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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the fiscal year ended December 31, 1996
or
[] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to __________________
Commission file Number 1-13828
MEMC ELECTRONIC MATERIALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1505767
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 PEARL DRIVE (CITY OF O'FALLON), ST. PETERS, MISSOURI 63376
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (314) 279-5500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
$.01 PAR VALUE COMMON STOCK NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(Title of class)
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. [X] Yes [] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based upon the closing price of such stock on March 3, 1997, as
reported by the New York Stock Exchange, was approximately $477 million.
The number of shares outstanding of the registrant's Common Stock as of
March 3, 1997 was 41,436,066 shares.
________________________________
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Stockholders for the
fiscal year December 31, 1996 (Part I, Part II, and Part IV of Form 10-K).
(2) Portions of the registrant's Notice of Annual Meeting of Stockholders
and Proxy Statement dated March 24, 1997 (Part III of Form 10-K).
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PART I
ITEM 1. BUSINESS
GENERAL
MEMC Electronic Materials, Inc. (MEMC or the Company) is a leading
worldwide producer of silicon wafers used in the manufacture of semiconductors
that are employed in all types of microelectronic applications, including
computer systems, telecommunications equipment, automobiles, consumer
electronics products, industrial automation and control systems, and analytical
and defense systems. The Company operates manufacturing facilities, directly
or through joint ventures, in China, Italy, Japan, Malaysia, South Korea,
Taiwan and the United States, and sells its products to most of the world's
largest manufacturers of semiconductors. MEMC is the leading worldwide
supplier of silicon wafers outside of Japan and is the only non-Japanese
silicon wafer manufacturer with manufacturing and research facilities in Japan.
MEMC was incorporated in 1984 under the name Dynamit Nobel Silicon
Holdings, Inc. (DNS). Huls AG, a subsidiary of VEBA AG, subsequently acquired
ownership of DNS. In 1989, Huls AG, through DNS and other related companies,
acquired the electronic materials businesses operated by Monsanto Company
(Monsanto) in the United States, Europe, Japan and Malaysia. Huls AG changed
the name of DNS to MEMC Electronic Materials, Inc. and combined the assets
acquired from Monsanto with the assets of its U.S. and Italian silicon wafer
business to form the current MEMC. VEBA Corporation, an affiliate of Huls AG,
acquired all of the outstanding common stock of MEMC from Huls AG in 1990,
which it subsequently transferred to its subsidiary, Huls Corporation, in 1993.
On July 12, 1995 the Company completed an initial public stock offering of
19.55 million shares of common stock at an initial offering price of $24 per
share. As a result of the public stock offering, Huls Corporation's ownership
of the Company was reduced to 51.9%.
PRODUCT
The silicon wafers manufactured in quantity by the Company vary in
diameter, surface features (polished or epitaxial), composition, electrical
properties and method of manufacture. MEMC's silicon wafers are manufactured
according to the exacting specifications required by its customers, and the
Company currently produces wafers with a variety of product features satisfying
more than 1,000 unique product specifications. Wafers of larger diameter and
more stringent technical specifications are required by semiconductor
manufacturers in order to produce increasingly complex semiconductor devices
such as the larger megabit memory chips and microprocessors.
The processes utilized by the Company's customers in manufacturing
such semiconductor devices have become more expensive, leading to their
increased focus on efficient semiconductor production processes. Because many
semiconductor devices, or chips, are made from the same wafer, and because all
chips from a particular wafer are manufactured and processed simultaneously at
each stage in the device manufacturing process, the larger sized wafers allow
for a greater yield from the same semiconductor manufacturing process and allow
semiconductor manufacturers to spread their fixed costs of production over a
larger volume of finished products. For example, a 150mm (6 inch) wafer has a
surface area of approximately 27.4 square inches, whereas a 200mm (8 inch)
wafer has a surface area of approximately 48.7 square inches, or approximately
78% more surface area than the 150mm wafer. Despite the industry's focus on
150mm and larger diameter wafers, the Company continues to manufacture and sell
a significant amount of 100mm (4 inch) and 125mm (5 inch) wafers.
The Company's silicon wafers fall into one of three general types:
Prime Polished Wafers
The Company's principal product is its prime polished wafer, which is
a highly refined and pure silicon wafer with an ultraflat and ultraclean
surface. Prime polished wafers undergo a sophisticated chemical-mechanical
polishing process that removes defects and leaves an extremely smooth surface
suitable for the advanced technologies used by the Company's customers. MEMC's
prime polished wafers are used by the Company's customers in a broad range of
applications.
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The Company manufactures prime polished wafers in sizes ranging from
100mm to 200mm in diameter. The larger diameter wafers are used in more
sophisticated applications where semiconductor manufacturers benefit from the
increased efficiencies and greater number of available die per wafer.
Epitaxial Wafers
In order to incorporate more complex functionality in the integrated
circuit, as well as to improve performance (which is affected by the distance
signals travel through the circuitry) and to control power consumption and heat
production, semiconductor manufacturers are forced to use smaller and smaller
device features. The Company manufactures epitaxial wafers to serve the
technological demands of its customers that manufacture advanced
semiconductors. Epitaxial wafers consist of a thin, single-crystal silicon
layer grown on the polished surface of the basic wafer substrate. The
substrate, which is designed to have different composition and electrical
properties from the layer of single-crystal silicon on the wafer surface, among
other things, helps to improve isolation between circuit elements fabricated on
the silicon film surface of the wafer. One result of such smaller devices is
the requirement that the distance between circuit elements (referred to as line
widths) becomes increasingly narrow. A critical aspect in the construction of
any integrated circuit device is the isolation of these different elements that
comprise the integrated circuit device. Without sufficient isolation of the
various elements, the elements could communicate electrically with each other,
which could render the device inoperable. The improved isolation provided by
epitaxial wafers allows for increased reliability of the finished semiconductor
device, greater efficiencies during the semiconductor manufacturing process,
and ultimately more complex integrated circuit devices.
Test/Monitor Wafers
Test/monitor wafers (monitor wafers) are principally supplied by the
Company to its customers for their use in testing semiconductor fabrication
lines and processes. Although monitor wafers are substantially the same as
prime polished wafers with respect to cleanliness, and in some cases, flatness,
other specifications are generally less rigorous, allowing for economies in
manufacturing. In addition, monitor wafers are generally produced from the
portion of a silicon ingot that does not meet customer specifications for the
production of wafers to be used for the manufacture of semiconductors.
Therefore, sales of monitor wafers allow the Company to experience a higher
yield from each silicon ingot produced.
NEW PRODUCTS
During 1996, two industry consortia were organized and funded by the
leading semiconductor manufacturers for the purpose of evaluating 300mm (12
inch) equipment and materials. Also in 1996, the principal silicon wafer
producers, including MEMC, announced plans to develop 300mm products to meet
future market demand.
MEMC is one of the industry leaders in the development of the next
generation of polished silicon wafers, having first produced 300mm diameter
wafers in 1991. 300mm wafers have over twice the surface area of 200mm
wafers, and will provide significant processing economies to device makers.
The Company's technologists are developing new equipment and improved processes
in all of the key manufacturing operations from crystal growing through final
packaging.
The first phase of the Company's 300mm project is now in start-up and
includes a pilot line with dedicated equipment. When the product development is
complete, it is anticipated this next generation wafer will be flatter, cleaner
and smoother than any available today and will permit the Company's customers
to enter the next generation of their device technology. MEMC is currently
manufacturing and selling 300mm wafers to equipment makers, industry consortia
and device makers.
The two industry consortia and their member companies have publicly
communicated their plans to purchase evaluation quantities of 300mm wafers in
1997. Industry surveys indicate that the 300mm wafer market will begin to ramp
up near the turn of the century.
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The Company also is currently conducting research and development of
silicon-on-insulator (SOI) wafers. SOI technology employs an intermediate
insulating layer of oxygen between the basic wafer substrate and the thin
surface layer of silicon in which the integrated circuit device is located.
This insulating layer is intended to virtually eliminate problems relating to
circuit element isolation. The incorporation of a buried insulating layer also
is intended to provide a number of other potential advantages for the most
advanced applications that are not provided by epitaxial wafers, including
operation at substantially higher speeds with improved reliability while
consuming less power and operating at very low supply voltages. The insulating
layer also is intended to allow the portion of the conventional device
manufacturing process devoted to achieving isolation between circuit elements
to be simplified, resulting in a process with fewer steps and a circuit with
smaller dimensions. This should result in cost savings for semiconductor
manufacturers from reduced processing time and increased yield.
RAW MATERIALS
Polysilicon is the predominant raw material used in the production
process. The Company produces approximately half of its total polysilicon
requirements and purchases the remainder of its requirements from third
parties. The availability of polysilicon is primarily dependent upon the
adequacy of manufacturing capacity, as the basic materials from which
polysilicon is derived are readily available. The Company believes that an
adequate supply of polysilicon in 1997 will be obtained through internal
sourcing and purchase contracts with third parties.
The Company was the first manufacturer to successfully use granular
polysilicon. Granular polysilicon has fluid-like transport properties and
minimizes contamination risks due to reduced handling, which enhances the
crystal growth process for larger diameter wafers. MEMC owns the only granular
polysilicon plant in the world today.
MANUFACTURING PROCESS
Silicon wafers for the semiconductor industry are extremely complex
materials with characteristics such as high purity levels, crystallographic
perfection and precise mechanical tolerances. Electronic grade silicon is one
of the most refined materials in the world, having an impurity level of no more
than one part per billion. Requirements for crystallographic perfection,
mechanical tolerances and cleanliness in the manufacture of silicon wafers are
at levels that stretch manufacturing processes to the limits of measurement,
and necessitate that certain processes be conducted in state of the art "clean
rooms." The silicon wafer manufacturing process is comprised of three
principal phases: the crystal growth process, the wafer slicing process and the
wafer finishing process.
Crystal Growth Process
The first step in the wafer manufacturing process is the formation of
a large, silicon single crystal or ingot. This process commences with the
melting of polysilicon, together with minute amounts of electrically active
"dopant" elements such as arsenic, boron, phosphorous or antimony in a quartz
crucible.
Once the melt has reached the desired temperature, a perfect silicon
crystal, or "seed" is lowered into the melt. The melt is slowly cooled to the
required temperature, and crystal growth begins around the seed. As the growth
continues, the seed is slowly extracted or "pulled" from the melt. The
temperature of the melt and the speed of extraction govern the diameter of the
ingot, and the dopant concentration in the melt governs the electrical
properties of the silicon wafers to be made from the ingot. This is a complex,
proprietary process requiring many control features on the crystal-growing
equipment.
Wafer Slicing Process
After the ingots are grown, they are extracted from the crystal
pulling furnaces and allowed to cool. The ingots are then ground to the
specified diameter, following which the ingots are sliced into thin wafers.
Next, a multi-step process using precision lapping machines, edge contour
machines and chemical etchers prepares the wafers for the surface polishing
steps.
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Wafer Finishing Process
Final polishing and cleaning processes give the wafers the clean,
defect-free, and superflat mirror polished surfaces required for the
fabrication of semiconductor devices. For wafer polishing, the Company
currently uses its proprietary, ninth-generation polishers together with its
innovative colloidal silica chemical-mechanical polishing process. Polishing
with colloidal silica solutions was one of MEMC's early inventions that first
allowed solid state devices to move from individual circuits to the
complexities of today's integrated circuits. Some of the Company's products are
further processed by the deposition of a thin, electrically different layer of
silicon on the polished surface of the wafer to make epitaxial wafers.
RESEARCH AND DEVELOPMENT
The Company's current research and development efforts are driven by
its business strategy and focus mainly on the development and improvement of
large diameter and advanced silicon wafer products and manufacturing processes,
enhancement of existing products and increases in efficiency. The Company works
closely with customers in developing new products and refining existing
products in order to attempt to meet the needs of the marketplace. Recent
products and innovations of the Company's research and development program
include the use of granular polysilicon in its production processes and
development of 300mm diameter wafers. The Company is also developing processes
to reduce microdefects in crystals, and recently introduced Submicron
Application Crystal to the market. Further improvements are also being made in
the polishing process and processes to improve productivity of the Company's
single slice epitaxial reactors.
The market for silicon wafer products is characterized by rapid
technological change and product innovation. MEMC believes that continued and
timely development of new products and enhancements to existing products is
necessary for it to maintain its competitive position. Accordingly, the Company
devotes a significant portion of its resources to research and development
programs and seeks to maintain close relationships with its customers to remain
responsive to their product needs. Expenditures for product development
activities (both in the laboratory and on the manufacturing line that are
included in marketing, administration and technology expenses and in cost of
goods sold, respectively) during 1996, 1995 and 1994, excluding expenditures by
the Company's joint ventures, were $61.3 million, $46.0 million, and $40.4
million, respectively, representing 5.5%, 5.2% and 6.1% of the Company's net
sales for the respective periods.
MARKETING AND SALES
MEMC markets substantially all of its product through a direct sales
force. The Company believes an essential element of its marketing strategy is
its establishment and maintenance of close relationships with its customers
through multi-functional teams comprised of technical, marketing and sales, and
manufacturing personnel. These teams work closely with customers in developing
their new production facilities, qualifying the Company's products for use at
such new facilities and maintaining qualification at all existing manufacturing
facilities. Sales are principally completed pursuant to indicative-only,
one-year contracts that indicate expected volumes and specify price.
The Company's close relationships with its customers are necessitated
in part by the lengthy and expensive "qualification" process pursuant to which
silicon wafer manufacturers, and their individual facilities, are qualified to
become suppliers of a particular product to their customers. The Company is
aware of changing customer needs and targets its manufacturing to produce
wafers uniquely tuned to each customer's process and requirements. For 1996,
over half of the Company's sales were generated by the following ten customers:
Chartered Semiconductor, Fujitsu Limited, International Business Machines
Corporation (IBM), LG Semicon Co., Ltd., Motorola, Inc., National
Semiconductor Corporation, Philips Electronics N.V., Samsung Electronics Co.,
Ltd. (Samsung), SGS-Thomson Microelectronics N.V. and Texas Instruments, Inc.
(Texas Instruments). Texas Instruments individually exceeded 10% of the
Company's sales in 1996. The highest rate of future growth in the
semiconductor market is expected to be in the Asia Pacific region. The Company
believes it is well positioned in the Asian market with manufacturing
facilities or joint ventures in Japan, Malaysia, South Korea and Taiwan.
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COMPETITION
The silicon wafer manufacturing industry is highly competitive.
Significant competitive factors in the silicon wafer market include quality,
reliability and device line performance, flexibility, price, the size of each
manufacturer's qualified customer base, available capacity, customer support
and breadth of product line. The Company believes that it competes favorably in
each of these areas. The Company also believes its presence with manufacturing
facilities in all key world areas gives it a competitive edge.
In many instances, the Company must compete for customers who have
already made substantial financial and operational commitments to products
offered by the Company's competitors. To sell its products to these customers,
the Company must demonstrate that the performance and other benefits of its
products justify the costs associated with the lengthy qualification process.
Additionally, three of the Company's customers produce a portion of their own
requirements for silicon wafers.
The Company believes that its wafers are highly competitive with other
products in the marketplace. However, the Company's competitors can be expected
to continue to improve the design and performance of their products and to
introduce new products with competitive performance characteristics.
STRATEGIC ALLIANCES
MEMC has entered into a number of strategic alliances as part of its
strategy to leverage its capital, to enter expanding markets, to forge closer
working relationships with its principal customers and to broaden the
geographic diversification of its operations. The Company has entered into
alliances with prominent partners around the world, such as China Sijia
Semiconductor Materials Corporation, China Steel Corporation (China Steel),
IBM, Khazanah Nasional Berhad, Pohang Iron and Steel Co., Ltd. (POSCO), Samsung
and Texas Instruments. The Company's investments in its less than majority
owned joint ventures with POSCO and Samsung (POSCO HULS Company Limited -- PHC)
and with China Steel (Taisil Electronic Materials Corporation -- Taisil) are
accounted for using the equity method of accounting.
In 1996, MEMC formed a new joint venture company, MEMC Kulim
Electronic Materials Sdn Bhd (MEMC Kulim), 75% owned by the Company and 25%
owned by Khazanah Nasional Berhad, an investment unit of the Malaysian
government. MEMC Kulim will be located within the newly established Kulim High
Technology Park near the city of Penang in Northern Malaysia. The Company
anticipates that MEMC Kulim will be a key component of the Company's large
diameter strategy, and believes that it will satisfy the growing market in
South Asia by providing a strong, low cost base to support MEMC's further
penetration into the Japanese market, and establishing a location where
increments of capacity can be installed quickly and cost effectively. The
joint venture will consist of a fully integrated large diameter facility, from
crystal growing through polishing. Construction of MEMC Kulim will be timed to
meet market needs.
The Company also formed a joint venture company in December, 1995 with
China Sijia Semiconductor Materials Company (CSMC). The venture, MCL, will
produce small diameter product after the renovation of an existing CSMC
production line in Luoyang, China. MEMC owns 60% of MCL. The Company believes
that MCL will be a low cost source of small diameter wafers and will provide
MEMC with joint venture and production experience in China.
BUSINESS RISKS AND UNCERTAINTIES
In addition to the risk factors discussed elsewhere in this Annual
Report on Form 10-K, the following are important risk factors which could cause
actual results and events to differ materially from those contained in any
forward-looking statement made by or on behalf of the Company.
Impact of Downturns in the Semiconductor Industry
The Company's business depends in large part upon market demand for
semiconductors and products utilizing semiconductors. The semiconductor
industry historically has been cyclical and has experienced periodic downturns,
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which have had an adverse impact on the semiconductor industry and suppliers to
the semiconductor industry -- including manufacturers of silicon wafers. Prior
semiconductor industry downturns have adversely affected the Company's
operating results. The Company believes that its strategy of geographic
diversification of operations may partially reduce the effect of regional
downturns in the semiconductor industry. However, the Company's operating
results will be adversely affected by any future downturns in the semiconductor
industry. In addition, the Company's significant investment in property and
equipment, continued investment in engineering, research and development,
expanded capacity and marketing necessary to penetrate targeted markets and to
maintain extensive worldwide customer service and support capabilities limits
the Company's ability to reduce expenses during downturns.
Capacity Expansions
The Company is currently expanding its manufacturing facilities at
certain of its locations around the world and continues to make investments in
its joint ventures for the purpose of funding capital expenditures by such
joint ventures. These capacity additions require significant capital
investment and result in a significant increase in fixed and operating
expenses. In addition, the Company has incurred additional indebtedness to
partially finance such expenditures and investments. If there is insufficient
demand for the silicon wafers produced in the Company's new or expanded
facilities or if revenue levels do not increase sufficiently to offset these
additional costs, the Company's operating results would be adversely impacted.
The Company believes that its principal competitors are rapidly
increasing manufacturing capacity, principally with respect to 200mm wafer
manufacturing facilities. There can be no assurance that expansion by the
Company and its competitors will not lead to overcapacity in the Company's
target markets, which could cause declines in product prices that would
adversely affect the Company's operating results.
Highly Competitive Industry
The silicon wafer industry is highly competitive. The Company faces
substantial competition from established silicon wafer manufacturers throughout
the world, some of which have substantial financial, technical, engineering and
manufacturing resources, and particularly from very large, well-capitalized
Japanese manufacturers. The Company believes that the Japanese companies with
which it competes benefit from their dominance of the technically advanced
Japanese market, which represented approximately 40% of the worldwide silicon
wafer market in 1996. In particular, Shin-Etsu Handotai is the largest
supplier of silicon wafers in Japan and the world, providing it with the sales
and technology base to compete effectively throughout the world. If the
Company were unable to continue to compete effectively with Japanese silicon
wafer manufacturers, then the Company's operating results would be adversely
affected.
The Company competes principally on the basis of technical innovation
and product quality and performance, as well as customer service, price and
product availability. The Company's competitors can be expected to continue to
improve the design and performance of their products and to introduce new
products with competitive price and performance characteristics. Competitive
pressures or downturns in the semiconductor industry may necessitate price
reductions which could adversely affect the Company's operating results.
Although the Company believes that it has certain technological,
geographic and other strengths over its competitors, realizing and maintaining
such strengths will require a continued high level of investment by the Company
in engineering, research and development, marketing and customer service and
support and increased manufacturing capacity. An inability to maintain such
investments could have an adverse affect on the Company's operating results.
The Company may be required to seek additional equity or debt financing to fund
these investments. There can be no assurance that such additional financing
will be available when needed, or if available, will be on satisfactory terms.
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Limited Number of Principal Customers
Historically, the Company has sold a significant portion of its
products to a limited number of principal customers. In 1996, over half of its
sales were generated by ten customers. Likewise, the majority of PHC's sales
were to one customer. There can be no assurance that the Company and PHC will
realize equivalent sales from their top customers in the future. The loss of,
or a significant curtailment of purchases by, one or more top customers could
have a material adverse effect on the Company's operating results.
Changing Customer Specifications
The silicon wafer industry is subject to rapid technological change,
new and enhanced product specification requirements and manufacturing
processes, as well as evolving industry standards. The Company's ability to
remain competitive will depend upon its ability to develop technologically
advanced products and processes, and to meet the increasingly demanding
requirements of its customers on a cost effective basis. As a result, the
Company expects to continue to make a significant investment in engineering and
research and development. Despite its past successes, there can be no
assurance that the Company will continue to be successful in the introduction,
marketing and cost-effective manufacture of any of its new products, or that
the Company will be able to develop new or enhanced products and processes that
satisfy customer needs or achieve market acceptance. The failure to develop,
enhance and introduce products and manufacturing processes successfully could
adversely affect the Company's competitive position and operating results.
Manufacturing
Disruption of operations at any of the Company's primary manufacturing
facilities, including work stoppages, fire, flood or shortages of raw materials
or supplies, would cause delays in or cancellations of shipments of silicon
wafers. There can be no assurance that alternate capacity would be available
on a timely basis or at all, thereby potentially resulting in a loss of
customers. The disruption of operations for those or other reasons could
adversely affect the Company's operating results.
International Operations
The Company expects that international sales will continue to
represent a significant percentage of its total sales. In addition, a
significant portion of its manufacturing operations is located outside of the
United States. International sales and operations may be adversely affected by
the imposition of governmental controls, fluctuations in the U.S. dollar that
could affect the sales prices and manufacturing costs in local currencies of
the Company's products in foreign markets, export license requirements,
restrictions on the export of technology, political instability, trade
restrictions, changes in tariffs and difficulties in staffing and managing
international operations. Although the Company generally hedges receivables
denominated in currencies other than the U.S. dollar at the time of sale by
entering into forward exchange contracts, there can be no assurance that
exchange rate fluctuations will not have an adverse effect on the Company's
operations in the future. Although the Company believes that the geographical
distribution of its operations may limit the effects on the Company from
regulatory, political and other factors, there can be no assurance that such
factors will not adversely impact the Company's operations in the future or
require the Company to modify its current business practices.
Dependence on Certain Suppliers
The Company obtains certain of its raw materials from a limited number
of suppliers. Although the supply of the Company's principal raw material,
polysilicon, had recently been constrained throughout the industry, tightness
in the supply of polysilicon did not have a material effect on the Company.
The Company believes that it has developed reliable sources for all of its raw
materials and that qualified alternative sources could be obtained to supply
such materials. Although the Company currently produces approximately half of
its polysilicon and sources a substantial portion of the remainder under
multi-year contracts with major polysilicon producers, a prolonged inability to
obtain raw materials, such as polysilicon, or increases in the prices of raw
materials resulting from tight supplies, could have an adverse effect on the
Company's operating results.
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Proprietary Information and Intellectual Property
The Company believes that the success of its business depends
primarily on its proprietary technology, information and processes and
know-how, rather than on patents or trademarks. Nevertheless, the Company
attempts to protect its intellectual property rights with respect to its
products and manufacturing processes through patents, trademarks and trade
secrets when appropriate as part of its ongoing research, development and
manufacturing activities, and has increased its efforts to obtain patent
protection for its technology in response to an increase in patent applications
by the Company's competitors. Much of the Company's proprietary information
and technology relating to the manufacturing process is not patented and may
not be patentable. Therefore, there can be no assurance that the Company will
be able to adequately protect its technology, that competitors will not be able
to develop similar technology independently, that the claims allowed on any
patents held by the Company will be sufficiently broad to protect the Company's
technology or that foreign property laws will adequately protect the Company's
intellectual property rights.
EMPLOYEES
At December 31, 1996, the Company had approximately 7,000 full-time
employees and 100 temporary workers worldwide. MEMC has not experienced any
material work stoppages at any of its facilities during the last several years.
The Company believes its relationships with its employees are satisfactory.
GEOGRAPHIC INFORMATION
Information regarding MEMC's foreign and domestic operations is
contained in Note 18 on page 33 of the Company's 1996 Annual Report to
Stockholders (the 1996 Annual Report), which information is incorporated herein
by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers is contained in Item 10 of
Part III of this Report (General Instruction G) and is incorporated herein by
reference.
ITEM 2. PROPERTIES
The Company's principal executive offices are located at 501 Pearl
Drive (City of O'Fallon), St. Peters, Missouri 63376, and its telephone number
at that address is (314) 279-5500. The principal manufacturing and
administrative facilities of the Company and its joint ventures currently
comprise approximately 3.5 million square feet and are situated in the
following locations:
Location Square Footage Ownership
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St. Peters, MO, USA 729,000 owned*
Spartanburg, SC, USA 309,000 owned
Santa Clara, CA, USA 66,000 leased
Sherman, TX, USA 212,000 leased
Pasadena, TX, USA 305,000 leased
Luoyang, China 82,000 leased
Merano, Italy 318,000 owned
Novara, Italy 302,000 owned
Utsunomiya, Japan 173,000 owned
Kuala Lumpur, Malaysia 76,000 leased
Kulim, Malaysia (future land leased
construction)
Chonan, South Korea 442,000 owned
(PHC joint venture)
Hsinchu, Taiwan land leased,
(Taisil joint venture) 449,000 building owned
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* A portion of the St. Peters facility is currently leased with an option to
purchase, pursuant to an industrial revenue bond financing.
The Company believes that its existing facilities and equipment are
well maintained, in good operating condition and are adequate to meet its
current requirements. The extent of utilization of such facilities varies from
plant to plant, and from time to time during the year.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company
is a party or to which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The narrative or tabular information regarding the market for the
Company's common equity and related stockholder matters required by this item
is set forth under Note 17, "Unaudited Quarterly Financial Information", and
under "Stockholder Information" on pages 32 and 38, respectively, of the
Company's 1996 Annual Report, which information is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The tabular information (including the footnotes thereto) required by
this item is set forth under "Five Year Selected Financial Data" on page 10 of
the Company's 1996 Annual Report, which information is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth on pages 11 through
14 of the Company's 1996 Annual Report, which information is incorporated
herein by reference. In addition, the information contained in the "Safe
Harbor Statement" section of the "Stockholder Information" on page 38 of the
Company's 1996 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company appearing on pages
15 through 33, and the Independent Auditors' Report thereon of KPMG Peat
Marwick LLP appearing on page 35 of the Company's 1996 Annual Report, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
9
<PAGE> 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A definitive proxy statement will be filed with the Securities and
Exchange Commission within 120 days of year-end (the 1997 Proxy Statement).
The information required by this item with respect to directors will be set
forth in the 1997 Proxy Statement, and is incorporated herein by reference.
The following is a list, as of March 1, 1997, of the names and ages of
the executive officers of MEMC and all positions and offices with the Company
presently held by the person named. There is no family relationship between
any of the named persons.
Name Age All Positions and Offices Held
---- --- ------------------------------
Ludger H. Viefhues 54 Chief Executive Officer and Director
Dr. Robert M. Sandfort 54 President, Chief Operating Officer and
Director
James M. Stolze 53 Executive Vice President and Chief
Financial Officer
Dr. Werner Schmitz 57 Executive Vice President
Tom L. Cadwell 51 Corporate Vice President
Marcel Coinne 56 Corporate Vice President
Charles W. Cook, Jr. 52 Corporate Vice President
Dr. John P. DeLuca 54 Corporate Vice President
Ralph D. Hartung 53 Corporate Vice President
Helene F. Hennelly 50 Corporate Vice President, General Counsel
and Secretary
Jonathon P. Jansky 45 Corporate Vice President
Paul V. Pastorek 50 Corporate Vice President
Huston E. Sherrill 54 Corporate Vice President
Dr. Kiyoo Shimada 54 Corporate Vice President
Lori S. Nye 43 Vice President
Each executive officer has held the same position or another executive
position with the Company during the past five years, except as set forth in
the 1997 Proxy Statement or as follows:
Mr. Stolze was a partner with KPMG Peat Marwick LLP from 1977 until
joining the Company in June, 1995. Dr. Schmitz was Head of Controlling,
Plastics Division of Huls AG (an affiliate of the Company) from 1986 until 1992,
and joined the Company in March, 1993 as a Corporate Vice President. Dr.
Schmitz became an Executive Vice President in June, 1995. Dr. DeLuca served as
Director, Manufacturing Technology from May, 1992 to November, 1994, and has
been a Corporate Vice President since November, 1994. Ms. Hennelly has been a
Corporate Vice President since May, 1996. Mr. Jansky served as Plant Manager of
MEMC's St. Peters facility from 1992 until he became a Corporate Vice President
on January 1, 1997. Mr. Pastorek was Director, Materials Management of the
Company from 1990 to 1993, and served as Director, Business Development-Asia of
the Company from 1993 until he became a Corporate Vice President in December,
1995. Mr. Sherrill was a director of the Company from May, 1993 to May, 1995,
and has been a Corporate Vice President since July, 1991. Dr. Shimada was
Director, 200mm of the Company from 1991 to 1992, Vice President of the Company
from 1993 to May, 1996, and has been a Corporate Vice President of the Company
since May, 1996. Dr. Shimada is also President and Representative Director of
MEMC Japan Ltd., a wholly owned subsidiary of the Company. Ms. Nye was a
Product Manager for the Company from prior to 1989 until 1992, and since 1992
has been a Vice President.
