a result of lower
margins at SPM, Polese Company and ASP, and the inclusion of Retconn's
operations, gross margin decreased to 35% in the nine month period ended
September 30, 1996 from 39% in the comparable 1995 period.
Selling, general and administrative ("SG&A") expenses in the three and nine
month periods ended September 30, 1996 increased $390,000, or 24%, and
$1,016,000, or 21%, respectively, over the comparable 1995 periods. The increase
was due to the inclusion of Retconn's SG&A costs with the Company's in the 1996
periods. SG&A expenses as a percentage of sales decreased from 23% and 24%,
respectively, in the three and nine month periods ended September 30, 1995 to
17% and 16%, respectively, in the comparable 1996 periods.
Net interest expense for the three and nine month periods ended September 30,
1996 increased $75,000 and decreased $276,000, respectively, from the comparable
1995 periods. The increase in interest costs in the three month period ended
September 30, 1996 related primarily to interest costs associated with term debt
incurred in conjunction with the Retconn acquisition. The decrease in interest
costs in the nine month period ended September 30, 1996 was primarily related to
a decrease in interest expense at ASP from prior year levels. Debt incurred in
the
8
<PAGE>
<PAGE>
ASP acquisition was retired using a portion of the proceeds from the Company's
July 1995 public offering.
A provision of $717,000 and $2,233,000 for income taxes has been made for the
three and nine month periods ended September 30, 1996, respectively, as compared
to a $207,000 and $457,000 provision in the three and nine month periods ended
September 30, 1995, respectively. In the three month and nine month periods
ended September 30, 1996, the Company's earnings were taxed at an effective tax
rate of 36.2% and 38.7%, respectively, as compared to an effective tax rate of
22.9% and 21.2%, respectively, in the comparable three and nine month 1995
periods. The effective tax rates in the 1995 periods were lower than the
effective tax rates in the 1996 periods due to the utilization of consolidated
net operating loss carry forwards in the 1995 periods.
As a result of the foregoing, net income increased by $567,000, or 81%, and
$1,836,000, or 109%, respectively, in the three and nine month periods ended
September 30, 1996 over the comparable 1995 periods. In the three month period
ended September 30, 1996, all of the Company's operations were profitable. In
the nine month period ended September 30, 1996, the parent company, Retconn and
ASP were profitable, while Polese Company experienced approximately $212,000 in
after tax losses, respectively. It is expected that Polese Company's
profitability will continue to improve as it increases sales of its
copper/tungsten heat dissipation products and improves its productivity.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its capital needs through the proceeds of its public
offerings, its revolving credit facility and term loans from First Union Bank
(the "Bank") and cash flow from operations.
At September 30, 1996, the Company had cash and cash equivalents of $4,165,000,
of which $1,968,000 related to cash at International Semiconductor Products Pte
Ltd ("ISP"), and an available balance on its revolving credit facility of
$5,000,000.
Net cash provided by operating activities in the three and nine month periods
ended September 30, 1996 amounted to $2,058,000 and $4,489,000, respectively, as
compared to $332,000 and $1,523,000, respectively, in the comparable 1995
periods. Cash provided by operating activities in the 1996 periods increased
over the 1995 periods primarily as the result of a $567,000 and $1,836,000
increase in net income in the three and nine month periods ended September 30,
1996, respectively, and a $783,000 and $1,959,000 increase in accrued expenses
in the three and nine month periods ended September 30, 1996, respectively,
primarily due to increased provisions for income taxes. In the three and nine
month periods ended September 30, 1996, depreciation and amortization of
property and equipment and other amortization in total increased $222,000 and
$694,000, respectively, over the comparable 1995 periods. These increases were
due to increased depreciation and amortization associated with investments made
by the Company in property and equipment in 1995 and 1996 and from amortization
of goodwill associated with the Retconn acquisition. In the nine month period
ended September 30, 1996, the Company recorded a net deferred tax liability of
$113,000 representing the tax effects of temporary differences between the
Company's book and tax bases. In the three and nine month periods ended
September 30, 1996, the Company used a total of $1,420,000 and $3,689,000,
respectively, of cash derived from operations to fund increases in accounts
receivable and inventories as compared to using a total of $474,000 and
$1,627,000 to fund such increases in the comparable 1995 periods. The increases
in the Company's accounts receivable and inventories were made to support
increased revenues. Prepaid expenses and other current assets in the three and
nine month periods ended September 30, 1996 increased $109,000 and $167,000,
respectively, and decreased $442,000 and $153,000, respectively, in the
comparable 1995 periods, primarily due to periodic fluctuations in refundable
deposits for fixed asset additions. Accounts payable increased $764,000 and
$559,000 in the three and nine month period ended September 30, 1996,
respectively, as compared to decreasing $1,089,000 and $307,000, respectively,
in the comparable 1995 periods. In the 1995 periods, the Company reduced its
accounts payable days outstanding to be in line with industry standards.
9
<PAGE>
<PAGE>
To support the Company's growth and enhance its profitability, in the
three and nine month periods ended September 30, 1996, the Company invested
$119,000 and $1,914,000, respectively, in property, machinery, equipment,
tooling and leasehold improvements, compared to an investment of $1,946,000 and
$4,382,000, respectively, in the comparable 1995 periods. This investment
excludes $1,607,000 and $2,916,000 invested in the three and nine month periods
ended September 30, 1996, respectively, and excludes $225,000 and $244,000,
respectively, invested the three and nine month periods ended September 30,
1995, for equipment acquired under capital leases. The majority of the capital
lease arrangements which the Company and its subsidiaries have entered into have
lease terms of five years and provide for a bargain purchase when the lease term
expires. At September 30, 1996, the Company had capital commitments in the
approximate amount of $4,789,000 for the acquisition of certain equipment to
upgrade and enhance the Company's manufacturing capabilities. At September 30,
1996, the Company was also committed to purchase a $2,200,000 building to house
SPM's operations, $1,760,000 of which was financed through term debt. The
building was acquired by the Company on November 4, 1996. The Company believes
that the lease financing available to it for certain equipment together with
cash flow from operations will be sufficient to fund its capital needs.
Other assets increased $695,000 and $1,365,000, respectively, in the three and
nine month periods ended September 30, 1996 as compared to decreasing $173,000
and $37,000, respectively, in the comparable 1995 periods. These increases were
primarily due to increases in deposits on equipment to be purchased by the
Company. Of the $1,365,000 increase in other assets in the nine month period
ended September 30, 1996, $1,205,000 related to increased deposits on equipment.
Effective January 2, 1996, the Company acquired all of the common stock of
Retconn, a manufacturer of coaxial contacts and connectors, for $5,750,000 in
cash, subject to an adjustment of $192,000, based on the closing net worth as
defined in the stock purchase agreement. This business combination was accounted
for as a purchase. The Company also issued 15,000 of its common shares, valued
at $146,250, in conjunction with the acquisition. In addition, to date, the
Company has paid approximately $614,000 in costs associated with the Retconn
acquisition. The fair value of the assets acquired, including approximately
$4,336,000 allocated to goodwill, which is being amortized over 25 years,
amounted to $7,674,000 and liabilities assumed amounted to approximately
$968,000.
As a result of the foregoing, the Company used $814,000 and $9,836,000 in its
investing activities in the three and nine month periods ended September 30,
1996, respectively, as compared to using $1,773,000 and $4,346,000,
respectively, in the comparable 1995 periods.
On February 8, 1994, the Company registered 698,625 shares of common stock
purchasable pursuant to the exercise of redeemable warrants. The redeemable
warrants were distributed without cost as a distribution to the Company's
stockholders of record as of February 8, 1994. Stockholders received one
redeemable warrant for each share of common stock held by the stockholder. Each
redeemable warrant was exercisable to purchase one-half (1/2) share of common
stock at an exercise price of $2.00 per share. Certain stockholders of the
Company, including, but not limited to, the Company's Chairman and three of its
directors, agreed to contribute the redeemable warrants issued to them back to
the Company. Consequently, the additional 831,000 shares which would have been
issuable upon the exercise of such redeemable warrants were not issued or sold.
The registration statement also related to shares of the Company's common stock
issuable upon the exercise of warrants to purchase 170,250 shares held by the
warrant solicitation agent and certain of its affiliates. On January 24, 1995,
the Company called its Common Stock Purchase Warrants for redemption. As of the
redemption date, February 23, 1995, all but 98,918 purchase warrants were
exercised. In the nine month period ended September 30, 1995, the Company
received net proceeds of $1,134,000 from the redemption of common stock purchase
warrants and solicitation agent warrants. In the three and nine month periods
ended September 30, 1996 the Company received proceeds of $2,400 from the
exercise of solicitation agent warrants.
10
<PAGE>
<PAGE>
In the three and nine month periods ended September 30, 1996, the Company
received $9,000 and $197,000, respectively, as compared to receiving $197,000
and $271,000, respectively, in the comparable 1995 periods, from the exercise of
stock options.
On August 1, 1995, the Company sold an aggregate of 1,654,500 shares of Common
Stock in a public offering. The Company received net proceeds of approximately
$16,900,000 after deducting underwriting discounts, commissions and expenses of
the offering of approximately $2,300,000. The Company used the proceeds of the
offering, among other things, to repay outstanding bank indebtedness in the
amount of $8,250,000 incurred in connection with the ASP acquisition, to repay
approximately $208,000 of the outstanding balance due on a $500,000 twelve month
term loan and to repay the Company's borrowings under its revolving credit line.
The Company used the balance of the proceeds of the offering to purchase and
improve its new ASP facility, to purchase machinery and equipment for all of its
operations and for general corporate and working capital purposes.
In connection with the Retconn acquisition, on January 4, 1996, the Company
entered into a term loan with the Bank in the principal amount of $6,000,000.
The loan bears interest at the Bank's loan pricing rate (8.25% at September 30,
1996)and the principal is payable in 48 consecutive monthly installments of
$125,000 commencing on February 1, 1997. Interest on the loan is payable monthly
and commenced on February 1, 1996.
On December 20, 1995, the Company entered into a $7,500,000 revolving credit
facility, a $2,000,000 capital lease facility and a $10,000,000 uncommitted line
of credit with the Bank. $5,000,000 of the revolving credit facility is
available to the Company for working capital purposes and $2,500,000 is used for
a standby letter of credit to support the Company's gold consignment arrangement
with a financial institution. The revolving credit facility bears interest at
.25% under the Bank's loan pricing rate and is unsecured with the exception of a
first priority security interest in the Company's gold inventory in the event of
a drawing under the letter of credit. The facility is also guaranteed by each of
the Company's subsidiaries. A fee equal to one half percent of the $7,500,000
line was paid. The maturity date of the facility is September 30, 1997. The
$2,000,000 capital lease facility is being used for equipment lease transactions
which bear interest at prevailing rates at lease inception dates and provide for
bargain purchases at the end of such leases. The Bank has a first priority
security interest in the equipment which is leased under the facility. The
Company did not pay any fee for the $10,000,000 uncommitted line and therefor
the availability of the line is at the discretion of the Bank. The Company has
utilized $6,000,000 of the $10,000,000 uncommitted line for the Retconn
acquisition, and has paid a fee for the use of the loan facility. The loan
agreement provides, among other things, that the Company maintain certain
financial ratios. The Company is also subject to restrictions relating to
incurring additional indebtedness, additional liens and security interests,
capital expenditures and the payment of dividends. In the three and nine month
periods ended September 30, 1996, the Company had not borrowed under its
revolving credit facility. In the three and nine month periods ended September
30, 1995, the Company repaid $2,000,000 and $1,565,000, respectively, under its
revolving credit facility.
In conjunction with the Company's acquisition of Polese Company on May 27, 1993,
the Company acquired from Frank J. Polese, the former sole shareholder of Polese
Company, all of the rights, including a subsequently issued patent, for certain
powdered metal technology and its application to the electronics industry for
$250,000 in cash and $750,000 in notes, as modified, including interest at 7%
per annum. The note was paid in full and as a result, in 1995 Mr. Polese
received the balance of principal payments due under the note totaling $424,000.
For a period of ten years, Mr. Polese has the right to receive 10% of (I) the
pre-tax profit from the copper tungsten product line, after allocating operating
costs and (ii) the proceeds of the sale, if any, by the Company of the powdered
metal technology. To date, no payments have been made pursuant to this
agreement.
11
<PAGE>
<PAGE>
To facilitate the acquisition by the Company of Polese Company on May 27, 1993,
the Company entered into a $1,200,000 five year term loan agreement with the
Bank. The term loan agreement calls for the repayment of the loan in twenty
equal installments which commenced on October 1, 1993. Further, on December 16,
1993, the Company entered into a $465,000 five year term loan agreement with the
Bank. The term loan agreement called for the repayment of such loan in eighteen
equal installments which commenced on April 1, 1994. The term loans bore
interest at the Bank's loan pricing rate plus 1.5%. The term loans are
collateralized with a blanket lien on substantially all of the parent company's
assets, excluding the common stock and assets of its subsidiaries. As of
September 30, 1996, the Company had repaid all amounts due under the $465,000
term loan and had an outstanding balance of $450,000 due on the $1,200,000 term
loan.
The Company has, and expects to be able to continue to, meet its obligations to
the Bank from cash generated from operations. As at September 30, 1996, the
Company was in compliance with all of the covenants contained in its loan
agreements.
In conjunction with the ASP acquisition, certain of the former stockholders of
ASP were to receive one-third of ASP's adjusted earnings before interest and
taxes in excess of $650,000 per fiscal quarter, (the "Consulting Agreements"),
through December 31, 1999. Payments and amounts due under the Consulting
Agreements have been recorded on the Company's books as additional purchase
price. In the fourth quarter of 1995, the Company bought out the remaining four
years of payments due under the Consulting Agreements for $725,000 in cash and
notes (of which $625,000 was outstanding at December 31, 1995) and 52,500 shares
of the Company's common stock. In January 1996, the Company paid the $625,000
note in full.
Effective August 28, 1996, the Company entered into a joint venture agreement to
develop a silicon wafer polishing and reclaiming facility in Singapore. The
jointly owned Singapore corporation, International Semiconductor Products Pte
Ltd ("ISP), is 50.1% owned by the Company and 49.9% owned by a holding company,
Semiconductor Alliance Pte Ltd. In the three and nine month periods ended
September 30, 1996, the Company and its joint venture partner each made a
$984,202 equity contribution into ISP.
As a result of the above, in the three and nine month periods ended September
30, 1996, $670,000 and $5,268,000, respectively, of cash was provided by
financing activities. This compares to net cash provided by financing activities
of $6,246,000 and $7,257,000, respectively, in the three and nine month periods
ended September 30, 1995. As a result of the Company's operations and equity
financing activities, shareholders' equity increased $3,872,000 in the nine
month period ended September 30, 1996.
The Company continually seeks to broaden its product lines by various means,
including through acquisitions. The Company intends to pursue only those
acquisitions for which it will be able to arrange the necessary financing by
means of the issuance of additional equity, the use of its cash or, through bank
or other debt financing.
The Company believes that it has the capacity for growth and that its working
capital and internally generated funds, combined with its bank line of credit,
the proceeds it has received from its public offerings, and from other sources
of financing, will be sufficient to satisfy the Company's currently anticipated
cash requirements on both a short-term and long-term basis.
12
<PAGE>
<PAGE>
PRO FORMA INFORMATION
The following unaudited pro forma combined financial statements and explanatory
notes are presented to reflect the acquisition of the business of Retconn
Incorporated ("Retconn ") by Semiconductor Packaging Materials Co., Inc. (the
"Company") effective as of January 2, 1996.
The pro forma statements of income for the three and nine month periods ended
September 30, 1995, give effect to these transactions as if they had occurred at
the beginning of the periods presented.
The pro forma information should be read in conjunction with (1) the historical
financial statements for the Company, including the related notes thereto,
included in the Company's Form 10-KSB for the fiscal year ended December 31,
1995, and included in the Company's Form 10-QSB for the three and six month
periods ended March 31, 1996 and June 30, 1996, respectively (2) the historical
financial statements of Retconn, including the related notes thereto and (3) the
Company's Form 8-K and 8-K/A filed on January 5, 1996 and March 15, 1996,
respectively.
The pro forma information is not necessarily indicative of the combined results
of operations or combined financial position that would have resulted had the
acquisition been consummated as of the date noted above, nor is it necessarily
indicative of the combined results of operations in any future period or of the
future combined financial position.
13
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED [ZW]
SEPTEMBER 30, 1995
[ZW]
- - --------------------------------------------------------------------
HISTORICAL
SEMICONDUCTOR
PACKAGING MATERIALS
CO., INC. AND [ZW]
RETCONN PRO FORMA
SUBSIDIARIES [ZW]
INCORPORATED ADJUSTMENTS AS ADJUSTED
------------- [ZW]
- - ------------- ------------- -------------
<S> <C> [ZW]
<C> <C> <C>
Net sales $5,217,345 [ZW]
$2,464,385 $7,681,730
Service revenue [ZW]
1,785,110 1,785,110
---------- [ZW]
- - ----------- ----------- ----------
Total revenue 7,002,455 [ZW]
2,464,385 9,466,840
Cost of goods Sold 3,432,422 [ZW]
1,735,458 (245)(1) 5,167,635
Cost of services performed [ZW]
902,280 902,280
---------- [ZW]
- - ----------- ----------- ----------
Total cost of goods sold and services performed 4,334,702 [ZW]
1,735,458 (245) 6,069,915
Gross profit 2,667,753 [ZW]
728,927 245 3,396,925
Selling, general and administrative expenses 1,605,361 [ZW]
213,016 44,054(4) 1,862,431
---------- [ZW]
- - ----------- ----------- ----------
Operating income 1,062,392 [ZW]
515,911 (43,809) 1,534,494
Interest expense (net) 159,074 [ZW]
4,435 129,271 (2) 288,345
[ZW]
(4,435)(3)
---------- [ZW]
- - ----------- ----------- ----------
Income before provision for income taxes 903,318 [ZW]
511,476 (168,645) 1,246,149
Provision for income taxes [ZW]
206,912 141,452 (5) 348,364
---------- [ZW]
- - ----------- ----------- ----------
Net income $696,406 [ZW]
$511,476 $(310,097) $897,785
========== [ZW]
=========== =========== ==========
Net income per common share $0.13 [ZW]
$51,147.60 $0.16
========== [ZW]
=========== =========== ==========
Weighted average number of [ZW]
common (10)(6)
shares outstanding 5,529,272 [ZW]
10 15,000 (6) 5,544,272
========== [ZW]
=========== =========== ==========
</TABLE>
14
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995
(1) Adjustment which reflects three months of depreciation expense on Retconn
Incorporated machinery and equipment and furniture and fixtures at
appraised values amounting to $431,204, assuming an estimated useful life
of seven years on a straight line basis adjusted by actual depreciation
expense on machinery and equipment and furniture and fixtures recorded by
Retconn Incorporated for the three months ended September 30, 1995,
amounting to $15,645.
(2) Adjustment which records interest expense on a $6,000,000 term note with a
floating rate yielding an effective interest rate of approximately 8.5%.
(3) Adjustment which records reduction in interest expense on $200,000 term
note repaid concurrent with the acquisition.
(4) Adjustment which records the amortization of the excess of the purchase
price paid for the fair market value of all tangible and identifiable
intangible assets acquired less liabilities assumed, totaling $4,405,430,
amortized over an estimated useful life of twenty-five years.
(5) Federal income taxes have been provided for the three month period ended
September 30, 1995 primarily because Retconn Incorporated prior to its
acquisition by the Company, was treated as an S corporation for federal
income tax purposes. The income tax provision of $141,452 represents
Retconn's pre-tax income of $511,476 less total pre-tax pro forma
adjustments of $168,645 adjusted for Connecticut income taxes of 11% and
federal income taxes of 34%.
(6) Adjustment which reflects the issuance of 15,000 shares of the Company's
common stock commensurate with the acquisition and the retirement of (10) S
corporation shares.
15
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED [ZW]
SEPTEMBER 30, 1995
[ZW]
- - ------------------------------------------------------------------------
HISTORICAL
SEMICONDUCTOR
PACKAGING MATERIALS
CO., INC. AND [ZW]
RETCONN PRO FORMA
SUBSIDIARIES [ZW]
INCORPORATED ADJUSTMENTS AS ADJUSTED
------------- [ZW]
- - ------------- ------------- -----------
<S> <C> [ZW]
<C> <C> <C>
Net sales $14,728,768 [ZW]
$6,754,600 $21,483,368
Service revenue [ZW]
5,393,105 5,393,105
---------- [ZW]
- - ---------- ------------- -----------
Total revenue 20,121,873 [ZW]
6,754,600 26,876,473
Cost of goods Sold 9,753,908 [ZW]
4,763,442 (735)(1) 14,516,615
Cost of services performed [ZW]
2,491,558 2,491,558
---------- [ZW]
- - ---------- ------------- -----------
Total cost of goods sold and services performed 12,245,466 [ZW]
4,763,442 (735) 17,008,173
Gross profit 7,876,407 [ZW]
1,991,158 735 9,868,300
Selling, general and administrative expenses 4,800,518 [ZW]
645,790 132,163(4) 5,578,471
---------- [ZW]
- - ---------- ------------- -----------
Operating income 3,075,889 [ZW]
1,345,368 (131,428) 4,289,829
Interest expense (net) 929,529 [ZW]
16,185 387,812 (2) 1,317,341
[ZW]
(16,185)(3)
---------- [ZW]
- - ---------- ------------- -----------
Income before provision for income taxes 2,146,360 [ZW]
1,329,183 (503,055) 2,972,488
Provision for income taxes [ZW]
456,763 2,825 338,035 (5) 797,623
---------- [ZW]
- - ---------- ------------- -----------
Net income $1,689,597 [ZW]
$1,326,358 $ (841,090) $2,174,865
========== [ZW]
========== ============= ===========
Net income per common share $0.36 [ZW]
$132,635.80 $0.46
========== [ZW]
========== ============= ===========
Weighted average number of [ZW]
common [ZW]
(10)(6)
shares outstanding [ZW]
4,745,754 10 15,000 (6) 4,760,754
========== [ZW]
========== ============= ===========
</TABLE>
16
<PAGE>
<PAGE>
SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(1) Adjustment which reflects nine months of depreciation expense on Retconn
Incorporated machinery and equipment and furniture and fixtures at
appraised values amounting to $431,204, assuming an estimated useful life
of seven years on a straight line basis adjusted by actual depreciation
expense on machinery and equipment and furniture and fixtures recorded by
Retconn Incorporated for the nine months ended September 30, 1995,
amounting to $46,935.
(2) Adjustment which records interest expense on a $6,000,000 term note with a
floating rate yielding an effective interest rate of approximately 8.5%.
(3) Adjustment which records reduction in interest expense on $200,000 term
note repaid concurrent with the acquisition.
(4) Adjustment which records the amortization of the excess of the purchase
price paid for the fair market value of all tangible and identifiable
intangible assets acquired less liabilities assumed, totaling $4,405,430,
amortized over an estimated useful life of twenty-five years.
(5) Federal income taxes have been provided for in the nine month period ended
September 30, 1995 primarily because Retconn Incorporated prior to its
acquisition by the Company, was treated as an S corporation for federal
income tax purposes. The income tax provision of $338,035 represents
Retconn's pre-tax income of $1,329,183 less total pre-tax pro forma
adjustments of $503,055 adjusted for Connecticut income taxes of 11% and
federal income taxes of 34%, less $2,825 of taxes recorded by Retconn
Incorporated in the nine month period ended September 30, 1995.
(6) Adjustment which reflects the issuance of 15,000 shares of the Company's
common stock commensurate with the acquisition and the retirement of (10) S
corporation shares.
17
<PAGE>
<PAGE>
PART II
Item 5 - Other Information
Effective August 28, 1996, the Company entered into a joint venture
agreement to develop a silicon wafer polishing and reclaiming facility in
Singapore. The jointly owned Singapore company, International Semiconductor
Products Pte Ltd ("ISP") is 50.1% owned by the Company and 49.9% owned by a
holding company, Semiconductor Alliance Pte Ltd. As of September 30, 1996, the
Company and its joint venture partner each made a $984,202 equity contribution
into ISP.
Item 6(a) - Exhibits
10.55 - Joint Venture Agreement dated August 28, 1996 between Semiconductor
Alliance Pte Ltd, the Company and International Semiconductor Products Pte Ltd.
10.56 - Intellectual Property License Agreement dated August 28, 1996 between
American Silicon Products, Inc. And International Semiconductor Products Pte
Ltd.
18
<PAGE>
<PAGE>
SIGNATURES
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 thereunto duly authorized.
SEMICONDUCTOR PACKAGING MATERIALS CO., INC.
DATE: NOVEMBER 13, 1996 By: /S/ GILBERT D. RAKER
-------------------------------
Name: Gilbert D. Raker
Title: Chairman of the Board
and Chief Executive Officer
DATE: NOVEMBER 13, 1996 By: /S/ ANDREW A. LOZYNIAK
-------------------------------
Name: Andrew A. Lozyniak
Title: Treasurer and Secretary
(Chief Accounting Officer)
19
<PAGE>
<PAGE>
DATED THIS 28TH DAY OF AUGUST 1996
BETWEEN
SEMICONDUCTOR ALLIANCE PTE LTD
AND
SEMICONDUCTOR PACKAGING MATERIALS CO. INC
AND
INTERNATIONAL SEMICONDUCTOR PRODUCTS PTE LTD
AND
THE PARTIES WHOSE NAMES ARE STATED
IN SCHEDULE 4 OF THIS AGREEMENT
===============================================
JOINT VENTURE AGREEMENT
===============================================
MESSRS KOH & CHOO
ADVOCATES & SOLICITORS
SINGAPORE
(KK/CYL/ts/3409/96)
<PAGE>
<PAGE>
This Agreement is made on the 28th day of August 1996.
BETWEEN
(1) Semiconductor Alliance Pte Ltd, a company incorporated in Singapore with
its registered office at 135 Middle Road #05-13/14, Bylands Building,
Singapore 188975; ("SCA");
(2) Semiconductor Packaging Materials Co., Inc., a company incorporated in
Delaware, United States of America with its principal place of business
at 431 Fayette Avenue, Mamaroneck, New York 10543, U.S.A, ("SPM");
(3) International Semiconductor Products Pte Ltd, a company incorporated in
Singapore with its registered office at 135 Middle Road #05-13/14,
Bylands Building, Singapore 188975, (the "Company" or "ISP"); and
(4) the parties whose names and addresses are stated at Schedule 4 of this
Agreement.
WHEREAS
(A) SCA and SPM are desirous of establishing and operating a joint venture
company in Singapore for the primary purpose of carrying on the Business
(as defined below).
(B) The parties referred to in Schedule 4 are selected directors and/or
officers and/or shareholders of SCA and SPM and/or its subsidiary ASP
and are executing this Agreement in order to be bound by clause 8
hereof.
(C) For the purpose of cooperatively carrying out the aforesaid desire SCA
has procured the formation of the Company with an authorised share
capital of S$100,000.00 divided into 100,000.00 ordinary shares of
S$1.00 each and an initial and paid-up capital of S$2.00.
(D) SCA is beneficially entitled to the 2 ordinary shares in the Company
constituting the initial issued and paid-up capital of $2.00 which are
held by the nominees of SCA.
(E) To give effect to the intention of the parties hereto as hereinbefore
recited, and to regulate their relationship inter se as shareholders in
the Company in the conduct of the Business and affairs of the Company in
the spirit of mutual confidence and co-operation, the parties hereto
have agreed to enter into this Agreement on the terms and conditions
hereinafter set out.