10
<PAGE> 12
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under (i) "BOARD MEETINGS AND COMMITTEES;
COMPENSATION OF DIRECTORS -- Directors Fees"; (ii) "SUMMARY COMPENSATION TABLE"
and related footnotes; (iii) "OPTION/SAR GRANTS IN LAST FISCAL YEAR" and
related footnotes; (iv) "AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES" and related footnotes; (v) "Pension Plan"; (vi)
"Pension Plan Table (1)" and "Pension Plan Table (2)"; (vii) "Employment
Agreements", and (viii) "Compensation Committee Interlocks and Insider
Participation" of the 1997 Proxy Statement are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information appearing under "Security Ownership of Management and
Certain Beneficial Owners" of the 1997 Proxy Statement is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under "Certain Relationships and Related Party
Transactions" of the 1997 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
1. FINANCIAL STATEMENTS
The following consolidated financial statements of the Company and its
subsidiaries, included on pages 15 through 33 of the 1996 Annual Report, and
the Independent Auditors' Report thereon of KPMG Peat Marwick LLP appearing on
page 35 of such report are incorporated herein by reference.
Consolidated Statements of Earnings -- Years ended December 31, 1996,
1995 and 1994.
Consolidated Balance Sheets -- December 31, 1996 and 1995.
Consolidated Statements of Cash Flows -- Years ended December 31, 1996,
1995 and 1994.
Consolidated Statements of Stockholders' Equity -- Years ended December
31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. FINANCIAL STATEMENT SCHEDULES
Report of Independent Auditors on Financial Statement Schedule F-1
Valuation and Qualifying Accounts F-2
Financial Statements of POSCO HULS Co., Ltd.:
Independent Auditors' Report of KPMG San Tong & Co. F-3
Balance sheets as of December 31, 1996,
and December 31, 1995 unaudited F-4
11
<PAGE> 13
Statements of Earnings -- Years ended December 31, 1996, and
December 31, 1995 and 1994 unaudited F-5
Statements of (Proposed) Appropriation (Disposition) of Retained
Earnings (Deficit) -- Years ended December 31, 1996, and
December 31, 1995 and 1994 unaudited F-6
Statements of Cash Flows -- Years ended December 31, 1996, and
December 31, 1995 and 1994 unaudited F-7
Notes to Financial Statements F-8
3. EXHIBITS
See the Exhibit Index beginning at page 15 of this report. For a
listing of all management contracts and compensatory plans or arrangements
required to be filed as exhibits to this report, see the Exhibits listed under
Exhibit Nos. 10-p through 10-u and Exhibit Nos. 10-dd, 10-vv, 10-ww, 10-eee
and 10-fff of the Exhibit Index. The following Exhibits listed in the Exhibit
Index are filed with this report:
10-ggg HSC/MEMC Agreement dated as of December 27, 1994 between the
Company and Hemlock Semiconductor Corporation ("Hemlock")
10-ggg(1) Letter Amendment dated as of June 20, 1995 to the HSC/MEMC
Agreement between the Company and Hemlock
10-ggg(2) Letter Amendment dated as of November 8, 1996 to the HSC/MEMC
Agreement between the Company and Hemlock
10-hhh Joint Venture Agreement dated as of December 20, 1996 between
the Company and Khazanah Nasional Berhad
10-iii Technology Cooperation Agreement dated as of December 20,
1996 between the Company and MEMC Kulim Electronic
Materials, SDN BHD
10-jjj Credit Agreement dated as of December 1, 1996 between the
Company and Huls AG
10-kkk Credit Agreement dated as of December 1, 1996 between the
Company and Huls AG
10-lll Credit Agreement dated as of April 1, 1996 between the
Company and Huls AG
10-mmm Fourth Short-Term Loan Agreement dated as of March 31, 1996
between the Company and Huls Corporation
13 Pages 10 through 35 (excluding the "Report of Management" on
page 34) and page 38 of the Company's 1996 Annual Report
21 Subsidiaries of the Company
23-a Consent of KPMG Peat Marwick LLP
23-b Consent of KPMG San Tong & Co.
24 Powers of Attorney submitted by Prof. Dr. Harald Jurgen
Biangardi; Armin-Peter Bode; Willem D. Maris; Dr. Alfred
Oberholz; Paul T. O'Brien; and Michael B. Smith
27 Financial Data Schedule (filed electronically with the SEC
only)
4. REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1996.
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MEMC ELECTRONIC MATERIALS, INC.
By: /s/ LUDGER H. VIEFHUES
--------------------------------------
Ludger H. Viefhues
Chief Executive Officer and Director
Date: March 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons, on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ LUDGER H. VIEFHUES Chief Executive Officer and March 21, 1997
- ------------------------------------- Director
Ludger H. Viefhues (Principal executive officer)
/s/ DR. ROBERT M. SANDFORT President, Chief Operating March 21, 1997
- ------------------------------------- Officer and Director
Dr. Robert M. Sandfort
/s/ JAMES M. STOLZE Executive Vice President and March 21, 1997
- ------------------------------------- Chief Financial Officer
James M. Stolze (Principal financial and
accounting officer)
/s/ DR. ERHARD MEYER-GALOW Chairman of the Board of March 21, 1997
- ------------------------------------- Directors
Dr. Erhard Meyer-Galow
* Director March 21, 1997
- -------------------------------------
Prof. Dr. Harald Jurgen Biangardi
* Director March 21, 1997
- -------------------------------------
Armin-Peter Bode
* Director March 21, 1997
- -------------------------------------
Willem D. Maris
* Director March 21, 1997
- -------------------------------------
Dr. Alfred Oberholz
* Director March 21, 1997
- -------------------------------------
Paul T. O'Brien
* Director March 21, 1997
- -------------------------------------
Michael B. Smith
</TABLE>
13
<PAGE> 15
* James M. Stolze, by signing his name hereto, does sign this document on
behalf of the above noted individuals, pursuant to powers of attorney duly
executed by such individuals which have been filed as an Exhibit to this
Report.
/s/ JAMES M. STOLZE
------------------------------
James M. Stolze
Attorney-in-Fact
14
<PAGE> 16
EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit
No. Description
--- -----------
2 Omitted -- Inapplicable
3(i) Restated Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit 3-a of the Company's
Form 10-Q for the Quarter ended June 30, 1995)
3(ii) Restated By-laws of the Company (Incorporated by reference to
Exhibit 3-b of the Company's Form 10-Q for the Quarter
ended September 30, 1996)
4 Omitted -- Inapplicable
9 Omitted -- Inapplicable
*10-a Shareholders Agreement dated May 24, 1994 among the Company
and China Steel Corporation ("China Steel"), China
Development Corporation and Chiao Tung Bank (Incorporated
by reference to Exhibit 10(a) of Amendment No. 4 to the
company's Form S-1 Registration Statement No. 33-92412)
*10-b Technology Cooperation Agreement dated October 26, 1994
between the Company and Taisil Electronic Materials
Corporation ("Taisil") (Incorporated by reference to
Exhibit 10-b of Amendment No. 4 to the Company's Form S-1
Registration Statement No. 33-92412)
10-c Joint Venture Agreement dated August 28, 1990 among the
Company, Pohang Iron and Steel Company, Ltd. ("POSCO") and
Samsung Electronics Company, Ltd. ("Samsung")
(Incorporated by reference to Exhibit 10-c of Amendment
No. 1 to the Company's Form S-1 Registration Statement No.
33-92412)
10-d First Amendment to Joint Venture Agreement dated December 9,
1993 among the Company, POSCO and Samsung (Incorporated by
reference to Exhibit 10-d of Amendment No. 1 to the
Company's Form S-1 Registration Statement No. 33-92412)
10-e Second Amendment to Joint Venture Agreement dated December 30,
1994 among the Company, POSCO and Samsung (Incorporated by
reference to Exhibit 10-e of Amendment No. 1 to the
Company's Form S-1 Registration Statement No. 33-92412)
*10-f Technical Agreement dated December 19, 1990 between the
Company and POSCO Huls Company Limited ("PHC")
(Incorporated by reference to Exhibit 10-f of Amendment
No. 1 to the Company's Form S-1 Registration Statement No.
33-92412)
*10-g Amendment to Technical Agreement dated as of January 1, 1995
between the Company and PHC (Incorporated by reference to
Exhibit 10-g of Amendment No. 1 to the Company's Form S-1
Registration Statement No. 33-92412)
*10-h Shareholder's Agreement dated as of May 16, 1995 between the
Company and Texas Instruments Incorporated ("TI")
(Incorporated by reference to Exhibit 10-h of Amendment
No. 4 to the Company's Form S-1 Registration Statement No.
33-92412)
*10-i TI Purchase Agreement dated as of June 30, 1995 between the
Company, MEMC Southwest Inc. ("MEMC Southwest") and TI
(Incorporated by reference to Exhibit 10-i of the
Company's Form 10-Q for the Quarter ended June 30, 1995)
10-j Lease Agreement Covering Silicon Wafer Operation Premises
dated June 30, 1995 between TI and MEMC Southwest
(Incorporated by reference to Exhibit 10-j of the
Company's Form 10-Q for the Quarter ended June 30, 1995)
10-j(1) Sublease Agreement covering Silicon Wafer Operation Premises
dated June 30, 1995 between TI and MEMC Southwest
(Incorporated by reference to Exhibit 10-j(1) of the
Company's Form 10-Q for the Quarter ended June 30, 1995)
*10-k Technology Transfer Agreement dated as of June 30, 1995
between the Company, TI and MEMC Southwest (Incorporated
by reference to Exhibit 10-k of the Company's Form 10-Q
for the Quarter ended June 30, 1995)
10-l Registration Rights Agreement between the Company and Huls
Corporation (Incorporated by reference to Exhibit 10-l of
the Company's Form 10-K for the Year ended December 31,
1995)
15
<PAGE> 17
10-m Master Reserve Volume Agreement (Incorporated by reference to
Exhibit 10-m of the Company's Form 10-K for the Year ended
December 31, 1995)
10-n Tax Sharing Agreement for 1995 among Huls Corporation and its
subsidiaries (Incorporated by reference to Exhibit 10-n of
Amendment No. 1 to the Company's Form S-1 Registration
Statement No. 33-92412)
10-o Tax Disaffiliation Agreement dated as of June 15, 1995 among
the Company, Huls Corporation and VEBA Corporation
(Incorporated by reference to Exhibit 10-o of the
Company's Form 10-Q for the Quarter ended June 30, 1995)
+10-p Amended and Restated Employment Agreement between the Company
and Roger D. McDaniel (Incorporated by reference to
Exhibit 10-p of the Company's Form 10-Q for the Quarter
ended June 30, 1996)
+10-q Employment Agreement between the Company and Dr. Robert M.
Sandfort (Incorporated by reference to Exhibit 10-q of the
Company's Form 10-K for the Year ended December 31, 1995)
+10-r Employment Agreement dated as of April 1, 1993 among Huls
Belgium S.A., the Company and Marcel Coinne (Incorporated
by reference to Exhibit 10-r of Amendment No. 1 to the
Company's Form S-1 Registration Statement No. 33-92412)
+10-s MEMC Electronic Materials, Inc. Supplemental Executive Pension
Plan (Incorporated by reference to Exhibit 10-s of
Amendment No. 1 to the Company's Form S-1 Registration
Statement No. 33-92412)
+10-t MEMC Electronic Materials, Inc. 1995 Equity Incentive Plan
(Incorporated by reference to Exhibit 10-t of Amendment
No. 1 to the Company's Form S-1 Registration Statement No.
33-92412)
+10-t(1) Form of Stock Option and Restricted Stock Agreement
(Incorporated by reference to Exhibit 10-t(1) of the
Company's Form 10-K for the Year ended December 31, 1995)
+10-t(2) Stock Option and Restricted Stock Agreement between the
Company and Roger D. McDaniel (Incorporated by reference
to Exhibit 10-t(2) of the Company's Form 10-K for the Year
ended December 31, 1995)
+10-t(3) Stock Option and Restricted Stock Agreement between the
Company and Dr. Robert M. Sandfort (Incorporated by
reference to Exhibit 10-t(3) of the Company's Form 10-K
for the Year ended December 31, 1995)
+10-u MEMC Electronic Materials, Inc. Annual Incentive Plan
(Incorporated by reference to Exhibit 10-u of Amendment
No. 1 to the Company's Form S-1 Registration Statement No.
33-92412)
10-v Service Agreement dated January 1, 1995 between the Company
and Huls Corporation (Incorporated by reference to Exhibit
10-v of Amendment No. 1 to the Company's Form S-1
Registration Statement No. 33-92412)
10-w Agreement amending the Service Agreement dated June 19, 1995
among the Company and Huls Corporation (Incorporated by
reference to Exhibit 10-w of the Company's Form 10-Q for
the Quarter ended June 30, 1995)
10-x Agency and Services Agreement dated January 1, 1995 between
MEMC Electronic Materials, SpA and Huls France S.A.
(Incorporated by reference to Exhibit 10-x of Amendment
No. 1 to the Company's Form S-1 Registration Statement No.
33-92412)
10-y Agency and Services Agreement dated April 1, 1989 between MEMC
Electronic Materials, SpA and Huls (U.K.) Ltd. and the
amendment thereto dated November 20, 1991 (Incorporated by
reference to Exhibit 10-y of Amendment No. 1 to the
Company's Form S-1 Registration Statement No. 33-92412)
10-z Service Agreement effective July 1, 1995 between MEMC
Electronic Materials, SpA and Huls AG (and English
translation thereof) (Incorporated by reference to Exhibit
10-z of the Company's Form 10-K for the Year ended
December 31, 1995)
10-aa Sales Representative and Offer Agency Agreement dated November
7, 1991 between MEMC Electronic Materials, SpA and MEMC
Electronic Materials, Company (now MEMC Huls Korea
Company) (Incorporated by reference to Exhibit 10-aa of
Amendment No. 1 to the Company's Form S-1 Registration
Statement No. 33-92412)
16
<PAGE> 18
*10-bb Trichlorosilane Supply Agreement between MEMC Electronic
Materials SpA and Huls Silicone GmbH dated as of December
31, 1995 (Incorporated by reference to Exhibit 10-bb of
the Company's Form 10-K for the Year ended December 31,
1995)
10-cc Sales Agency Agreement dated December 9, 1991 between the
Company and MEMC Huls Korea Company (Incorporated by
reference to Exhibit 10-cc of Amendment No. 1 to the
Company's Form S-1 Registration Statement No. 33-92412)
+10-dd Employment Agreement effective as of June 16, 1995 between the
Company and James M. Stolze (Incorporated by reference to
Exhibit 10-ee of Amendment No. 1 to the Company's Form S-1
Registration Statement No. 33-92412)
10-ee Note Agreement dated as of June 30, 1995 among MEMC Southwest
Inc., Texas Instruments Incorporated and MEMC Electronic
Materials, Inc. (Incorporated by reference to Exhibit
10-gg of the Company's Form 10-K for the Year ended
December 31, 1995)
10-ff Reimbursement Agreement dated as of June 29, 1995 between
Dresdner Bank AG and MEMC Electronic Materials, Inc.
(Incorporated by reference to Exhibit 10-hh of Amendment
No. 4 to the Company's Form S-1 Registration Statement No.
33-92412)
10-gg Credit Agreement dated as of July 10, 1995, between the
Company and Huls Corporation (Incorporated by reference to
Exhibit 10- jj of the Company's Form 10-Q for the Quarter
ended June 30, 1995)
10-hh Credit Agreement dated as of July 10, 1995, between the
Company and Huls Corporation (Incorporated by reference to
Exhibit 10- kk of the Company's Form 10-Q for the Quarter
ended June 30, 1995)
10-ii Credit Agreement dated as of July 10, 1995, between the
Company and Huls Corporation (Incorporated by reference to
Exhibit 10- ll of the Company's Form 10-Q for the Quarter
ended June 30, 1995)
10-jj Credit Agreement dated as of July 10, 1995, between the
Company and Huls Corporation (Incorporated by reference to
Exhibit 10- mm of the Company's Form 10-Q for the Quarter
ended June 30, 1995)
10-kk Credit Agreement dated as of July 10, 1995, between the
Company and Huls AG (Incorporated by reference to Exhibit
10-nn of the Company's Form 10-Q for the Quarter ended
June 30, 1995)
10-ll Credit Agreement dated as of July 10, 1995, between the
Company and Huls AG (Incorporated by reference to Exhibit
10-oo of the Company's Form 10-Q for the Quarter ended
June 30, 1995)
10-mm Revolving Credit Agreement dated as of July 10, 1995, between
the Company and Huls AG (Incorporated by reference to
Exhibit 10-pp of the Company's Form 10-Q for the Quarter
ended June 30, 1995)
10-nn Deposit Agreement dated July 21, 1995 between the Company and
Huls AG (Incorporated by reference to Exhibit 10-qq of the
Company's Form 10-Q for the Quarter ended June 30, 1995)
10-oo Reimbursement Agreement effective as of August 1, 1995 between
the Company and Huls AG (Incorporated by reference to
Exhibit 10-rr of the Company's Form 10-K for the Year
ended December 31, 1995)
10-pp Asset Purchase Agreement dated as of July 31, 1995, among
Albemarle Corporation, the Company, and MEMC Pasadena,
Inc. (Incorporated by reference to Exhibit 10-ss of the
Company's Form 10-K for the Year ended December 31, 1995)
10-qq MEMC Technology License Agreement dated as of July 31, 1995,
between Albemarle Corporation and the Company
(Incorporated by reference to Exhibit 10-tt of the
Company's Form 10-K for the Year ended December 31, 1995)
10-rr Operating Agreement dated as of July 31, 1995, between
Albemarle Corporation and MEMC Pasadena, Inc.
(Incorporated by reference to Exhibit 10-uu of the
Company's Form 10-K for the Year ended December 31, 1995)
*10-ss Seller Technology License Agreement dated as of July 31, 1995,
among Albemarle Corporation, the Company, and MEMC
Pasadena, Inc. (Incorporated by reference to Exhibit
10-vv of the Company's Form 10-K for the Year ended
December 31, 1995)
*10-tt Technology Purchase Agreement dated as of July 31, 1995, among
Albemarle Corporation and the Company (Incorporated by
reference to Exhibit 10-ww of the Company's Form 10-K for
the Year ended December 31, 1995)
17
<PAGE> 19
10-uu Ground Lease Agreement dated as of July 31, 1995, between
Albemarle Corporation and MEMC Pasadena, Inc.
(Incorporated by reference to Exhibit 10-xx of the
Company's Form 10-K for the Year ended December 31, 1995)
+10-vv Form of Stock Option and Performance Restricted Stock
Agreement (Incorporated by reference to Exhibit 10-yy of
the Company's Form 10-K for the Year ended December 31,
1995)
+10-ww Form of Stock Option Agreement (Incorporated by reference to
Exhibit 10-zz of the Company's Form 10-K for the Year
ended December 31, 1995)
10-xx Credit Agreement between the Company and Huls AG dated as of
December 22, 1995 (Incorporated by reference to Exhibit
10-aaa of the Company's Form 10-K for the Year ended
December 31, 1995)
10-yy Credit Agreement between the Company and Huls AG dated as of
December 22, 1995 (Incorporated by reference to Exhibit
10-bbb of the Company's Form 10-K for the Year ended
December 31, 1995)
10-zz Credit Agreement between the Company and Huls AG dated as of
December 22, 1995 (Incorporated by reference to Exhibit
10-ccc of the Company's Form 10-K for the Year ended
December 31, 1995)
10-aaa Credit Agreement between the Company and Huls AG dated as of
December 22, 1995 (Incorporated by reference to Exhibit
10-ddd of the Company's Form 10-K for the Year ended
December 31, 1995)
10-bbb Commitment Fee Agreement between the Company and Huls
Corporation dated as of July 10, 1995 (Incorporated by
reference to Exhibit 10-eee of the Company's Form 10-K for
the Year ended December 31, 1995)
10-ccc Commitment Fee Agreement between the Company and Huls
Corporation dated as of July 10, 1995 (Incorporated by
reference to Exhibit 10-fff of the Company's Form 10-K for
the Year ended December 31, 1995)
10-ddd Commitment Fee Agreement between the Company and Huls
Corporation dated as of July 10, 1995 (Incorporated by
reference to Exhibit 10-ggg of the Company's Form 10-K for
the Year ended December 31, 1995)
+10-eee Employment Agreement dated as of September 3, 1996 between the
Company and Ludger H. Viefhues (Incorporated by reference
to Exhibit 10-hhh of the Company's Form 10-Q for the
Quarter ended September 30, 1996)
+10-fff Stock Option Agreement dated as of September 1, 1996 between
the Company and Ludger H. Viefhues (Incorporated by
reference to Exhibit 10-iii of the Company's Form 10-Q for
the Quarter ended September 30, 1996)
**10-ggg HSC/MEMC Agreement dated as of December 27, 1994 between the
Company and Hemlock Semiconductor Corporation ("Hemlock")
**10-ggg(1) Letter Amendment dated as of June 20, 1995 to the HSC/MEMC
Agreement between the Company and Hemlock
**10-ggg(2) Letter Amendment dated as of November 8, 1996 to the HSC/MEMC
Agreement between the Company and Hemlock
**10-hhh Joint Venture Agreement dated as of December 20, 1996 between
the Company and Khazanah Nasional Berhad
**10-iii Technology Cooperation Agreement dated as of December 20, 1996
between the Company and MEMC Kulim Electronic Materials,
SDN BHD
10-jjj Credit Agreement dated as of December 1, 1996 between the
Company and Huls AG
10-kkk Credit Agreement dated as of December 1, 1996 between the
Company and Huls AG
10-lll Credit Agreement dated as of April 1, 1996 between the Company
and Huls AG
10-mmm Fourth Short-Term Loan Agreement dated as of March 31, 1996
between the Company and Huls Corporation
11 Omitted -- Inapplicable
12 Omitted -- Inapplicable
13 Pages 10 through 35 (excluding the "Report of Management" on
page 34) and page 38 of the Company's 1996 Annual Report
16 Omitted -- Inapplicable
18
<PAGE> 20
18 Omitted -- Inapplicable
21 Subsidiaries of the Company
22 Omitted -- Inapplicable
23-a Consent of KPMG Peat Marwick LLP
23-b Consent of KPMG San Tong & Co.
24 Powers of Attorney submitted by Prof. Dr. Harald Jurgen
Biangardi; Armin-Peter Bode; Willem D. Maris; Dr. Alfred
Oberholz; Paul T. O'Brien; and Michael B. Smith
27 Financial Data Schedule (filed electronically with the SEC
only)
99 Omitted -- Inapplicable
- ----------------------
* Confidential treatment of certain portions of these documents has
been granted.
** Portions of these Exhibits have been deleted pursuant to a request
for Confidential Treatment filed separately with the Secretary of
the Securities and Exchange Commission.
+ These Exhibits constitute all management contracts, compensatory
plans and arrangements required to be filed as an Exhibit to this
form pursuant to Item 14(c) of this report.
19
<PAGE> 21
Independent Auditors' Report
The Board of Directors and Stockholders
MEMC Electronic Materials, Inc.
Under date of January 24, 1997, we reported on the consolidated balance sheets
of MEMC Electronic Materials, Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1996, as contained in the 1996 annual report to stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1996. In connection
with our audits of the aforementioned consolidated financial statements, we
also audited the related financial statement schedule as listed in item 14(2)
of this Form 10-K. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
January 24, 1997
F-1
<PAGE> 22
MEMC ELECTRONIC MATERIALS, INC.
AND SUBSIDIARIES
Schedule II -- Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning Costs and Other Accounts- Deductions- End of
Dollars in thousands of Period Expenses(1) Describe(2) Describe Period
--------- ----------- ----------- -------- ------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1994 $1,399 311 202(A)(B) (232)(C) 1,680
Year ended December 31, 1995 1,680 338 30(B) (8)(B) 2,040
Year ended December 31, 1996 2,040 295 0 (36)(B)(C) 2,299
===== === == ==== =====
</TABLE>
(A) Acquisition of business
(B) Currency fluctuations
(C) Write-off of uncollectible accounts
F-2
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
POSCO HULS Co., Ltd.:
We have audited the accompanying balance sheet of POSCO HULS Co., Ltd. as of
December 31, 1996, and the related statements of earnings, (proposed)
appropriation (disposition) of retained earnings (deficit) and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion, as an
independent auditor, on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in
the Republic of Korea, which are substantially equivalent to generally accepted
auditing standards in the United States.
In our opinion, the financial statements referred to above present fairly the
financial position of POSCO HULS Co., Ltd. as of December 31, 1996, and the
results of its operations, the changes in its retained earnings, and its cash
flows for the year then ended in conformity with generally accepted financial
accounting standards in the Republic of Korea.
The financial statements for the years ended December 31, 1995 and 1994, which
are presented herein for the convenience of the reader, were not audited.
Accordingly, we express no opinion or other form of assurance on the financial
statements for the years ended December 31, 1995 and 1994.
Generally accepted accounting principles in the Republic of Korea vary in
certain significant respects from generally accepted accounting principles in
the United States. Application of generally accepted accounting principles in
the United States would have affected results of operations for each of the
years in the two-year period ended December 31, 1996 and stockholders' equity
as of December 31, 1996 and 1995, to the extent summarized in Note 19 to the
financial statements.
/s/ KPMG San Tong & Co.
Seoul, Korea
January 12, 1997
F-3
<PAGE> 24
POSCO HULS CO., LTD.
BALANCE SHEETS
December 31, 1996 and 1995
(In thousands of Won, except share data)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
Assets (Unaudited)
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 2) Won 34,903,183 28,244,275
Marketable securities 3,000,000 187,741
Notes and accounts receivable, less allowance
for doubtful accounts of Won 133,905 thousand
in 1996 (nil in 1995) (note 9) 13,256,629 6,853,609
Inventories 40,843,069 18,483,648
Prepaid expenses and other current assets (notes 3 and 9) 4,859,826 6,340,360
------------ -----------
Total current assets 96,862,707 60,109,633
Investments and other assets (note 5) 11,226,652 4,661,157
Fixed assets, less accumulated
depreciation (notes 4, 6, 7 and 8) 208,379,715 198,415,725
------------ -----------
Won 316,469,074 263,186,515
============ ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Notes and accounts payable (note 9) 1,510,799 2,027,308
Short-term borrowings (note 4) 2,217,954 575,038
Accounts payable - other (note 9) 8,674,078 14,069,062
Current portion of long-term liabilities
(notes 4, 7, 11 and 12) 40,648,355 39,474,029
Accrued expenses and other current liabilities 4,852,728 3,306,607
------------ -----------
Total current liabilities 57,903,914 59,452,044
Retirement and severance benefits (note 10) 4,194,476 2,113,783
Bonds issued (note 11) 19,689,194 29,407,653
Long-term debt, less current portion (notes 4 and 12) 64,596,501 56,095,999
Long-term obligations under financing leases (note 7) 39,716,760 31,808,427
------------ -----------
Total liabilities 186,100,845 178,877,906
------------ -----------
Stockholders' equity (notes 9 and 13):
Common stock of Won 5,000 par value. Authorized -
20,000,000 shares, issued and outstanding -
17,200,000 shares in 1996 and 1995 86,000,000 86,000,000
Retained earnings (deficit) 44,368,229 (1,691,391)
------------ -----------
Total stockholders' equity 130,368,229 84,308,609
------------ -----------
Commitments and contingencies (note 15)
Won 316,469,074 263,186,515
============ ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 25
POSCO HULS CO., LTD.
STATEMENTS OF EARNINGS
Years ended December 31, 1996, 1995 and 1994
(In thousands of Won, except share data)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Sales (note 9) Won 222,195,104 139,171,643 77,858,960
Cost of goods sold (note 9) 142,828,088 102,842,445 68,858,384
------------ ------------ ------------
Gross profit 79,367,016 36,329,198 9,000,576
Selling, general and administrative
expenses 8,657,838 4,847,000 4,034,723
------------ ------------ ------------
Operating income 70,709,178 31,482,198 4,965,853
------------ ------------ ------------
Other income (deductions):
Interest income 3,965,838 2,471,534 993,047
Interest expense (14,710,337) (14,526,033) (15,730,013)
Foreign exchange gain (loss), net (7,454,961) 1,929,605 1,683,955
Amortization of deferred charges - (4,179,719) (4,547,074)
Other, net (1,789,098) 2,140,913 819,504
------------ ------------ ------------
(19,988,558) (12,163,700) (16,780,581)
------------ ------------ ------------
Earnings (loss) before
income taxes 50,720,620 19,318,498 (11,814,728)
Income taxes (note 14) 4,661,000 - -
------------ ------------ ------------
Net earnings (loss) Won 46,059,620 19,318,498 (11,814,728)
============ ============ ============
Earnings (loss) per share of common
stock (note 16) Won 2,678 1,153 (1,084)
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 26
POSCO HULS CO., LTD.