IT IS AGREED as follows:-
1. DEFINITIONS AND INTERPRETATION
1
<PAGE>
<PAGE>
(A) Definitions
In this Agreement and the Schedules, unless the subject or context
otherwise requires, the following words and expressions shall have the
following meanings respectively ascribed to them:-
"Act" means the Companies Act, Chapter 50;
"Articles" means the articles of association for the time being of the
Company;
"Auditors" means the auditors for the time being of the Company;
"ASP" means American Silicon Products, Inc., a corporation incorporated
in the United States of America with its place of business at 15
Clarkson Street, Providence, Rhode Island, 02908, U.S.A;
"Board" means the board of Directors for the time being of the Company;
"Business" means the business of polishing and reclamation of
semiconductor wafers and the brokering of semiconductor wafers used in
the electronics industry;
"Control" and any form thereof, such as Controlling means the possession
by one person, directly or indirectly through one or more
intermediaries, of the power to direct or cause the direction of the
management or policies of another person; with respect to a corporation
such power may be evidenced by the right to exercise, directly or
indirectly, more than 50% of the voting rights attributable to the
shares or interest of such corporation, partnership or other body
corporate;
"Directors" means the directors for the time being of the Company;
"Exchange Rate" means the rate of exchange between the US$ and the S$ as
published by the Asian Wall Street Journal;
"Expert" means an independent merchant bank of international repute who
shall be nominated by agreement between the Shareholders or failing such
nomination within 14 days after the request of any Shareholder to the
others therefor, nominated at the request of any Shareholder by the
Chairman of the Singapore International Arbitration Centre;
"Intellectual Property Rights" means any patent, copyright, registered
design and unregistered designs, trade name, trade mark, logo, trade
dress, or other similar industrial, commercial or intellectual property
rights wherever in the world enforceable;
"Knowhow" means all industrial, marketing and commercial information and
techniques including without limitation to the foregoing, drawings,
formulae, test
2
<PAGE>
<PAGE>
reports, operating and testing procedures, instruction manuals, tables
of operating conditions, administrative procedures, lists and
particulars of customers, marketing methods and procedures, advertising
copy and computer software programmes relating to and/or used in
connection with the Business;
"Memorandum" means the memorandum of association for the time being of
the Company;
"Related Party" means in relation to any person, a person directly or
indirectly (through one or more intermediaries) Controlling, Controlled
by or under common Control with that person;
"Shareholders" means SCA, SPM and any other person holding shares in the
capital of the Company who shall have executed a deed of ratification
and accession pursuant to clause 6(C);
"Scheduled Board Meetings" means Board meetings referred to in clause
3(I);
'Specified Sum" means the sum of US$4,000,000.00 less S$100,000.00;
"SCA Directors" means Directors nominated in accordance with clause
3B(i);
"SPM Directors" means Directors nominated in accordance with clause
3B(ii);
"S$" means the lawful currency of Singapore;
"Territories" means all the countries listed in Schedule 1;
"Unscheduled Board Meetings" means Board meetings referred to in clause
3(J); and
"US$" means the lawful currency of the United States of America.
(B) Interpretation
(i) Any reference in this Agreement to:-
(a) "clauses","paragraphs" "sub-paragraphs", and "schedules" are to
the clauses, paragraphs and sub-paragraphs of, and the schedules
to, this Agreement; and
(b) "financial year" means a period in respect of which an audited
profit and loss account of the Company has or is to be prepared
for the purpose of laying before the Company at its annual
general meeting, whether that period is a year or not. The
accounting reference date of the Company shall be the first of
January of each calendar year.
(ii) The headings are for convenience only and shall not affect the
interpretation
3
<PAGE>
<PAGE>
of this Agreement.
(iii) The schedules form a material part to this Agreement and all references
to the this Agreement shall include references to the schedules.
(iv) Unless the context otherwise requires or permits, references to the
singular number shall include references to the plural number and vice
versa; references to natural persons shall include bodies corporate and
incorporate and vice versa; and words denoting any gender shall include
all genders.
(v) The expression "related corporation" shall bear the meaning ascribed
thereto in Section 6 of the Act.
(vi) All references to time, days of the week and calendar months are
references to Singapore time, days and calendar months.
2. COMPLETION
On or before 5 September 96, or such other date as SCA and SPM shall
agree in writing, SCA and SPM shall each take or cause to be taken the
following steps at Directors' and Shareholders' meetings of the Company
(as appropriate):-
(i) the appointment of each of Messrs Andrew A. Lozyniak, Gilbert
Raker ("SPM Directors") and Dr. Freddy Goh Hin Choon and Mr Lee
Boon Leng ("SCA Directors") as Directors;
(ii) the transfer of the 2 subscriber shares of S$1.00 each from the
nominee shareholders of the Company to SCA;
(iii) the subscription by each of SCA and SPM for 49,898.00 and
50,100.00 shares of S$1.00 each respectively in the Company at
par and the allotment and issue of such shares by the Company to
SCA and SPM respectively against payments in full in cash;
(iv) the appointment of Dr Freddy Goh Hin Choon as Managing Director
of the Company and the execution of the Service Agreement on the
terms appearing on Schedule 2; and
(v) the resignations of the nominee Directors Wong Yhui Kong and Low
Kok Poo.
Provided Always that the Shareholders' obligations under paragraph (iii)
above shall be conditional upon the execution, by ASP and the Company,
of the Intellectual Property License Agreement referred to in clause 14.
In the event of the execution of the Intellectual Property License
Agreement after 5 September 96, the date for the subscription by the
Shareholders of shares in the Company referred to in paragraph (iii)
above shall be agreed in writing
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between SCA and SPM and in any event unless otherwise agreed in writing,
shall be no later than the 7th day after the execution of the
Intellectual Property License Agreement.
3. BOARD OF DIRECTORS
(A) Number
Unless otherwise unanimously agreed upon by the Shareholders in writing,
the Board shall consist of 4 Directors.
(B) Composition
Save as hereinafter provided, the Board shall comprise:-
(i) 2 persons nominated by SCA for the time being as Directors (who
shall be designated as "SCA" Directors); and
(ii) 2 persons nominated by SPM for the time being as Directors (who
shall be designated as "SPM" Directors),
so long as SCA and SPM shall each hold such numbers of shares for the
time being in the total issued share capital of the Company as are not
less than a 49.9% : 50.1% ratio respectively.
(C) Right of Nomination
The right to nomination conferred on a Shareholder under paragraph (B)
above shall include the right of that Shareholder to request the removal
at any time from office such person nominated by that Shareholder as a
Director and the right of that Shareholder at any time and from time to
time to determine the period during which such person shall hold the
office of Director.
(D) Notice in Writing
Each nomination or request for removal of a Director pursuant to this
clause shall be in writing and signed by or on behalf of the Shareholder
nominating or requesting the removal of such Director and shall be
delivered to the registered office for the time being of the Company.
(E) Further Director
Whenever for any reason a person nominated by a Shareholder ceases to be
a Director, that Shareholder shall be entitled to nominate forthwith a
further Director.
(F) Alternate Director
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A Director shall be entitled to any time and from time to time to
appoint any person to act as his alternate and to terminate the
appointment of such person and in that connection the provisions of the
Articles shall be complied with. Such alternate Director shall be
entitled while holding office as such to receive notices of meetings of
the Board and to attend and vote as a Director at any such meetings at
which the Director appointing him is not present and generally to
exercise all the powers, rights, duties and authorities and to perform
all functions of his appointor as Director. Further, such alternate
Director shall be entitled to exercise his vote of the Director
appointing him at any meetings of the Board and if such alternate
Director represents more than one Director such alternative Director
shall be entitled to one vote for every Director he represents.
(G) Chairman
The Chairman of the Board shall be an "SPM" Director, as designated from
time to time by SPM. He shall have a second calling or casting vote in
meetings of the Board.
(H) Managing Director
The Managing Director of the Company shall be an "SCA" Director
appointed by SCA. He shall be responsible for the day to day running and
management of the business of the Company within the limits imposed by
the Board and this Agreement. The first Managing Director of the Company
shall be Dr. Freddy Goh Hin Choon. SPM shall be consulted on all
subsequent appointments of the post of Managing Director and shall have
the right to veto SCA's selection provided that (i) this right is
exercised in the best interest of the Company and (ii) SPM shall state
the reasons for its objection in writing to SCA.
(I) Scheduled Board Meetings
(i) Unless otherwise agreed between the "SCA" Directors and the "SPM"
Directors, there shall be a monthly telephone Board meeting held in
accordance with the procedure described in clause 3(K) on the third
Tuesday of every calendar month ("Scheduled Board Meetings"). The first
Scheduled Board Meeting shall be held at 8.00 am. on the third Tuesday
following 28 August 96. The time for all subsequent Scheduled Board
Meetings shall alternate between 8.00 pm and 8.00 am. respectively. The
quorum necessary for the transaction of any business of the Company at
Scheduled Board Meetings shall be 2 Directors including at least one
"SCA" Director and at least one "SPM" Director. All resolutions of the
Directors at a Scheduled Board Meeting shall be adopted by a simple
majority vote of the Directors present.
(ii) If within 60 minutes from the time appointed for the holding of a
Scheduled Board Meeting (but not an adjourned Scheduled Board Meeting) a
quorum is not present, then the meeting shall stand adjourned to the
same time 72 hours later and if at such adjourned Scheduled Board
Meeting a quorum is not
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present within 60 minutes from the time appointed for holding the
meeting, any 2 Directors present shall form a quorum and any resolutions
passed thereat shall be considered valid and binding Board resolutions.
(J) Unscheduled Board Meetings
(i) All meetings of the Board other than those referred to in clause 3(I)
shall be Unscheduled Board Meetings. The quorum at an Unscheduled Board
Meeting necessary for the transaction of any business of the Company
shall be 2 Directors, including at least one "SCA" Director and at least
one "SPM" Director. All resolutions of the Directors at an Unscheduled
Board Meeting shall be adopted by a simple majority vote of the
Directors present.
(ii) With the exception of a Board meeting held in accordance with the clause
3 (K), no Unscheduled Board Meeting shall be held outside Singapore
unless with the consent of both the "SCA" Directors and "SPM" Directors.
(iii) No Unscheduled Board Meeting may be held unless 3 days' prior written
notice setting out the agenda, time and place of the meeting has been
given to all Directors and alternate Directors, including those not
present in Singapore, unless all the Directors agree to a shorter period
of notice. Such notice may be delivered personally or sent by prepaid
registered post (unless it is sent from overseas in which case it shall
be sent by telex or facsimile transmission or by Federal Express or
similar courier service) or by facsimile transmission addressed to the
Directors or alternate Directors to such address or facsimile number as
the Directors or alternate Directors shall from time to time notify the
company secretary. Meetings conducted in accordance with clause 3(K)
below may be convened on such shorter period of notice as both the "SPM"
and "SCA" Directors agree. Meetings conducted in accordance with clause
3(K) below may be summoned on verbal notice.
(K) Telephone Board meetings
The Directors may (unless otherwise required by the Act), meet together
either in person or by telephone, radio conference, television or
similar communication by which all persons participating in the meeting
are able to hear and be heard by all other participants, for the
despatch of business and adjourn and otherwise regulate their meetings
as they think fit and the quorum for such teleconference meetings shall
be the same as the quorum required by clauses 3 (I) and (J) above. A
resolution passed by such a conference shall, notwithstanding that the
Directors are not present together at one place at the time of the
conference, be deemed to have been passed at a meeting of the Directors
held on the day and at the time at which the conference was held and
shall be deemed to have been held at the office of the Company, unless
otherwise agreed, and all Directors participating at that meeting shall
be deemed for all purposes of this Agreement to be present at that
meeting.
(L) Unanimous Consents
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A resolution in writing signed by all Directors shall be as valid and
effectual as if it had been passed at a Board meeting duly called and
constituted. Such resolution may be signed in any number of counterparts
and shall become effective when one or more counterparts have been
signed by all of the Directors.
4. BUSINESS OF THE COMPANY
(A) Business
The Shareholders agree that the Company shall carry on the Business in
the Territories and such other businesses as may from time to time be
determined by the Board.
(B) Shareholders' Obligations
In consideration of the mutual obligations of the Shareholders herein
contained, and except as the Shareholders may otherwise agree in writing
or save as otherwise provided or contemplated in this Agreement, each of
the Shareholders shall exercise its powers in relation to the Company so
as to ensure that:-
(i) the Company carries on its business and conducts its affairs in a
proper and efficient manner;
(ii) the Company, and the Directors appointed by that Shareholder,
will comply strictly and expeditiously with the provisions of
this Agreement and the Articles;
(iii) the Business shall be carried on pursuant to the policies set out
herein or laid down from time to time by the Board, which shall
hold Board meetings in accordance with clauses 3(I) and 3(J) and
the Articles;
(iv) the Company shall cause to be kept full and proper accounting
records relating to the business, undertakings and affairs of the
Company, which records shall be made available at all reasonable
times for inspection by the Directors by prior appointment during
office hours;
(v) the Company shall prepare annual accounts, in each case in
accordance with generally accepted accounting principles and in
compliance with all applicable legislation in respect of each
accounting reference period, and shall procure that such accounts
are audited as soon as practicable and shall supply copies of the
same both in draft and final form, to each of the Shareholders
immediately upon their issue;
(vi) the Company shall do all that the Auditors may reasonably require
by way of keeping records and accounts and provide the Auditors
with all such information and explanation as they may reasonably
require and
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otherwise assist the Auditors in all reasonable ways;
(vii) the Company continues to qualify as resident in Singapore for the
purpose of taxation and is not resident elsewhere;
(viii) the accounting reference date of the Company shall be the 1st of
January of each calendar year;
(ix) an additional set of financial statements be prepared by the
Company in conformity with the Generally Accepted Accounting
Principles as practised in the United States and with the United
States Securities Exchange Commission's requirements to enable
SPM to consolidate the Company's financial statements in
accordance with United States legal requirements; and
(x) the Board submits an annual budget for Shareholders' approval by
the first day of December of each calendar year.
5. GENERAL MEETING
(i) No business shall be transacted at any general meeting of the Company
unless a quorum of Shareholders is present throughout the meeting;
notwithstanding the provisions of the Articles, two Shareholders present
in person or by proxy shall be a quorum.
(ii) A resolution in writing signed by all Shareholders shall be as valid and
effectual as if it had been passed at a general meeting of the company
duly called and constituted. Such resolution may be signed in any number
of counterparts and shall become effective when one or more counterparts
have been signed by all of Shareholders.
(iii) The Shareholders shall exercise all voting rights and other powers of
control available to them in relation to the Company so as to procure
(so far as they are able by the exercise of such rights and powers) that
the Company shall not without the prior written consent of SCA and SPM
or the affirmative votes of SCA and SPM at a general meeting of the
Company carry out any of the following:-
(a) acquiring or disposing any interest in any other company or
carrying on any business that is outside the Business;
(b) declaring any dividend distribution;
(c) incurring aggregate capital commitments in excess of the lesser
of S$250,000 or 5% of the sum provided in the annual budget for
the financial year;
(d) the creation or redemption of any fixed or floating charge,
debenture,
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mortgage, lien (other than a lien arising by operation of law)
or other encumbrance over the whole or any part of the
undertaking, property or assets of the Company;
(e) the issuance, allotment, grant of option, over any of the
Company's unissued share capital or other securities or the
reorganisation of its share capital in any way;
(f) obtaining any loan or the creation of any debt other than the
shareholders' loans referred to in clause 7(A)(i);
(g) terminating any service agreement between the Company and its
Managing Director;
(h) confirming the remuneration of any Director; and
(i) confirming the terms of employment of the Managing Director and
other key management personnel.
6. TRANSFER OF SHARES
(A) Restrictions on Transfer
(i) No Shareholder shall create or have outstanding any pledge, lien, charge
or other encumbrance or security interest on or over any shares in the
capital of the Company or any part of its interest in such shares.
(ii) Subject to paragraph (xi) and paragraph (B) below, no Shareholder shall
transfer shares held by it in the capital of the Company or otherwise
sell, dispose of or deal with all or any part of its interest in such
shares unless and until the rights of pre-emption conferred by this
clause 6 have been exhausted. It shall be a pre-condition to any share
transfer that the transferor shall transfer all but not part of his
shares in the capital of the Company.
(iii) Subject to paragraph (B) below, every Shareholder who desires to
transfer its shares (the "Transferor") shall give to the Company notice
in writing of such desire (a "Transfer Notice"). Subject as hereinafter
mentioned, a Transfer Notice shall constitute the Company the
Transferor's agent for the sale of all its shares (in the capital of the
Company (the "Sale Shares") to the other Shareholder (the "Other
Shareholder") at the Purchase Price.
(iv) The Purchase Price shall be the market value of the Sale Shares as at
the date of the Transfer Notice as determined by the Expert on the
following assumptions and bases:-
(a) valuing the Sale Shares as on an arm's length sale between a
willing vendor and willing purchaser;
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(b) if the Company is carrying on business as a going concern, on the
assumption that it will continue to do so;
(c) that the Sale Shares are capable of being transferred without
restriction; and
(d) valuing the Sale Shares as a rateable proportion of the total
value of all the issued shares of the Company which value shall
not be discounted or enhanced by reference to the number thereof.
If any difficulty shall arise in applying any of the foregoing
assumptions or bases then such difficulty shall be resolved by the
Expert in such manner as he shall in his discretion think fit.
The Company shall procure that the Expert determines the Purchase Price
within 21 days of being requested to do so.
In making such determination, the Expert shall be acting as an expert
and not as an arbitrator and his decision shall be binding on all
Shareholders.
(v) The costs and expenses of the Expert in determining the Purchase Price
shall be borne by the Company.
(vi) Upon receipt of the Expert's written determination of the Purchase Price
in writing, the Company shall within 2 days by notice in writing inform
the Other Shareholder of the Purchase Price of the Sale Shares and
invite the Other Shareholder to apply in writing to the Company within
21 days of the date of despatch of the notice (which date shall be
specified therein) for such Sale Shares, subject however to such
limitations as may be specified in the Transfer Notice and which the
Expert took into account in his valuation.
(vii) If the Other Shareholder shall within the period of 21 days apply for
all of the Sale Shares, the Board shall notify in writing the Other
Shareholder the place and time (being not earlier than 14 and not later
than 28 days after the date of the Other Shareholder's application for
the Sale Shares) at which the sale and purchase of the Sale Shares shall
be completed.
(viii) Subject to paragraph (vi) above, the Transferor shall be bound to
transfer the Sale Shares to the Other Shareholder at the time and place
therein specified by the delivery of duly executed transfer forms
together with the relative share certificates in respect of the Sale
Shares and, if it shall fail to do so, the Chairman of the Company or
some other person appointed by the Board shall be deemed to have been
appointed attorney of the Transferor with full power to execute,
complete and deliver, in the name and on behalf of the Transferor,
transfers of the Sale Shares to the Other Shareholder against payment of
the price to the Company. On payment of the price to the Company the
Other Shareholder shall be deemed to have obtained good quittance for
such payment and on execution and delivery of the transfer the Other
Shareholder
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shall be entitled to insist upon its name being entered in the Register
of Members as the holder by transfer of the Sale Shares. The Company
shall forthwith pay the price into a separate bank account in the
Company's name and shall hold such price in trust for the Transferor.
(ix) If the Other Shareholder does not apply to purchase the Sale Shares the
Transferor shall be entitled, during the 3 months following the expiry
of the said period of 21 days referred to in paragraph (vi) above, to
transfer to any third party and at any price (not being less than the
Purchase Price fixed under paragraph (iv) above) and on the same terms
the Sale Shares.
(x) Notwithstanding paragraph (ix) above, if the Transferor receives a bona
fide offer from a third party other than a Related Party (the "Third
Party") during the 3 months following the expiry of the said period of
21 days referred to in paragraph (vi) above, to purchase the Sale Shares
at a price (the "Third Party Price") less than the Purchase Price and if
the Transferor desires to sell the Sale Shares to such Third Party at
such Third Party Price, then the Transferor shall fully and fairly
disclose in writing to the Other Shareholder the principal terms and
conditions of the Third Party's proposal to purchase the Sale Shares.
The Other Shareholder shall have 30 days from the date of such written
presentation to it (the "Presentation Date") to decide whether to
purchase the Sale Shares at the Third Party Price and on the same terms
and conditions offered by such Third Party (the "Third Party Proposal
Terms"). If the Other Shareholder accepts the Third Party Proposal Terms
in writing within 30 days of the Presentation Date, then the Transferor
shall be bound to transfer the Sale Shares to the Other Shareholder
pursuant to the provisions of paragraph (viii) above. If the Other
Shareholder fails to accept such offer to purchase the Sale Shares
within the said 30 days from the Presentation Date, then the Transferor
shall be entitled during the 3 months following the expiry of the said
30 day period, to transfer the Sale Shares to such Third Party and at
any price not being less than the Third Party Price and on any terms and
conditions not more favourable to the Third Party than the Third Party
Proposal Terms.
(xi) Notwithstanding anything in the foregoing paragraphs but subject to
paragraph (C) below, a Shareholder being a company may transfer all or
any part of its shares to any of its related corporations (the
"Transferee Corporations"). It shall be a condition precedent to the
right of such Shareholder to transfer shares to the Transferee
Corporation that such Shareholder and the Transferee Corporation both
execute, in such form as may be reasonably required and agreed between
the other Shareholder, a deed of undertaking under which such
Shareholder undertakes to repurchase, and the Transferee Corporation
undertakes to sell, all the shares held by the Transferee Corporation in
the capital of the Company in the event that the Transferee Corporation
ceases to be a related corporation of such Shareholder.
(B) Moratorium on Transfer
Notwithstanding anything contained in this Agreement or the Articles but
subject
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to clause 2(ii), no Shareholder shall transfer all or any part of its
shares in the capital of the Company to any person within a period of 30
months from the 28 August 96 unless with the prior written consent of
the other Shareholder.
(C) Supplementary Provisions
It shall be a condition precedent to the right of any Shareholder to
transfer shares in the capital of the Company that the purchaser or
transferee (if not already bound by the provisions of this Agreement)
executes in such form as may be reasonably required by and agreed
between the other Shareholder a deed of ratification and accession under
which the purchaser or transferee shall agree to be bound by and shall
be entitled to be the benefit of this Agreement as if an original party
hereto in place of or in addition to the transferring Shareholder (as
the case may be).
7. FINANCE
(A) Shareholders' Loans
(i) The Shareholders shall provide to the Company, in proportion to their
respective shareholdings in the Company, an aggregate sum up to the
Specified Sum by way of unsecured shareholders' loans, on the terms and
conditions set out in Schedule 3.
(ii) In fulfilment of their obligations under paragraph (i) above, SCA and
SPM shall each deposit the following percentages of the Specified Sum
(base on the Exchange Rates on the following dates) at the following
dates into the Company's bank accounts:-
<TABLE>
<CAPTION>
Date SPM SCA
---- --- ---
<S> <C>
5 September 96 50.1% X (50% of Specified Sum) 49.9% X (50% of [ZW]
Specified Sum)
1 October 96 50.1% X (25% of Specified Sum) 49.9% X (25% of [ZW]
Specified Sum)
1 November 96 50.1% X (25% of Specified Sum) 49.9% X (25% of [ZW]
Specified Sum)
</TABLE>
SCA will deposit the S$ equivalent of the Specified Sum into the
Company's bank account with the Development Bank of Singapore, Towner
Road Branch, Account No. 025-011-826-0. SPM will deposit the US$
equivalent of the Specified Sum into the Company's US$ bank account with
the said bank, Account No. 0099-319-049-581.
Thereafter, the Shareholders shall have fulfilled their obligations
under paragraph (i) above. The Company shall be entitled to draw on the
Shareholders' loans as and when the same are deposited into its account,
as working capital.
(iii) If the Company requires further working capital, either party may
provide further
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loans to the Company at an interest rate of 15% per annum. Such loans
shall have a priority of payment over loans referred to in paragraph (i)
above.
(iv) All Shareholders' loans shall be repaid by the Company in Singapore
dollars.
(B) Third Party Loans
Additional financing requirements as the Company may require from time
to time may, in addition to clause 7(A)(ii), be raised by way of loan,
debenture, mortgage or in such other manner as the Shareholders may
agree and such financing requirements shall be procured, wherever
possible, without any additional security by way of guarantee or
otherwise from the Shareholders. In the event that any such guarantee is
required in order to secure financing requirements for the Company, the
Shareholders shall provide the same. The legal costs incurred by the
shareholders in providing any such guarantee shall be borne by the
Company.
(C) Proportionate Liability
(i) As a separate and independent covenant, Shareholders agree with each
other that the aggregate amount of any liability arising under
guarantees, indemnities and covenants given to any bank or other
financial institution at any time during the term of this Agreement by
any Shareholder to secure the indebtedness and obligations of the
Company to such bank or financial institution shall be borne between the
Shareholders in proportion to the respective shareholdings in the
Company. Any legal and other costs which a Shareholder may be ordered to
pay or otherwise incurs in any action brought to enforce any such
guarantees, indemnities or covenants shall similarly be borne by the
other Shareholder in proportion to the their respective shareholdings in
the Company.
(ii) Paragraph (i) above shall apply irrespective of whether or not the
Shareholders are liable as co-sureties to the creditor enforcing the
relevant guarantee, indemnity or covenant and whether or not they are
liable jointly and/or severally and by the same or different
instruments.
8. FUTURE ACTIVITIES
(A) Non-Competition
(i) Save with the previous written consent of the other Shareholder:-
(a) each of SCA and SPM hereby undertakes to the other that it will
not, and will procure that each of its Related Parties and
directors will not and;
(b) SCA hereby undertakes to SPM that it will procure that its
shareholders (with the exception of the Singapore Economic
Development Board,
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which may become a shareholder of SCA) and Excellent Scientific
Instruments Pte Ltd will not;
for so long as SCA or SPM, as the case may be, shall hold any shares in
the issued share capital of the Company and for a period of 30 months
from the date of transfer of the entirety of the relevant Shareholder's
shares:-
(aa) engage or be interested directly or indirectly (otherwise than by
virtue of its interests as a shareholder of the Company) in the
Business within the Territories; or
(bb) solicit in the Territories in competition with the Business of
the Company the custom of any person who is or has been at any
time during the period it held any shares in the issued share
capital of the Company, a customer of the Company; or
(cc) solicit or entice away or attempt to solicit or entice away from
the Company any person who is an officer, manager or employee of
the Company whether or not such person would commit a breach of
his contract of employment by reason of leaving such employment.
(ii) (a) Save with the written previous consent of SPM, each of FG, XC and
LBL undertakes to SPM that for so long as SCA shall hold any
shares in the issued capital of the Company and for a period of
30 months from the date of the transfer of the entirety of SCA's
shares he will not and;
(b) save with the previous written consent of SCA, each of GR, AL and
LJ undertakes to SCA and the Company that, for so long as they
are employees of SPM or a wholly owned SPM subsidiary and SPM
shall hold any shares in the issued share capital of the Company
and, provided that they continue as employees of SPM or a wholly
owned SPM subsidiary, for a period of 30 months from the date of
transfer of the entirety of SPM's shares, he will not:-
(aa) engage or be interested directly or indirectly (otherwise
than by virtue of his interests as a shareholder of the
Company) in the Business within the Territories; or
(bb) solicit in the Territories in competition with the
Business of the Company the custom of any person who is or
has been at any time during the period SCA or SPM (as the
case may be) held any shares in the issued share capital
of the Company, a customer of the Company; or
(cc) solicit or entice away or attempt to solicit or entice
away from the Company any person who is an officer,
manager or employee of the Company whether or not such
person would commit a breach of his contract of employment
by reason of leaving such
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employment; or
(dd) cause or permit any person directly or indirectly under
his Control to do any of the acts or things specified
above.
(iii) The obligations of each of FG, XC, LBL, GR, AL and LJ shall
survive the termination of this Agreement.
(iv) Notwithstanding any and all aspects of this clause 8, and the
Agreement, SPM and its wholly owned subsidiary ASP shall be
entitled to continue to compete to the extent that they are
conducting business in any of the Territories on or before the
date on which ISP's facility becomes operational.
(B) Several Obligations
Each and every obligation under sub-clause (A) above shall be treated as
a separate obligation and shall be severally enforceable as such. In the
event of any obligation or obligations being or becoming unenforceable
in whole or in part such part or parts as are unenforceable shall be
deleted from this clause and any such deletion shall not affect the
enforceability of all such parts of this clause as remain not so
deleted.
(C) Modifications to Restrictions
While each of the Shareholders acknowledges that the restrictions
contained in sub-clause (a) above are reasonable in all the
circumstances it is recognised that restrictions of the nature in
question may fail for technical reason unforeseen and accordingly, it is
hereby agreed and declared that if any of such restrictions shall be
adjudged by a court of competent jurisdiction to be void as going beyond
what is reasonable in all the circumstances for the protection of the
interests of the Company but would be valid if part of the wording
thereof were deleted or the periods thereof reduced or the range of
activities or area dealt with thereby reduced in scope, the said
restrictions shall apply with such modifications as may be necessary to
make it valid and effective.
(D) Company's obligations
The Company shall procure that its key employees enter into
non-competition covenants similar to those stated in clause 8(A)(ii)(aa)
to (dd) with the Company as part of their employment terms.