STATEMENTS OF (PROPOSED) APPROPRIATION (DISPOSITION)
OF RETAINED EARNINGS (DEFICIT)
Years ended December 31, 1996, 1995 and 1994
(In thousands of Won)
Date of Proposed Appropriation for 1996: March 7, 1997
Date of Disposition for 1995 : February 8, 1996
Date of Disposition for 1994 : March 28, 1995
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Unappropriated retained earnings (deficit):
Balance at beginning of year Won (1,691,391) (21,009,889) (10,620,944)
Prior year adjustment, net (note 18) - - 1,425,783
Net earnings (loss) for the year 46,059,620 19,318,498 (11,814,728)
---------- ----------- ------------
44,368,229 (1,691,391) (21,009,889)
---------- ----------- ------------
Proposed appropriation of unappropriated
retained earnings (deficit):
Legal reserve (note 13) 2,500,000 - -
Reserve for business
rationalization (note 13) 4,396,250 - -
Cash dividends (note 17) 25,000,000 - -
Reserve for technology development 1,600,000 - -
Reserve for export loss 4,100,000 - -
Reserve for overseas
market development 1,400,000 - -
---------- ----------- ------------
38,996,250 - -
---------- ----------- ------------
Balance of unappropriated
retained earnings (deficit)
after (proposed) appropriation Won 5,371,979 (1,691,391) (21,009,889)
========== =========== ============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 27
POSCO HULS CO., LTD.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
(In thousands of Won)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) Won 46,059,620 19,318,498 (11,814,728)
Adjustments to reconcile net earnings (loss) to cash
provided by operating activities:
Unrealized foreign translation loss (gain), net 9,394,083 (1,136,910) (1,694,214)
Loss on disposition of fixed assets 1,932,245 109,281 46,363
Depreciation and amortization 48,237,889 35,573,663 20,880,795
Provision for retirement and severance benefits 2,506,376 1,100,561 903,188
Contribution to National Pension Fund (179,869) (102,430) -
Payment for retirement and severance benefits (245,814) (239,918) (260,449)
Decrease (increase) in notes and accounts receivable (6,403,020) (2,882,158) 102,420
Decrease (increase) in prepaid expenses and
other current assets 971,188 (4,035,094) 36,248
Decrease (increase) in inventories (22,329,594) (7,082,396) 1,706,205
Increase (decrease) in trade notes and accounts payable (516,509) 311,472 867,881
Increase in accrued expenses and other current liabilities 1,546,121 112,063 1,567,630
Other, net 467,325 31,842 -
------------ ------------ ------------
Net cash provided by operating activities 81,440,041 41,078,474 12,341,339
------------ ------------ ------------
Cash flows from investing activities:
Additions to fixed assets (57,921,305) (40,452,647) (13,088,055)
Purchase of marketable securities (3,000,000) - -
Proceeds from sale of fixed assets 24,448 7,710 130,020
Proceeds from disposition of marketable securities 187,741 1,000,000 4,385,800
Increase in investments and other assets
and deferred charges (6,056,683) (2,150,594) (328,880)
------------ ------------ ------------
Net cash used in investing activities (66,765,799) (41,595,531) (8,901,115)
------------ ------------ ------------
Cash flows from financing activities:
Increase (decrease) in bank overdraft and
short-term borrowings, net 1,636,868 (3,670,027) (17,837,670)
Proceeds from issuance of bonds - 29,234,000 -
Proceeds from long-term debt 29,821,827 27,208,837 13,043,713
Repayment of long-term liabilities, including current
portion (39,474,029) (59,102,871) (14,851,310)
Proceeds from issuance of common stock - 30,000,000 20,000,000
------------ ------------ ------------
Net cash (used in) provided by financing activities (8,015,334) 23,669,939 354,733
------------ ------------ ------------
Net increase in cash and cash equivalents 6,658,908 23,152,882 3,794,957
Cash and cash equivalents at beginning of year 28,244,275 5,091,393 1,296,436
------------ ------------ ------------
Cash and cash equivalents at end of year Won 34,903,183 28,244,275 5,091,393
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the year for:
Income taxes Won 2,611,415 195,361 (261,891)
Interest 14,931,976 14,474,079 15,513,029
============ ============ ============
Supplemental schedule of noncash investing and
financing activities - capital lease obligations incurred
and additions to leased equipment Won 13,892,207 14,678,987 19,721,159
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 28
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
Won in thousands, except share data
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
POSCO HULS Co., Ltd. (the Company) maintains its books of account in
accordance with generally accepted financial accounting standards in
the Republic of Korea.
(b) Marketable Securities
Marketable securities are stated at cost plus incidental expenses,
determined by the weighted average method.
(c) Inventories
Inventories, excluding materials-in-transit, are stated at cost
determined by the weighted average method. Materials-in-transit are
valued at cost determined by the individual identification method.
(d) Fixed Assets
Fixed assets are stated at cost. The Company charges maintenance,
repairs and minor renewals to expense as incurred. Major renewals and
improvements are capitalized. Interest incurred during the
construction and installation of manufacturing plants are capitalized
as part of fixed assets.
Depreciation is computed by the straight-line method at rates based on
the following estimated useful lives:
Useful lives
in years
Buildings 30 - 60
Buildings - auxiliary facilities 15 - 18
Structures 15 - 40
Machinery and equipment 4 - 10
Vehicles 5
Tools and equipment 5
Furniture and fixtures 5
Industrial water usage rights 15
(e) Accounting for Leases
The Company accounts for leases as operating or financing leases in
accordance with the Accounting Standards for Leases.
F-8 (Continued)
<PAGE> 29
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(1) Summary of Significant Accounting Policies, Continued
(e) Accounting for Leases, Continued
Under the operating lease method, the lease expense is charged to
income as actual payments are made or due. Prepaid lease expense
relating to operating leases is amortized over the lease term of the
related lease.
Under the financing lease method, the present value of leased
equipment, which is the amount of total minimum lease payments minus
the interest portion included in the amount, is recorded as a leased
asset and a long-term obligation under financing leases. The leased
assets are amortized over the lease term. Interest expense on
long-term obligations under financing leases is recorded when
incurred.
(f) Deferred Charges
Preoperating costs are deferred and amortized by an equal annual
amount over three years from 1993. Bond issue costs and research and
development costs are expensed in the year they are incurred.
(g) Discount on Bonds Issued
Discount on bonds issued is amortized over a period from the date of
issuance to the maturity of the related bonds using the straight-line
method.
(h) Retirement and Severance Benefits
Employees who have been with the Company for more than one year are
entitled to lump-sum payments based on current rates of pay and length
of service when they leave the Company. A portion of the liability is
covered by an insurance policy. The Company's estimated liability
under the plan has been accrued in the accompanying financial
statements at the amounts which would be payable if all employees left
the Company at the balance sheet date.
Under the National Pension Scheme of Korea, effective January 1, 1994,
the Company is required to transfer a certain portion of retirement
allowances of employees to the National Pension Fund. The amount
transferred will reduce the retirement and severance benefit amount to
be payable to the employees when they leave the Company and is
reflected in the accompanying financial statements.
(i) Revenue Recognition
Local sales are recognized when goods are delivered and inspection by
the customer is completed while export sales are recognized as of the
shipment date.
F-9 (Continued)
<PAGE> 30
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(1) Summary of Significant Accounting Policies, Continued
(j) Foreign Currency Translation
Assets and liabilities denominated in foreign currencies are
translated into Korean Won at the standard rate of exchange at
year-end. Exchange adjustments are generally charged or credited to
income as they occur.
(k) Income Taxes
Provision is not made in the accounts to reflect the future tax
benefit (expense) on the interperiod allocation of income taxes
resulting from certain income and expense items being treated
differently for financial reporting purposes than tax computation
purposes.
(l) Earnings (Loss) per Common Share
Earnings (loss) per common share is calculated by dividing net
earnings (loss) by the weighted average number of shares of common
stock outstanding during each period.
(m) Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid marketable securities with a maturity of three months or
less to be cash equivalents.
(2) Cash and Cash Equivalents
Cash and cash equivalents at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
(Unaudited)
<S> <C> <C>
Cash on hand Won 2,429 12,472
Passbook accounts 17 -
Checking accounts 4,480 124,556
Corporate savings deposits 1,404 25,899
Foreign currency deposits 4,062 1,681,348
Time deposits 15,390,291 8,000,000
Installment time deposits 1,492,500 800,000
Cash management account 18,008,000 17,600,000
---------- -----------
Won 34,903,183 28,244,275
========== ===========
</TABLE>
F-10 (Continued)
<PAGE> 31
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(3) Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets at December 31, 1996 and 1995
consist of the following:
<TABLE>
<CAPTION>
1996 1995
--------- -----------
(Unaudited)
<S> <C> <C>
Other receivables Won 220,900 730,247
Accrued income 1,090,265 698,291
Prepayments 62,823 211,663
Income taxes refundable - 441,566
Value added tax refundable 764,932 2,678,419
Prepaid expenses 1,121,687 392,788
Import guarantee deposit 1,599,219 1,187,386
--------- -----------
Won 4,859,826 6,340,360
========= ===========
</TABLE>
(4) Pledged Assets and Guarantees Provided by Others
(a) The following assets are pledged as collateral for short-term
borrowings and long-term debt at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
------
Land Won 8,554,899 8,508,577
Buildings 36,554,709 5,539,486
Machinery and equipment 129,367,603 115,040,837
----------- -----------
Won 174,477,211 129,088,900
=========== ===========
Obligations the collateral is pledged to secure
-----------------------------------------------
Short-term borrowings 2,217,954 575,038
Long-term debt, including current portion 91,985,751 60,687,674
----------- -----------
Won 94,203,705 61,262,712
=========== ===========
</TABLE>
F-11 (Continued)
<PAGE> 32
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(4) Pledged Assets and Guarantees Provided by Others, Continued
(b) In addition, at December 31, 1996 and 1995, to secure borrowings of
the Company, its shareholders have provided guarantees as follows:
<TABLE>
<CAPTION>
Guarantors 1996 1995
---------- ---------- -----------
(Unaudited)
<S> <C> <C>
Pohang Iron and Steel
Co., Ltd. Won 11,843,090 30,103,206
MEMC Electronic Materials,
Inc. 5,829,201 16,458,502
---------- -----------
Won 17,672,291 46,561,708
========== ===========
</TABLE>
(5) Investments and Other Assets
Investments and other assets at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
(Unaudited)
<S> <C> <C>
Long-term deposits Won 3,600,000 1,102,500
Investment securities 52,655 31,800
Leasehold deposits 262,000 260,367
Rental deposit 98,364 15,558
Deposits for retirement
and severance benefits 2,060,112 1,174,515
Loans to employees 4,233,141 1,613,514
Restricted cash and deposits 13,500 12,000
Telephone rights 61,257 24,261
Membership rights 730,851 289,356
Long-term prepaid expenses 114,772 137,286
---------- -----------
Won 11,226,652 4,661,157
========== ===========
</TABLE>
F-12 (Continued)
<PAGE> 33
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(6) Fixed Assets
Fixed assets at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996
------------------------------------------
Accumulated
Cost depreciation Net
----------- ---------------- -----------
<S> <C> <C> <C>
Land Won 8,554,899 - 8,554,899
Buildings 38,564,272 2,009,563 36,554,709
Building - auxiliary facilities 7,465,452 1,298,240 6,167,212
Structures 6,534,246 831,503 5,702,743
Machinery and equipment 217,518,551 88,150,948 129,367,603
Vehicles 552,180 224,759 327,421
Tools and equipment 2,438,412 1,207,830 1,230,582
Furniture and fixtures 8,565,656 3,947,288 4,618,368
Machinery-in-transit 2,280,900 - 2,280,900
Construction-in-progress 12,817,993 - 12,817,993
Industrial water usage rights 757,285 - 757,285
----------- ---------------- -----------
Won 306,049,846 97,670,131 208,379,715
=========== ================ ===========
<CAPTION>
1995 (Unaudited)
------------------------------------------
Accumulated
Cost depreciation Net
----------- ---------------- -----------
<S> <C> <C> <C>
Land Won 8,508,577 - 8,508,577
Buildings 26,692,706 1,153,220 25,539,486
Building - auxiliary facilities 7,455,652 910,832 6,544,820
Structures 6,067,838 577,148 5,490,690
Machinery and equipment 160,684,161 45,643,324 115,040,837
Vehicles 416,582 139,967 276,615
Tools and equipment 1,948,128 779,472 1,168,656
Furniture and fixtures 6,425,384 2,168,154 4,257,230
Machinery-in-transit 16,021,876 - 16,021,876
Construction-in-progress 14,726,406 - 14,726,406
Industrial water usage rights 840,532 - 840,532
----------- ---------------- -----------
Won 249,787,842 51,372,117 198,415,725
=========== ================ ===========
</TABLE>
F-13 (Continued)
<PAGE> 34
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(7) Financing Leases
The Company has leased silicon wafer manufacturing and other facilities
from Hanmi Leasing Co., Ltd. and Korea Development Leasing Co., Ltd. under
the financing lease contracts. The following is a schedule of minimum
future payments on financing leases as of December 31, 1996:
Minimum lease payments under financing leases:
<TABLE>
<S> <C>
1997 Won 4,887,916
1998 6,328,949
1999 11,695,023
2000 9,694,871
2001 and after 20,483,885
----------
53,090,644
Less interest portion 10,087,779
Less current portion 3,286,105
----------
Long-term obligations under financing leases Won 39,716,760
==========
</TABLE>
The following is a summary of the acquisition cost of leased assets and
accumulated depreciation thereon at December 31, 1996, which are included
in machinery and equipment:
<TABLE>
<S> <C>
Leased assets at cost (including
other incidental costs) Won 48,482,345
Accumulated depreciation 19,717,416
----------
Won 28,764,929
==========
</TABLE>
(8) Operating Leases
The Company leases certain equipment and machinery from Korea Industrial
Leasing Co., Ltd. and accounts for each of the leases as an operating
lease. The following is a summary of minimum lease payments of the
operating leases:
<TABLE>
<S> <C>
1997 Won 417,471
1998 134,378
-------
Won 551,849
=======
</TABLE>
Operating lease expenses of Won 1,157,834, Won 1,254,538 and Won 1,203,677
were charged to income in the years ended December 31, 1996, 1995 and 1994,
respectively.
F-14 (Continued)
<PAGE> 35
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(9) Stockholders and Related Party Transactions
The Company was established under the Foreign Capital Inducement Law in
December 1991 as a joint venture company to manufacture and sell silicon
wafers and related products. The stockholders of the Company and their
ownership percentages at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Number of Ownership
Stockholders shares percentage
------------------------------------------ ----------- -----------
<S> <C> <C>
Pohang Iron and Steel Co., Ltd. (POSCO) 6,880,000 40%
MEMC Electronic Materials, Inc. (MEMC) 6,880,000 40%
Samsung Electronics Co., Ltd. (SEC) 3,440,000 20%
----------- -----------
17,200,000 100%
=========== ===========
</TABLE>
The following are major balances and transactions with stockholders at and
for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
MEMC:
Notes and accounts receivable Won 1,483,437 449,303
Prepaid expenses and other current assets 78,289 247,683
Notes and accounts payable 273,762 877,013
Accounts payable - other 2,106,128 1,520,050
Sales 71,695,777 15,841,927
Purchases 7,083,896 13,546,248
Royalty payments 5,162,992 -
=========== ===========
SEC:
Trade accounts receivable 4,801,722 3,639,992
Sales 114,974,590 97,471,914
=========== ===========
</TABLE>
(10) Retirement and Severance Benefits
Detail of changes in retirement and severance benefits for the years ended
December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------- -----------
(Unaudited)
<S> <C> <C>
Beginning balance Won 2,349,030 1,488,387
Provision for the year 2,506,376 1,100,561
Payments 268,726 239,918
--------- -----------
Ending balance 4,586,680 2,349,030
Contribution to National Pension Fund 392,204 235,247
--------- -----------
Won 4,194,476 2,113,783
========= ===========
</TABLE>
F-15 (Continued)
<PAGE> 36
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(11) Bonds Issued
Bonds issued at December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Interest
Series Maturity per annum Won(thousands) Guarantor
------ -------- --------- ----------------------- ------------------
1996 1995
---------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
#1 1995 16.5% Won - - Chungbuk Bank
#2 1995 16.2% - - Dongnam Bank
#3 1995 16.8% - - Dongnam Bank
#4 1996 14.0% - 5,000,000 Daewoo Securities
#5 1996 11.0% - 10,000,000 Daeshin Securities
#6 1998 13.0% 10,000,000 10,000,000 Samsung securities
#7 1998 13.0% 10,000,000 10,000,000 LG securities
#8 1997 11.5% 10,000,000 10,000,000 Unsecured (Private
acceptance by Korea
Long-term Credit Bank)
---------- ----------
30,000,000 45,000,000
Less current portion 10,000,000 15,000,000
Less unamortized discount 310,806 592,347
---------- ----------
Won 19,689,194 29,407,653
========== ==========
</TABLE>
F-16 (Continued)
<PAGE> 37
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(12) Long-term Debt
Long-term debt at December 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
Interest
per annum Due 1996 1995
--------------------- --------- ---------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Local currency loans:
Technology facility loan Floating rate 1995-1997 Won 1,125,000 2,250,000
General facility loan Floating rate 1995-1997 1,000,000 2,000,000
High technology facility
loan Floating rate 1995-1997 6,500,000 13,000,000
Information communication
supporting fund 6.5% 1995-1999 845,680 922,560
---------- -----------
9,470,680 18,172,560
---------- -----------
Foreign currency loans:
Facility loan 6LIBOR*+0.9% 1995 - -
Facility loan 6LIBOR*+0.95% 1995 - -
Facility loan 6LIBOR*+0.8% 1996 - -
Facility loan Floating rate 1997 3,218,090 5,906,313
Facility loan 3LIBOR*+1.15% 1998 3,376,800 4,648,200
Facility loan 6LIBOR*+0.5~1% 1996 - 1,145,006
Facility loan 6LIBOR*+0.7% 2003 5,005,520 -
Facility loan 6LIBOR*+1.0% 2003 247,773 -
Facility loan 3LIBOR*+2% 1999 1,384,488 1,778,711
Facility loan 3LIBOR*+1.5% 1999 1,067,913 1,371,993
Facility loan 6LIBOR*+0.6% 2002 27,603,652 21,124,520
Facility loan 6LIBOR*+0.6% 2003 1,733,143 -
Facility loan 6LIBOR*+0.6% 2003 245,086 -
Operating loan 6LIBOR*+0.67% 2000 10,721,340 -
Operating loan 6LIBOR*+0.8% 2001 2,954,700 -
Operating loan 6LIBOR*+1.3% 1996 6,188,326 7,514,590
Operating loan 6LIBOR*+0.7% 1997 11,987,640 11,000,740
Operating loan 6LIBOR*+0.73% 1999 2,566,368 2,355,088
Operating loan 6LIBOR*+0.77% 2001 4,187,232 3,842,512
---------- -----------
82,488,071 60,687,673
---------- -----------
Total long-term debt 91,958,751 78,860,233
Less current portion 27,362,250 22,764,234
---------- -----------
Won 64,596,501 56,095,999
========== ===========
</TABLE>
* 3LIBOR = 3 month London inter-bank offered rate
* 6LIBOR = 6 month London inter-bank offered rate
F-17 (Continued)
<PAGE> 38
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
The following is a schedule of payments of long-term debt as of
December 31, 1996:
<TABLE>
<S> <C>
1997 Won 27,362,250
1998 8,515,677
1999 8,800,114
2000 16,233,966
2001 and after 31,046,744
----------
Won 91,958,751
==========
</TABLE>
(13) Appropriated Retained Earnings
The Korean Commercial Code requires the Company to appropriate as legal
reserve an amount equal to at least 10% of cash dividends for each
accounting period until the reserve equals 50% of stated capital. This
legal reserve may be used to reduce a deficit or it may be transferred to
common stock as a stock dividend.
Under the Tax Exemption and Reduction Control Law, the Company is allowed
to make certain deductions from corporate income taxes. The Company is,
however, required to appropriate from retained earnings the amount of the
tax benefit obtained and transfer such amount into a reserve for business
rationalization. This legal reserve may be used to reduce a deficit or they
may be transferred to common stock as a stock dividend.
Under the Tax Exemption and Reduction Control Law, the Company is allowed
to make certain deductions from taxable income and set up reserves for
technology development, reserves for export loss and reserves for overseas
market development by appropriating retained earnings. The unused portion
of the reserves is generally added back to taxable income over three to
four years after a certain grace period. These voluntary reserves may be
restored to unappropriated retained earnings by a future Board of Directors
resolution.
(14) Income Taxes
The Company is subject to a number of taxes based upon taxable earnings
which result in the following normal tax rates:
<TABLE>
<CAPTION>
Taxable earnings Rates
---------------- --------------------
1996 1995 1994
----- ----- ------
<S> <C> <C> <C>
Up to Won 100,000 thousand 17.6% 19.8% 19.35%
Over Won 100,000 thousand up to Won 500,000 thousand 30.8% 33.0% 34.40%
Over Won 500,000 thousand 30.8% 35.0% 36.40%
</TABLE>
Under the Foreign Capital Inducement Law (FCIL), the Company is entitled to
the exemption from corporation taxes to the extent of its foreign equity
portion for the periods stipulated in the Law.
F-18 (Continued)
<PAGE> 39
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
A reconciliation between net earnings (loss) before income taxes and
taxable income for the years ended December 31, 1996, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net earnings (loss) before
income taxes Won 50,720,620 19,318,498 (11,814,728)
Unrealized exchange loss, net (40,911) (115,975) (109,262)
Accrued interest income, net (390,705) (196,749) 267,558
Interest capitalized - - 323,397
Entertainment expense over tax limit 85,879 146,623 157,080
Reserve for tax purpose (7,100,000) - -
Income deduction for foreign capital increase (870,499) - -
Others, net 174,206 240 (787)
---------- ----------- -----------
42,578,590 19,152,637 (11,176,742)
Utilization of tax loss carryforward (1,973,750) (19,152,637) -
---------- ----------- -----------
Taxable income 40,604,840 - -
========== =========== ===========
Income taxes payable on taxable income 12,350,593 - -
Tax exemption tax under FCIL (2,532,688) - -
Investment tax credit (5,156,905) - -
---------- ----------- -----------
Income tax expense Won 4,661,000 - -
========== =========== ===========
</TABLE>
(15) Commitments and Contingencies
(a) At December 31, 1996, the Company has provided 8 blank checks and 10
blank notes in connection with various contracts.
(b) The Company has entered into a bank overdraft agreement for borrowings
up to Won 14,000 million with five banks and has also entered into
borrowing arrangements with three short-term financing companies.
(c) Under a technical license agreement with MEMC Electronic Materials,
Inc., the Company paid a lump-sum royalty in the amount of
US$7,800,000 for the transfer of a technical license to manufacture
silicon wafers. The Company is also required to pay a royalty of 3.94%
of net sales not over one hundred million square inches and 1.735% of
net sales over one hundred million square inches of produced wafer for
five years from the commencement of commercial production, which took
place in 1995.
F-19 (Continued)
<PAGE> 40
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(16) Earnings (Loss) Per Share
Earnings (loss) per share for the years ended December 31, 1996, 1995 and
1994 are calculated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net earnings (loss) Won 46,059,620 19,318,498 (11,814,728)
Weighted average number of
shares of common stock 17,200,000 16,756,164 10,904,109
---------- ----------- ------------
Earnings per share Won 2,678 1,153 (1,084)
========== =========== ============
</TABLE>
(17) Cash Dividends
The cash dividends for 1996 are calculated as follows:
<TABLE>
<CAPTION>
Dividend
Number of stock Par value Dividend rate amount
--------------- ------------ ------------- ----------
<S> <C> <C> <C>
17,200,000 Won 5,000 29.07% Won 25,000,000
==========
</TABLE>
(18) Prior Period Adjustments
As allowable under generally accepted financial accounting standards in the
Republic of Korea, certain adjustments for financial items related to
prior years have been made directly to the retained deficit at the
beginning of the year.
Details of such prior year adjustment gain (loss) for the year ended
December 31, 1994 (nil in 1996 and 1995) are as follows:
<TABLE>
<CAPTION>
(Unaudited)
<S> <C>
Capitalized interest Won 1,489,897
Depreciation (64,213)
Other, net 99
---------
Won 1,425,783
=========
</TABLE>
F-20 (Continued)
<PAGE> 41
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won, except earnings per share)
(19) Reconciliation to United States Generally Accepted Accounting Principles
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles in the Republic of Korea (Korean
GAAP), which differ in certain significant respects from generally
accepted accounting principles in the United States (U.S. GAAP). The
significant differences are described below. Other differences do not have
a significant effect on either consolidated net earnings or stockholders'
equity.
The estimated effects of the significant adjustments to net earnings (loss)
and stockholders' equity which would be required if U.S. GAAP were applied
instead of Korean GAAP are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Net earnings - Korean GAAP Won 46,059,620 19,318,498
Adjustments:
Pre-operating costs - 3,909,348
Start-up costs 2,520,712 1,252,809
Capital leases 72,011 20,015
Inventories (1,913,216) (709,585)
Depreciation in relation to useful life difference 15,810,002 9,776,064
Capitalized interest and amortization thereon 2,121,846 213,867
Bond issue costs (84,934) 49,789
Deferred income taxes (4,910,975) (231,059)
Others (579,069) -
---------- ----------
Total adjustments 13,036,377 14,281,248
---------- ----------
Net earnings - U.S. GAAP Won 59,095,997 33,599,746
========== ==========
Net earnings per share - U.S. GAAP Won 3.44 2.01
========== ==========
</TABLE>
F-21 (Continued)
<PAGE> 42
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(19) Reconciliation to United States Generally Accepted Accounting
Principles, Continued
<TABLE>
<CAPTION>
1996 1995
------------ -----------
(Unaudited)
<S> <C> <C>
Stockholders' equity - Korean GAAP Won 130,368,229 84,308,609
Adjustments:
Start-up costs (3,046,070) (5,566,783)
Capital leases (31,687) (103,698)
Inventories (2,736,705) (823,489)
Depreciation in relation to useful life difference 25,586,066 9,776,064
Amortization of capitalized interest 1,123,798 (998,048)
Bond issue costs 17,446 102,380
Deferred income taxes (5,142,034) (231,059)
Others (579,069) -
----------- ----------
Total adjustments 15,191,745 2,155,367
----------- ----------
Stockholders' equity - U.S. GAAP Won 145,559,974 86,463,976
=========== ==========
</TABLE>
The tax effects of temporary differences that resulted in significant
portions of the deferred tax assets and liabilities at December 31, 1996
and 1995 computed under U.S. GAAP, and a description of the financial
statement items that created these differences follow:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Deferred tax assets:
Inventories Won 506,290 240,459
Start-up costs 563,523 1,625,501
Capital leases 5,862 30,280
Capitalized interest and amortization thereon - 291,430
Tax loss carryforward - 642,400
Others 114,714 27,277
---------- ----------
Total deferred tax assets 1,190,389 2,857,347
---------- ----------
Deferred tax liabilities:
Depreciation in relation to useful life difference (4,733,422) (2,854,611)
Capitalized interest and amortization thereon (207,903) -
Reserve for tax purpose (1,313,500) -
Accrued income (74,370) (203,900)
Bond issue costs (3,228) (29,895)
---------- ----------
Total deferred tax liabilities (6,332,423) (3,088,406)
---------- ----------
Net deferred tax liabilities Won (5,142,034) (231,059)
========== ==========
</TABLE>
F-22 (Continued)
<PAGE> 43
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(19) Reconciliation to United States Generally Accepted Accounting
Principles, Continued
The tax rate used to calculate deferred tax assets and liabilities was
changed to 18.5% in 1996 from 29.2% in 1995 to reflect the normal
corporation tax rate and exemptions under statutorily available FCIL. The
effect of a reduction in tax rates and an increase in tax exemptions under
FCIL is to reduce the net deferred tax liability and increase net earnings
by Won 24,723 in 1996.
(a) Deferred Income Taxes
Under Korean GAAP, a provision is not made in the accounts to reflect
the future tax benefits on the interperiod allocation of income taxes
resulting from certain income and expense items being treated
differently for financial reporting purposes than tax computation
purposes.
However, U.S. GAAP requires the recognition of deferred tax assets and
liabilities created by temporary differences between the financial
statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
(b) Preoperating and Start-up Costs
Certain preoperating and start-up costs are deferred for Korean GAAP
and amortized by an equal annual amount within three years from 1993.
However, these costs are normally expensed as incurred under U.S.
GAAP.
(c) Capital Leases
The Company has leased certain equipment and machinery which are
accounted for as operating leases under Korean GAAP. However, under
U.S. GAAP these leases would be accounted for as capital leases.
Under U.S. GAAP, equipment under capital lease is recorded as an asset
and a liability is recorded for the present value of minimum lease
payments at the inception of the lease. This equipment is depreciated
over the estimated useful life of the asset.
(d) Bond Issue Costs
The Company charged bond issue costs to current income as incurred.
However, under U.S. GAAP, those bond issue costs are amortized during
the maturity of the related bonds.
F-23 (Continued)
<PAGE> 44
POSCO HULS CO., LTD.
NOTES TO FINANCIAL STATEMENTS
(In thousands of Won)
(19) Reconciliation to United States Generally Accepted Accounting
Principles, Continued
(e) Useful Life of Machinery and Equipment
In 1995, the Company changed the estimated useful life of certain
machinery to four years from six years. For U.S. GAAP purposes, the
Company continues to depreciate the machinery and equipment over six
years.
(f) Inventories
For U.S. GAAP, inventories are adjusted for the effect of depreciation
in relation to useful life difference of machinery and equipment and
depreciation on capitalized interest.
(g) Amortization of Capitalized Interest
In 1994, the Company made a prior year adjustment under Korean GAAP
for interest that should have been capitalized to
construction-in-progress in 1993 and is being amortized over the
useful life of the related fixed assets. For U.S. GAAP purposes, the
interest amount was charged to earnings in 1993.
(h) Estimated Fair Value
The estimated fair value of the Company's financial instruments at
December 31, 1996 and 1995 approximates their financial statement
carrying amounts.
F-24
<PAGE> 1
EXHIBIT 10 - ggg
CONFIDENTIAL TREATMENT REQUSTED
HSC/MEMC AGREEMENT
This Agreement is made this 27th day of December, 1994, by and between Hemlock
Semiconductor Corporation, having its principal place of business at 12334
Geddes Road, Hemlock, Michigan 48626 ("HSC" or "Supplier") and MEMC Electronic
Materials, Inc. having its principal place of business at 501 Pearl Drive (City
of O'Fallon), P.O. Box 8, St. Peters, Missouri, 63376 ("MEMC" or "Customer").
Whereas, HSC and MEMC desire to enter into this Agreement to govern the terms of
the sale by HSC to MEMC of Polycrystalline Silicon;
Now, therefore, in consideration of the mutual obligations stated herein, it is
hereby agreed as follows:
1. DEFINITIONS:
1.1 Actual Purchases means the number of tons of Material shipped by
Supplier to MEMC and MEMC Affiliates during a specified period, and
includes any Stockpile quantities shipped during that period.