9. RIGHT OF FIRST REFUSAL
(i) Save as provided in this clause, each of the Shareholders shall not, and
shall procure and ensure that none of its Related Parties shall, make
any Relevant Investment (as defined in paragraph (vi) below) unless such
Shareholder or
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Related Party (as the case may be) shall have first complied with the
provisions of this clause. It shall be the duty of each Shareholder to
procure and ensure that any Related Party of such Shareholder who wishes
to make any Relevant Investment shall comply with the provisions of
paragraphs (ii) to (vii) below and a breach of such provisions by a
Related Party of a Shareholder shall be deemed to be a breach by that
Shareholder of such provisions.
(ii) In the event that any Shareholder or any of its Related Parties proposes
to make any Relevant Investments (the "Proposing Party"), the Proposing
Party shall first offer to the other Shareholder (the "Other
Shareholder") the opportunity to participate in the Relevant Investment.
The Proposing Party shall fully and fairly disclose in writing to the
Other Shareholder the principal terms and conditions of the Relevant
Investment. The Other Shareholder shall have 30 days from the date of
such presentation in writing to it (the "Presentation Date") to decide
whether to participate in the Relevant Investment. Any such
participation shall be in one-half of the investment on the same terms
and conditions as those applicable to the Proposing Party. If the Other
Shareholder shall indicate to the Proposing Party an interest in
considering a participation in the Relevant Investment, the Proposing
Party and the Other Shareholder shall negotiate in good faith as to the
terms of a definitive agreement between them in relation to such
Relevant Investment.
(iii) If after the making of such disclosure in relation to any Relevant
Investment, the Other Shareholder shall indicate in writing to the
Proposing Party that it does not wish to participate therein or the
Proposing Party and the Other Shareholder shall fail to agree upon the
terms of and enter into legally binding documentation in relation to
their participation in the Relevant Investment within 60 days from the
Presentation Date, the Proposing Party shall be free, during the next
succeeding 90 days, to make such Relevant Investment on substantially
the same terms and conditions as those disclosed to the Other
Shareholder without the participation of the Other Shareholder therein.
The making of a Relevant Investment pursuant to this clause 9 by a
Shareholder or its Related Party shall not be a violation by that
Shareholder of clause 8 provided that the operation of the Relevant
Investment restricts its solicitation of business to the Territory in
which its plants are located.
(iv) If the Proposing Party and the Other Shareholder shall so agree, any
such Relevant Investment may be taken up in its entirety by the Company.
(v) For the purposes of this clause, the expression "Relevant Investment"
shall mean:-
(a) the acquisition of any shares in or an interest in or the assets
of any entity principally and primarily engaged or proposing to
engage in the Business in, or in relation to, one or more of the
Territories other than Singapore; or
(b) the investment in or formation of any joint venture, partnership
or other
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entity the purpose of which is to engage in the Business in, or
in relation to, one or more of the Territories other than
Singapore.
provided, however, that the expression "Relevant Investment" shall not
include any further acquisition of shares in, or assets of, or
investment in any entity which itself was the subject of a Relevant
Investment presented to the Other Shareholder in which the Other
Shareholder declined or failed to participate.
(vi) Nothing in this Agreement shall be construed so as to prohibit the
Proposing Party from owning, operating or investing in any business or
entity of any nature or description, independently or with others,
provided that (a) such business or entity shall not be carrying on the
Business in Singapore (and regardless whether such business or entity
shall be carrying on the Business in the other countries in the
Territories) and (b) if such Proposing Party shall have complied with
the provisions of this clause including those with regard to offering
such investment opportunity to the Other Shareholder which shall have
declined or failed to participate therein, or such operation or
investment does not fall within the definition of a Relevant Investment
as set out herein.
(vii) Any reference in this clause to a Proposing Party in any context, shall
include a reference to any of its Related Parties and each Proposing
Party shall be obliged to procure that each of its Related Party shall
act accordingly.
10. GENERAL OBLIGATIONS OF SHAREHOLDERS
Each Shareholder shall take all steps necessary on its part to give full
effect to the provisions of this Agreement and to procure (so far as it
is able by the exercise of voting rights or otherwise so to do) that the
Company and the Directors shall perform and observe the provisions of
this Agreement.
11. PREVALENCE OF AGREEMENT AND AMENDMENT OF THE ARTICLES
(i) In the event of any inconsistency or conflict between the provisions of
this Agreement and the provisions of the Articles, the provisions of
this Agreement shall as between the Shareholders prevail.
(ii) The Shareholders shall use their respective best endeavours to procure
that new Articles in a form consistent in all respects with the terms of
this Agreement are adopted by the Company as soon as reasonably
practicable after the signing hereof.
12. DURATION AND TERMINATION
(A) Duration
This Agreement shall take effect from the date hereof and continue
thereafter without limit in point of time but, upon the transfer by any
Shareholder of the
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entirety of its shares in the capital of the Company, it shall be
released from all its obligations hereunder (other than under clauses 8
and 14) but, if at that time there are two or more Shareholders bound by
the provisions of this Agreement, this Agreement shall continue in full
force and effect as between the continuing Shareholders.
(B) Termination
The termination of this Agreement from any cause shall not release any
Shareholder from any liability which at the time of termination has
already accrued, or which thereafter may accrue and was related to the
time period in which a Shareholder held its investment in ISP.
13. DEFAULT
(A) Remedy of Breach of Default
Where a Shareholder fails to perform its obligations hereunder or to
comply with the terms and conditions of this Agreement, the other
Shareholder shall be at liberty to issue to the defaulting Shareholder a
notice specifying the breach or default and, in the case of a breach or
default capable of remedy, stipulating a period of not less than 30 days
during which such breach or default shall be remedied or steps taken in
pursuance thereof. For the purposes of this paragraph (A), a breach or
default shall be considered capable of remedy if the defaulting
Shareholder can comply with the term or condition in question in all
respects other than as to the time of performance.
(B) Disposal of Shares by Defaulting Shareholder
In the event that a breach of this Agreement or a default by a
Shareholder has been admitted or established following upon the failure
of that defaulting Shareholder to comply with the terms of a notice
under paragraph (A) above, the other Shareholder shall, without
prejudice to any other rights and remedies such a Shareholder may have,
be entitled by notice in writing to the defaulting Shareholder to
require such defaulting Shareholder to dispose of all its shares in the
Company and upon receipt of such notice, the defaulting Shareholder
shall be bound to forthwith give a Transfer Notice in accordance with
the provisions of clause 6(A)(iii) and the provisions of clause
6(A)(iii) to clause 6(A)(viii) shall apply mutatis mutandis to such
disposal. The restriction on transfer of shares contained in Clause 6(B)
and in the Articles shall not apply to such disposal.
(C) Default by Shareholders
In the event that :-
(i) any Shareholder shall become insolvent; or
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(ii) a resolution is passed for the winding up of any Shareholder; or
(iii) a proceeding has been instituted seeking a declaration that any
Shareholder is bankrupt or insolvent or seeking bankruptcy,
arrangement or composition with creditors, liquidation or the
appointment of a trustee, receiver or liquidator or analogous
procedure under any applicable law and such proceedings remain
undismissed and unstayed for a period of 60 days or are being
consented to by that Shareholder,
then a breach of this Agreement or default shall have been committed by
the Shareholder concerned and the provisions of paragraph (B) above
shall apply mutatis mutandis as if a breach of this Agreement or default
has been admitted or established.
14. KNOWHOW, INTELLECTUAL PROPERTY AND CONFIDENTIAL INFORMATION
(A) Knowhow and Intellectual Property
(i) During the term of this Agreement, SPM shall cause ASP to grant
to the Company an exclusive and irrevocable licence to use the
Knowhow and Intellectual Property Rights which exist in the
Knowhow (the "Licensed Property"), for the purpose of carrying on
the Business in the Territories upon fair and reasonable terms
and conditions, and subject to the terms in paragraphs (ii),
(iii) and (iv) below (the "Intellectual Property License
Agreement").
(ii) The Intellectual Property License Agreement shall provide for an
annual royalty based on the net sales of the Company as
determined by the Auditors (the "Net Sales") and calculated as
follows:-
(aa) with effect from the date hereof to 31 December 1997, 0.5%
of Net Sales; and
(bb) with effect from 1 January 1998, 1% of Net Sales;
provided that when the aggregate amount of royalty accrues to a
sum equivalent to US$1,000,000.00 the Intellectual Property
License shall be royalty free.
(iii) The Intellectual Property License Agreement shall provide for the
royalties be payable by the Company in 16 equal quarterly
instalments, without interest, only after:-
(aa) all shareholders' loans are repaid by the Company; and
(bb) receipt of ASP's written notice specifying the due dates
and amount of royalty payable.
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(iv) The Intellectual Property License Agreement shall also require
the Company to grant, at the request of a Proposing Party under
clause 9, a non-exclusive licence (but without the right to
sub-license) to the Licensed Property to any entity which is the
subject of a Relevant Investment proposal by such Proposing
Party, (the "Relevant Investment Entity'), but only in the
country or countries in which such Relevant Investment Entity
establishes a facility utilizing the Licensed Property.
(v) SPM warrants that ASP has the power, right and authority to grant
the aforesaid licence to the Company and that SPM has not
received any notice or have any knowledge that the Licensed
Property infringes the intellectual property rights or knowhow of
third parties and no claims of such infringement have been made
or are the subject of litigation actual or threatened.
(vi) Where SPM ceases to be a Shareholder the Company shall be
entitled to continue with the use of the Knowhow and Intellectual
Property Rights which exist in the Knowhow on the same terms to
enable the Company to continue the Business without interruption.
(vii) Any and all Knowhow and Intellectual Property Rights throughout
the world resulting from any work carried out exclusively by the
Company or relating to an improvement to the products exclusively
generated by the Company shall vest exclusively in the Company.
The Company shall grant an irrevocable non-exclusive licence free
of royalty or any other payment upon fair and reasonable terms
without limit in time but excluding the power to grant
sub-licences of such Intellectual Property Rights to ASP or any
successor and any Proposing Party for the purpose of carrying out
the Relevant Investments in accordance with the provisions of
clause 9.
(B) Communications Confidential
All communications between the Company and the Shareholders or any of
them and all information and other material supplied to or received by
any of them from any one or more of the others which it either marked
"confidential" or is by its nature intended to be exclusively for the
knowledge of the recipient alone, or to be used by the recipient only
for the benefit of the Company, any information concerning the business
transactions or the financial arrangements, including without
limitation, trade secrets, customer lists, know-how, designs, processes,
drawings and specifications, of the Company or of the Shareholders or
any of them, 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
and shall be used by the recipient solely and exclusively for the
benefit of the Company unless disclosure is required by law or unless or
until any party can reasonably demonstrate that it is or part of it is,
in the public domain through no act or default on the part of the
recipient, its servants and/or agents, whereupon, to the extent that it
is
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public, this obligation shall cease.
(C) Indemnity
The Shareholders shall indemnify each other from and against any loss,
damages, charges, costs and expenses of whatever nature (including legal
costs on a full indemnity basis) suffered or incurred by the other
Shareholder arising from the breach of that Shareholder of any provision
of this clause or the unauthorised use or disclosure of any Knowhow,
Intellectual Property Rights or confidential information referred to in
paragraphs (A) and (B) above by any director, employee, shareholder or
Related Party of that Shareholder.
(D) Shareholders' Obligations
The Shareholders shall procure the observance of the abovementioned
restrictions by the Company and shall take all reasonable steps to
minimise the risk of disclosure of confidential information, by ensuring
that only their employees and directors and those of the Company whose
duties will require them to possess any of such information shall have
access thereto, and that they shall be instructed to treat the same as
confidential. The Shareholders shall in addition procure that such
employees of the Company whose duties will require them to possess, or
have access to, confidential information, shall sign confidentiality
agreements with the Company respecting the confidentiality of such
information.
(E) Obligations to Continue
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.
15. MANAGERIAL EXPERTISE
(i) SCA shall provide the necessary management and consultancy expertise to
operate and manage the Business and may in its discretion second any
number of its employees to the Company, the terms and condition of such
secondment to be approved by the Board.
(ii) The Company shall pay management and consultancy fees the amount and
payment date of which shall be determined by SCA provided that SPM's
prior written consent is required if the management and consultancy fees
charged exceed the amount of royalties accruing to ASP under the
Intellectual Property License Agreement referred to under clause 14(A).
(iii) The management and consultancy fee shall be invoiced and payable after
all Shareholders' loans are repaid and shall be paid in 16 equal
quarterly instalments, but without interest, on such dates as SCA may in
its discretion determine but in any event no earlier than the repayment
dates for the
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Intellectual Property License Agreement.
16. DIVIDEND DISTRIBUTION POLICY
In respect of any financial year if all outstanding Shareholders' loans
have been repaid in full, and if the Company has profits available for
distribution within the meaning of the Act, the Shareholders shall
procure that the maximum amount of dividends in cash shall be paid after
taking into account the Company's capital and working capital
requirements for the next financial year.
17 FURTHER UNDERTAKINGS
(A) The Company undertakes with each of the Shareholders to be bound by and
comply with the terms and conditions of this Agreement insofar as the
same relate to the Company and to act in all respects as contemplated by
this Agreement.
(B) The Shareholders undertake with each other to exercise their powers in
relation to the Company so as to ensure that the Company fully and
promptly observes, performs and complies with its obligations under this
Agreement.
18. NO PARTNERSHIP
The relationship between the Shareholders shall not constitute a
partnership. No Shareholder has the power or the right to bind, commit
or pledge the credit of the other Shareholder or the Company.
19. INDULGENCE, WAIVER ETC.
No failure on the part of any Shareholder to exercise and no delay on
the part of any Shareholder in exercising any right hereunder will
operate as a release or waiver thereof, nor will any single or partial
exercise of any right under this Agreement preclude any other or further
exercise of it. The rights and remedies provided in this Agreement are
cumulative and not exclusive of any right or remedy provided by law.
20. COSTS
Each of the Shareholders shall bear its own legal and other professional
costs and expenses incurred by it in the negotiation and preparation of
this Agreement. To the extent legally permissible the Shareholders shall
cause the Company to bear such costs related to the formation of the
Company as shall be mutually agreed between the Shareholders.
21. COUNTERPARTS
This Agreement may be entered into in any number of counterparts, all of
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which taken together shall constitute one and the same instrument. Any
party may enter into this Agreement by signing any such counterpart.