1.2 Base Purchase Quantity for the calendar years [CONFIDENTIAL MATERIAL
HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of this Agreement is
as follows:
Year Base Purchase Quantity
---- ----------------------
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
1.3 The Base Unit Price for the Base Purchase Quantity for the calendar
years [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY
WITH SEC] of this Agreement is as follows:
Year Base Unit Price Ceiling Price*
---- --------------- -------------
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
*[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH
SEC]
1.4 Contract Purchase Quantity is defined in paragraph 5.1.
1.5 Specified period means the period from [CONFIDENTIAL MATERIAL HAS
BEEN DELETED AND FILED SEPARATELY WITH SEC] through and including
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH
SEC].
1.6 Material means the Polycrystalline Silicon identified in Appendix I.
1.7 MEMC Affiliate means (i) any business entity that, directly or
indirectly, through one or more intermediaries, owns or control at
least forty percent (40%) of the voting stock of MEMC; or (ii) any
business entity in which MEMC directly or indirectly, through one or
more intermediaries, owns, controls or has a partnership interest in
at least forty percent (40%) of the assets or voting stock of that
entity; or (iii) any business entity that is a successor (whether by
change of name, dissolution, merger, consolidation, reorganization or
otherwise) to any such entity or its business and assets.
1.8 Minimum Purchase Quantity for the calendar years [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of this
Agreement is as follows:
Year Minimum Purchase Quantity
---- -------------------------
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
1.9 Stockpile is defined in Section 9.
<PAGE> 2
2. SCOPE:
2.1 Customer agrees to purchase from Supplier, and Supplier agrees to sell
to Customer, the Polycrystalline Silicon identified in Appendix I
("Material"). MEMC Affiliates may, at their option, purchase from
Supplier pursuant to this Agreement but shall not be required to do
so. Purchases by, or on behalf of, MEMC Affiliates shall be credited
against the Minimum Purchase Quantity. Every year MEMC will provide
Supplier with the Contract Purchase Quantity for the following
calendar year, pursuant to the provisions of paragraph 5.1. Each year
MEMC and any MEMC Affiliate electing to purchase during that year will
issue a Purchase Order incorporating by reference the terms and
conditions of this Agreement; Release Orders will be issued quarterly
pursuant to the provisions of Section 8.
2.2 In consideration of the foregoing commitment, Supplier agrees to
participate in the MEMC SUPPLIER IMPROVEMENT PROCESS, as set forth in
the document dated March 20, 1989 (which may be revised by MEMC from
time to time), and understands that its continuing participation in
this program is a condition to Customer's obligation to purchase
hereunder.
3. TERM: [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH
SEC]. This Agreement supercedes the former supply agreement dated
November 18, 1991.
4. SPECIFICATIONS: The current specifications for the Materials are set
forth in Appendix I ("Specifications"). Supplier understands that
Customer manufactures its products to the specifications of its customers
and that such specifications are subject to change. It is expected that
new or more stringent specifications for Supplier's Materials will, in
good faith, be necessary during the term of this Agreement so that
Customer will able to respond to its customers' requirements and be
able to improve the quality of its products. Supplier has committed
technical resources to reducing the impurities in the Materials to the
levels shown on Appendix II. Supplier will promptly review any changes
made by Customer to the Specifications along with Customer's
requested schedule to implement the revised Specifications, and, within
sixty (60) days, will either (i) accept, indicating the time
required to implement the revised Specifications, or (ii) reject
those changes in writing. Customer will consider the changes accepted if
no written objections are received within the sixty (60) day review
period. Supplier's consent shall not be unreasonably withheld. In the
event that Supplier does not accept said revised Specifications, or in the
event that the revised Specifications are not implemented within the
time period requested by Customer; and further provided that another
supplier can met the revised Specifications, then Customer may
purchase less than the Minimum Purchase Quantity.
5. QUANTITY:
5.1 The Contract Purchase Quantity for the calendar year [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] shall be
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH
SEC]. Prior to October 1 of each successive year MEMC will
provide Supplier with notification of the Contract Purchase Quantity
for the following year, specifying an amount [CONFIDENTIAL MATERIAL
HAS BEEN DELETED AND FILED SEPARATELY WITH SEC].
5.2 Supplier shall offer for sale to Customer [CONFIDENTIAL MATERIAL HAS
BEEN DELETED AND FILED SEPARATELY WITH SEC] of the Contract
Purchase Quantity and Customer shall be obligated to purchase the
Minimum Purchase Quantity for the year. Furthermore, in each
calendar quarter, Customer must purchase at least [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of the
Contract Purchase Quantity and no more than [CONFIDENTIAL MATERIAL
HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of the Contract
Purchase Quantity. In any given year, upon Supplier's request,
Customer will release Supplier from its obligation to offer to sell
the Material to the extent that Customer does not intend to
purchase; and upon Customer's request, Supplier will release
Customer from its obligation to purchase to the extent that there
are other purchasers for the Material.
6. PRICING:
6.1 [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH
SEC].
6.2 The invoice unit price will be set for the first calendar quarter of
the year according to the Contract Purchase Quantity for the year. In
each quarterly Release Order (referenced in Paragraph 8.1 below),
Customer will forecast its purchases for the entire calendar year;
these forecasts will be used for the sole purpose of determining the
invoice unit price for the following quarter. At the end of the year,
if the invoice unit price differs from the unit price calculated using
the Actual Purchases for the year, then the appropriate credit or
debit will be issued by Supplier to Customer's account on or before
December 31 of the relevant year.
6.3 Unless changed pursuant to the provisions of this Section 6, the price
shall not be increased during the Initial Term of this Agreement.
6.4 [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH
SEC].
6.5 Customer shall be liable for or shall reimburse Supplier for federal,
state and local sales, excise and use taxes or their equivalent, as
applicable. Taxes payable by Customer shall be billed as a separate
line item on the invoice.
6.6 Supplier represents that prices for the Materials furnished to
Customer under this Agreement are no less favorable than the prices
Supplier charges to other customers for the same or comparable
grade/quality Polycrystalline Silicon, in the same or less quantities.
If during the Term of this Agreement, Supplier sells Polycrystalline
Silicon of comparable grade/quality to another customer at a lower
price or on more favorable provisions, then Supplier will offer the
same terms to Customer. This Section shall be implemented as follows:
(a) On or before January 30 Supplier shall notify Customer of more
favorable terms given to other customers in the preceding
calendar year.
(b) If Supplier gives more favorable terms to more than one other
customer, Customer must select the terms given to one of the
customers which it deems most favorable.
(c) The more favorable terms, if accepted by Customer, shall be
applied against future purchases by Customer.
This Section shall not apply to spot quantity sales of less than 25 tons, to
sales made to Supplier's Joint Venture partners, sales made under the provisions
of agreement which also include technology purchases or sales made to the U.S.
Government.
No more than once per calendar year, Customer may engage an independent
certified auditor to audit the records of Supplier solely to ascertain
compliance with this provision. Auditor will comply with reasonable
confidentiality agreements and will report to Customer only whether Supplier has
or has not complied with this Section. If the auditor reports that Supplier has
not complied with this Section, all costs of the audit will be borne by the
Supplier. Supplier will cooperate as necessary for the conduct of this audit.
<PAGE> 3
7. INVOICES: Invoices shall be rendered to the billing address set forth on
the Release Order and shall include the number of tons of
Material sold and delivered to Customer. Any credits due may be
applied by Customer against Supplier's invoice with appropriate
information attached. Any credits due Customer that are not so applied
for any reason shall be refunded by Supplier within thirty (30) days
after the date the credit arose. Customer shall pay Supplier any
undisputed amounts due within thirty (30) days of the later of the receipt
of Supplier's invoice or the receipt of the Material.
8. RELEASE ORDERS:
8.1 At least sixty (60) days prior to each calendar quarter, MEMC will
issue a Release Order to Supplier. Each Release Order shall be deemed
to incorporate this Agreement and specify the Materials to be
delivered during the next three months along with the delivery
schedule and any special delivery instructions. MEMC may specify that
Materials be delivered to any facility of an MEMC Affiliate.
8.2 Supplier shall promptly acknowledge each Release Order in writing.
Supplier may reject a Release Order only if (i) Customer fails to
provide the ordering information required by this Agreement, (ii)
Customer does not correctly state pertinent prices or other amounts,
or (iii) the Release Order contains non-preprinted terms and
conditions that impose commercially unreasonable obligations on
Supplier. If Supplier rejects a Release Order, it shall inform
Customer in writing of the specific grounds for such rejection.
8.3 The Release Order shall be deemed accepted unless Supplier has
rightfully rejected the Release Order within ten (10) days after the
date on which the Release Order was issued. No changes by Supplier to
a Release Order, including adjustment of price or the shipment dates,
shall be effective unless agreed upon in writing by Customer. If
Customer does not agree to the changes proposed by Supplier, and if
Supplier does not have any of the grounds permitted by this Agreement
for rejection of a Release Order, the Release Order shall be accepted
by Supplier as submitted by Customer.
8.4 Customer may cancel a Release Order in whole or in part without
liability if a cancellation notice is sent to Supplier no less than
twenty (20) days before the scheduled shipment. Supplier will do all
that is reasonable under the circumstances to accommodate any request
for a schedule change.
9. INVENTORY: [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY
WITH SEC].
10. SHIPMENT:
10.1 Shipments will be made F.O.B. Hemlock, Michigan, freight collect.
Title and risk of loss or delay shall pass to Customer upon Supplier's
delivery to the carrier at the shipping point.
10.2 Supplier shall insure that the Materials are properly packed and
marked and shipped in suitable containers. Unless otherwise agreed by
the parties, all shipments will be in truck loads.
10.3 The scheduled shipment date will be specified in the Release Order. In
the event that Supplier fails to ship ordered Materials within three
(3) working days of the scheduled shipment date, and if in the opinion
of Customer, the respective plant is in risk of needing said Material
to continue uninterrupted production, Supplier will expedite the
shipment. In such an event, Supplier will issue a credit to Customer
for the difference between the shipment costs for the method of
transportation originally specified by Customer in the Release Order
and costs required to expedite the shipment. Customer may refuse to
accept Material shipped more than seven (7) days prior to the
scheduled shipment date.
10.4 Customer shall furnish written shipping instructions to Supplier no
later than ten (10) days prior to the scheduled shipment date. In the
absence of such instructions, Supplier may chose a carrier and ship to
the address specified on the face of this document, at Supplier's
expense.
<PAGE> 4
11. TECHNICAL COOPERATION:
11.1 Customer and Supplier shall each name a technical coordinator. The
technical coordinators shall provide the principal interface between
Customer and Supplier on technical matters and they may clarify,
explain and provide further details as required for the performance of
this Agreement, but they shall have no authority to make any
agreements between them which change any of the terms and conditions
of this, or any other agreement between the parties. Supplier agrees
that work related to this Agreement shall be the primary assignment
for its technical coordinator, which shall take priority over any
other assignment. The parties may mutually agree to increase or
decrease these commitments.
11.2 Every quarter, or as requested by either party, the parties will meet
to discuss common problems and concerns, the progress made and to set
the priorities for the next period.
11.4 The parties will work on improving packaging, handling, and shipping
processes to eliminate surface contamination and to alleviate
environmental concerns. If the parties agree, there may be an
additional handling charge for any resulting new process.
11.5 Supplier shall provide Customer with at least ninety (90) days written
notice of any significant proposed change in raw materials or methods
of manufacture employed in producing any Material sold hereunder; the
reasons for the proposed change; and the effect which Supplier
estimates such change will have upon the Specifications for the
Materials. If Customer objects to the proposed change and Supplier
elects to make such change despite Customer's objection or if Supplier
makes such a change without prior notification to Customer, then
Customer will be excused from any obligation to purchase from Supplier
under this Agreement. Supplier understands that any significant change
in processing will require re-qualification of Supplier's materials.
Customer's obligations hereunder shall abate during such
re-qualification period. Improvements in quality resulting from
efforts to continuously control existing processes are not considered
to be changes in process.
12. CONFIDENTIALITY:
12.1 During the performance of this Agreement, each party may disclose
information to the other party which the disclosing party considers
confidential and proprietary ("Confidential Information"). Each party
agrees that: (i) it shall not disclose any Confidential Information
which it receives from the disclosing party to any third party or to
any personnel of either party except those who require access to such
Confidential Information to accomplish the purpose of this Agreement;
and (ii) it shall not use the Confidential Information disclosed by
the other party for any purpose other than the purposes for which that
Confidential Information was disclosed to it.
12.2 Confidential Information shall not include, and neither party shall
have any obligation with respect to information which: (i) is known to
the receiving party at the time of receipt from the disclosing party
as shown by documentary evidence; or (ii) is rightfully obtained by
the receiving party from a third party having no obligation to the
disclosing party; or (iii) is either published or otherwise available
to the public at the time of its receipt by the receiving party from
the disclosing party or later becomes published or available to the
public other than by a breach of this Agreement; or (iv) was
discovered, developed or invented by the receiving party independently
of the information received hereunder from the disclosing party.
12.3 The obligations in this Section 12 shall extend for ten (10) years
beyond the termination of this Agreement.
13. WARRANTY:
13.1 Supplier warrants that the Materials delivered under this Agreement
will conform to the applicable Specifications, will be free from
defects in material and workmanship, and when used by Customer will
produce silicon wafers that consistently conform to customers'
requirements.
13.2 Upon notice by Customer to Supplier of a breach of the foregoing
warranty, Supplier shall promptly instruct Customer to either dispose
of said Materials or return said Materials to Supplier, freight
collect. At Customer's option, Supplier will either issue a credit for
the defective Materials or replace said Materials at Supplier's
expense, including all shipping and handling costs. [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]. In the
event that said Materials are, at Customer's discretion, required to
ensure continued uninterrupted production, then Supplier will take
all necessary steps to expedite delivery of the replacement
Materials. The breach of the warranty of ny portion of a lot shall
be sufficient grounds to reject the entire lot.
13.3 Supplier agrees to hold Customer harmless and indemnify Customer from
and against any and all liability, loss, cost, claim, suit, judgement
or expense including reasonable attorney's fees arising out of or in
any way related to an infringement of any patent or copyright or a
violation of any trade secret or other proprietary right of any third
party in any of the items provided to Customer pursuant to this
Agreement.
<PAGE> 5
14. FORCE MAJEURE: Neither party shall be liable for delay in performance or
non-performance caused by circumstances beyond the reasonable
control of the party affected including, but not limited to, acts of God;
fire; flood; war; government regulations, direction, or request; or
inability to obtain packaging or raw material or equipment. The party so
affected shall provide the other party with written notice thereof
within a reasonable time of the occurrence. The party receiving notice
may elect to (i) terminate, without further liability, the
applicable Release Orders as to Materials not already delivered, or (ii)
suspend the time for performance. In the absence of a written notice,
the second option will be deemed to have been elected. Notwithstanding
the foregoing, Customer, by written notice to Supplier, may reduce the
Contract Purchase Quantity by an amount no greater than the quantity which
was either not shipped or suspended pursuant to the provisions of this
paragraph.
15. CLAIMS: It is the intent of the parties that any disputes relating to this
Agreement be resolved in an amicable manner, fair and equitable to
both parties under the circumstances. If a dispute should arise between
the parties relating to this Agreement which cannot be resolved by the
personnel directly involved, either party may invoke the provisions
of this section by sending a written notice stating the dispute in clear
and concise language and designating its executive officer who shall
have appropriate authority to be its representative in negotiations. The
party receiving the notice shall, within five (5) business days, serve its
notice upon the invoking party, designating its executive officer
with similar authority to be its representative, and stating its
counter-statement of the dispute. After the exchanges of notices, the
designated executive representatives will establish a mutually
convenient date for conciliation. Prior to the executive
representatives' meeting, either side may make reasonable requests for
information pertaining to the defined dispute provided such requests are
not burdensome to comply with and can be accomplished within two business
days. At such conciliation, the parties will in good faith endeavor to
settle the dispute. Unless the other party objects, a party may enlist
one additional person to attend the conciliation to assist. Unless
otherwise agreed by the parties, if the parties are unable to resolve the
matter between them within seven (7) business days following the first
meeting of the designated executive representatives, either party may
initiate litigation. Nothing said during the conciliation sessions shall
be admissible in a court of law, since all such sessions were
undertaken as settlement efforts. Once invoked, this procedure is
mandatory.
16. HARDSHIP: If during the term of this Agreement, either Party believes that
(a) the price of the Products supplied under this Agreement
with due consideration to the Annual Purchase Commitment is grossly out
of line based on conditions then existing in the marketplace, (b) the
volume commitments are not consistent with market conditions, or (c) the
quality of any products supplied under this agreement deviates from the
level attained by the state of the art available to suppliers of
comparable products, the parties shall meet at the request of either to
negotiate in good faith to resolve such issues with appropriate
remedial action. It is understood that neither Party shall be
obligated to change any term of this Agreement, unless both Parties
are in agreement.
<PAGE> 6
17. GENERAL:
17.1 Notice. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be sufficiently given if
delivered in person, via telex, fax, or if sent by overnight courier,
by Air Mail, registered or certified, addressed to the appropriate
party at the following respective addresses (or at such addresses as
the parties may later specify):
If to Supplier addressed to: Hemlock Semiconductor Corporation
12334 Geddes Road
Hemlock, Michigan 48626
Attn: Duane O. Townley
Vice President Marketing & Sales & Quality
If to Customer addressed to: MEMC Electronic Materials, Inc.
P.O. Box 8
501 Pearl Drive
St. Peters, Missouri 63376
Attn: John Robb
Corporate VP Quality & Facilities
cc: MEMC Electronic Materials, Inc.
P.O. Box 8
501 Pearl Drive
St. Peters, Missouri 63376
Attn: Vice President & General Counsel
17.2 Assignment. Either party may assign or transfer its rights and
delegate its obligations hereunder to the purchaser of, or successor
to, all or substantially all of its assets. Except as set forth in the
preceding sentence, neither party may, whether by operation of law or
otherwise, assign or otherwise transfer any of its rights nor delegate
any of its obligations under this Agreement without the other party's
prior written consent. Any attempted assignment, transfer, or
delegation without such consent shall be void and of no benefit, and
will not be binding upon the parties hereto and their respective
successors and assigns.
17.3 Order of Precedence. In the event of an conflict the handwritten or
hand-typed provisions on the face of Customer's Purchase Order or
Release Order shall govern; but such terms shall be in effect for that
Purchase Order or Release Order only. Any preprinted terms and
conditions on a Purchase Order or on Supplier's quotation,
acknowledgment, or invoice shall be deemed superseded and deleted.
17.4 Modifications. This Agreement shall not be varied by any oral
agreement or representation or by other than an instrument in writing
of subsequent date, executed by both parties by their duly authorized
representatives.
17.5 Waiver. The failure of either party to exercise any of its rights or
to enforce any of the provisions of this Agreement on any occasion
shall not be a waiver of such right or provision, nor affect the right
of such party thereafter to enforce each and every provision of this
Agreement.
17.6 Severability. If any provision of this Agreement is invalid or
unenforceable under applicable law, such provision shall be modified
to the extent necessary to cure its invalidity and this Agreement as
so modified shall continue in full force and effect.
17.7 Headings. The headings are inserted for convenience only and shall not
limit or affect any of the terms hereof.
17.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties, and supersedes all previous agreements between
the parties with respect to the subject matter hereof.
17.9 Relationship. Except as expressly provided, this Agreement does not
create any relationship of agency, partnership or employment between
the parties.
17.10Governing Law. The validity of this Agreement and any Purchase Order,
the construction and enforcement of their terms and the interpretation
of the rights and duties of the parties shall not be governed by the
provisions of the 1980 U.N. Convention on Contracts for the
International Sale of Goods, but instead shall be governed by the
internal law of the State of Missouri. Any action relating to this
Agreement or any Purchase Order or Release Order issued under it shall
be brought in an appropriate court in the United States.
MEMC Electronic Materials, Inc. Hemlock Semiconductor Corporation
BY /s/Robert M. Sandfort BY /s/ James R. McCormick
TITLE President & COO TITLE President & CEO
DATE 1/26/95 DATE 4/20/95
<PAGE> 1
EXHIBIT 10 - ggg(1)
CONFIDENTIAL TREATMENT REQUESTED
June 20, 1995
Dr. James R. McCormick
President & CEO
Hemlock Semiconductor Corporation
12334 Geddes Road
Hemlock, Michigan 48626
RE: Agreement between Hemlock Semiconductor Corporation ("HSC") and MEMC
Electronic Materials, Inc. ("MEMC") for the sale of Polycrystalline
Silicon by HSC to MEMC dated December 27, 1994 (the "Agreement")
Dear Dr. McCormick:
This letter confirms our understanding to amend the Agreement as follows:
1. Paragraph 1.2 is amended in its entirety to read as follows:
1.2 Base Purchase Quantity for the calendar year [CONFIDENTIAL MATERIAL
HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of this Agreement is as follows:
Year Base Purchase Quantity
---- ----------------------
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
2. Paragraph 1.3 is amended in its entirety to read as follows:
1.3 The Base Unit Price for the Base Purchase Quantity for the calendar
years [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
of this Agreement is as follows:
Year Base Unit Price Ceiling Price*
---- --------------- --------------
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
*[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
3. Paragraph 1.5 is amended in its entirety to read as follows:
1.5 "Specified Period" means the period from [CONFIDENTIAL MATERIAL HAS
BEEN DELETED AND FILED SEPARATELY WITH SEC] through and including [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC].
4. Paragraph 1.8 is amended in its entirety as follows:
1.8 Minimum Purchase Quantity for the calendar years [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of this Agreement is
as follows:
Year Base Purchase Quantity
---- ----------------------
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
5. Paragraph 3 is amended in its entirety to read as follows:
3. TERM: [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY
WITH SEC]. This Agreement supersedes the former supply agreement dated
November 18, 1991.
6. Paragraph 5.2 is amended in its entirety to read as follows:
5.2 Supplier shall offer for sale to Customer [CONFIDENTIAL MATERIAL HAS
BEEN DELETED AND FILED SEPARATELY WITH SEC] of the Contract Purchase Quantity
if available but not less than [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND
FILED SEPARATELY WITH SEC] of the Contract Purchase Quantity and Customer
shall be obligated to purchase the Minimum Purchase Quantity for the year.
Furthermore, in each calendar quarter, Customer must purchase at least
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of the
Contract Purchase Quantity and no more than [CONFIDENTIAL MATERIAL HAS
BEEN DELETED AND FILED SEPARATELY WITH SEC] of the Contract Purchase Quantity.
In any given year, upon Supplier's request, Customer will release Supplier
from its obligation to offer to sell the material to the extent that Customer
does not intend to purchase; and upon Customer's request, Supplier will release
Customer from its obligation to purchase to the extent that there are other
purchasers for the Material.
Other than as expressly set forth above, the Agreement shall remain in full
force and effect.
If the foregoing is acceptable to you, please indicate your agreement on behalf
of HSC by signing in the space provided below and returning one fully executed
copy to me.
Sincerely yours,
MEMC Electronic Materials, Inc.
By: /s/ Robert M. Sandfort
Title: President and Chief
Operating Officer
AGREED AND ACCEPTED TO:
Hemlock Semiconductor Corporation
By: /s/ James R. McCormick
Title: President
<PAGE> 1
EXHIBIT 10 - ggg(2)
CONFIDENTIAL TREATMENT REQUESTED
November 8, 1996
Dr. James R. McCormick
President & CEO
Hemlock Semiconductor Corporation
12334 Geddes Road
Hemlock, MI 48626
RE: Agreement between Hemlock Semiconductor Corporation ("HSC") and
MEMC Electronic Materials, Inc. ("MEMC") for the sale of Polycrystalline
Silicon by HSC to MEMC dated December 27, 1994, as amended by Letter
Agreement dated June 20, 1995 (the "Agreement")
Dear Dr. McCormick:
This letter confirms our understanding to further amend the Agreement as
follows:
1. Paragraph 1.2 is amended in its entirety to read as follows:
1.2 Base Purchase Quantity for the calendar years [CONFIDENTIAL MATERIAL
HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of this Agreement is as follows:
Year Base Purchase Quantity
---- ----------------------
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
2. Paragraph 1.8 is amended in its entirety to read as follows:
1.8 Minimum Purchase Quantity for the calendar years [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of this Agreement is
as follows:
Year Minimum Purchase Quantity
---- -------------------------
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
Other than as expressly set forth above, the Agreement shall remain in full
force and effect.
If the foregoing is acceptable to you, please indicate your agreement on behalf
of HSC by signing in the space provided below and returning one fully executed
copy to me.
Sincerely yours,
MEMC Electronic Materials, Inc.
By: /s/ Robert M. Sandfort
Title: President and Chief Operating Officer
AGREED AND ACCEPTED TO:
Hemlock Semiconductor Corporation
By: /s/ James R. McCormick
Title: President & CEO
<PAGE> 1
EXHIBIT 10 - hhh
CONFIDENTIAL TREATMENT REQUESTED
Joint Venture Agreement
THIS AGREEMENT is made this 20th day of December, 1996
BETWEEN
MEMC ELECTRONIC MATERIALS INC, a company organized and incorporated under the
laws of the State of Delaware, United States of America and having its principal
place of business at 501, Pearl Drive, St. Peters, Missouri, United States of
America of the one part
AND
KHAZANAH NASIONAL BERHAD [formerly called KHAZANAH HOLDINGS BERHAD], a company
incorporated in Malaysia under the Companies Act 1965 and having its registered
office at 27th Floor, Tower Block, Putra Place, 100 Jalan Putra, 50622 Kuala
Lumpur, Malaysia of the other part.
WHEREAS:-
I. MEMC
A) MEMC has extensive experience and technical expertise and know-how in
the manufacture and sale worldwide of the Product.
B) MEMC is the proprietor of the Trade Mark used on the Product.
II. KHAZANAH
KHAZANAH is an investment holding company and holds equity interests in a
large number of companies carrying on a wide range of businesses.
III. JVC
The PARTIES have agreed to cooperate in the form of a joint venture upon
the terms and conditions hereinafter appearing and by a joint venture company
called "MEMC KULIM ELECTRONIC MATERIALS SDN BHD" established by the PARTIES, to
carry on the business of manufacturers in Malaysia and sellers in the ASEAN
Region of the Product.
IV. JOINT VENTURE AGREEMENT
The PARTIES are desirous of:-
A) regulating the relationship between themselves as the holders of JVC
Shares; and
B) making provision for the management and operations of the JVC and the
conduct of the JVC's affairs.
NOW THEREFORE in consideration of the premises and the mutual covenants and
agreements herein contained each PARTY HEREBY AGREES with the other PARTIES as
follows:-
<PAGE> 2
1. DEFINITIONS & INTERPRETATION
1.1 Definitions
In this Agreement, unless the context otherwise requires, the following
expressions shall have the meanings set forth opposite such expressions:-
"Annual Business Plan" : the JVC's annual business plan as adopted by
the JVC for a financial year of the JVC
"Appropriate Approvals" : all such approvals as may be required by
applicable laws, policies and guidelines (upon terms acceptable to the
relevant parties) and (as applicable) the FIC and MITI and any other
Malaysian or other governmental or quasi-governmental authority to the
purchase of JVC Shares pursuant to Clauses 4 and 11
"ASEAN Region" : the following countries:-
i) Thailand;
ii) Singapore;
iii) Malaysia;
iv) Indonesia;
v) Philippines; and
vi) Brunei;
vii) and for a period of 7 (Seven) years
commencing from the Effective Date,
Vietnam
excluding at all times, any other country which may
be a member of the Association of South East
Asian Nations (ASEAN)
"Certified Value" : in relation to a JVC Share, the value thereof as
valued and certified by the Valuers (acting as experts and not as
arbitrators):-
i) by reference to the fair value of the JVC;
ii) on the assumption that if the JVC is, as at
the date of valuation, carrying on business
as a going concern, it would continue to do
so; and
iii) on the basis of a sale and purchase
between a willing seller and a willing
purchaser made on ordinary commercial
terms and on an armslength basis
"Claimant" : the aggrieved PARTY who refers a dispute or difference to
arbitration in accordance with Clause 19
"Companies Act" : the Malaysian Companies Act 1965 and includes all
subsidiary legislation thereto
"Defaulting Party" : the PARTY referred to in Clauses 11.1.1 to 11.1.3
"Distributorship Agreement" : the Distributorship Agreement between
MEMC and the JVC (substantially in the form of the proof thereof annexed
hereto as "Annexure D") and includes all amendments thereto in force from
time to time
"Effective Date" : the date of this Agreement
"Encumbrance" : a lien, pledge, charge, mortgage, assignment or other
encumbrance or security interest
"Event of Default" : any of the events described in Clauses 11.1.1 to
11.1.3
<PAGE> 3
"FIC" : FOREIGN INVESTMENT COMMITTEE, MALAYSIA
"Intermediate Products" : Silicon ingots and unfinished Wafers
"JVC" : "MEMC KULIM ELECTRONIC MATERIALS SDN BHD" a company
incorporated in Malaysia and having its registered office at 102, 1st
Floor, Kompleks Antarabangsa, Jalan Sultan Ismail, 50200 Kuala Lumpur,
Malaysia.
"JVC Articles" : the Articles of Association of JVC
"JVC Auditors" : the external statutory auditors of the JVC from time
to time
"JVC Board" : Board of Directors of the JVC
"JVC Director" : a Director of the JVC
"JVC Financial Year" : a financial period of 12 (Twelve) months for
which the accounts of the JVC are made up and audited
"JVC M&A" : the Memorandum & Articles of Association of the JVC
"JVC Member" : a holder of JVC Shares registered in the JVC's Register
of Members
"JVC Plant" : the factory and necessary ancillary facilities to be
constructed and equipped by the JVC in Malaysia for the manufacture of the
Product
"JVC President" : the President of the JVC nominated pursuant to
Clause 5.1
"JVC Share" : an ordinary share having a par value of RM1.00 (Ringgit
Malaysia One) in the JVC
"KHAZANAH" : KHAZANAH NASIONAL BERHAD above described
"KLRAC" : REGIONAL CENTRE FOR ARBITRATION, KUALA LUMPUR established
under the auspices of the ASIAN-AFRICAN LEGAL CONSULTATIVE COMMITTEE
"laws" : constitutional provisions, Acts of Parliament, State
Enactments, Ordinances, subsidiary legislation, by-laws, regulations and
rules made pursuant to the foregoing
"Lock-Up Period" : a period of [CONFIDENTIAL MATERIAL HAS BEEN
DELETED AND FILED SEPARATELY WITH SEC] years following the Effective Date
"MEMC" : MEMC ELECTRONIC MATERIALS INC above described
"MEMC Customer" : a 3rd Party Purchaser who is also a purchaser or
prospective customer of the products manufactured by MEMC, MEMC's
Subsidiaries and MEMC JVs
"MEMC JV" : any company or corporation engaged in the manufacture of
Wafers in which MEMC is a stockholder or shareholder
"MITI" : MINISTRY OF INTERNATIONAL TRADE & INDUSTRY, MALAYSIA and
includes MALAYSIAN INDUSTRIAL DEVELOPMENT AUTHORITY
<PAGE> 4
"Non-Defaulter" : a PARTY which is not the Defaulting PARTY
"Offer" : an offer to sell JVC Shares made pursuant to Clause 4.6
"Offeror" : the holder of the JVC Shares which are the subject of an
Offer
"Offeree" : a JVC Member to whom an Offer is made
"PARTY" : either of the PARTIES
"PARTIES" : KHAZANAH and MEMC and includes any person, firm or company
who delivers a Shareholders Undertaking pursuant to Clause 4.13
"Product" : Wafers and includes such other products as the PARTIES may
agree upon in writing from time to time
"Related Co" : a related company within the meaning assigned to such
expression by Section 6 of the Companies Act
"Respondent" : the PARTY against whom a claim is made pursuant to
Clause 19
"ROC" : the REGISTRAR OF COMPANIES, MALAYSIA
"Rules" : the Rules of Arbitration of the KLRAC
"Said Business" : the manufacture in Malaysia and sale in the ASEAN
Region under the Trade Mark of the Product and includes such other
businesses as may be agreed upon in writing between the PARTIES and carried
on by the JVC from time to time
"Shareholders Undertaking" : an undertaking substantially in the terms
set forth in "Annexure A"
"Shareholding Percentages" : the respective proportions [including
those set forth in column (2) of Clause 3.3] in which the JVC's total
issued capital for the time being is held by the JVC Members [and (if
applicable) their respective Subsidiaries and Related Cos] from time to
time
"Silicon" : a semiconductor grade of elemental silicon of sufficient
purity and crystalline structure essential in the manufacture of semi
conductor devices
"Subject Shares" : the JVC Shares comprised in an Offer
"Subsidiary" : a subsidiary within the meaning assigned to such
expression by Section 5 of the Companies Act and "Subsidiaries" shall be
construed accordingly
"3rd Party Purchaser" : a person, firm or company who:-
i) is not a PARTY;
ii) (unless such person, firm or company is a Subsidiary of MEMC
or a MEMC JV or is a purchaser or transferee of JVC Shares
from MEMC, a Subsidiary of MEMC, a MEMC Related Co or a MEMC
JV) does not carry on or hold (directly or indirectly) any
beneficial interest exceeding 5% (Five Percent) in a company
which carries on research into and/or the business of
manufacturers and/or sellers of the Product;
iii) agrees to purchase or to subscribe for JVC Shares; and
iv) agrees to deliver Shareholders Undertakings to and is
consented to (such consent not to be unreasonably withheld)
by such of the PARTIES as shall remain JVC Members
subsequent to the aforesaid person's, firm's or company's
purchase of or subscription for JVC Shares
<PAGE> 5
"TCA" : the Technology Cooperation Agreement between MEMC and the JVC
(substantially in the form of the proof thereof annexed hereto as "Annexure
C") and includes all amendments thereto in force from time to time
"Trade Mark" : MEMC's trade marks particulars whereof are contained in
"Annexure B"
"Valuers" : such major international accounting firm as may be agreed
upon between the seller and purchaser of JVC Shares or, failing
agreement, the JVC Auditors at the material time
"Valuers' Certificate" : the certificate of the Valuers as to the
Certified Value issued pursuant to Clause 4.7
"Wafers" : [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED
SEPARATELY WITH SEC]
1.2 Interpretation
1.2.1 The Annexures hereto shall be taken, read and construed as
essential parts of this Agreement. The headings in this Agreement are
inserted for convenience of reference only and shall not be taken, read and
construed as essential parts of this Agreement. All references to Recitals,
Annexures and Clauses shall be references to recitals and annexures to and
clauses of this Agreement.
1.2.2 All references to provisions of statutes include such provisions
as modified, re-certified or re-enacted. Words applicable to natural
persons include any body of persons, company, corporation, firm or
partnership corporate or incorporate and vice versa. Words importing the
masculine gender shall include the feminine and neuter genders and vice
versa. Words importing the singular number shall include the plural number
and vice versa.
1.2.3 Where two or more persons or parties are included or comprised
in any expression, agreements, covenants, terms, stipulations and
undertakings expressed to be made by or on the part of such persons or
parties shall, unless otherwise provided herein, be deemed to be made by
and be binding upon such persons or parties jointly and severally.
1.2.4 All references to a company includes such company's
successors-in-title and permitted assigns. All references to this Agreement
shall include all amendments and modifications to this Agreement as shall
from time to time be in force.
1.2.5 In computing time for the purposes of this Agreement, unless the
contrary intention appears, a period of days from the happening of an event
or the doing of any act or thing shall be deemed to be exclusive of the day
on which the event happens or the act or thing is done and if the last day
of the period is a weekly or public holiday in Malaysia or the United
States of America, the period shall include the next following day which is
not a weekly or public holiday in Malaysia or the United States of America.
<PAGE> 6
2. JVC'S NAME, JVC M&A, JVC'S OBJECTIVES, EXECUTION OF AGREEMENTS
2.1 JVC's name & JVC M&A
The JVC shall (subject to the provisions of Clause 2.2) be called "MEMC
KULIM ELECTRONIC MATERIALS SDN BHD".
The JVC's M&A shall reflect the provisions of this Agreement at all times.
In the event of a conflict between the provisions of this Agreement and the
provisions of the JVC M&A, the provisions of this Agreement shall prevail and
the PARTIES shall cause the JVC to amend, with all due speed, the JVC M&A so as
to remove the conflict.
2.2 Use of MEMC's or KHAZANAH's name in JVC's names & products
The PARTIES acknowledge that "MEMC" and "KHAZANAH" are valuable assets of
MEMC and KHAZANAH respectively.
Accordingly if MEMC ceases to hold a direct and/or indirect interest in at
least [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] of
the total of the JVC Shares issued from time to time or KHAZANAH ceases to
hold any JVC Shares, then (as applicable) MEMC or KHAZANAH shall be entitled
(by notice in writing served upon the JVC) to require that (as applicable)
"MEMC" or KHAZANAH be excluded from the JVC's corporate name.
Upon the service on the JVC of a notice pursuant to this Clause 2.2, such
of the PARTIES as are then JVC Members shall cause all acts and things to be
done so that the JVC changes its corporate name as required and as soon as may
be possible within a period of 120 (One Hundred And Twenty) days from the date
of the aforesaid notice.
For the purpose of this Clause 2.2, the names "MEMC" and "KHAZANAH" shall
include such other name(s) as (as applicable) MEMC or KHAZANAH may hereafter
adopt.
2.3 Objectives
Unless otherwise agreed in writing between the PARTIES, the JVC shall carry
on the Said Business.
2.4 Execution of TCA & Distributorship Agreement
MEMC shall execute and the PARTIES shall cause the JVC to execute the TCA
and the Distributorship Agreement promptly after the Effective Date.
2.5 Reimbursement by JVC of costs & expenses
The PARTIES shall cause the JVC to reimburse to a PARTY (at such time as
the JVC Board deems appropriate and subject to its delivery to the JVC of
relevant receipts or other reasonably acceptable evidence of all payments
made):-
2.5.1 all costs and expenses which such PARTY shall have reasonably
incurred in relation to the incorporation of the JVC;
2.5.2 all costs and expenses which such PARTY shall have reasonably
incurred in relation to the identification and purchase, lease or sub-lease
of the land selected for the JVC Plant; and
2.5.3 such other costs and expenses as a PARTY shall have incurred for
the benefit of the JVC with the prior written approval of a committee
comprising of 1 (One) representative nominated by each of the PARTIES.
2.6 Construction of JVC Plant
The PARTIES acknowledge that the schedule for the commencement and
construction of the JVC Plant must reflect market conditions relating to sales
of the Product. Accordingly if, in the opinion of the JVC Board, weak market
demand for the Product so warrant, the PARTIES shall cause the JVC to delay the
commencement of the construction or the completion of the JVC Plant.
2.7 Sale & purchase of Intermediate Products
The PARTIES shall, as JVC Members, pass appropriate resolutions approving
from time to time, the sale and purchase by the JVC of Intermediate Products to
and from MEMC, MEMC's Subsidiaries and MEMC JVs upon such terms and at such
prices as the JVC Board may reasonably recommend to the JVC Members.
<PAGE> 7
3. JVC'S CAPITAL
3.1 Restructure of JVC's capital
On such date(s) following the Effective Date as the JVC Board deems
appropriate, the PARTIES shall cause:-
3.1.1 the authorised capital of the JVC to be increased from
RM100,000.00 (Ringgit Malaysia One Hundred Thousand) divided into 100,000
(One Hundred Thousand) JVC Shares to such amount in Ringgit Malaysia as is
equivalent to USD300,000,000.00 (United States Dollars Three Hundred
Million) [rounded up to the nearest million in Ringgit Malaysia] at the
then applicable exchange rate divided into such number of JVC Shares as
reflects the increased authorised capital; and
3.1.2 the issued and paid up share capital of the JVC to be increased
from RM4.00 (Ringgit Malaysia Four) to such amount as the JVC Board deems
necessary and as shall not be less than RM350,000,000.00 (Ringgit Malaysia
Three Hundred and Fifty Million) divided into 350,000,000 (Three Hundred
and Fifty Million) JVC Shares but shall not be more than the authorised
capital of the JVC as increased pursuant to Clause 3.1.1.
3.2 Allotment of JVC Shares and KHAZANAH's Initial Shares
Subject to the provisions of Clause 3.3, the JVC Shares to be allotted to
each of MEMC and KHAZANAH pursuant to Clause 3.1.2 shall be allotted for cash at
par payable upon allotment and each of MEMC and KHAZANAH shall duly subscribe
for such JVC Shares and pay all sums payable by bankers draft/cheque, cashiers
order or telegraphic transfer of the requisite funds to the JVC's account.
3.3 Shareholding Percentages
Notwithstanding anything to the contrary in the JVC M&A but subject to the
provisions of this Agreement, the total issued share capital of the JVC shall
(unless otherwise agreed in writing between the PARTIES or altered pursuant to
this Agreement) be held by the PARTIES or their respective Subsidiaries in the
respective percentages stated in column (2) below:-
====================================== =======================================
(1) (2)
PARTY Shareholding
Percentage
MEMC 75%
KHAZANAH 25%
TOTAL 100%
====================================== =======================================
3.4 Further increase of JVC's capital
At such times as the JVC Board determines it is necessary to increase the
issued and paid up share capital of the JVC (from the amount increased following
the Effective Date in the manner as stated in Clause 3.1.2) in order to meet the
following expenditure :-
3.4.1 JVC's costs and expenses incurred or expected to be incurred
towards the cost of construction of the JVC Plant; and
3.4.2 working capital for the JVC;
the PARTIES shall subscribe for such number of JVC Shares as to ensure that
the total issued share capital of the JVC shall be held by the PARTIES or
their respective Subsidiaries in the respective percentages stated in column
(2) of Clause 3.3.
The JVC Board shall have power to determine the increase of the issued and paid
up share capital of the JVC for the purposes as stated in Clauses 3.4.1
and 3.4.2 and such increase shall not exceed the amount of the authorised
share capital of the JVC as increased following the Effective Date in the
manner as stated in Clause 3.1.1. The PARTIES' subscription of the new JVC
Shares shall be for cash at par payable upon allotment.
<PAGE> 8
4. PRE-EMPTION
4.1 Restriction on Encumbrances
No PARTY may, during the continuance of this Agreement, create any
Encumbrance on any of the JVC Shares held for the time being by such PARTY
without the prior written consent of the other PARTY.
4.2 Lock-up Period
Except as otherwise provided in Clauses 4.3 to 4.5, 4.14 and 4.15, no PARTY
shall sell, transfer or otherwise dispose of any of its JVC Shares or rights in
or associated with its JVC Shares during the Lock-up Period.
4.3 Permitted sales by KHAZANAH during Lock-up Period
During the Lock-up Period, KHAZANAH shall be at liberty to sell, transfer
or otherwise dispose of any of its JVC Shares to a single 3rd Party Purchaser
if:-
4.3.1 such 3rd Party Purchaser carries on business as a Malaysian
incorporated manufacturer of integrated circuits with facilities in
Malaysia to perform oxidation, diffusion and photolithography, ranks
as and is reasonably expected to continue in the succeeding 5 (Five)
years to rank as one of the top 25 (Twenty Five) MEMC Customers (in
terms of the gross invoice values of their respective purchases from
MEMC, MEMC's Subsidiaries and MEMC JVs of the products manufactured by
them) is a company in which KHAZANAH holds equity shares, delivers to
the PARTIES, a Shareholders Undertaking prior to its acquisition of
the JVC Shares concerned and obtains all relevant Appropriate
Approvals; and
4.3.2 the JVC Shares to be sold, transferred or otherwise
disposed of by KHAZANAH to such 3rd Party Purchaser shall not exceed
5% (Five Percent) of the then issued capital of the JVC.
KHAZANAH shall be entitled to re-purchase any JVC Shares sold, transferred
or disposed of pursuant to this Clause 4.3. The provisions of Clauses 4.6 to
4.11 shall not apply to the sale, transfer or other disposal by KHAZANAH to a
3rd Party Purchaser pursuant to this Clause 4.3 or to the re-purchase by
KHAZANAH and the sale, transfer and disposal of JVC Shares by the 3rd Party
Purchaser concerned to KHAZANAH pursuant to this Clause 4.3.
4.4 Permitted sales by MEMC during Lock-up Period
During the Lock-up Period, MEMC shall be at liberty to sell, transfer or
otherwise dispose of such number of its JVC Shares as shall not exceed in the
aggregate [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH
SEC] of the then issued capital of the JVC to one or several manufacturer(s)
of integrated circuits if such manufacturer(s) deliver(s) to the PARTIES,
Shareholders Undertakings prior to its/their respective acquisition(s) of the
JVC Shares concerned and obtains all relevant Appropriate Approvals.
MEMC shall be entitled to re-purchase any JVC Shares sold, transferred or
disposed of pursuant to this Clause 4.4 and the provisions of Clauses 4.6 to
4.11 shall not apply to the sale, transfer or other disposal by MEMC to a 3rd
Party Purchaser pursuant to this Clause 4.4 or to the re-purchase by MEMC and
the sale, transfer and disposal of JVC Shares by the 3rd Party Purchaser
concerned to MEMC pursuant to this Clause 4.4.
4.5 Sale to a PARTY's Subsidiary or Related Co
A PARTY shall be at liberty at any time (including during the Lock-up
Period) to sell, transfer or otherwise dispose of all of its JVC Shares to its
Subsidiary or Related Co if prior thereto:-
4.5.1 the proposed transferee delivers to the other PARTY:-
i) Shareholders Undertaking; and
ii) a binding undertaking to re-transfer to the PARTY
being the transferor of the JVC Shares concerned, all of such
JVC Shares prior to such Subsidiary or Related Co ceasing to be a
Subsidiary or Related Co of the aforesaid PARTY; and
4.5.2 the PARTY being the transferor of the JVC Shares
concerned delivers to the other PARTIES, a binding guarantee (in
form satisfactory to the other PARTY) guaranteeing the performance
by the proposed transferee (whether a Subsidiary or Related Co of
the transferor) of such transferee's obligations under this Agreement
upon its joinder as a party hereto.
<PAGE> 9
4.6 Offer
Subject as otherwise provided in Clauses 4.3 to 4.5 and 4.14.1, a JVC
Member who wishes to sell, transfer or otherwise dispose of its JVC Shares shall
first make simultaneous offers in writing to sell all of its JVC Shares to the
other JVC Member(s) for the time being (and if there are more than 1 (One) other
JVC Member, in the proportions in which the nominal value of the JVC Shares held
by the other JVC Members bear to each other as at the date of the Offer) and at
such price as may be agreed upon between the Offeror and the Offeree concerned
within a period of 30 (Thirty) days from the Offeree's receipt of the Offer or
at the Certified Value if the same is acceptable to the Offeror.
An Offer made to MEMC shall be deemed to incorporate a right for MEMC to
nominate a 3rd Party Purchaser to purchase the Subject Shares offered.
Each Offer shall be deemed to be made upon terms that the Offeror shall be
entitled:-
4.6.1 to revoke (in accordance with Clause 4.7) an Offer remaining
unaccepted or to terminate the agreement constituted by such Offer and any
acceptance thereof if the Certified Value of the Subject Shares comprised
in any of the simultaneous Offers is unacceptable to the Offeror who so
notifies an Offeree pursuant to Clause 4.7; and
4.6.2 to terminate pursuant to Clauses 4.7.2, 4.9.1 or 4.11.1 the
agreement constituted by the Offer and the acceptance thereof if ALL of the
Subject Shares comprised in the simultaneous Offers made are not sold as a
result of:-
i) the non-acceptance of any such Offer;
ii) the absence of Appropriate Approvals required for the
acquisition of the Subject Shares accepted by an Offeree or
(if applicable) the 3rd Party Purchaser; or
iii) the Offeree's or (if applicable) the 3rd Party Purchaser's
failure to complete (in accordance with Clause 4.11) its
purchase of the Subject Shares concerned.
4.7 Valuation
If the Offeror and the Offeree fail to agree within a period of 30 (Thirty)
days from the Offeree's receipt of the Offer) on a mutually acceptable price for
the Subject Shares, a major international accounting firm agreed upon between
the Offeror and the Offeree or, failing agreement, the JVC's Auditors shall be
requested by the JVC Board to determine and certify the Certified Value of the
Subject Shares as at the date of the Offer and to issue the Valuer's Certificate
to the Offeror and the Offeree concerned.
The cost and expense of a valuation of Subject Shares shall be borne by the
Offeror and the Offeree in equal shares.
If the Certified Value is not acceptable to the Offeror, the Offeror shall
be entitled by written notice to such effect served upon the Offeree(s)
concerned within 7 (Seven) days from the Offeror's receipt of the Valuer's
Certificate:-
4.7.1 to revoke all or any Offers then remaining unaccepted; and
4.7.2 to terminate all or any of the agreements constituted by an
Offer and an acceptance thereof.
4.8 Acceptance of Offer
An acceptance of an Offer (which has not been revoked pursuant to Clause
4.6) shall be in writing served on the Offeror within 60 (Sixty) days from the
date of the Offeree's receipt of (as applicable):-
4.8.1 the Offer if the price for the Subject Shares is mutually agreed
upon; or
4.8.2 the Valuer's Certificate as to the Certified Value of the
Subject Shares concerned.
<PAGE> 10
In the absence of an acceptance served as aforesaid by the Offeree
concerned, the Offer made to such Offeree shall be deemed to be rejected by such
Offeree.
An acceptance shall relate to ALL (and not some only) of the Subject Shares
comprised in the Offer and shall be made or deemed to be made subject to the
grant of all Appropriate Approvals to the purchase by the Offeree of the JVC
Shares accepted.
4.9 Partial acceptances & further offers
If any of the Subject Shares comprised in the simultaneous Offers
(available for acceptance) are NOT accepted pursuant to Clause 4.7, the Offeror
shall make simultaneous offers to sell such Subject Shares to the Offeree(s) who
shall have accepted the Offers made to them (and, if there are more than 1 (One)
of such Offerees, in the proportions which the nominal value of the JVC Shares
held by them bear to each other) and at the same price per Subject Share as that
applicable to the Subject Shares already accepted by the Offeree concerned.
An acceptance of an offer made pursuant to this Clause 4.9 shall be in
writing served on the Offeror within 14 (Fourteen) days from the Offeree's
receipt of such offer. In the absence of an acceptance served as aforesaid by
the Offeree concerned, the offer made to such Offeree shall be deemed to be
rejected by such Offeree.
If any of the Subject Shares comprised in the simultaneous Offers
(available for acceptance) remain unsold following upon offers made pursuant to
this Clause 4.9, further offers of such Subject Shares shall be made in
accordance with this Clause 4.9 by the Offeror to such Offerees as shall have
accepted the offers made pursuant to this Clause 4.9.
If any Subject Shares remain unsold following upon such further offers, the
Offeror shall be entitled at its option by notice served on all Offerees within
14 (Fourteen) days from the date of the Offeror's receipt of the last of the
notices served by the Offerees pursuant to this Clause 4.9:-
4.9.1 to terminate the agreements for the sale and purchase of such of
the Subject Shares as are accepted AND to continue to hold all of the
Subject Shares held by the Offeror or to sell all of the Subject Shares to
a 3rd Party Purchaser; or
4.9.2 to proceed with the sale of the Subject Shares as are accepted
AND to continue to hold all of the Subject Shares which were not accepted
or to sell all of such Subject Shares to a single 3rd Party Purchaser.
4.10 Nomination of a 3rd Party Purchaser by MEMC
MEMC being the Offeree of Subject Shares comprised in an Offer shall be
entitled to identify and nominate a 3rd Party Purchaser to accept such Offer and
to purchase such Subject Shares all in the same manner as if the Offer had been
made to such 3rd Party Purchaser. For the purposes of accepting such Offer and
completing the purchase of the Subject Shares concerned, the 3rd Party Purchaser
nominated shall have the same rights as MEMC under Clauses 4.7 to 4.9.
<PAGE> 11
4.11 Completion by PARTIES concerned
Subject to the grant of all Appropriate Approvals therefor and any
termination by the Offeror pursuant to Clauses 4.7.2 or 4.9.1 of the sale and
purchase agreements for the Subject Shares sold, the sale and transfer of such
of the JVC Shares as are accepted (whether upon Offers made pursuant to Clause
4.6 or further offers made pursuant to Clause 4.9) shall be completed
simultaneously at the JVC's registered office upon the expiry of whichever is
applicable of the following periods each commencing from the date of the
Offeror's receipt of the notices of acceptance (or the last of them) served
pursuant to (as applicable) Clauses 4.8 or 4.10:-
i) if no Appropriate Approvals are required, a period of 30 (Thirty)
days; or
ii) if Appropriate Approvals are required by any Offeree and/or a 3rd
Party Purchaser, a period of 120 (One Hundred And Twenty) days.
If the sale and transfer of any of the Subject Shares are not completed as
a result of the absence of requisite Appropriate Approvals then unless an
Offeree (who is able to complete its purchase of the Subject Shares offered to
such Offeree) agrees to purchase all of the unsold Subject Shares at the price
per Subject Share payable by such Offeree and to complete such purchase
simultaneously with the completion of the purchase of the Subject Shares offered
to such Offeree the Offeror shall be entitled at its option by notice served on
all Offerees and (if applicable) 3rd Party Purchaser concerned:-
4.11.1 to terminate the agreements for the sale and purchase of such
of the Subject Shares comprised in Offers as are accepted and capable of
being completed AND to continue to hold or to sell to a single 3rd Party
Purchaser all of the JVC Shares held by the Offeror; or
4.11.2 to proceed to complete the sale of the Subject Shares as are
capable of being completed AND to continue to hold or sell to a single 3rd
Party Purchaser all of the Subject Shares the sale and purchase whereof
cannot be completed.
4.12 New Offer
A JVC Member who fails to sell, transfer or otherwise dispose of such JVC
Member's JVC Shares pursuant to Clauses 4.6 to 4.11 may make another Offer to
sell the same in accordance with Clauses 4.6 to 4.11.
4.13 Sale to 3rd Party Purchaser
Any sale of Subject Shares to a 3rd Party Purchaser pursuant to Clause 4.9
or 4.11 shall be:-
4.13.1 at a price which is not less than the highest price per Subject
Share payable to the Offeror by an Offeree who has served a notice of
acceptance pursuant to Clause 4.8; and
4.13.2 subject to the delivery by the 3rd Party Purchaser to such of
the PARTIES as will continue to be JVC Members of Shareholders Undertaking
and if such 3rd Party Purchaser is a company, satisfactory evidence that it
is duly authorised to give the Shareholders Undertaking.
4.14 Change of ownership of MEMC's business & assets
If beneficial ownership of substantially all of the business and assets of
MEMC shall be transferred in its entirety at any time:-
4.14.1 MEMC shall be at liberty to sell, transfer or otherwise dispose
of its JVC Shares to the acquirer (of the beneficial ownership of
substantially all of the business and assets of MEMC) at such price and
upon such terms as MEMC deems fit subject to the delivery by such acquirer
to such of the PARTIES as will continue to be JVC Members, of Shareholders
Undertakings and if such acquirer is a company, satisfactory evidence that
it is duly authorised to give the Shareholders Undertaking. AND the
provisions of Clauses 4.2, 4.6 to 4.11 shall not apply to the sale,
transfer and disposal by MEMC of its JVC Shares pursuant to this Clause
4.14.1; and
4.14.2 KHAZANAH shall be at liberty to sell, transfer or otherwise
dispose of all of its JVC Shares in accordance with Clauses 4.6 to 4.11 AND
the provisions of Clause 4.2 shall not apply to the sale, transfer and
disposal by KHAZANAH of its JVC Shares pursuant to this Clause 4.14.2.
<PAGE> 12
4.15 Mandatory offer of sale
If a PARTY (other than MEMC, a subsidiary of MEMC or a MEMC JV or any other
PARTY who shall have acquired JVC Shares from MEMC, a Subsidiary of MEMC, MEMC's
Related Co or a MEMC JV) carries on or holds (directly or indirectly) at any
time, any beneficial interest exceeding 5% (Five Percent) in a company which
carries on research into and/or the business of manufacturers and/or sellers of
the Product, such PARTY shall within 7 (Seven) days of its commencement of such
research and/or business or of the acquisition of the beneficial interest
concerned, make, in accordance with Clause 4.6, an offer to sell to the other
PARTIES, all of the JVC Shares held by such PARTY whereupon the provisions of
Clauses 4.6 to 4.11 shall apply to the sale and transfer of such JVC Shares.
5. BOARD OF DIRECTORS
5.1 Nomination
There shall be no fewer than 7 (seven) and no more than 10 (Ten) JVC
Directors.
Subject to applicable laws, the JVC Board shall be constituted as nearly as
may be possible, by such persons as are nominated in accordance with this
Agreement by the PARTIES (or, if applicable, their respective Subsidiaries or
Related Cos) in the Shareholding Percentages. So long as the PARTIES hold the
total issued capital of the JVC in the Shareholding Percentages stated in Clause
3.3:-
5.1.1 7 (seven) JVC Directors shall be nominated by MEMC; and
5.1.2 2 (two) JVC Directors shall be nominated by KHAZANAH.
So long as MEMC (and if applicable, aggregated with its Subsidiaries' or
Related Co's shareholding in the JVC) has the largest shareholding in the JVC,
the Chairman of the JVC Board shall be such of the JVC Directors nominated by
MEMC (or, if applicable, its Subsidiary or Related Co) as MEMC (or, if
applicable, its Subsidiary or Related Co) selects.
So long as KHAZANAH (and if applicable, aggregated with its Subsidiaries'
or Related Co's shareholding in the JVC) has the second largest shareholding in
the JVC the Deputy Chairman of the JVC Board shall be such of the JVC Directors
nominated by KHAZANAH (or, if applicable, its Subsidiary or Related Co) as
KHAZANAH (or, if applicable, its Subsidiary or Related Co) selects.
So long as MEMC (and if applicable, aggregated with its Subsidiaries' or
Related Co's shareholding in the JVC) has the largest shareholding in the JVC,
the JVC President (who shall act as the chief executive officer of the JVC)
shall be such of the JVC Directors nominated by MEMC (or, if applicable, its
Subsidiary or Related Co) as MEMC (or, if applicable, its Subsidiary or Related
Co) selects.
5.2 Appointments & removals
A JVC Member is entitled to nominate and appoint a JVC Director for every
10% (Ten percent) of the JVC Shares held by such JVC Member in the JVC.
A JVC Member entitled to appoint a JVC Director shall be entitled:-
5.2.1 to appoint an Alternate Director to such JVC Director;
5.2.2 to determine the period such JVC Director and his Alternate
Director shall hold office;
5.2.3 to fill any casual vacancy arising from the JVC Director
appointed or his Alternate Director vacating his office; and
5.2.4 to remove such JVC Director or his Alternate Director and
appoint another in his place.
Any such appointment, determination and removal shall be by notice in
writing to the JVC and such notice shall (subject to the provisions of the
Companies Act) take effect when it is delivered to the Secretary of the JVC.
The JVC Member appointing, determining and removing a JVC
Director/Alternate Director shall indemnify and save harmless the JVC from all
claims (if any) by the JVC Director/Alternate Director appointed or removed and
resulting from the appointment, determination or removal.
<PAGE> 13
5.3 Resignations
If in pursuance of Clause 5.2, a purchaser of JVC Shares shall be entitled,
by reason of his holding thereof, to nominate a number of JVC Directors, then
simultaneously with the completion of the sale of the JVC Shares concerned, the
PARTY who is the seller thereof shall:-
5.3.1 cause such number of the persons as shall have been nominated by
such PARTY to hold office as JVC Directors (and as shall be equivalent to
the number of JVC Directors which the aforesaid purchaser is entitled to
appoint):-
i) to resign from such office; and
ii) to disclaim unconditionally and in writing, all rights (if any)
to such monies as may be payable by JVC to such person(s) by way
of compensation for loss of office; and
5.3.2 remove the aforesaid persons from office as JVC Directors if
they do not resign from such office as aforesaid or give the aforesaid
disclaimer.
The PARTIES (other than the PARTY who is the seller of the JVC Shares)
shall agree to the nomination by the acquirer (of the JVC Shares hereinbefore
referred to) of a JVC Director in the place of each JVC Director who resigns or
is removed pursuant to the foregoing provisions of this Clause 5.3.