22. NOTICES AND GENERAL
(A) Notices
All notices, demands or other communications required or permitted to be
given or made hereunder shall be in writing and delivered personally or
by overseas courier or sent by prepaid registered post (by air-mail if
to or from an address outside Singapore) with recorded delivery, or by
facsimile transmission addressed to the intended recipient thereof at
its address or at its facsimile number set out in this Agreement (or to
such other address or facsimile number as a party to this Agreement may
from time to time duly notify the others in writing). Any such notice,
demand or communication shall be deemed to have been served (if
delivered personally or given or made by facsimile) immediately or (if
given or made by letter or by overseas courier) 96 hours after posting
or delivery to the courier or (if made or given by air-mail) ten days
after posting and in proving the same it shall be sufficient to show
that the envelope containing the same was duly addressed, stamped and
posted. The addresses and facsimile numbers of the parties hereto for
the purpose of this Agreement are:-
Semiconductor Alliance Pte Ltd
135 Middle Road #05-13/14
Singapore 188975
Facsimile Number: 3385633
Semiconductor Packaging Materials Co., Inc.
431 Fayette Avenue, Mamaroneck, N.Y. 10543
U.S.A
Facsimile Number: 914-698-5386
International Semiconductor Products Pte Ltd
135 Middle Road #05-13/14
Singapore 188975
Facsimile Number:3385633
Freddy Goh Hin Choon
Blk 202, Clementi Avenue 6, #05-63
Singapore 120202
Xavier Chong Fook Choy
Blk 96, Lorong 3, Toa Payoh, #01-48
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Singapore 310096
Lee Boon Leng
Blk 868, Woodlands St. 83, #02-341
Singapore 730868
Gilbert Raker/Andrew Lozyniak/Leonard Johnson
c/o Semiconductor Packaging Materials Co. Inc., 431 Fayette
Avenue, Mamaroneck, New York 10543, U.S.A.
(B) 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 Shareholders shall not constitute a waiver by
such Shareholder of the right to pursue any other available remedies.
(C) Severance
If any provision of this Agreement or any 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 it
shall in no way affect or prejudice the enforceability of the remainder
of such provision or the provisions of this Agreement.
(D) Entire Agreement
This Agreement embodies all the terms and conditions agreed upon between
the Shareholders as to the subject matter of this Agreement and
supersedes and cancels in all respects all previous agreements and
undertakings, if any, between the Shareholders with respect to the
subject matter hereof, whether such be written or oral. Any amendment to
or variation of this Agreement shall be effective only if it is in
writing and duly signed and confirmed in writing by the authorised
representative of each Shareholder.
(E) Governing Law and Dispute Resolution
(i) This Agreement shall be governed by, and construed in accordance with
the laws of Singapore. Any dispute arising out of or in connection with
this Agreement, including any question regarding its existence, validity
or termination, shall be referred to and finally resolved by arbitration
in Singapore in accordance with the Rules of the Singapore International
Arbitration Centre.
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(ii) The winning party to the arbitration shall be awarded costs of the
arbitration, such costs such include reimbursement of reasonable costs
of carrying on the arbitration including costs of travel, accommodation
and related expenses necessary for that party's personnel and
professionals to arbitrate the issues.
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SCHEDULE 1
The Territories
Territories currently constituting:-
1. Bangladesh, People's Republic of
2. Bhutan
3. Brunei Darussalam Negara
4. Cambodia, People's Republic of
5. China, People's Republic of
6. Hong Kong
7. India, Republic of
8. Indonesia, Republic of
9. Korea, Democratic People's Republic of (North Korea)
10. Korea, Republic of (South Korea)
11. Laos, People's Democratic Republic
12. Malaysia
13. Pakistan, Islamic Republic of
14. Philippines, Republic of the
15. Singapore, Republic of
16. Sri Lanka, Democratic Socialist Republic of
17. Taiwan (Republic of China)
18. Thailand, Kingdom of
19. Vietnam, Socialist Republic of
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SCHEDULE 2
Managing Director's Service Agreement
An Agreement made the day of August 1996
BETWEEN
(A) INTERNATIONAL SEMICONDUCTOR PRODUCTS PTE LTD, a company incorporated in
Singapore with its registered office at 135 Middle Road, #05-13/14,
Bylands Building, Singapore (188975), Facsimile No. , (hereinafter
called the "Company") of the one part; and
(B) DR. FREDDY GOH HIN CHOON of Blk 202, Clementi Avenue 6, #05-63,
Singapore (120202) (hereinafter called the "Managing Director") of the
other part.
WHEREBY IT IS AGREED as follows:-
TERM OF EMPLOYMENT
1. The Company shall employ Freddy Goh Hin Choon and he shall serve the
Company as Managing Director of the Company and subject to the provision for
determination of this agreement hereinafter contained, such employment shall be
for a period of 5 years 4 months commencing on the 1st day of September 1996
until the 31st day of December 2001 and shall continue thereafter unless and
until this agreement shall be determined by either party hereto giving to the
other 3 months' notice in writing of such intended determination (or pay in lieu
of such notice), such notice to expire on the day after the end of the said
period.
DUTIES
2. As managing director of the Company the Managing Director shall:-
(a) undertake such duties and exercise such powers in relation to the
Company and its business as the Board of Directors of the Company
(hereinafter referred to as the "Board") shall from time to time assign
to or vest in him;
(b) in the discharge of such duties and in the exercise of such powers
observe and comply with all resolutions, regulations and directions from
time to time made or given by the Board; and
(c) devote substantially the whole of his time and attention during business
hours to the discharge of his duties hereunder.
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NON-DISCLOSURE OF TRADE SECRETS
3. The Managing Director shall not, except as authorised or required by his
duties, reveal to any person or company any of the trade secrets, secret or
confidential operations, processes or dealings or any information concerning the
organisation, business, finances, transactions or affairs of the Company or any
subsidiary company of the Company (if any) which may come to his knowledge
during his employment hereunder and shall keep with complete secrecy, all
confidential information entrusted to him and shall not use or attempt to use
any such information in any manner which may injure or cause loss either
directly or indirectly to the Company or its business or may be likely so to do.
This restriction shall cease to apply to information or knowledge which may come
into the public domain, except through the default of the Managing Director.
KEEPING OF NOTES, ETC. DURING EMPLOYMENT
4. The Managing Director shall not during the continuance of this agreement
make otherwise than for the benefit of the Company any notes or memoranda
relating to any matter within the scope of the business of the Company or
concerning any of its dealings or affairs nor shall the Managing Director either
during the continuance of this agreement or afterwards use or permit to be used
any such notes or memoranda otherwise than for the benefit of the Company it
being the intention of the parties hereto that all such notes or memoranda made
by the Managing Director shall be the property of the Company and left at its
registered office upon the termination of the Managing Director's employment
hereunder.
MANAGING DIRECTOR'S DUTY TO DISCLOSE PATENTS, ETC.
5.1 Any discovery or invention or secret process or improvement in procedure
made or discovered by the Managing Director while in the service of the Company,
in connection with or in any way affecting or relating to the business of the
Company or any subsidiary company of the Company (if any) or capable of being
used or adapted for use therein or in connection therewith shall forthwith be
disclosed to the Company and shall belong to and be the absolute property of the
Company or any such subsidiary company as the Company may nominate for the
purpose.
5.2 The Managing Director if and whenever required so to do (whether during
or after the termination of his appointment) shall at the expense of the Company
or its nominee apply or join in applying for letters patent or other similar
protection for any such discovery, invention, process or improvement as
aforesaid and execute all instruments and do all things necessary for vesting
the said letters patent or other similar protection when obtained and all right
and title to and interest in the same in the Company (or its nominee) absolutely
and as sole beneficial owner or in such other person as the Company may require.
SALARY
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6. Subject as hereinafter provided the Company shall pay to the Managing
Director during the continuance of his employment hereunder a salary at the
following rates:-
<TABLE>
<CAPTION>
Date: Salary
----- ------
<S> <C>
1. 1.9.96 to 31.12.96 S$7,500.00 per month
2. 1.1.97 to 31.12.9 S$8,000.00 per month
3. 1.1.98 to 31.12.98 S$8,600.00 per month
4. 1.1.99 to 31.12.99 S$9,200.00 per month
5. 1.1.2000 to 31.12.2000 S$10,000.00 per month
6. 1.1.2001 to 31.12.2001 S$10,800.00 per month
</TABLE>
The salary shall be payable in arrears on the last day of each month.
BONUS
7.1 The Managing Director shall be entitled to an National Wage Counsel
(NWC) 13th month wage supplement every financial year (as the term is defined in
clause 8.1).
7.2 The Managing Director shall also be entitled, depending on the
performance of the Company, to a variable bonus of between 1 to 3 months' salary
every financial year or portion thereof ending on 31 December) subject to the
Board's approval. The Board may further award additional variable bonus of up to
2 months' salary.
PROFIT SHARING
8.1 By way of further remuneration in respect of every financial year during
the continuance of the employment of the Managing Director hereunder, the
Managing Director shall be entitled to profit sharing on the Net Profit of the
Company based on the % Return on Investment of the Company and its subsidiaries
(if any) in accordance with the following rates:-
<TABLE>
<CAPTION>
% Return on Investment Percentage of Net Profit to [ZW]
be given
--------------------- [ZW]
- - ------------------------------------
<S> <C>
10% - 15% 10%
>15% - 20% 9%
</TABLE>
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<TABLE>
<S> <C>
>20% - 25% 8%
>25% - 50% 7%
>50% - 75% 6%
>75% 5%
</TABLE>
where:-
"Net Profit" of the Company means the profits shown by the audited
consolidated profit and loss accounts of the Company and its subsidiaries (if
any) for the relevant financial year with the following adjustments unless
already taken into account in such profit and loss accounts:-
(a) after deducting all expenses of the Company, including
depreciation, interest and employees and managerial bonuses, but
excluding profit sharing under this clause 8.1;
(b) after deducting income tax on profits (including corporation tax
and any similar or additional or substituted tax);
(c) without taking into account profits and losses of a capital
nature arising on a disposal of fixed assets, investments, plant
or any other property of the Company or of any subsidiary company
of the Company (if any);
(d) after deducting such part of the profits or adding back such part
of the losses (as the case may be) of any subsidiary company (if
any) as shall be proportionate to such part (if any) of such
subsidiary as shall not be in the ownership of the Company or of
any subsidiary company of the Company on the last day of such
financial year; and
(e) after making any further adjustments which the auditors of the
Company shall consider fair and reasonable or as may be agreed.
"% Return on Investment" means the rate of return of shareholders'
investment (consisting of share capital contribution and unsecured shareholders'
loans) in the Company and shall be calculated as follows:-
% Return on Investment = (Net Profit) / (total shareholders' investment)
X 100.
"financial year" means a year or other period for which the Company's
accounts are made up ending on 31 December.
8.2 The said profit sharing shall be paid not later than fourteen days after
the
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accounts for the relevant financial year have been made up and audited and the
certificate of the said auditors as to the amount of the said profit sharing for
any financial year (or part thereof) shall be conclusive and binding.
8.3 Unless the Managing Director is terminated for cause, with respect to
any period of the Managing Director's appointment embracing only part of a
financial year, the Company shall pay to the Managing Director for every week or
part thereof such period a bonus and/or profit sharing entitlement equal to one
fifty second part of the bonus and/or profit sharing entitlement which would
have been payable hereunder if he had served the Company during the whole of the
financial year.
MAXIMUM REMUNERATION
9. The maximum remuneration payable to the Managing Director for a
financial year, under this agreement, shall not exceed the sum of
S$1,000,000.00.
PROVISION OF MOTOR CAR
10. The Company shall provide and maintain for the sole use of the Managing
Director a motor car and shall pay all reasonable expenses in connection with
such use of such motor car (including without limitation, road tax, service,
repairs and maintenance, insurance and cost of petrol), such vehicle to be
changed from time to time in accordance with the Company's policy regarding
vehicle replacements.
EXPENSES
11. The Managing Director shall be reimbursed all travelling hotel and other
out-of-pocket expenses reasonably incurred by him in or about the discharge of
his duties hereunder.
ANNUAL LEAVE
12.1 The Managing Director shall be entitled to 21 days' annual leave,
exclusive of statutory and public holidays in each calendar year.
12.2 The Managing Director shall be entitled to 60 days hospitalisation and
medical leave each calendar year.
TERMINATION OF AGREEMENT
13.1 This agreement may be terminated forthwith by the Company without prior
notice if the Managing Director shall at any time:-
(a) commit any serious or persistent breach of any of the provisions herein
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contained;
(b) be guilty of any grave misconduct or wilful neglect in the discharge of
his duties hereunder;
(c) become bankrupt or make any arrangements or composition with his
creditors; or
(d) become permanently incapacitated by accident or ill-health from
performing his duties under this agreement and for the purposes of this
sub-clause, incapacity for six consecutive months in any period of
twelve calender months shall be deemed to be permanent incapacity.
13.2 If the Managing Director shall cease to be a director of the Company
this agreement shall thereupon automatically terminate. If such cessation shall
be caused by any act or omission of either party without the consent concurrence
or complicity of the other such act or omission shall be deemed a breach of this
agreement and determination hereunder shall be without prejudice to any claim
for damages in respect of such breach.
13.3 The Company may terminate this agreement by giving the Managing Director
3 months' prior written notice or 3 months' salary in lieu thereof provided that
all shareholders of the Company agree to the termination pursuant to this clause
13.3. In addition, the Managing Director shall be entitled to compensation in
the sum equivalent to 9 months' salary if this agreement is terminated pursuant
to this clause 13.3.
13.4 The Managing Director may terminate this agreement by giving to the
Company 3 months' prior written notice.
13.5 Upon the termination of this agreement for whatsoever reason the
Managing Director shall upon the request of the Company resign from office as a
Managing Director of the Company and from all offices held by him in any
subsidiary.