5.4 No rotation or removal by JVC
The JVC Directors shall not be required to retire by rotation nor shall
they be removed by the JVC.
Any removal of any JVC Director may be effected only by the JVC Member
which appointed the JVC Director concerned.
5.5 No shareholding qualification
There shall not be any shareholding qualification for the holding of the
office of a JVC Director.
5.6 Meetings of JVC Board
Meetings of the JVC Board shall be convened and held at regular intervals
not exceeding 6 (Six) months each.
In addition to such meetings of the JVC Board as may be convened by order
of the JVC Board, the Secretary of the JVC shall, upon being directed so to do
by the Chairman or President and any JVC Director, give notice of a meeting of
the JVC Board. The JVC shall pay/reimburse to (as applicable) the JVC Directors
or their Alternates, all such costs and expenses (including travelling,
accommodation and other out-of-pocket expenses) as may reasonably be incurred by
them in attending meetings of the JVC Board. Save as aforesaid and unless
otherwise determined by the JVC Board, the JVC Directors shall not be entitled
to any payment for acting as a JVC Director of the JVC.
5.7 Notice of JVC Board meetings
A meeting of the JVC Board shall be called by notice in writing served on
all of the JVC Directors. Unless a majority of the JVC Directors (including at
least 1 (One) JVC Director appointed by each of MEMC and KHAZANAH) otherwise
agree, the period of notice given (exclusive of the date of the notice and of
the date of the meeting concerned) shall not be less than 14 (Fourteen) days.
<PAGE> 14
Each notice of a meeting of the JVC Board shall be:-
5.7.1 accompanied by an agenda specifying in reasonable detail, all
the business to be transacted thereat and all relevant papers for
consideration or discussion; and
5.7.2 sent by hand, courier or registered post to such of the JVC
Directors as reside in Malaysia and by telefax (with copy sent by courier
or registered post) or courier or registered airmail to such of the JVC
Directors as reside outside Malaysia.
5.8 Quorum
The quorum for all meetings of the JVC Board (other than an adjourned
meeting) shall be 2 (Two) JVC Directors (or their duly appointed Alternate
Directors) comprising of at least 1 (One) JVC Director nominated by each of MEMC
and KHAZANAH.
If such a quorum is not present at any meeting of the JVC Board within
half-an- hour of the time appointed for the meeting, then (unless the PARTIES
otherwise agree in writing) such meeting shall stand adjourned to the day next
immediately following the day of the initial meeting and at the same time and
place as the initial meeting. If, at the adjourned meeting, a quorum is not
present within half an hour from the time appointed for the adjourned meeting, a
majority of the JVC Directors shall constitute a quorum.
At any adjourned meeting of the JVC Board, only matters specified in the
notice of the initial meeting of the JVC Board may be decided.
5.9 Chairman of JVC Board meetings
The Chairman of the JVC Board shall be the Chairman of all meetings of JVC
Directors. In the absence of the Chairman within 15 (Fifteen) minutes after the
time appointed for the holding of the meeting or if he is unwilling to act, the
Deputy Chairman of the JVC Board (and in his absence or if he is unwilling to
act) any JVC Director appointed by the JVC Board shall act as Chairman of the
meeting.
5.10 Voting
Subject to the provisions of Clause 7, a resolution of the JVC Board at a
meeting of the JVC Directors is valid if passed by an affirmative vote of a
simple majority of the JVC Directors present and voting.
The Chairman of the JVC Board shall have a second or casting vote in the
case of an equality of votes in a meeting of the JVC Board.
5.11 JVC Directors' resolutions in writing
Subject to the provisions of Clause 7, a resolution in writing signed by a
simple majority of the JVC Directors (including at least 1 (One) JVC Director
appointed by each of MEMC and, so long as KHAZANAH holds not less than 20%
(Twenty Percent) of all of the then issued JVC Shares, at least 1 (One) JVC
Director appointed by KHAZANAH) shall be as valid and effectual as if it had
been passed at a meeting of the JVC Board duly convened and held.
Any such resolution in writing may be contained in one document or separate
copies thereof (prepared and circulated by telefax, telex or telegram with copy
sent by courier or registered post) which is signed by one or more of the JVC
Directors. An approval by letter or other written means of a proposed resolution
in writing (which has been prepared and circulated as aforesaid) signed by a JVC
Director and sent by him by telefax, telex or telegram (with copy sent by
courier or registered post) shall be deemed to be a document signed by him for
the purposes of the foregoing provisions.
Where 2 (Two) or more documents or copies of a document are prepared and
circulated for the purpose of obtaining signatures, each of such documents or
copies shall be certified in advance by the Secretary of the JVC as a true copy
of the proposed resolution in writing.
<PAGE> 15
5.12 Indemnity to JVC Directors and officers
The PARTIES shall cause the JVC to the fullest extent permitted by any
applicable law:-
5.12.1 to indemnify any JVC Director and any other person as the JVC
Board deems appropriate, who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative, arbitrative or investigative) any
appeal in such an action, suit or proceeding and any inquiry or
investigation that could lead to such an action, suit or proceeding by
reason of the fact:-
i) that he is or was a JVC Director or an officer, employee or agent
of the JVC; or
ii) that he is or was serving at the JVC's request as a director,
officer, partner, venturer, proprietor, trustee, employee, agent
or similar functionary of another company, corporation,
partnership, joint venture, sole proprietorship, trust,
non-profit entity, employee benefit plan or other enterprise
against all judgements, penalties (including excise and
similar taxes), fines, settlements and expenses (including
solicitors' and attorneys' fees and court costs) actually and
reasonably incurred by him in connection with such action, suit
or proceeding and to the effect that such indemnity shall inure
to the benefit of his heirs, executors and administrators; and
5.12.2 to pay and advance, if the JVC Board deems fit, the
expenses incurred by the JVC Director or person indemnified pursuant
to Clause 5.12.1 in defending any action, suit or proceeding and the
like and upon such terms as the JVC Board deems appropriate
the aforesaid indemnification and advancement of expenses to be
provided or granted to be in addition to and without prejudice to any other
right to which the person indemnified may be entitled under any laws.
6. GENERAL MEETINGS
6.1 Quorum
The quorum necessary for the transaction of business at a General Meeting
of the JVC shall be 2 (Two) JVC Members holding at least 50% (Fifty Percent) of
the total issued JVC Shares for the time being present in person or their
corporate representatives or proxies.
If within half-an-hour from the time appointed for the holding of a General
Meeting, a quorum as aforesaid is not present, the meeting shall stand adjourned
to the same day the following day at the same time and place. No notice of the
adjourned meeting shall be required to be given.
If at the adjourned meeting a quorum as aforesaid is not present within
half-an- hour from the time appointed for holding the meeting, such JVC
Member(s) holding not less than 50% (Fifty Percent) of the JVC's then issued
capital shall be a quorum.
<PAGE> 16
6.2 Voting
Subject to the provisions of Clause 7 and except as otherwise required by
the Companies Act or by law, matters arising at a General Meeting of the JVC
shall be decided as follows whether on a show of hands or upon a poll by an
affirmative vote of such number of the JVC Members holding for the time being
more than 50% (Fifty percent) of the total number of issued and paid up JVC
Shares.
6.3 JVC Members resolution in writing
Subject to the provisions of the Companies Act and of Clause 7, a
resolution in writing of the JVC Members shall be valid if the same shall have
been signed by such number of the JVC Members holding for the time being more
than 50% (Fifty percent) of the total number of issued and paid up JVC Shares
for the time being.
Any such resolution in writing may be contained in one document or separate
copies thereof (prepared and circulated by telefax, telex or telegram with copy
sent by courier or registered post) which is signed by one or more of the JVC
Members. An approval by letter or other written means of a proposed resolution
in writing (which has been prepared and circulated as aforesaid) signed by a JVC
Member and sent by him by telefax, telex or telegram (with copy sent by courier
or registered post) shall be deemed to be a document signed by him for the
purposes of the foregoing provisions.
Where 2 (Two) or more documents or copies of a document are prepared and
circulated for the purpose of obtaining signatures, each of such documents in
copies shall be certified in advance by the Secretary of the JVC as a true copy
of the proposed resolution in writing.
7. RESERVED MATTERS
7.1 Description of Reserved Matters
So long as KHAZANAH holds not less than [CONFIDENTIAL MATERIAL HAS BEEN
DELETED AND FILED SEPARATELY WITH SEC] of all of the then issued JVC Shares,
a resolution of the JVC to transact any of the following matters shall be
valid only if the transaction shall have been first approved in writing by
MEMC and KHAZANAH:-
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
7.2 Non-accrual of personal rights
The rights conferred upon MEMC and KHAZANAH by Clause 7.1 being personal to
MEMC and KHAZANAH, none of such rights shall accrue to or be exercisable by any
acquirer of JVC Shares held from time to time by (as applicable) MEMC or
KHAZANAH.
<PAGE> 17
8. MANAGEMENT OF THE JVC
8.1 JVC President
The JVC Board shall delegate to the JVC President such powers, authorities
and discretions as may be necessary for the JVC President to be entrusted with
overall supervision and control of the day-to-day management of the JVC and
conferred with responsibility for the day to day coordination of the various
activities of the JVC and its observance and performance of the terms and
conditions of any contract to which it is a party.
Without derogating from the generality of the foregoing provisions, the JVC
President shall be empowered:-
8.1.1 to enter into contracts in the JVC's ordinary course of
business and in implementation of the Annual Business Plan approved by
the JVC Board; and
8.1.2 to engage and dismiss officers, workmen, servants and other
personnel upon such terms as to work functions and terms and
conditions of employment and also to modify such terms and conditions
in accordance with the JVC's approved Annual Business Plan and the
JVC's employment policy.
8.2 Key management personnel
The JVC's key management personnel shall consist of the JVC President,
Financial Controller, Director (Technology) and Director (Operations) all being
persons nominated by MEMC so long as MEMC (and if applicable, aggregated with
its Subsidiaries' or Related Co's shareholding in the JVC) has the largest
shareholding in the JVC.
9. BUSINESS POLICY, FINANCIAL YEAR & POLICY & ANNUAL BUSINESS PLAN
9.1 Financial Year, JVC Auditors & Accounts
9.1.1 The annual financial period for which the accounts of the
JVC shall be made up and audited shall terminate in each calendar year
on the 31st day of December or such other date as the PARTIES may
agree upon to comply with any applicable law.
9.1.2 The JVC Auditors shall be such major international
accounting firm as the JVC Board shall determine.
9.1.3 The accounts of the JVC shall be kept in English at its
registered office. All transactions of the JVC shall be adequately and
fully recorded and reflected in the JVC's accounts so that the JVC's
accounts give a true and fair view of the financial affairs of the
JVC. The PARTIES (and their authorised representatives) shall have the
right to inspect the JVC's accounts during the JVC's normal business
hours and to make copies of such accounts.
9.1.4 The accounts of the JVC shall be prepared on a historical
cost basis and in accordance with generally accepted accounting
principles consistently applied.
9.1.5 For the purposes of Clause 9.1.3, the PARTIES shall cause
the JVC to devise and maintain a system of internal accounting
controls sufficient to provide reasonable assurance that:-
i) transactions are executed in accordance with the JVC's
Board's and the managing officers' general or specific
authorization;
ii) transactions are recorded as necessary:-
a) to permit preparation of financial statement in
conformity with generally accepted accounting
principles or any other criteria applicable to such
statements; and
b) to maintain accountability for assets;
iii) access to assets is permitted only in accordance with the
JVC's Board's and managing officers' general or specific
authorization; and
iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
9.1.6 The PARTIES shall cause the JVC to modify or supplement
such accounting and record keeping procedures in such manner as may be
necessary from time to time to enable MEMC and its designees to comply
with the provisions of the United States Foreign Corrupt Practices
Act, as amended from time to time, including any accounting and other
regulations adopted in connection therewith.
<PAGE> 18
9.2 Financing policy
The PARTIES anticipate that the costs of the JVC Plant (including
construction costs) shall be funded entirely from the JVC's share capital but
shall be at liberty to finance any part of such costs with borrowings from third
parties.
If:-
9.2.1 the financial requirements of the JVC exceeds the total
issued capital and retained earnings of the JVC as herein provided; or
9.2.2 bank guarantees, performance bonds, indemnities and the
like are required by the JVC in the ordinary course of the Said
Business
the PARTIES shall use their best endeavours to assist the JVC to raise the
additional working capital and the aforesaid bank guarantees, performance bonds,
indemnities and the like by obtaining from banks and other financial
institutions, such loans, credit, guarantee and other facilities as the JVC
Board may approve.
Without derogating from the generality of the foregoing provisions,
KHAZANAH shall render every assistance in obtaining on the best terms obtainable
from fund based and non-fund based banks in Malaysia, the facilities required by
the JVC from time to time and shall also assist (as applicable) the JVC and/or
MEMC to obtain all approvals, permissions, consents and the like required of the
Appropriate Authorities in relation to the acceptance of such facilities.
Unless the JVC Members otherwise agree in writing, nothing herein contained
shall be construed to render any JVC Member liable to provide the aforesaid sums
or any part thereof by way of loans to the JVC or to require any of the JVC
Directors to guarantee the payment by the JVC of moneys due and owing from time
to time and at any time by the JVC.
9.3 JVC Members' Guarantees
Unless the JVC Members otherwise agree, nothing herein shall be construed
to render any JVC Member liable to provide any guarantee for the repayment by
the JVC of the loans, credit, guarantee and other facilities referred to in
Clause 9.2.
Such guarantees as all of the JVC Members may agree to provide from time to
time for the repayment by the JVC of the loans, credit, guarantee and other
facilities referred to in Clause 9.2 shall be given (subject to all applicable
laws) by the JVC Members in the Shareholding Percentages but if a JVC Member
shall not be permitted by applicable laws to give the aforesaid guarantees
then:-
9.3.1 such JVC Member will provide an alternative to the
guarantee required of such JVC Member (including giving an indemnity
if so permitted by applicable laws or subscribing for redeemable,
non-convertible, non-voting preference shares in the JVC) for its
proportion of the aforesaid indebtedness; or
9.3.2 if the other JVC Members so agree (but without being
obliged so to do) such JVC Members shall provide in the proportions
which the JVC Shares held by them bear to each other, guarantees for
the amount which would otherwise have been guaranteed by the JVC
Member referred to in Clause 9.3.1 if such JVC Member delivers to the
others of the JVC Members, indemnities (in terms acceptable to such
other JVC Members).
<PAGE> 19
9.4 Annual Business Plan & Periodical Reports
The PARTIES shall (by the JVC Directors appointed by them) cause the JVC:-
9.4.1 to prepare and furnish the following documents at the
following times to the JVC Directors [for approval in the case of the
Annual Business Plan referred to in Clause 9.4.1(i)]:-
i) at least 60 (Sixty) days prior to the end of each of the
JVC's financial years, a draft of the Annual Business Plan
to be adopted by the JVC for the JVC's financial year next
following; and
ii) within 45 (Forty Five) days of the end of each quarter, a
balance sheet and profit and loss statement for the
preceding quarter; and
9.4.2 to require the JVC Auditors to prepare and furnish within
90 (Ninety) days of the end of each of the JVC's financial years, the
audited financial statements of the JVC for the preceding financial
year.
9.5 Dividends & Distribution of Profits
The amount of final dividends to be declared by the JVC in a financial year
shall be determined by the JVC Board acting in the best interests of the JVC and
with regard to the following:-
i) the importance to the JVC of a sound capital structure which
is consistent with regulatory requirements and the JVC's
operational and growth requirements;
ii) the reinvestment of profits (in particular, for the purposes
of increasing the capacity of the JVC Plant) from time to
time and, in particular, during the JVC's initial 5 (Five)
financial years; and
iii) the maintenance of a balance between the foregoing
considerations and the PARTIES' need for returns on their
investments in the JVC.
10. REPRESENTATIONS AND WARRANTIES
Each of the PARTIES hereby represent to the other that:-
10.1 it is a corporation duly organized and incorporated and validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has full power and authority to execute and deliver and
perform all of its obligations under this Agreement and in the case of MEMC, the
TCA and the Distributorship Agreement and any other agreements contemplated
hereunder;
10.2 this Agreement is, and all other agreements and instruments
contemplated hereunder shall be, when executed and delivered, enforceable
against it in accordance with their terms except insofar as:-
10.2.1 such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights; and
10.2.2 the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding
therefor may be brought; and
<PAGE> 20
10.3 the execution, delivery and performance of this Agreement by it will
not conflict with:-
10.3.1 existing law, order, judgement, decree, rule or regulation
of any court, arbitral tribunal or governmental agency, which is
applicable to it; or
10.3.2 any material agreement, instrument or indenture to which
it is a party.
11. TERMINATION
11.1 Events of Default
Each of the following events shall be an Event of Default:-
11.1.1 if a PARTY commits or allows to be committed a material
breach of any of such PARTY's obligations hereunder and does not
remedy such breach within 30 (Thirty) days after written notice has
been given to such PARTY by any other PARTY requiring such remedy; or
11.1.2 if a petition shall be presented or an order made or a
resolution passed for the winding up (except as part of a bona fide
scheme of reconstruction or amalgamation) of a PARTY or a PARTY shall
compound with its creditors or have a receiver appointed of the whole
or any part of its assets or shall cease or threaten to cease (other
than in the course of reconstruction or amalgamation) to carry on the
whole or any substantial part of its business; or
11.1.3 if in breach of an undertaking given in accordance with
Clause 4.5.1, a Subsidiary of a PARTY fails to re-transfer prior to
its ceasing to be such Subsidiary, the JVC Shares held by such
Subsidiary to the PARTY who transferred such JVC Shares and continues
to so fail for a period of 45 (Forty Five) days after the aforesaid
Subsidiary ceased to be a Subsidiary of the aforesaid PARTY.
11.2 Call option/deemed offer of sale/winding-up
Upon the occurrence of an Event of Default, the Non-Defaulter(s) shall be
entitled (but shall not be obliged and in relation to the remedies described in
Clauses 11.2.2 to 11.2.4, only if the Non-Defaulter(s) hold(s) more than 50%
(Fifty Percent) of the JVC's then issued capital) by notice in writing issued by
the Non-Defaulter (or if there are several of them, by all of the Non-Defaulters
or, in the case of the remedies described in Clauses 11.2.2 to 11.2.4, by such
of the Non-Defaulters as hold a simple majority of the total number of the JVC
Shares held by all of the Non-Defaulters) and served on the Defaulter within 180
(One Hundred And Eighty) days from the date on which the Non-Defaulter(s) became
aware of the occurrence of the Event of Default:-
11.2.1 to require the Defaulter to purchase, (subject to the
grant of all Appropriate Approvals) all of the JVC Shares held by the
Non-Defaulter(s) in which event, the Defaulter shall purchase the
aforesaid JVC Shares at the price and otherwise upon the terms
provided in Clauses 11.3 to 11.7; or
11.2.2 to require the Defaulter to sell to the Non-Defaulter(s)
(subject to the grant of all Appropriate Approvals) and if there are
several Non-Defaulters, in the proportions in which the JVC Shares
held by them bear to each other) all of the JVC Shares held by the
Defaulter whereupon the Defaulter shall immediately make an offer
(failing which it shall be deemed to have made an offer upon its
receipt of the notice served as aforesaid) to sell to the Non-
Defaulter(s) the JVC Shares held by the Defaulter, at the price and
otherwise upon the terms provided in Clauses 11.3 to 11.7; or
11.2.3 to require that the JVC be wound up in which event, the
PARTIES shall forthwith do all acts and things to procure the winding
up of the JVC in accordance with all applicable laws and the JVC
Articles; and/or
11.2.4 to terminate this Agreement but without prejudice to the
Defaulter's obligations arising upon the service of the aforesaid
notice and any rights or liabilities of any PARTY hereunder whether
pre-existing or arising from the termination of this Agreement.
<PAGE> 21
Failing unanimity between several Non-Defaulters in relation thereto, the
remedy to be adopted pursuant to this Clause 11.2, shall be selected by such of
the Non- Defaulter(s) as hold (and, if applicable, in the aggregate) a simple
majority of the total number of the JVC Shares held by all of the
Non-Defaulters.
11.3 Sale price
The JVC Shares referred to in Clauses 11.2.1 and 11.2.2 shall be sold and
purchased at the Certified Value as established and certified by the JVC
Auditors.
The costs incurred in establishing the Certified Value of the JVC Shares
referred to in Clauses 11.2.1 and 11.2.2 shall be borne by the Defaulter.
The aforesaid costs may be deducted from the proceeds of sale of the JVC
Shares sold by the Defaulter and applied in discharge of the aforesaid costs.
11.4 Time for acceptance
The offer to sell the JVC Shares referred to in Clause 11.2.2 shall remain
open for acceptance for a period of 45 (Forty Five) days from the date on which
the Certified Value is certified. Failing acceptance as aforesaid, the offer
shall be deemed to be declined.
11.5 Further offers
Any JVC Share remaining unaccepted pursuant to Clause 11.4 shall be deemed
to be offered by the selling PARTY for sale at the Certified Value to such
PARTIES as shall have accepted as aforesaid the JVC Shares offered to them and
in the proportions in which the JVC Shares held by them bear to each other. Such
PARTIES shall be at liberty to accept the JVC Shares offered pursuant to this
Clause 11.5 within 30 (Thirty) days from the date of expiry of the period of 45
(Forty Five) days referred to in Clause 11.4.
If any JVC Shares remain undisposed of pursuant to the foregoing
provisions, then such further offers as may be necessary shall be deemed to be
made in like manner until all of the JVC Shares concerned shall have been sold.
11.6 Acceptances to be subject to the grant of Appropriate Approvals
Any acceptance given pursuant to the foregoing provisions shall be deemed
to be made subject to the grant of all Appropriate Approvals.
If a PARTY who has accepted an offer made pursuant to Clause 11.2.2 or 11.5
fails to obtain all Appropriate Approvals for the purchase of the JVC Shares
concerned, such PARTY shall be entitled to nominate a 3rd Party Purchaser to
purchase the JVC Shares concerned in the place of such PARTY.
11.7 Completion of sale and purchase
The sale and purchase of the JVC Shares referred to in Clauses 11.2.1 and
11.2.2 (the offer wherefor shall have been accepted in the case described in
Clause 11.2.2) shall be completed (subject to the grant of all Appropriate
Approvals or, if applicable, the nomination of a 3rd Party Purchaser) at the
JVC's registered office within a period of 40 (Forty) days from the date on
which the Certified Value is certified or the grant of the last of the
Appropriate Approvals whichever shall be the later.
For the purposes of the completion of such sale and purchase:-
11.7.1 the PARTY who is the seller of the JVC Shares aforesaid,
shall deliver to the purchasing PARTY or, if applicable, the 3rd Party
Purchaser nominated, the share certificates to the JVC Shares sold
together with valid and registrable forms of transfer thereof executed
by such PARTY in favour of the purchasing PARTY or, if applicable, the
3rd Party Purchaser; and
11.7.2 the purchasing PARTY or, if applicable, the 3rd Party
Purchaser shall (against the delivery of the aforesaid share
certificates and forms of transfer) pay to the selling PARTY the
Certified Value for such JVC Shares after deduction (if applicable) of
the costs incurred in establishing the Certified Value thereof.
<PAGE> 22
12. MUTUAL CO-OPERATION
12.1 Compliance
Each PARTY shall do all acts and things within its power (including
exercising its voting rights in the JVC for the time being) to procure the
implementation of the provisions of this Agreement.
12.2 Fair operation of Agreement
In entering into this Agreement, the PARTIES recognise that it is
impracticable to make provision for every contingency that may arise in the
course of the performance hereof.
Accordingly, the PARTIES hereby declare it to be their intention that this
Agreement shall operate between them with fairness and without detriment to the
interests of any of them and if, in the course of the performance of this
Agreement, unfairness to any PARTY is disclosed or anticipated, then the PARTIES
shall use their best endeavours to agree upon such action as may be necessary
and equitable to remove the cause(s) of the same.
12.3 Review of provisions
Without prejudice to the generality of Clause 12.2, the PARTIES hereby
expressly agree that if the laws governing this Agreement and/or the
interpretation thereof and/or governmental policies affecting the same in force
and applied as at the date of this Agreement shall be amended, varied or
modified in any manner as a result whereof any PARTY may suffer prejudice
(whether by reason of a change in the construction placed on the rights and
obligations hereunder of such PARTY or otherwise) then the PARTIES shall review
the provisions of this Agreement with a view to making such modifications and
alterations of the same as may appear desirable and expedient and so as to
restore the PARTIES to their rights and obligations as contemplated as at the
date of this Agreement.
13. CONFIDENTIALITY & PUBLICITY
13.1 Meanings
In Clauses 13.2 and 13.3, the expressions "JVC Technical Information" and
"MEMC Technical Information" shall have the respective meanings given to such
expressions by the TCA and the expression "secret or confidential information"
includes all such information and other materials as shall be marked
"CONFIDENTIAL" or "SECRET" or is by its nature intended to be retained in
confidence) given to or received by a PARTY and whether given by the JVC or
another of the JVC Members.
The expression "Third Party" in Clause 13.3.3 means:-
13.1.1 in relation to MEMC Technical Information and other secret
or confidential information received by the JVC from MEMC pursuant to
the TCA, a party other than MEMC; and
13.1.2 in relation to JVC Technical Information and other secret
or confidential information belonging to the JVC, a party other than
the JVC.
<PAGE> 23
13.2 Duty of confidentiality
Subject to the provisions of Clause 13.3, as from the date of this
Agreement and for 10 (Ten) years following the termination for any reason
whatsoever of the TCA, each PARTY shall and shall use its best endeavours to
cause the JVC to keep confidential:-
13.2.1 all MEMC Technical Information and other secret or
confidential information received by the JVC from MEMC pursuant to the
TCA; and
13.2.2 all JVC Technical Information and other secret and
confidential information belonging to the JVC
and restrict and use its best endeavours to cause the JVC to restrict access to
the same to such directors, officers, employees, and representatives of (as
applicable) such PARTY or the JVC as have a reasonable need for such information
in carrying out their respective duties on behalf of (as applicable) such PARTY
or the JVC.
Prior to its permitting such of its directors, officers, employees and
representatives as aforesaid, access to any MEMC Technical Information and other
secret or confidential information received by the JVC from MEMC pursuant to the
TCA and/or any JVC Technical Information and other secret and confidential
information belonging to the JVC, a PARTY shall require its directors, officers,
employees and representatives concerned to execute a confidentiality agreement
in terms acceptable to (as applicable) MEMC or the JVC.
13.3 Exceptions to duty of confidentiality
A PARTY's duty of confidentiality under Clause 13.2 shall not be applicable
to information which:-
13.3.1 was in the public domain at the time of disclosure or
comes into the public domain (otherwise than by reason of a breach by
such PARTY of Clause 13.2);
13.3.2 such PARTY can show by written or other tangible evidence
was in its possession at the time of the disclosure and which such
PARTY without breach of any obligation is free to disclose to others;
13.3.3 was received by such PARTY from a Third Party who did not
acquire it, directly or indirectly, from (as applicable) MEMC or the
JVC under an obligation of confidentiality and which the Third Party
without breach of any obligation is free to disclose to others; or
13.3.4 is required to be disclosed by laws, regulations, or court
orders provided that all reasonably necessary steps are taken by such
PARTY to the extent permitted by law, government regulations, and
court orders to maintain the information as confidential, and provided
further that (as applicable) MEMC or the JVC is given advance notice
that such a disclosure is being required.
<PAGE> 24
13.4 Publicity
Except with the prior written consent of the other PARTIES or when required
by law, regulation or other competent authority, a PARTY shall not make or issue
or permit or authorise the making or issue of any public statement or
announcement or press release concerning this Agreement or any of the
transactions hereby contemplated and shall consult with the other PARTIES prior
to making or issuing any such public statement or announcement or press release
as is permitted by the foregoing provisions.
14. DURATION
The provisions of this Agreement shall take effect on the Effective Date
and shall continue thereafter in full force and effect until:-
14.1 the JVC shall be dissolved or otherwise cease to exist as a separate
entity; or
14.2 this Agreement is terminated by mutual consent of the PARTIES; or
14.3 this Agreement is terminated pursuant to the terms hereof.
Upon the occurrence of any of the aforesaid events, this Agreement shall
be deemed to be terminated forthwith except in relation to such
obligations hereof as are expressly stated to survive the termination of this
Agreement and the rights and remedies of a PARTY in respect of any breach of
such surviving obligations and also any breach of any provision of this
Agreement occurring prior to the termination of this Agreement.
15. FORCE MAJEURE
Neither of the PARTIES shall be in default hereunder by reason of its delay
in the performance of or failure to perform any of its obligations hereunder if
such delay or failure is caused by any contingency beyond its reasonable
control, including, without limitation, war, restraints affecting shipping,
strikes, lockouts, fires, accidents, floods, droughts, natural calamities,
demand or requirements of any government or of any governmental subdivisions
thereof, restraining orders or decrees of any court or judge having
jurisdiction. If the event of a force majeure continues for a period of more
than 30 (Thirty) days, the PARTIES shall discuss efforts that each can
reasonably take to avoid or minimize the effect of said force majeure. If due to
an event of force majeure, for a period of 180 (One Hundred And Eighty) days,
either PARTY is deprived of a substantial benefit it reasonably anticipated
under this Agreement the PARTY so detrimentally impacted may terminate this
Agreement by written notice to the other PARTY.
In the event of such force majeure event, the PARTY prevented from
performing its obligations under this section shall promptly give written notice
to the other PARTY together with full details.
16. SEVERABILITY
Provided that if the invalidity or unenforceability shall not substantially
nullify the underlying intent of this Agreement and provided that the invalid or
enforceable provisions shall be severable, the invalidity or unenforceability of
any term or provision of this Agreement shall not affect the validity or
enforceability of the other terms or provisions herein contained which shall
remain in full force and effect.
<PAGE> 25
17. CORPORATE AUTHORITY
Within 7 (Seven) days from the date of this Agreement, each PARTY shall
deliver to the other PARTY, a copy (certified as true by its Director or Company
Secretary) of each of the following documents:-
17.1 its Certificate of Incorporation or other evidence of its
incorporation;
17.2 its By-Laws (in the case of MEMC) and its Memorandum & Articles of
Association in the case of KHAZANAH); and
17.3 an extract of the resolutions passed by its Directors authorising its
entry into and its execution of this Agreement.
18. MODIFICATIONS TO AGREEMENT & WAIVERS
18.1 Modifications in writing
Any modification of or alteration to any part of this Agreement, shall be
conferred upon and determined in writing by mutual consultation between the
PARTIES.
18.2 Delay or acquiescence
No failure or delay on the part of any PARTY in exercising any power or
right under this Agreement shall operate as a waiver of such power or right nor
shall the knowledge or acquiescence by any party hereto of or in a breach of any
terms or conditions of this Agreement constitute a waiver of such terms or
conditions.
18.3 Subsequent breaches not affected
No waiver by any party hereto of a breach of any term or condition of this
Agreement shall constitute a waiver of any subsequent breach of the same or any
other term or condition of this Agreement.
18.4 Waivers to be in writing
No waiver of any of the terms of this Agreement shall be valid unless in
writing and signed by or on behalf of the PARTIES.
19. ARBITRATION
19.1 Amicable resolution
If any dispute or controversy arises at any time out of or in relation to
this Agreement, the PARTIES shall seek to resolve the matter amicably through
discussions between the PARTIES. If the PARTIES fail to resolve such dispute or
controversy within 30 (Thirty) days by amicable arrangement and compromise or
when arbitration is otherwise provided for in this Agreement, the Claimant may
seek arbitration as set forth in this Clause 19.
19.2 Reference to arbitration
Any dispute or controversy arising out of or in relation to or in
connection with this Agreement which cannot be amicably resolved as provided in
Clause 19.1 may be referred by the Claimant to arbitration by a single
arbitrator pursuant to the Rules for Arbitration of the REGIONAL CENTRE FOR
ARBITRATION, KUALA LUMPUR then in force in accordance with the provisions of
this Clause 19.
Arbitration under this Clause 19 shall be the exclusive means for a PARTY
to seek resolution of any dispute or controversy arising out of, in relation to,
or in connection with this Agreement except that any PARTY in dispute may bring
an action before a court of competent jurisdiction for the adoption of
provisional or protective measures pending the final decision or award of the
arbitration.
<PAGE> 26
The single arbitrator shall be selected by agreement between the PARTIES
within 60 (Sixty) days from the date on which the Claimant's request for
arbitration is filed with the KLRAC pursuant to Clause 19.3 or, failing
agreement between the PARTIES, the KLRAC shall be the appointing authority. The
single arbitrator shall be a jurist (with qualifications and experience in a
common law jurisdiction) who is not a citizen of either the United States of
America or Malaysia.
The arbitration shall be conducted in Kuala Lumpur.
The arbitrators shall make every effort to find a solution to the dispute
in the provisions of this Agreement, giving full effect to all parts thereof.
However, if a solution cannot be found in the provisions of this Agreement, the
arbitrator shall apply the substantive law of Malaysia without regard to its
choice of law provisions. If there is any conflict between the Rules and this
Clause 19, the provisions of this Clause 19 shall govern.
19.3 Discovery
The Claimant shall file a request for arbitration with the KLRAC and notify
the Respondent in writing of the nature of the claim(s).
After a request for arbitration of any dispute subject to arbitration under
this Agreement has been filed, the PARTIES shall, upon request, make discovery
and disclosure of all materials relevant to the subject of the dispute. The
arbitrator shall make the final determination as to any discovery disputes
between the PARTIES. Examination of witnesses by the PARTIES and by the
arbitrator shall be permitted.
Following the selection of the arbitrator as set forth above, the
arbitration shall be conducted promptly and expeditiously so as to enable the
arbitrator (to the extent reasonably possible) to render a decision within 120
(One Hundred And Twenty) days after the arbitrator has been appointed.
19.4 Language of proceedings
Unless otherwise agreed by the PARTIES in dispute, the arbitration
proceedings shall be conducted in English.
19.5 Arbitral award
The award of the arbitrator shall be final and binding on the PARTIES in
dispute. Judgement on the arbitral award rendered may be entered in any court of
competent jurisdiction or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may be.
In rendering the award, the arbitrator shall apply the terms and conditions
of this Agreement in accordance with the laws governing this Agreement. The
arbitrator shall state the reasons upon which the award is based and shall
determine how the reasonable expenses of the arbitration are to be borne by the
PARTIES in dispute.
Each PARTY hereby agrees that any judgement upon an award rendered by the
arbitration may be executed against the assets of each PARTY in any
jurisdiction.
<PAGE> 27
20. LAW OF AGREEMENT & JURISDICTION
This Agreement shall be construed and take effect under the laws of
Malaysia and, subject to the provisions of Clause 19, the PARTIES hereby submit
unconditionally to the non-exclusive jurisdiction of the courts in Malaysia.
21. NO AGENCY
None of the provisions herein shall be deemed to constitute an agency
between the PARTIES and none of the PARTIES shall have any authority to bind or
shall be deemed to be the agent of the other PARTIES for any purpose whatsoever.
22. LANGUAGE OF AGREEMENT
The rights and obligations of the PARTIES shall be construed in accordance
with the English version of this Agreement which shall be the authoritative
version of this Agreement notwithstanding any translation of the same into any
other language.
23. ENTIRETY OF AGREEMENT
This Agreement constitutes the entirety of the agreement between the
PARTIES in relation to the subject matter hereof and supercedes all negotiations
and prior agreements between the PARTIES in relation thereto including the
Memorandum of Understanding dated 27th September 1995.
24. NOTICES
24.1 Modes of service
All notices hereunder shall be in writing signed by the PARTY by whom it is
served or by its solicitors and shall be sufficiently served on the PARTY to
whom it is addressed if it is delivered by hand or courier at or sent by
pre-paid registered or certified post, telex or telefax (and confirmed
forthwith, in the case of a notice sent by telex or telefax, by the delivery by
hand or courier or by registered post of a copy of the notice) to the address
set forth below of the PARTY to whom it is sent or to such address as one PARTY
may from time to time notify to the other PARTY:-
24.1.1 to MEMC:-
President
MEMC ELECTRONIC MATERIALS INC
501, Pearl Drive
City of O'Fallon
St. Peters, Missouri
United States of America
Telefax: (314) 279 5158
24.1.2 to KHAZANAH:-
KHAZANAH NASIONAL BERHAD
27th Floor, Tower Block
Putra Place
100 Jalan Putra
50622 Kuala Lumpur
Telefax: (603) 441 6340
24.2 Time of service
A notice sent:-
24.2.1 by telex or telefax (and confirmed by the delivery of a
copy thereof by hand or by registered post) shall be deemed to have
been served at the time (in the place of the receipt thereof) when the
transmission by telex or telefax is completed provided in the case of
a notice sent by telex, the sender receives at the end of the
transmission, the answer back code and telex number of the addressee
of such notice; or
24.2.2 by registered post shall be deemed to have been served on
the 7th (Seventh) day occurring after the date on which it is posted;
or
24.2.3 by hand to any address shall be deemed to have been served
at the time it is left at such address; or
24.2.4 by courier shall be deemed to have been served on the 7th
(Seventh) day occurring after the date on which it is given to the
courier company.
Notwithstanding the foregoing provisions, if the time or day hereinbefore
referred to shall not be a business day (when banks are open for business) in
the place of the receipt of the notice given, such notice shall be deemed to be
received on the next immediately following business day.
<PAGE> 28
25. COSTS
25.1 Agreement
Each of the PARTIES shall bear its own solicitors' costs and other expenses
related to this Agreement. MEMC shall bear the stamp duty on this Agreement.
25.2 Sale of JVC Shares
The stamp duty payable on any transfer of JVC Shares shall be borne by the
transferee thereof. The stamp duty and other disbursements, if any, chargeable
on the transfers of JVC Shares sold and purchased pursuant to an Offer shall be
borne by the purchaser thereof.
26. NON-ASSIGNABILITY
Neither PARTY may assign its rights hereunder or any interest herein or
transfer its obligations hereunder to any person, firm or company without the
prior written consent of the other PARTY.
27. SUCCESSORS-IN-TITLE
This Agreement is binding upon the respective successors-in-title and
permitted assigns of the PARTIES.
- -------------------------------------------------------------------------------
IN WITNESS WHEREOF the PARTIES have by their respective officers duly
authorised hereunto set their hands the day and year first above written.
SIGNED by ) /s/ Robert M. Sandfort
) President and Chief Operating
for and on behalf of ) Officer
MEMC ELECTRONIC MATERIALS )
INC, MEMC aforesaid in the presence of:- )
/s/ Helene F. Hennelly
Corporate Vice President,
General Counsel & Secretary
SIGNED by ) /s/ Tan Sri Dato' Mohd. Sheriff Bin
) Mohd. Kassim
for and on behalf of ) Managing Director
KHAZANAH NASIONAL BERHAD )
KHAZANAH aforesaid in the presence of:- )
/s/ Salmah Sharif
Company Secretary/Legal Advisor
<PAGE> 1
EXHIBIT 10 - iii
CONFIDENTIAL TREATMENT REQUESTED
Technology Cooperation Agreement
THIS TECHNOLOGY COOPERATION AGREEMENT made and entered into as of the 20th
day of December, 1996
BETWEEN
MEMC ELECTRONIC MATERIALS, INC, a corporation organized under the laws of the
State of Delaware, United States of America, having an office at 501 Pearl
Drive, St. Peters, Missouri, U.S.A.
AND
MEMC KULIM ELECTRONIC MATERIALS SDN BHD, a corporation incorporated in Malaysia
and having its registered office at 102, 1st Floor, Kompleks Antarabangsa, Jalan
Sultan Ismail, 50250 Kuala Lumpur, Malaysia.
WHEREAS:-
I. MEMC has developed and possesses information and processes involving
technology, equipment design, and other intangible assets and property rights of
value, all of which are useful with respect to the manufacture of Wafers (as
hereinafter defined).
II. MEMC is commercially practising in the United States and elsewhere the
foregoing processes embodying the technology, equipment design, assets, and
property rights for the manufacture of the aforesaid Wafers;
III. The JVC is a company established for the joint venture between MEMC
and KHAZANAH NASIONAL BERHAD (formerly called KHAZANAH HOLDINGS BERHAD) pursuant
to a Joint Venture Agreement (as hereinafter defined) for the purpose of
manufacturing Wafers in Malaysia.
IV. MEMC is willing to license the aforesaid technology to the JVC to
assist the JVC to establish a Wafer manufacturing facility in Malaysia so as to
satisfy the growing needs for Wafers of MEMC and other customers.
V. The JVC desires to have MEMC license the aforesaid intangible assets and
property rights to the JVC to the extent provided in this Agreement.
VI. MEMC is willing to license such intangible assets and property rights
to the JVC under the terms and conditions set forth in this Agreement.
VII. Approvals required of the MINISTRY OF INTERNATIONAL TRADE AND
INDUSTRY, MALAYSIA for this Agreement have been duly obtained.
NOW, THEREFORE, for and in consideration of the mutual covenants set forth
herein and other valuable consideration, IT IS AGREED by and between the PARTIES
as follows:-
<PAGE> 2
ARTICLE 1 DEFINITIONS & INTERPRETATION
1.1 As used in this Agreement, the following terms shall (unless the
context otherwise requires) have the meanings set forth opposite such terms in
this Article 1.1:-
"Affiliate" : the Subsidiaries and Joint Ventures of the referenced
company
"ASEAN Region" : the following countries:-
i) Thailand;
ii) Singapore;
iii) Malaysia;
iv) Indonesia;
v) Philippines; and
vi) Brunei;
vii) and for a period of 7 (Seven) years commencing
from the date of the Joint Venture Agreement,
Vietnam
excluding at all times, any other country
which may be a member of the Association of
South East Asian Nations (ASEAN)
"Claimant": the aggrieved PARTY who seeks arbitration in accordance
with Article 11
"Date of First Commercial Production": the date of Sale by
the JVC of a Qualified Prime Wafer
"Date of First Sale" : the date on which the JVC makes its first
commercial sale of a Wafer
"Date of this Agreement" : the date first set forth above
"Distributorship Agreement" : the Distributorship Agreement dated the
same date as this Agreement between MEMC and JVC
"Effective Date" : the 15th day of October 1996
"Field of this Agreement" : Wafers and processes, apparatus,
equipment, and materials useful in producing Wafers
"Joint Development" : any information or invention, whether or not
patentable, made or developed jointly by MEMC and the JVC, with or without
the assistance of one or more third parties
"Joint Venture" : any company or corporation engaged in the
manufacture of Wafers in which MEMC is a stockholder or shareholder
"Joint Venture Agreement" : the Joint Venture Agreement dated the day
of 199 between MEMC and KHAZANAH NASIONAL BERHAD (formerly called KUMPULAN
KHAZANAH HOLDINGS BERHAD)
"JVC" : MEMC KULIM ELECTRONIC MATERIALS SDN BHD above described
"JVC Equity Share" : an issued equity share in the JVC
"JVC Licensed Programmes" : such computer programmes for the
manufacture of Wafers and Silicon crystal growing:-
i) as are owned by the JVC or to which the JVC is entitled to
grant licences of the scope granted herein without any
obligation to a third party; and
ii) as are commercially in use at the JVC Plant from time to
time
<PAGE> 3
"JVC Patents" : all patents and patent applications which are
hereafter owned or acquired by the JVC
"JVC Plant" : the factory and necessary ancillary facilities to be
constructed and equipped by the JVC in Malaysia for the manufacture of the
Product
"JVC Technical Information" : any information or invention made or
developed by the JVC within the Field of this Agreement, whether patentable
or non- patentable, including but not limited to data and other information
relative to research and pilot plant projects
"KLRAC" : REGIONAL CENTRE FOR ARBITRATION, KUALA LUMPUR established
under the auspices of the ASIAN- AFRICAN LEGAL CONSULTATIVE COMMITTEE
"Mechanical Completion" : the date on which utilities and machinery
are installed in the JVC Plant and are ready to begin processing raw
materials to produce Wafers
"MEMC" : MEMC ELECTRONIC MATERIALS, INC above described
"MEMC Licensed Programmes" : such computer programmes for the
manufacture of Wafers and Silicon crystal growing:-
i) as are owned by MEMC or to which MEMC is entitled to grant
licences of the scope granted herein without any obligation
to a third party; and
ii) as are commercially in use at the MEMC Plants from time to
time
"MEMC Patents" : the patents and patent applications identified in
"Annexure B" and all patents issued by or patent applications filed in
Malaysia which are hereafter owned or acquired by MEMC
"MEMC's Plants" : MEMC's and its Subsidiaries' plants engaged in the
commercial manufacture of Wafers from polycrystalline Silicon
"MEMC Technical Information" : any and all information, know-how,
apparatus and processes commercially in use at MEMC's Plants for
manufacturing Wafers and Silicon crystal growing on or after the Date of
this Agreement INCLUDING:-
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
"MEMC Trademarks" : the trade marks, trade names and service marks
described in "Annexure D" of which MEMC is the proprietor
"MSIE" : million square inch equivalent being a unit to measure the
surface area of Wafers
"Net Sales Proceeds" : the gross selling price (ie. invoice price) of
Wafers sold by MEMC (pursuant to the Distributorship Agreement) less as may
be separately stated in JVC's or (as applicable) MEMC's invoice to its
customer, any charges for transport, shipping and insurance, sales and
other similar taxes, export duties and sales discounts
"New Products" : [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED
SEPARATELY WITH SEC]
"PARTIES" : MEMC and the JVC
"PARTY" : either of the PARTIES
"Prime Wafers" : Wafers which meet customer specifications for prime
wafers and are used by a customer as direct substrates of semiconductor
devices
<PAGE> 4
"Qualification" and "Qualified" : approval by a purchaser of Wafers
for a manufacturer of Wafers to sell from a particular manufacturing
facility or plant to the purchaser, Wafers having certain specifications
"Respondent" : the PARTY against whom a claim is brought pursuant to
Article 11
"Rules" : the Rules of Arbitration of the Regional Centre for
Arbitration, Kuala Lumpur as described in Article 11.2
"Sale" or "Sold" : when Wafers are invoiced to MEMC ( as sold by JVC
pursuant to the Distributorship Agreement)
"Silicon" : a semiconductor grade of elemental silicon of sufficient
purity and crystalline structure essential in the manufacture of
semiconductor devices
"Subsidiary" : a company or corporation, 100% (One Hundred Percent) of
whose entire stock or shares which is eligible to be voted for the election
of directors is owned or controlled, directly or indirectly, through stock
or share ownership by another company or corporation
"Technical Design Package" : the technical design package described in
Article 2.2
"Technical Fees" : the licence initiation fee and the running royalty
described in Articles 5.1 and 5.2 respectively
"Third Party" : any individual, corporation, partnership, trust or
other business organization or entity other than MEMC, the JVC and their
respective Affiliates
"Wafers" : [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED
SEPARATELY WITH SEC]
1.2 The Annexures hereto shall be taken, read and construed as essential
parts of this Agreement. The headings in this Agreement are inserted for
convenience of reference only and shall not be taken, read and construed as
essential parts of this Agreement. All references to Recitals, Annexures and
Articles shall be references to recitals and annexures to and articles of this
Agreement.
All references to provisions of statutes include such provisions as
modified, re- certified or re-enacted. Words applicable to natural persons
include any body of persons, company, corporation, firm or partnership corporate
or incorporate and vice versa. Words importing the masculine gender shall
include the feminine and neuter genders and vice versa. Words importing the
singular number shall include the plural number and vice versa.
Where two or more persons or parties are included or comprised in any
expression, agreements, covenants, terms, stipulations and undertakings
expressed to be made by or on the part of such persons or parties shall, unless
otherwise provided herein, be deemed to be made by and be binding upon such
persons or parties jointly and severally.
All references to a company includes such company's successors-in-title and
permitted assigns. All references to this Agreement shall include all amendments
and modifications to this Agreement as shall from time to time be in force.
In computing time for the purposes of this Agreement, unless the contrary
intention appears, a period of days from the happening of an event or the doing
of any act or thing shall be deemed to be exclusive of the day on which the
event happens or the act or thing is done and if the last day of the period is a
weekly or public holiday in Malaysia or the United States of America, the period
shall include the next following day which is not a weekly or public holiday in
Malaysia or the United States of America.
<PAGE> 5
ARTICLE 2 TECHNICAL INFORMATION AND ASSISTANCE
2.1 In consideration of the JVC's performance of its obligations under this
Agreement, MEMC shall provide technical assistance, consultation, advice, and
the like to the JVC to enable the JVC to design, construct, and operate a plant
in Malaysia with an initial nominal production capacity of approximately 100
MSIE of polished Wafers per year utilizing the MEMC Technical Information
provided hereunder, subject to allowance for local labor and manufacturing
conditions, including available raw materials. The JVC Plant shall initially
include process capabilities for 200mm wafers from crystal growing through
polishing.
2.2 The technical assistance referenced in Article 2.1 shall include the
delivery to the JVC of a technical design package written in English in terms of
standard engineering practices and shall include 1 (One) reproducible set of
full-size engineering drawings. All drawings, data sheets, specifications, etc.
provided in the Technical Design Package shall be in units of the International
System of Units and applicable United States standards and codes such as ASME,
TEMA, ANSI, and NEC. Any transformation to standards and codes of Malaysia shall
be the responsibility of the JVC which shall prepare or cause to be prepared,
all the detailed design and construction drawings and specifications for the JVC
Plant based on the Technical Design Package provided by MEMC.
2.3 The JVC acknowledges that so as to enable MEMC to prepare the Technical
Design Package, it was necessary for MEMC to obtain (and incur costs in relation
thereto) the information specific to the site of the JVC Plant and on local
legal requirements set forth in "Annexure A" all of which costs shall be
reimbursed by the JVC to MEMC upon the JVC's receipt of MEMC's invoice therefor.
2.4 MEMC shall arrange for the technical training until the Date of First
Commercial Production of certain technical personnel of the JVC in one or
several of MEMC's Plants. All training will be in English. The time and duration
of such training and the number of the JVC's personnel to be trained shall be
arranged by mutual consent of the PARTIES and the JVC will pay all salaries,
benefits, travelling, living, visa, and other expenses of its own personnel
incurred during the training pursuant to this Article 2.4.
2.5 Following the Date of First Commercial Production and for so long as
MEMC holds a direct and/or indirect interest in [CONFIDENTIAL MATERIAL HAS BEEN
DELETED AND FILED SEPARATELY WITH SEC] or more of the total number of JVC
Equity Shares and maintains control of and over the JVC and this Agreement
continues to have full force and effect, MEMC shall supply, at the JVC's
expense, such qualified technical personnel experienced within the Field
of this Agreement as shall be mutually agreed upon between MEMC and the
JVC and provide assistance to the JVC in operating the JVC Plant in
accordance with this Agreement.
ARTICLE 3 NEW TECHNOLOGY AND OTHER MATTERS RELATED TO LICENSED TECHNOLOGY
3.1 The obligations of the JVC and MEMC set forth in this Article 3 shall
commence on the Date of this Agreement and continue until termination or
expiration of this Agreement.
3.2 MEMC Technical Information and MEMC Licensed Programmes related to the
production of a New Product shall be disclosed by MEMC to the JVC in the manner
described in Article 3.5 only at such time as the JVC commits to producing
commercial quantities of a New Product. A resolution of the JVC's Board of
Directors committing to the installation of equipment to produce a New Product
shall be evidence of the JVC's commitment to produce commercial quantities of a
New Product. The PARTIES shall agree on the procedure for the initial transfer
of Technical Information and MEMC Licensed Programmes related to a New Product
at such time as the JVC commits to producing commercial quantities of a New
Product.
<PAGE> 6
3.3 In consideration of the performance by the JVC of its obligations under
this Agreement and for no additional payment, MEMC shall disclose to the JVC,
all MEMC Technical Information and MEMC Licensed Programmes developed during the
term of this Agreement. MEMC's obligations under this Article 3.3 shall be
fulfilled in the manner described in Article 3.5.
3.4 In consideration of the performance by MEMC of its obligations under
this Agreement and for no payment, the JVC shall disclose to MEMC, all JVC
Technical Information and JVC Licensed Programmes developed during the term of
this Agreement. The JVC's obligations under this Article 3.4 shall be fulfilled
in the manner described in Article 3.5.
3.5 MEMC shall permit representatives of the JVC and the JVC shall permit
representatives of MEMC to inspect, examine, and study, respectively MEMC's and
the JVC's machinery, equipment, including detailed engineering drawings thereof,
manufacturing processes and documents related thereto, MEMC's Plants or the
JVC's Plant and related control laboratories, wherever located, engaged in the
commercial production of Wafers to the extent that any of the foregoing embody
information required to be disclosed to the other party hereto.
The number of the JVC's or MEMC's representatives and the time and duration
of their visits to MEMC's Plants or the JVC's Plant and laboratories shall be
subject to MEMC's or the JVC's approval, respectively, it being understood that
such inspection, examinations and studies shall not interfere with MEMC's or the
JVC's operation, and such inspections shall not be excessive.
The visit of a representative of either party as provided for in this
section shall not be disapproved or limited without good cause. It is understood
and agreed that the expenses of the visiting party shall be borne by the
visiting party.
3.6 The JVC shall cause each of its employees as a term of his employment,
to enter into a written agreement in the form of "Annexure C" (together with
such modifications thereto as MEMC may require from time to time) which require
such employee to assign to the JVC, all inventions conceived or made during
their employment with the JVC within the Field of the Agreement (whether or not
patentable) and which permit the JVC to disclose, use, patent and license such
inventions to MEMC.
3.7 Notwithstanding anything contained herein to the contrary, the PARTIES
shall be obligated under this Agreement to supply only such information, MEMC
Technical Information and MEMC Licensed Programmes and JVC Technical Information
and JVC Licensed Programmes and licences of third party patents as each has the
legal right to supply and only to the extent and manner set forth in this
Agreement.
If at any time disclosure of any information required under this Agreement
requires any payments to third parties, such disclosure shall be made only after
the party seeking disclosure has agreed to bear the cost of such payments. In
the event such payments are requested by the JVC, the JVC shall obtain
governmental approval, if required, for such payments.
ARTICLE 4 RIGHTS AND LICENCES
4.1 For the term of this Agreement, MEMC grants to the JVC, [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] licence:-
4.1.1 to use the MEMC Technical Information provided to the JVC
pursuant to Articles 2.1 and 3.3 to manufacture Wafers in Malaysia;
4.1.2 under the MEMC Patents to the extent necessary to manufacture
Wafers in Malaysia using MEMC Technical Information provided to the JVC
pursuant to Articles 2.1 and 3.3;
4.1.3 to sell in the ASEAN Region and for use in the ASEAN Region
Wafers manufactured under the licences granted in Articles 4.1.1 and 4.1.2
; and
4.1.4 to sell to MEMC (upon such terms and conditions as may be agreed
upon between the JVC and MEMC and for resale by MEMC), Wafers manufactured
under the licences granted in Articles 4.1.1 and 4.1.2.
<PAGE> 7
4.2 The JVC hereby grants to MEMC and its Affiliates, [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] license to make,
have made, use or sell the inventions claimed in the JVC Patents and
comprising the JVC Technical Information.
The rights and licences granted to MEMC and in this Article 4.2 shall
include an absolute and unfettered right to assign or sublicense such rights to
others.
The JVC shall and shall cause its legal representatives and employees at
MEMC's request made at any time and from time to time after the execution of
this Agreement to take such further action and execute, acknowledge, and deliver
such additional documents and instruments as may be necessary to effectuate this
Article 4.2. If governmental approval is required to effectuate the provisions
of this Article 4.2, the JVC shall use its best efforts to obtain the said
approval.
4.3 MEMC hereby grants to the JVC:-
4.3.1 [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY
WITH SEC] licence to install, use, and execute the MEMC Licensed
Programmes on computers at the JVC Plant in support of the internal
business activities of the JVC; and
4.3.2 [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY
WITH SEC] licence to make and use only at the JVC Plant any modifications
or derivative works thereof created by the JVC or its employees, servants
and agents.
The JVC acknowledges that the MEMC Licensed Programmes are confidential to
MEMC and the JVC's duties of confidentiality with respect to the MEMC Licensed
Programmes shall be the same as those set forth in Article 7 with respect to
MEMC Technical Information.
4.4 The JVC hereby grants to MEMC and its Affiliates, [CONFIDENTIAL
MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] license to install,
use, and execute the JVC Licensed Programmes and to make and use any
modifications or derivative works thereof. The rights granted to MEMC and
its Affiliates in this Article 4.4 shall include the right to sub-license
such rights to others.
MEMC understands that the JVC Licensed Programmes may embody valuable
confidential information of the JVC and MEMC's duties of confidentiality with
respect to the JVC Licensed Programmes shall be the same as those set forth in
Article 7 with respect to the JVC Technical Information.
ARTICLE 5 PAYMENTS
5.1 As consideration for the rights, licences and assistance provided under
this Agreement, the JVC shall pay to MEMC a licence initiation fee of
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]. This
licence initiation fee shall be non-refundable and not creditable against
any royalties, fees or other payments due to MEMC pursuant to this
Agreement and shall be paid by four instalments based upon the following
milestones:
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC]
5.2 As further consideration for the rights, licences and assistance
provided under this Agreement, the JVC shall pay to MEMC a running royalty of
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] per
annum of Net Sales Proceeds commencing from the Date of First Sale.
<PAGE> 8
The PARTIES shall meet at least 6 (Six) months prior to the expiration of
the period of [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH
SEC] years commencing from the Date of First Sale to try and reach an agreement
on the applicable rate of running royalty for a further period of
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] years
commencing immediately after the expiration of [CONFIDENTIAL MATERIAL HAS
BEEN DELETED AND FILED SEPARATELY WITH SEC] years from the Date of First Sale.
If the PARTIES fail to arrive at an agreement on the applicable rate for
the revised running royalty, this difference shall be referred to arbitration in
accordance with Article 11 (save that the single arbitrator selected by (as
applicable) the PARTIES or KLRAC, shall be a person with knowledge and/or
experience in the commercial aspects of the Silicon Wafer industry and who is
not a citizen of the United States of America or Malaysia). The arbitrator shall
be instructed to select the revised running royalty proposed by either MEMC or
by the JVC as the running royalty applicable for the renewed period of this
Agreement and to issue the arbitral award as soon as may be possible prior to
the commencement of such renewal period.
5.3 The running royalty referred to in Article 5.2 shall be computed
semi-annually and shall be paid by the JVC to MEMC within 60 (Sixty) days of the
last day of June and December of each calendar year, each such payment to be
accompanied by a written report setting forth the quantities and descriptions of
all Wafers Sold by the JVC during the period in respect of which payment is
made.
5.4 The JVC shall reimburse MEMC within 30 (Thirty) days from the JVC's
receipt of MEMC's invoice therefor and MEMC shall separately invoice the JVC for
(and furnish to the JVC upon the JVC's request, reasonable evidence to
substantiate the amounts invoiced):-
5.4.1 the expenses which MEMC incurs in providing to the JVC, the
assistance and training described in Article 2; and
5.4.2 all expenses paid by MEMC (in accordance with MEMC's travel
policy, for travel expenses to and from their place of employment, local
travel expenses, and local living expenses) to such of its personnel as
provide to the JVC the assistance or training described in Article 2 of
this Agreement.
5.5 All payments hereunder by the JVC to MEMC shall be made in US Dollars
to such account in New York, State of New York, United States of America as MEMC
shall specify. If payment as aforesaid shall be prohibited by exchange
regulation or other governmental restraint in United States of America or
Malaysia, then the JVC shall make payments hereunder (as applicable) in such
currency and/or to such account as shall be permitted by law and selected by
MEMC.
5.6 The JVC shall:-
5.6.1 make due payments of such withholding tax (calculated as at the
date hereof, at 10% (Ten Percent) of the amounts of the Technical Fees) as
may be properly chargeable under applicable laws and treaties on the
Technical Fees and deduct the withholding tax so payable from the Technical
Fees; and
5.6.2 promptly furnish to MEMC, a copy of:-
i) the JVC's letter accompanying each payment of withholding tax
deducted as aforesaid; and
ii) the receipt issued to the JVC for the withholding tax so paid.
5.7 Save as provided in Article 5.6, all sums payable by the JVC to MEMC
shall be paid without any set-off, counter-claim, qualification or condition
whatsoever.
<PAGE> 9
5.8 The JVC shall keep such detailed records as may be necessary to
determine the payments due under this Agreement. At the request of MEMC, the JVC
shall permit an independent public accountant selected by MEMC or an MEMC
internal auditor to have access during ordinary business hours to such records
as may be necessary to determine in respect to any semi-annual period, the
correctness of any report and/or payment under this Agreement or information as
to any sum payable for such period.
5.9 If the JVC fails to pay on due date, any sums payable hereunder by the
JVC to MEMC, the JVC shall pay to MEMC (in addition and without prejudice to
MEMC's other rights and remedies in respect of the JVC's failure) interest on
the aforesaid sums calculated at a rate equivalent to 2% (Two Percent) per annum
above the then prevailing Base Lending Rate of MALAYAN BANKING BERHAD from the
date on which the said sums are due and until the date of actual payment
thereof.
ARTICLE 6 JOINT DEVELOPMENTS
6.1 The JVC and MEMC shall jointly own all Joint Developments and all
applications for patent which claim a Joint Development as an invention shall be
filed in the names of and jointly owned by the JVC and MEMC.
6.2 The JVC hereby grants MEMC, the right to prepare, file, prosecute,
maintain, license and enforce on the JVC's behalf, all patents and patent
applications which are jointly owned by the JVC and MEMC, for the full term of
such patents and patent applications. The JVC shall and shall cause its legal
representatives and employees at any time to take such further action and
execute, acknowledge, and deliver such additional documents and instruments as
are reasonably requested by MEMC to effectuate Article 6.1 and this Article 6.2.
ARTICLE 7 CONFIDENTIAL INFORMATION
7.1 As from the Date of this Agreement and for 10 (Ten) years following the
termination for any reason whatsoever of this Agreement, the JVC shall (subject
to the provisions of Article 7.2) keep confidential all MEMC Technical
Information and other secret or confidential information received by the JVC
from MEMC pursuant to this Agreement and restrict access to the same to such
directors, officers, employees, and representatives of the JVC as have a
reasonable need for such information in carrying out their respective duties on
behalf of the JVC.
Prior to its permitting such directors, officers, employees and
representatives as aforesaid, access to any MEMC Technical Information and other
secret or confidential information received by the JVC from MEMC pursuant to
this Agreement, the JVC shall require such persons to execute (unless they shall
have previously executed the same pursuant to Article 3.6) a written agreement
in such form as may be acceptable to MEMC.
7.2 The JVC's duty of confidentiality pursuant to Article 7.1 shall not be
applicable to information which:-
7.2.1 was in the public domain at the time of disclosure or comes into
the public domain;
7.2.2 the JVC can show by written or other tangible evidence was in
its possession at the time of the disclosure hereunder, and which the JVC
without breach of any obligation is free to disclose to others;
7.2.3 was received by the JVC from a Third Party or from JVC's
Affiliate who did not acquire it, directly or indirectly, from MEMC under
an obligation of confidentiality and which the Third Party and JVC's
Affiliate without breach of any obligation is free to disclose to others;
or
7.2.4 is required to be disclosed by laws, regulations, or court
orders provided that all reasonably necessary steps are taken by the JVC to
the extent permitted by law, government regulations, and court orders to
maintain the information as confidential, and provided further that MEMC is
given advance notice that such a disclosure is being required.
7.3 The JVC shall require all engineering contractors and other contractors
and vendors in the design, engineering, equipment manufacture, and erection of
the JVC Plant, prior to their having access to the MEMC Technical Information or
any confidential information within the Field of this Agreement received from
MEMC, to sign and shall require the aforesaid contractors and vendors also to
obtain from their employees, secrecy agreements in terms acceptable to MEMC
wherein such contractors and vendors and their respective employees agree for
the benefit of the JVC and MEMC, to keep confidential and to use only on behalf
of the JVC, any confidential information within the Field of this Agreement
received, directly or indirectly, from MEMC.
<PAGE> 10
7.4 Subject to the provisions of Articles 3 and 4, as from the Date of this
Agreement and for 10 (Ten) years following the termination for any reason
whatsoever of this Agreement, MEMC shall keep confidential, using the same
degree of care as MEMC uses with MEMC Technical Information of a like character,
all JVC Technical Information and other secret or confidential information
received from the JVC. MEMC's duty of confidentiality pursuant to this Article
7.4 shall not be applicable to information which:-
7.4.1 was in the public domain at the time of disclosure or comes into
the public domain;
7.4.2 MEMC can show by written or other tangible evidence was in its
possession at the time of the disclosure hereunder, and which MEMC without
breach of any obligation is free to disclose to others;
7.4.3 was received by MEMC from a Third Party or from MEMC's Affiliate
who did not acquire it, directly or indirectly, from JVC under an
obligation of confidentiality and which the Third Party and MEMC's
Affiliate without breach of any obligation is free to disclose to others;
or
7.4.4 is required to be disclosed by laws, regulations, or court
orders provided that all reasonably necessary steps are taken by MEMC to
the extent permitted by law, government regulations, and court orders to
maintain the information as confidential, and provided further that the JVC
is given advance notice that such a disclosure is being required.
ARTICLE 8 ASSIGNABILITY
Except as expressly provided in this Agreement, neither this Agreement nor
any of the rights and obligations arising hereunder may be assigned or
transferred by either party and any such purported assignment shall be null and
void, except that MEMC may assign and transfer this Agreement and the rights and
obligations arising hereunder to a company acquiring substantially all of the
business and assets of MEMC dealing with the Field of this Agreement and the JVC
shall consent to such assignment and transfer of MEMC's rights and obligations
and release MEMC from all liability hereunder upon the assumption by the
aforesaid company (in place of MEMC) of such liability.
ARTICLE 9 FORCE MAJEURE
9.1 Neither of the PARTIES shall be in default hereunder by reason of its
delay in the performance of or failure to perform any of its obligations
hereunder if such delay or failure is caused by any contingency beyond its
reasonable control, including, without limitation, war, restraints affecting
shipping, strikes, lockouts, fires, accidents, floods, droughts, natural
calamities, demand or requirements of a government or of any governmental
subdivisions thereof, restraining orders or decrees of any court or judge having
jurisdiction. If the event of a force majeure continues for a period of more
than 30 (Thirty) days, the PARTIES shall discuss efforts that each can
reasonably take to avoid or minimize the effect of said force majeure. If due to
an event of force majeure, for a period of 180 (One Hundred And Eighty) days,
either the JVC is unable to make payments to MEMC hereunder or either party is
deprived of a substantial benefit it reasonably anticipated under this Agreement
the party so detrimentally impacted may terminate this Agreement by written
notice to the other party.
9.2 In the event of such force majeure event, the party prevented from
performing its obligations under this section shall promptly give written notice
to the other party together with full details.
<PAGE> 11
ARTICLE 10 NOTICES
10.1 All notices hereunder shall be in writing signed by the PARTY by whom
it is served or by its solicitors and shall be sufficiently served on the PARTY
to whom it is addressed if it is delivered by hand or courier at or sent by
pre-paid registered or certified post, telex or telefax (and confirmed
forthwith, in the case of a notice sent by telex or telefax, by the delivery by
hand or courier or by registered post of a copy of the notice) to the address
set forth below of the PARTY to whom it is sent or to such address as one PARTY
may from time to time notify to the other PARTY:-
If to MEMC : MEMC ELECTRONIC MATERIALS, INC
501 Pearl Drive (City of O'Fallon)
St. Peters, Missouri
United States of America
Attention: President
Facsimile: (314) 279- 5158
If to the JVC : MEMC KULIM ELECTRONIC MATERIALS SDN BHD
c/o Khaw & Hussein
6th Floor, Menara Boustead
69, Jalan Raja Chulan
50200 Kuala Lumpur
Malaysia
Attention: President
Facsimile: (603) 248 3904 / 244 0078
10.2 A notice sent:-
10.2.1 by telex or telefax (and confirmed by the delivery of a copy
thereof by hand or by registered post) shall be deemed to have been served
at the time (in the place of the receipt thereof) when the transmission by
telex or telefax is completed provided in the case of a notice sent by
telex, the sender receives at the end of the transmission, the answer back
code and telex number of the addressee of such notice; or
10.2.2 by registered post shall be deemed to have been served on the
7th (Seventh) day occurring after the date on which it is posted; or
10.2.3 by hand to any address shall be deemed to have been served at
the time it is left at such address; or
10.2.4 by courier shall be deemed to have been served on the 7th
(Seventh) day occurring after the date on which it is given to the courier
company.
Notwithstanding the foregoing provisions, if the time or day hereinbefore
referred to shall not be a business day (when banks are open for business) in
the place of the receipt of the notice given, such notice shall be deemed to be
received on the next immediately following business day.
<PAGE> 12
ARTICLE 11 ARBITRATION
11.1 If any dispute or controversy arises at any time out of or in relation
to this Agreement, the PARTIES shall seek to resolve the matter amicably through
discussions between the PARTIES. If the PARTIES fail to resolve such dispute or
controversy within 30 (Thirty) days by amicable arrangement and compromise or
when arbitration is otherwise provided for in this Agreement, the Claimant may
seek arbitration as set forth in this Article 11.
11.2 Any dispute or controversy arising out of or in relation to or in
connection with this Agreement which cannot be amicably resolved as provided in
Article 11.1 may be referred by the Claimant to arbitration by a single
arbitrator pursuant to the Rules of Arbitration of the KLRAC then in force in
accordance with the provisions of this Article 11. Arbitration under this
Article 11 shall be the exclusive means for a PARTY to seek resolution of any
dispute or controversy arising out of, in relation to, or in connection with
this Agreement except that any PARTY in dispute may bring an action before a
court of competent jurisdiction for the adoption of provisional or protective
measures pending the final decision or award of the arbitration.
The single arbitrator shall be selected by agreement between the PARTIES
within 60 (Sixty) days from the date on which the Claimant's request for
arbitration is filed with the KLRAC pursuant to Article 11.3 or, failing
agreement between the PARTIES, the KLRAC shall be the appointing authority. The
single arbitrator shall be a jurist (with qualifications and experience in a
common law jurisdiction) who is not a citizen of the United States of America or
Malaysia.
The arbitration shall be conducted in Kuala Lumpur.
The arbitrator shall make every effort to find a solution to the dispute in
the provisions of this Agreement, giving full effect to all parts thereof.
However, if a solution cannot be found in the provisions of this Agreement, the
arbitrator shall apply the substantive law of the State of Missouri, United
States of America without regard to its choice of law provisions. If there is
any conflict between the Rules and this Article 11, the provisions of this
Article 11 shall govern.
11.3 The Claimant shall file a request for arbitration with the KLRAC and
notify the Respondent in writing of the nature of the claim(s). After a request
for arbitration of any dispute subject to arbitration under this Agreement has
been filed, the PARTIES shall, upon request, make discovery and disclosure of
all materials relevant to the subject of the dispute. The arbitrator shall make
the final determination as to any discovery disputes between the PARTIES.
Examination of witnesses by the PARTIES and by the arbitrator shall be
permitted.
Following the selection of the arbitrator as set forth above, the
arbitration shall be conducted promptly and expeditiously so as to enable the
arbitrator (to the extent reasonably possible) to render a decision within 120
(One Hundred And Twenty) days after the arbitrator has been appointed.
Unless otherwise agreed by the PARTIES in dispute, the arbitration
proceedings shall be conducted in English.
11.4 The award of the arbitrator shall be final and binding on the PARTIES
in dispute. Judgment on the arbitral award rendered may be entered in any court
of competent jurisdiction or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as the case may
be.
In rendering the award, the arbitrator shall apply the terms and conditions
of this Agreement in accordance with the laws governing this Agreement. The
arbitrator shall state the reasons upon which the award is based and shall
determine how the reasonable expenses of the arbitration are to be borne by the
PARTIES in dispute.
Each PARTY hereby agrees that any judgment upon an award rendered by the
arbitration may be executed against the assets of each PARTY in any
jurisdiction.
<PAGE> 13
ARTICLE 12 GOVERNING LAW AND JURISDICTION
This Agreement shall be construed, interpreted and governed in accordance
with the laws of the State of Missouri, United States of America. Subject to the
provisions of Article 11, the PARTIES hereby submit unconditionally to the
non-exclusive jurisdiction of the courts of the State of Missouri.
ARTICLE 13 TERM, TERMINATION AND DEFAULT
13.1 The term shall commence on the Effective Date and shall continue for
[CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED SEPARATELY WITH SEC] years
following the Date of First Sale unless terminated earlier as herein provided.
Upon the expiration of such [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED
SEPARATELY WITH SEC] year period, this Agreement shall be renewed (subject to
the prior written approval of the Ministry of International Trade and Industry,
Malaysia and the grant of all other requisite approvals if applicable, for
such renewal including the revised running royalty payable during the
period of renewal) for a second period of [CONFIDENTIAL MATERIAL HAS BEEN
DELETED AND FILED SEPARATELY WITH SEC] years.
The PARTIES shall meet at least 6 (Six) months prior to the expiration of
the further period of [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND FILED
SEPARATELY WITH SEC] years aforesaid to determine whether this Agreement
shall be further renewed and if so, the terms applicable to such further
renewal period.
13.2 In the event that either PARTY is in default under this Agreement, the
other may give written notice to the defaulting PARTY, calling attention
thereto. A failure by the JVC to make a payment required under Article 5 or any
other material breach by a PARTY which is not corrected within 60 (Sixty) days
after the date of receipt of such notice shall entitle the non-defaulting PARTY
at any time thereafter to terminate this Agreement by giving written notice to
that effect. A PARTY's right to terminate pursuant to this Article 13.2 shall be
at its option and shall not constitute a waiver of its other rights or remedies
with respect to said default, and the failure to exercise any such right in the
event of any occurrence giving rise thereto, shall not constitute a waiver of
the right in the event of any subsequent occurrence.
13.3 Notwithstanding any other provision to the contrary in this Agreement,
MEMC may terminate this Agreement upon giving 90 (ninety) days' written notice
to JVC in the event that:-
13.3.1 MEMC's holding of a direct and/or indirect interest in JVC
Equity Shares falls below [CONFIDENTIAL MATERIAL HAS BEEN DELETED AND
FILED SEPARATELY WITH SEC] of the total number of JVC Equity Shares
without MEMC being in breach of Clause 4.2 of the Joint Venture
Agreement;
13.3.2 MEMC is no longer a party to the Joint Venture Agreement;
13.3.3 MEMC or MEMC's representative is prohibited from voting as a
shareholder or director of the JVC or prohibited from participating in the
management of the JVC due to a Malaysian statutory or regulatory
restriction which would result in a situation where in the reasonable
opinion of MEMC, its right and interest in the JVC or under the Joint
Venture Agreement or this Agreement will be impaired; or
13.3.4 the Joint Venture Agreement is terminated for any reason.
13.4 Termination or expiration of this Agreement shall not terminate the
following:-
13.4.1 the licences granted to MEMC pursuant to Articles 4.2 and 4.4;
13.4.2 the respective obligations of the PARTIES to observe:-
i) their confidentiality obligations herein;
ii) their obligations under Articles 6.1 and 6.2;
iii) their obligations under the first two sentences of Article
14.1 and the first sentence of Article 14.2; and
iv) any of the obligations of the PARTIES which arise prior to a
termination or expiration and the remedies of either PARTY
provided in this Agreement with respect thereto; and
13.4.3 the payment obligations of the JVC pursuant to Article 5.
<PAGE> 14
13.5 Upon the expiration or termination of this Agreement for any reason,
the JVC shall discontinue using the MEMC Technical Information and the JVC shall
return to MEMC originals and copies of all portions of any notes, reports,
photographs, manuals, memoranda, plans, drawings, flow sheets, records or other
documents containing any MEMC Technical Information provided, directly or
indirectly to and in the JVC's possession and further agrees to destroy all
portions of any copies of any materials prepared by the JVC, its employees or
representatives which contain MEMC Technical Information.
ARTICLE 14 EXPORT OF TECHNICAL INFORMATION
14.1 Notwithstanding other provisions of this Agreement, the JVC agrees to
make no disclosure of or use any MEMC Technical Information furnished or made
known to the JVC pursuant to this Agreement, except in compliance with the laws
and regulations of the United States of America, and in particular, the JVC
agrees not to export, directly or indirectly, either the MEMC Technical
Information or the "direct product" thereof to any country or countries for
which a validated license is required pursuant to the Export Regulations
pertaining to the exportation of technical data and the "direct product"
thereof, promulgated by the Bureau of Export Administration of the United States
Department of Commerce.
The term "direct product" as used above is defined to mean the immediate
product (including processes and services) produced directly by the use of the
technical data. MEMC agrees to notify the JVC from time to time what legal
restrictions under the laws of the U.S. are applicable to disclosure or use of
MEMC Technical Information.
14.2 Notwithstanding other provisions of this Agreement, MEMC agrees to
make no disclosure of or use JVC Technical Information except in compliance with
the export laws and regulations of Malaysia. The JVC agrees to notify MEMC from
time to time what legal restrictions under the export laws of Malaysia are
applicable to disclosure or use of JVC Technical Information.
ARTICLE 15 TRADEMARKS
15.1 MEMC hereby grants to the JVC, the non-exclusive right to use the MEMC
Trademarks identified in "Annexure D" to identify Wafers made by the JVC for
such period commencing from the Date of this Agreement and expiring (unless MEMC
elects otherwise, at its absolute discretion) on the date on which MEMC ceases
to maintain control of the JVC or to hold a direct and/or indirect interest in
51% (Fifty One Percent) or more of the total number of JVC Equity Shares from
time to time and this Agreement continues in full force and effect.
15.2 At all times, MEMC shall have the right to inspect at reasonable
times, the operations and products of the JVC which bear or are identified by
any MEMC Trademark for the purpose of assuring that MEMC standards of quality
and performance are maintained by the JVC. The JVC's right to use the MEMC
Trademarks shall be terminated at any time if MEMC, in its sole discretion,
determines that the MEMC's standards of quality and performance are not being
maintained by the JVC or if there are any restrictions whatsoever placed on the
right of MEMC to inspect the operations and products of the JVC which bear any
MEMC Trademark.
15.3 Ownership of the MEMC Trademarks including the goodwill of the
business symbolized thereby shall be vested at all times in MEMC and the JVC
shall not claim any title, right or interest (other than as provided in this
Agreement) in any of the MEMC Trademarks.
15.4 Upon the registration of MEMC as the proprietor of any of the MEMC
Trademarks in any of the countries comprised in the Region, MEMC will join the
JVC in making an application to the Registrar of Trade Marks in the country
concerned for the purpose of securing the registration of the JVC as a
registered user of the MEMC Trademarks concerned.
15.5 The JVC hereby covenants with MEMC that the JVC will:-
15.5.1 not during the continuance of this Agreement or at any time
after the termination or expiry of this Agreement or of the licence granted
under Article 15.1, manufacture or sell Wafers on behalf of or for others
which use the same or similar marks to the MEMC Trademarks or simulate in
any way, the get-up or design of Wafers upon which the MEMC Trademarks
shall be used and/or which is sold under any of the MEMC Trademarks;
15.5.2 make such use of the MEMC Trademarks as will be necessary to
maintain the validity of the MEMC Trademarks in the Region;
15.5.3 notify MEMC of any conflicting use of the MEMC Trademarks or of
any acts of infringement or unfair competition involving the MEMC
Trademarks forthwith upon the same being brought to the JVC's attention or
knowledge;
15.5.4 assist MEMC (at MEMC's cost) in instituting proceedings against
third parties to prevent any infringement or any acts of unfair competition
involving the MEMC Trademarks;
15.5.5 save with MEMC's prior written consent, not settle in any
circumstances, any claim or action against third parties for any
infringement or acts of unfair competition involving the MEMC Trademarks;
15.5.6 not use the MEMC Trademarks in a manner likely to
prejudice the protection afforded to it by law and/or their validity; and
15.5.7 not at any time, do or suffer to be done, any act or thing
which may in any way impair the rights of MEMC in and to the MEMC
Trademarks or represent that the JVC has any title, right or interest
(other than pursuant to this Agreement) in the MEMC Trademarks.
<PAGE> 15
ARTICLE 16 MISCELLANEOUS
16.1 This Agreement constitutes the full understanding of the PARTIES with
respect to the subject matter contained herein and supersedes all prior
agreements or understandings, whether oral or written, with respect to such
matter. There are no representations or warranties made by any of the PARTIES
with respect to the subject hereof, including, but not limited to, patent
infringement or third party proprietary rights, failure of performance, or
accuracy and completeness save as specifically set forth in this Agreement or in
a document signed by a party hereto, in which document it is expressly stated
that the statements therein are representations, conditions, or undertakings for
the purpose of this Agreement. No terms, conditions, understandings, or
agreements purporting to modify or vary the terms of this Agreement shall be
binding unless hereafter made in writing and signed by a duly authorized
representative of the party to be bound.
16.2 Failure of a party to insist upon strict and punctual performance of
any provision hereof shall not constitute a waiver of, or estoppel against,
asserting the right to require such performance, nor shall any one waiver or
estoppel constitute a waiver or estoppel with respect to a later breach whether
of similar nature or otherwise.
16.3 If any one or more of the provisions of this Agreement should be ruled
wholly or partly invalid or unenforceable by a court or other government body of
competent jurisdiction, then:-
16.3.1 the validity and enforceability of all provisions of this
Agreement not ruled to be invalid or unenforceable will be unaffected;
16.3.2 the effect of the ruling will be limited to the jurisdiction of
the court or other governmental body making the ruling;
16.3.3 the provision(s) held wholly or partly invalid or unenforceable
will be deemed amended, and the court or other government body or an
arbitrator appointed as permitted pursuant to the Agreement is authorized
to reform the provision(s), to the minimum extent necessary to render them
valid and enforceable in conformity with the PARTIES' intent as manifested
herein.
16.3.4 if the ruling, and/or the controlling principle of law or
equity leading to the ruling, is subsequently overruled, modified, or
amended by legislative, judicial, or administrative action, then the
provision(s) in question as originally set forth in this Agreement will be
deemed valid and enforceable to the maximum extent permitted by the new
controlling principle of law or equity.
16.4 This Agreement shall be executed in English. The terms and provisions
hereof are to be interpreted in accordance with their plain English meaning.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be the original. The English text of this Agreement shall prevail
over any translation.
- -------------------------------------------------------------------------------
IN WITNESS WHEREOF the PARTIES hereto have caused this Agreement to be
executed in duplicate by their duly authorized representatives MEMC executing
this Agreement within 60 (Sixty) days from the execution hereof by the JVC.
SIGNED by ) /s/ Robert M. Sandfort
) President and Chief Operating
for and on behalf of ) Officer
MEMC ELECTRONIC MATERIALS, )
INC, MEMC aforesaid in the presence of:- )
/s/ Helene F. Hennelly
Corporate Vice President,
General Counsel & Secretary
SIGNED by ) /s/ Samuel Tennison
)
for and on behalf of )
MEMC KULIM ELECTRONIC )
MATERIALS SDN BHD )
the JVC aforesaid in the presence of:- )
/s/ Narayanaswami
<PAGE> 1
EXHIBIT 10 - jjj
CREDIT AGREEMENT
Dated as of December 1, 1996
MEMC ELECTRONIC MATERIALS, INC., a Delaware corporation, as the
borrower (the "Borrower"), and HULS AG, a company formed under the laws of the
Federal Republic of Germany ("Huls"), as the initial lender (the "Initial
Lnder") and as agent (together with any successor appointed pursuant to Article
VII, the "Agent") for the Lenders (as hereinafter defined), hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advance" has the meaning specified in Section 2.01.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the voting stock of such Person or
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting stock, by contract or otherwise.
"Agent" has the meaning specified in the recital of parties to this
Agreement.
"Agent's Account" means the Dollar account of the Agent maintained with
such bank as the Agent shall specify in writing to the Borrower and the Lenders
from time to time.
"Applicable Margin" means, as of the date occurring 45 Business Days after
the Change of Control Date,
(a) a percentage per annum equal to the average (rounded upward to the
nearest wholemultiple of 1/16 of 1 % per annum, if such average is not such a
multiple) of the ratesper annum in excess of the Base Rate at which each
Reference Bank would offer the Borrower the Advances outstanding or to be
outstanding for the Designated Maturity; or
(b) a percentage per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1 % per annum, if such average is not such a
multiple) of the rates per annum in excess of the Base Rate at which each
Reference Bank, based on the Senior Debt Rating of the Borrower as of the Change
of Control Date, would offer the Borrower the Advances outstanding or to be
outstanding for the Designated Maturity; or
(c) a percentage per annum equal to the applicable percentage set forth
below for the Performance Level set forth below:
PERFORMANCE APPLICABLE
LEVEL MARGIN
==================================== ====================================
I 0.450%
II 0.500%
III 0.625%
IV 1.000%
<PAGE> 2
In each case the Applicable Margin for the Advances shall be determined
by the Agent 40 Business Days after the Change of Control Date in
accordance with the provisions of Section 2.06.
"Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an Eligible Assignee and accepted by the Agent, in substantially
the form of Exhibit C hereto.
"Bank" means any Lender other than the Initial Lender or any Affiliate of
the Initial Lender.
"Base Rate" means, with respect to the Advances comprising a Borrowing for
the Designated Maturity, the interbank rate for Dollars for the period most
nearly comparable to the Designated Maturity that appears on the Dow Jones
Telerate Screen as of 11:00 A.M. (London time) two Business Days before the date
of such Borrowing.
"Borrower" has the meaning specified in the recital of parties to this
Agreement.
"Borrowing" means the borrowing consisting of the Advances made by the
Lenders.
"Borrowing Notice" has the meaning specified in Section 2.02(a).
"Business Day" means a day of the year on which banks are not required or
authorized by law to close in New York City.
"Change of Control" means the Initial Lender or any Affiliate of the
Initial Lender, through any transaction or series of transactions or otherwise,
no longer has beneficial ownership, directly or indirectly, of more than 50% of
the shares of common stock of the Borrower.
"Change of Control Date" means the date of occurrence of a Change of
Control.
"Commitment" has the meaning specified in Section 2.01.
"Confidential Information" means information that the Borrower furnishes to
the Agent or any Lender in a writing designated as confidential, but does not
include any such information that is or becomes generally available to the
public or that is or becomes available to the Agent or such Lender from a source
other than the Borrower, an Affiliate of the Borrower or an Affiliate of the
Initial Lender.
"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.
"Debt" means (a) indebtedness for borrowed money, (b) obligations evidenced
by bonds, debentures, notes or other similar instruments, (c) obligations to pay
the deferred purchase price of property or services, (d) obligations as lessee
under leases which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases, and (e) obligations
under direct or indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clause (a) through (d) of this definition; provided,
however, that, solely for purposes of calculating the Leverage Ratio at any
time, Debt shall not include obligations of the Borrower under direct or
indirect guaranties of indebtedness or obligations of any Subsidiary of the
Borrower, to the extent the inclusion of any such obligation results in
double-counting thereof.
<PAGE> 3
"Default" means any Event of Default or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.
"Designated Maturity" means, with respect to the Advances comprising a
Borrowing, the period from the date of such Borrowing until the Repayment Date
for such Advances.
"Dollars" and the sign "$" each means lawful money of the United States of
America.
"Domestic Lending Office" means, with respect to any Bank, the office of
such Bank specified as its "Domestic Lending Office" in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office of such
Bank as such Bank may from time to time specify to the Borrower and the Agent.
"EBIT" means, with respect to the Borrower and its Subsidiaries for any
period, the sum of (a) net income (or net loss), (b) interest expense and (c)
income tax expense, in each case determined in accordance with GAAP for such
period.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (a) an Affiliate of the Initial Lender approved
by the Borrower, such approval not to be unreasonably withheld; (b) a commercial
bank organized under the laws of the United States, or any state thereof, and
having a long-term senior unsecured debt rating by S&P of "A" or better and
total assets in excess of $20,000,000,000; (c) a commercial bank organized under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development or has concluded special lending arrangements with
the International Monetary Fund associated with its "General Arrangements to
Borrow" and having a long-term senior unsecured debt rating by S&P of "A" or
better and total assets in excess of $20,000,000,000, so long as such bank is
acting through a branch or agency located in the United States; and (d) any
other Person approved by all of the Lenders and the Borrower; provided, however,
that neither the Borrower nor any Subsidiary of the Borrower shall qualify as an
Eligible Assignee; provided, further, however, that, solely with respect to
assignments of the Advance owing to the Initial Lender, an Affiliate of the
Initial Lender shall qualify as an Eligible Assignee without the approval of the
Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Events of Default" has the meaning specified in Section 6.01.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"GAAP" has the meaning specified in Section 1.03.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any federal, state, local or foreign court or
governmental, executive, legislative, judicial, administrative or regulatory
agency, department, authority, instrumentality, commission, board or similar
body.
<PAGE> 4
"Indemnified Party" has the meaning specified in Section 8.04(b).
"Initial Lender" has the meaning specified in the recital of parties to
this Agreement.
"Interest Coverage Ratio" means, with respect to the Borrower and its
Subsidiaries on a Consolidated basis for any period, a ratio of (a) Consolidated
EBIT of the Borrower and its Subsidiaries for such period to (b) interest
payable on all Debt during such period.
"Lender" means the Initial Lender and each Person that shall become a party
hereto pursuant to Section 8.07.
"Leverage Ratio" means, with respect to the Borrower and its Subsidiaries
at any date of determination, the ratio of (a) Consolidated Debt of the Borrower
and its Subsidiaries at such date to (b) Consolidated net worth of the Borrower
and its Subsidiaries at such date.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and its