RESTRICTIVE COVENANTS; INTERPRETATION
14 Save with the previous consent of the Company, the Managing Director
will not whilst acting as Managing Director and for a period of 30
months thereafter:-
(a) engage or be interested directly or indirectly (otherwise than by
virtue of his interests as a shareholder of the Company) in any
business which is in competition with the business of the Company
within Singapore; or
(b) solicit in Singapore in competition with the business of the
Company the custom of any person, firm or company who is or has
been at any time during the period it held any shares in the
issued share capital of the
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Company, a customer of the Company;
(c) solicit or entice away or attempt to solicit or entice away from
the Company any person who is an officer, manager or employee of
the Company whether or not such person would commit a breach of
his contract of employment by reason of leaving such employment;
or
(d) cause or permit any person directly or indirectly under his
control to do any of the acts and things specified above (and for
the purpose of this clause, "control" means the possession by one
person, directly or indirectly through one or more
intermediaries, of the power to direct or cause the direction of
the management or policies of another person; with respect to a
corporation such power may be evidenced by the right to exercise,
directly or indirectly, more than 50% of the voting rights
attributable to the shares or interest of such corporation,
partnership or other body corporate).
(iii) Each of the undertakings in paragraphs (a), (b) and (c) above shall be
treated as independent of the other undertakings so that, if one or more
is held to be invalid as an unreasonable restraint of trade or for any
other reason, the remaining undertakings shall be valid to the extent
that they are not affected.
(iv) Whilst the undertakings in paragraphs (i) and (ii) above are considered
by all parties to be reasonable in all circumstances, if one or more is
held invalid as an unreasonable restraint of trade or for any other
reason but would have been held valid if part of the wording had been
deleted, the period reduced or the range of activities or area dealt
with reduced in scope, the undertakings shall apply with such
modifications as may be necessary to make them valid.
SERVICE OF NOTICES
15. All notices, demands or other communications required or permitted to be
given or made under this agreement shall be in writing and delivered personally
or sent by prepaid registered post (by air-mail if to or from an address outside
Singapore) with recorded delivery, or by fax addressed to the intended recipient
thereof at his address or fax number set out in this agreement (or to such other
address or fax number as either party may from time to time duly notify the
other) Any such notice, demand or communication shall be deemed to have been
duly served (if given or made by fax) on the day of despatch or (if given or
made by letter) 48 hours after posting or (if made or given to or from an
address outside Singapore) 10 days after posting and in proving the same it
shall be sufficient to show that the envelope containing the same was duly
addressed, stamped and posted.
EFFECT OF TERMINATION ON UNDERTAKINGS
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16. The expiration or termination of this agreement howsoever arising shall
not affect such of the provisions hereof as are expressed to operate or have
effect thereafter and shall be without prejudice to any right of action already
accrued to either party in respect of any breach of this agreement by the other
party.
GOVERNING LAW
17. This agreement shall be governed by and construed in accordance with the
laws of Singapore. Each of the parties hereto hereby irrevocably and
unconditionally submits to the non-exclusive jurisdiction of the Courts of
Singapore for all purposes in relation to this agreement.
IN WITNESS WHEREOF this agreement has been entered into on the day and
year first above written.
Signed by )
for and on behalf of INTERNATIONAL SEMICONDUCTOR )
PRODUCTS PTE LTD in the presence of :- )
Signed by DR. FREDDY GOH HIN CHOON )
in the presence of:- )
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SCHEDULE 3
Terms And Conditions Of Shareholder Loans
The following terms and conditions shall apply in respect of the loans referred
to in clause 7(A) (each a "Shareholder Loan").
1. Proportionality
Shareholder Loans shall be provided by the Shareholders on the same time
and on the same terms and conditions.
2. Availability
Shareholder Loans shall be provided to the Company at such time or times
during the term of this Agreement and in such amounts as are set out in
clause 7(A)(ii) of the Agreement. No Shareholder Loan repaid by the
Company shall be available for re-drawing.
3. Ranking
All Shareholder Loans shall constitute unsecured obligations of the
Company which rank pari passu with all other unsecured obligations of
the Company. All Shareholder Loans shall be designated in Singapore
Dollars and shall be repayable in such currency unless the Shareholders
decide otherwise.
4. Interest
Save as provided in clause 7(A)(iii) of the Agreement, no interest shall
be payable in respect of any Shareholder Loans, unless the Shareholders
unanimously decide otherwise.
5. Repayment
The Shareholder Loans shall be repayable on the occurrence of the
earlier of the following dates (and not otherwise) :-
(a) the date on which an order shall be made or a resolution shall be
passed (whichever shall first occur) for the winding-up or
dissolution of the Company.
(b) the date on which the Board shall have determined, in its
absolute discretion, such Shareholder Loans or any part thereof
shall be repayable provided, however, that the Board shall make
such determination in respect of Shareholder Loans only on a
proportionate
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basis as between the Shareholders.
6. Transferability
(a) No amount of Shareholder Loans may be transferred except in
accordance with the following provisions.
(b) If any of the Shareholders (a "Transferor") shall at any time
hereafter sell, transfer or otherwise dispose of any shares it
holds in the capital of the Company ("a Disposal"), such
Transferor on the occasion of any such Disposal shall be entitled
and obliged to transfer to the party to whom it shall make such
disposal of such shares a proportion of the Shareholder Loans
held by it equal to the proportion which the number of shares the
subject of such Disposal shall bear to the aggregate number of
such shares held by the Transferor immediately prior to such
Disposal.
(c) Each of the Shareholders agree that the restrictions set out in
paragraph (a) and (b) above shall fully and effectively bind it
in respect of all of the shares at any time held by it in the
capital of the Company in addition of its obligations under the
Articles and that also it will not make any Disposal of any such
shares to any person unless prior thereto such Shareholder and
the person to whom such Disposal is proposed to be made (the
"Transferee") shall be entered into a legally binding commitment
(in form and content to the reasonable satisfaction of the other
Shareholders) to the effect that the Transferee shall be fully
and effectively bound by the restrictions set out in this Clause
in respect of all shares held or to be held by it in the capital
of the Company at any time in the same manner as if it had been
an original party hereto (without prejudice to such obligations
of the Transferor in respect of any shares in the capital of the
Company retained by it).
7. Register
The Company shall maintain a register of the holders of Shareholder
Loans and the amount of Shareholder Loans held by them and details of
any permitted transfers thereof. Unless otherwise specifically agreed by
the Company in any particular case, the Company shall be entitled to
treat the persons registered as the holders of Shareholder Loans as the
absolute owners thereof to such persons or at their order without any
obligation to make any enquiry of any nature.
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SCHEDULE 4
SCA directors/shareholders/officers:-
1. Freddy Goh Hin Choon of Blk 202, Clementi Avenue 6, #05-63, Singapore
(120202) (referred to as "FG" in the Agreement);
2. Xavier Chong Fook Choy of Blk 96, Lorong 3, Toa Payoh, #01-48, Singapore
310096, (referred to as "XC" in the Agreement);
3. Lee Boon Leng of Blk 868, Woodlands St 83, #02-341, Singapore 730868,
(referred to as "LBL" in the Agreement");
SPM and/or ASP directors/shareholders/officers:-
4. Gilbert Raker c/o Semiconductor Packaging Materials Co. Inc., 431
Fayette Avenue, Mamaroneck, New York 10543, U.S.A., (referred to as "GR"
in the Agreement);
5. Andrew Lozyniak c/o Semiconductor Packaging Materials Co. Inc., 431
Fayette Avenue, Mamaroneck, New York 10543, U.S.A., (referred to as
"AL") in the Agreement; and
6. Leonard Johnson c/o Semiconductor Packaging Materials Co. Inc., 431
Fayette Avenue, Mamaroneck, New York 10543, U.S.A., (referred to as
"LJ") in the Agreement.
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IN WITNESS WHEREOF this Agreement has been entered into on the date
stated at the beginning.
Signed by Xavier Chong Fook Choy )
for and on behalf of ) XAVIER CHONG FOOK CHOY
Semiconductor Alliance Pte Ltd )
in the presence of:- )
CHAN YUEN LENG
Chan Yuen Leng
Advocate & Solicitor
Singapore
Signed by Gilbert D. Raker )
for and on behalf of ) GILBERT D. RAKER
Semiconductor Packaging )
Materials Co. Inc. in the presence of:- )
MAXINE BARR
Notary Public, State of New York
No. 4699017
Qualified in Westchester County
Commission Expires 3/30/97
MAXINE BARR
Signed by Freddy Goh Hin Choon )
for and on behalf of International ) FREDDY GOH HIN CHOON
Semiconductor Products Pte Ltd )
in the presence of:- )
CHAN YUEN LENG
Chan Yuen Leng
Advocate & Solicitor
Singapore
Signed by Freddy Goh Hin Choon in ) FREDDY GOH HIN CHOON
the presence of:- )
CHAN YUEN LENG
Chan Yuen Leng
Advocate & Solicitor
Singapore
Signed by Xavier Chong Fook Choy ) XAVIER CHONG FOOK CHOY
in the presence of:- )
CHAN YUEN LENG
Chan Yuen Leng
Advocate & Solicitor
Singapore
Signed by Lee Boon Leng ) LEE BOON LENG
in the presence of:- )
CHAN YUEN LENG
Chan Yuen Leng
Advocate & Solicitor
Singapore
Signed by Gilbert D. Raker ) GILBERT D. RAKER
in the presence of:- )
MAXINE BARR
Notary Public, State of New York
No. 4699017
Qualified in Westchester County
Commission Expires 3/30/97
MAXINE BARR
Signed by Andrew Lozyniak ) ANDREW LOZYNIAK
in the presence of:- )
MAXINE BARR
Notary Public, State of New York
No. 4699017
Qualified in Westchester County
Commission Expires 3/30/97
MAXINE BARR
Signed by Leonard Johnson ) LEONARD JOHNSON
in the presence of:- )
<PAGE>
<PAGE>
INTELLECTUAL PROPERTY
LICENSE AGREEMENT
THIS AGREEMENT, made as of this 28th day of August, 1996 by and between AMERICAN
SILICON PRODUCTS, INC., a Rhode Island corporation ("Licensor") and
INTERNATIONAL SEMICONDUCTOR PRODUCTS PTE LTD., a company incorporated in
Singapore ("Licensee")
W I T N E S E T H:
WHEREAS, Licensee has been formed by Semiconductor Packaging Materials
Co., Inc., the parent of Licensor, and Semiconductor Alliance Pte Ltd. pursuant
to a Joint Venture Agreement dated August 28, 1996 (the "Joint Venture
Agreement") to engage in the business of polishing and reclamation of
semiconductor wafers and the brokering of semiconductor wafers used in the
electronic industry (the "Business");
WHEREAS, Licensor is engaged in the Business in the United States and
elsewhere and possesses valuable industrial, marketing and commercial
information regarding the conduct of the Business to be conducted by Licensee
including, without limitation, drawings, formulae, test reports, operating and
test procedures, instruction manuals, tables of operating conditions,
administration procedures, marketing methods and procedures, advertising copy
and computer software programs relating to and/or used in connection with the
Business (the "Licensor's Wafer Technology");
WHEREAS, Licensee desires to obtain a license to use the Wafer
Technology in the countries listed in Schedule 1 annexed hereto (the
"Territories") and Licensor is willing to grant such a license to Licensee, upon
the terms and conditions hereinafter set forth; and
WHEREAS, capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Joint Venture Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and
legal sufficiency of which is hereby acknowledged, Licensee and Licensor agree
as follows:
SECTION 1 - GRANT
1.1 Licensor hereby grants Licensee an exclusive license in the Territories to
use Licensor's Wafer Technology to carry on its Business. Except as
provided in subsection 1.2 below, Licensee may not sublicense Licensor's
Wafer Technology without first obtaining the written consent of Licensor.
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<PAGE>
1.2 The provisions of Section 1.1 above notwithstanding, (i) Licensor and SPM
may use Licensor's Wafer Technology to the extent that they are conducting
business in the Territories on or before the date on which Licensee's
facility in Singapore commences commercial production and (ii) a Proposing
Party may require Licensee to grant a non-exclusive sublicense (but
without the right to sublicense) of Licensor's Wafer Technology licensed to
Licensee hereunder and to Licensee's Wafer Technology (defined in Section
1.3 hereof) to a Relevant Investment Entity, but only for use in such
country or countries in the Territories in which such Relevant Investment
Entity establishes a facility which uses Licensor's Wafer Technology and
Licensee's Wafer Technology.
1.3 (a) Licensor shall permit representatives of Licensee upon reasonable
notice to visit Licensor's silicon wafer reclamation facility in Rhode
Island during regular business hours and shall provide at Licensee's
request copies of any and all written materials included in Licensor's
Wafer Technology and shall answer all reasonable questions concerning
Licensor's Wafer Technology, provided that Licensor may restrict such
visits as to duration and number of people as it reasonably determines is
necessary for the orderly transfer of the Wafer Technology given the
operating requirements of Licensor. All out-of-pocket costs and expenses
incurred by Licensor in transferring Licensor's Wafer Technology to
Licensee shall be borne by Licensee.
(b) Unless otherwise agreed by Licensor, all such visits shall be completed
within six (6) months from the date hereof and the total number of
visitor-days shall not exceed thirty (30) days. Licensor shall not be
required to create any manuals or other written information regarding the
operation of Licensor's facility or Licensor's Wafer Technology for the
purpose of providing the same to Licensee.
(c) Licensor represents that Licensor's Wafer Technology disclosed or to be
disclosed by Licensee hereunder is or will be, to the best of Licensor's
knowledge and belief, accurate (provided always that the Licensor will
promptly advise Licensee of any significant errors which subsequently come
to its attention) with respect to the information disclosed to Licensee
hereunder. However, Licensee acknowledges that due to differences in the
facility operated by Licensor and the facility to be equipped and operated
by Licensee that there is no guaranty that Licensor's Wafer Technology will
be able to be used without modification by Licensee. All information
provided to Licensee under this Section or otherwise pursuant to this
Agreement whether orally or in writing shall be deemed
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confidential information except only to the extent such information is or
becomes publically available without fault of the Licensee.
SECTION 2 - CROSS-LICENSING
2.1 Any and all Knowhow and Intellectual Property Rights throughout the world
resulting from any work carried out exclusively by the Licensee or relating
to an improvement to the products produced or processes employed by
Licensee for the purpose of carrying on the Business which are exclusively
generated by Licensee ("Licensee's Wafer Technology") shall belong
exclusively to Licensee. Licensee does hereby grant to Licensor or any
successor owner of Licensor's Wafer Technology an irrevocable non-exclusive
worldwide license to Licensee's Wafer Technology (whether or not patentable
or copyrightable) free of royalty or other payment and without limit of
time, but excluding the right to grant sublicenses without first obtaining
the written consent of Licensee.
2.2 Licensee shall promptly notify Licensor of the development of Licensee's
Wafer Technology and shall provide such reasonable assistance as may be
necessary to enable Licensor to effectively use such Licensee's Wafer
Technology as Licensor may request. All out-of-pocket expenses incurred by
Licensee in transferring Licensee's Wafer Technology to Licensor shall be
borne by Licensor.
2.3 The provisions of Sections 1.3(a) and (c), 4.2(a), (b) and (c) and 5 hereof
shall apply to Licensee and Licensor with respect to the cross-licensing of
Licensee Wafer Technology mutatis mutandis.
SECTION 3 - ROYALTIES
3.1 Licensee shall pay to Licensor a royalty on the net sales of Licensee as
determined by Licensee's Auditors ("Net Sales") as follows:
(i) with effect from the date hereof to December 31, 1997, one-half of one
(0.5%) percent of Net Sales; and
(ii) with effect from January 1, 1998, one (1%) percent of Net Sales;
provided that when the aggregate amount of royalties accrues hereunder
to a sum equivalent to One Million (U.S.$1,000,000) Dollars, this
license shall be royalty free thereafter. The amount of royalty due
hereunder shall be computed annually commencing with the period ending
December 31, 1996 and shall be converted to U.S.$ from S$ at the
exchange rate published by the Asian Wall Street Journal on December
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31 of the year in question. The determination of Net Sales by the
Auditors of Licensee shall be conclusive and binding upon the parties.
Licensee shall provide to Licensor an annual statement of Licensee's
Net Sales certified by its Auditors.
3.2 Royalties which accrue hereunder shall be due and payable without interest
in sixteen (16) equal quarter-annual installments commencing on the first
day of the month only after:
(i) all loans owing by Licensee to its shareholders have been paid in
full; and
(ii) receipt of written notice from Licensor requesting Licensee to
commence making payments of the accrued royalty.
SECTION 4 - TERMS AND DEFAULT
4.1 Subject to earlier termination by reason of default of Licensee, this
Agreement shall commence as the date hereof and shall continue without
limit of time.
4.2 (a) If Licensee fails to perform its obligations hereunder or to comply
with the terms and conditions of this Agreement, Licensor shall be at
liberty to issue to the Licensee a notice specifying the breach or
default and, in the case of a breach or default capable of remedy,
stipulating a period of not less than thirty (30) days during which
such breach or default shall be remedied. For the purpose of this
subsection 4.2(a), a breach or default shall be considered capable of
remedy if the Licensee can comply with the term or condition in
question in all respects other than as to the time of performance. If
a breach or default capable of remedy is not timely cured or if a
breach or default not capable of remedy shall occur, then the Licensor
may terminate this Agreement forthwith.
(b) In the event that:
(i) the Licensee shall become insolvent; or
(ii) a resolution is passed for the winding up of Licensee; or
(iii) a proceeding has been instituted seeking a declaration that the
Licensee is bankrupt or insolvent or seeking bankruptcy,
arrangement or composition with creditors, liquidation or the
appointment of a trustee, receiver or liquidator
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or analogous procedure under any applicable law and such
proceedings remain undismissed and unstayed for a period of
sixty (60) days or are consented to by Licensee,
then a breach of this Agreement shall be deemed to have been committed by
Licensee and this Agreement shall terminate without any further action upon the
part of Licensor.
(c) Termination of this Agreement by Licensor shall be without
prejudice to its other rights or remedies hereunder with respect
to damages accrued prior to termination.
(d) All unpaid royalties shall, notwithstanding the provisions of
Section 3.2 to the contrary, become immediately due and payable
in full upon termination of this Agreement.
SECTION 5 - LICENSOR'S REPRESENTATIONS; INDEMNIFICATION
5.1 Licensor represents that it has the power, right and authority to grant
this license to Licensee and that Licensor has not received any notice nor
does it have any knowledge that Licensor's Wafer Technology infringes the
intellectual property rights or knowhow of third parties and no claims of
such infringement have been made or are the subject of litigation actual or
threatened.
5.2 Except as specifically set forth in Section 5.1 above, Licensor makes no
representation or warranty with respect to Licensor's Wafer Technology. In
no event shall Licensor be liable for lost profits or consequential damages
even if advised of the possibility thereof.
5.3 Licensee shall indemnify and hold Licensor harmless with respect to any
claims asserted by third parties against Licensor including legal fees
incurred by Licensor in defending against such claim arising out of the use
by Licensee of Licensor's Wafer Technology except for claims arising out of
a breach of the representations set forth in Section 5.1 and as to such
claims Licensor shall indemnify and hold Licensee harmless with respect
thereto including legal fees incurred by Licensee in defending against such
claims.
SECTION 6 - COMMUNICATIONS CONFIDENTIAL
6.1 All communications between Licensor and Licensee and all information and
other material supplied to or received by either of them from the other
which is either marked "confidential" or is by its nature intended to be
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exclusively for the knowledge of the recipient alone, or to be used by the
recipient only for the benefit of the other or in furtherance of the
purposes of this Agreement or the Joint Venture Agreement, including,
without limitation, Licensor's Wafer Technology or Licensee's Wafer
Technology, any information concerning the business transactions or the
financial arrangements between Licensor and Licensee, , or of any person
with whom either 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 and shall be used by the recipient
solely and exclusively for the purposes of this Agreement unless disclosure
is required by law or unless or until either party can reasonably
demonstrate that it is in the public domain through no act or default on
the part of the recipient, its servants and/or agents, whereupon, to the
extent that it is public, this obligation shall cease. In the event either
party is served with legal process requiring it to disclose any such
confidential information it shall promptly notify the other party hereto
and shall assist the other party in preventing or restricting such
disclosure.
6.2 The parties shall indemnify each other from and against any loss, damages,
charges, costs and expenses of whatever nature (including legal costs on a
full indemnity basis) suffered or incurred by the other arising from the
breach of that party of any provision of this Section or the unauthorized
use or disclosure of any confidential information by any director,
employee, agent, shareholder or Related Party of that party.
6.3 The parties shall take all reasonable steps to minimize the risk of
disclosure of confidential information, by ensuring that only their
directors and employees whose duties will require them to possess any of
such information shall have access thereto, and that they shall be
instructed to treat the same as confidential. The parties shall in addition
procure that such of its employees whose duties will require them to
possess, or have access to, confidential information, shall sign
confidentially agreements with it respecting the confidentiality of such
information.
6.4 The obligations contained in this Section 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.
SECTION 7 - GENERAL PROVISIONS
(a) Each party acknowledges to the other that it has not entered into this
Agreement in reliance upon any warranties,
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representations or assurances (whether express or implied and whether
written or oral) other than those contained in this Agreement.
(b) The parties hereto agree and declare that this Agreement constitutes the
entire agreement concerning the subject matter hereof and supersedes all
earlier agreements concerning the same.
(c) This Agreement may not be altered, modified or amended unless such
alteration, modification or amendment is in writing and signed by the
parties to this Agreement nor, except as otherwise specifically set forth
herein, may this Agreement be terminated except by a writing signed by the
parties to this Agreement; and no waiver of any breach, condition,
provision or term of this Agreement on any one occasion shall be deemed to
be a waiver of any subsequent breach, condition, provision or term of this
agreement on any other occasion whether of like or different nature.
(d) This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York applicable to agreements executed in and to
be performed entirely within the State of New York without giving effect to
the principles of conflict of laws thereof.
(e) (i) The captions set forth in this Agreement are for convenience only and
shall not be considered as part of this Agreement or as in any way
limiting or amplifying the terms and provisions hereof.
(ii) This Agreement shall be construed according to its fair meaning as if
prepared jointly by the parties hereto.
(iii) Each section, subsection and lesser section of this Agreement
constitutes a separate and distinct undertaking, covenant and/or
provision hereof.
(iv) If any provision of this Agreement is held invalid, such invalidity
shall not affect the other provisions hereof which can be given
effect without the invalid provisions, and, to this end, the
provisions of this Agreement are intended and shall be deemed
severable. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties
hereby waive
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any provision of law which render any provision of this Agreement
prohibited or unenforceable in any way. In the event any such
provision is found to be unlawful or otherwise unenforceable, the
parties hereto agree to negotiate in good faith to modify the void or
unenforceable provision, but only to the extent necessary to make
such provision valid and enforceable having full regard for all
applicable laws and the interests and purposes of the parties in
entering into this Agreement. In the event the parties cannot agree
upon such modification then such dispute shall be submitted to
expedited arbitration pursuant to Section 7(j) hereof.
(v) This Agreement may be executed in counterparts, each of which shall
be deemed an original, and all of which shall constitute but one and
the same instrument which may be sufficiently evidenced by one
counterpart.
(f) (i) In the event that a change, occurring after the date first set forth
above, in the governmental laws and regulations to which either party
is subject requires such party to alter its performance under this
Agreement in any material respect or in the event that performance
by one of the parties is substantially hindered or prevented by force
majeure such as Acts of God, strikes, failure of suppliers to perform
or other acts beyond the reasonable control of the party effected
thereby, such party shall give immediate written notice to the other
party specifying the manner in which such performance is to be
altered and the reasons for such alteration.
(ii) No later than thirty (30) days after receipt of written notice
pursuant to Section 7(f)(i) the party receiving such notice shall,
upon written notice to the other party to this Agreement, be entitled
to an equitable adjustment of its rights and obligations under this
Agreement. In the event the parties cannot agree on such equitable
adjustment, then such dispute shall be submitted to expedited
arbitration pursuant to the provisions of Section 7(j) hereof.
(g) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns; provided,
however, that no party may make any assignment of this Agreement or any
interest therein or sublicense its rights hereunder (except as specifically
provided above) by operation of law or otherwise, without the prior written
consent of the other party except if a party desires to assign this
Agreement to a Related Party, such consent shall not be unreasonably
withheld and provided
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further that Licensor may assign this Agreement without the consent of
Licensee to any entity which acquires Licensor's Wafer Technology.
(h) Each party hereto shall bear its own legal and other costs in connection
with the preparation and negotiation of this Agreement.
(i) Nothing herein will create an agency relationship or a partnership
relationship between the parties, and neither party shall be entitled
to legally bind the other with respect to any obligation other than as
expressly set forth in this Agreement, which is entered into for the
limited purposes described herein.
(j) The parties agree to arbitrate any and all claims, controversies or
disputes arising under or out of this Agreement or relating in any way
thereto. All such claims, controversies or disputes shall be submitted to
arbitration in the City of New York, State of New York, to three (3)
arbitrators designated under and pursuant to the Rules of the American
Arbitration Association, and the arbitration shall be heard under the
auspices of said Association and subject to its rules. The arbitrators
shall have the power to award costs and counsel fees. The parties consent
to the jurisdiction of the Courts of the State of New York located in the
County of New York or the United States District Court for the Southern
District of New York with respect to any and all proceedings relating to
any such arbitration, and further agree that any and all process and
notices of motion or applications in relation to any such arbitration may
be served upon a party as provided in Section 7(k) hereof. Such service may
be accomplished either within or without the State of New York, and such
notice shall be given of all applications and hearings as is provided by
the laws of the State of New York. The award of the arbitrators shall be
final and binding upon the parties and judgment thereon may be entered as
provided by the laws of the State of New York. The foregoing
notwithstanding, either party may apply to any court of competent
jurisdiction for an injunction pending the award of the arbitrators.
(k) All notices, demands or other communications required or permitted to be
given or made hereunder shall be in writing and delivered personally or by
overseas courier or sent by prepaid registered post (by air-mail if to or
from an address outside Singapore) with recorded delivery, or by facsimile
transmission addressed to the intended recipient thereof at its address or
at its facsimile number set out in this Agreement (or to such other address
or facsimile number as a party to this Agreement may from time to time duly
notify the others in writing). Any such notice, demand or
9
<PAGE>
<PAGE>
communication shall be deemed to have been served (if delivered personally
or given or made by facsimile) immediately or (if given or made by letter
or by overseas courier) 96 hours after posting or delivery to the courier
or (if made or given by air-mail) ten days after posting and in proving the
same it shall be sufficient to show that the envelope containing the same
was duly addressed, stamped and posted. The addresses and facsimile numbers
of the parties hereto for the purpose of this Agreement are:
American Silicon Products, Inc.
c/o Semiconductor Packaging Materials Co., Inc.
431 Fayette Avenue
Mamaroneck, New York 10543
U.S.A.
Facsimile Number: (914) 698-5386
Attention: President
International Semiconductor Products Pte Ltd
135 Middle Road #05-13/14
Singapore 188975
Facsimile Number: 3385633
Attention: Managing Director
(l) 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 either of the parties
shall not constitute a waiver by such party of the right to pursue any
other available remedies.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the year
and date first above written.
INTERNATIONAL SEMICONDUCTOR AMERICAN SILICON PRODUCTS,
PRODUCTS PTE LTD INC.
By: ___________________________ By: _________________________
10
<PAGE>
<PAGE>
SCHEDULE 1
THE TERRITORIES
Territories currently constituting:
1. Bangladesh, People's Republic of
2. Bhutan
3. Brunei Darussalam Negara
4. Cambodia, People's Republic of
6. Hong Kong
7. India, Republic of
8. Indonesia, Republic of
9. Korea, Democratic People's Republic of (North Korea)
10. Korea, Republic of (South Korea)
11. Laos, People's Democratic Republic
12. Malaysia
13. Pakistan, Islamic Republic of
14. Philippines, Republic of
15. Singapore, Republic of
16. Sri Lanka, Democratic Socialist Republic of
17. Taiwan (Republic of China)
18. Thailand, Kingdom of
19. Vietnam, Socialist Republic of
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,165
<SECURITIES> 0
<RECEIVABLES> 6,693
<ALLOWANCES> 134
<INVENTORY> 8,312
<CURRENT-ASSETS> 19,766
<PP&E> 20,535
<DEPRECIATION> 5,883
<TOTAL-ASSETS> 51,528
<CURRENT-LIABILITIES> 8,182
<BONDS> 8,552
0
0
<COMMON> 628
<OTHER-SE> 34,473
<TOTAL-LIABILITY-AND-EQUITY> 51,528
<SALES> 24,862
<TOTAL-REVENUES> 35,436
<CGS> 17,692
<TOTAL-COSTS> 23,207
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 654
<INCOME-PRETAX> 5,759
<INCOME-TAX> 2,233
<INCOME-CONTINUING> 3,526
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,526
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
</TABLE>
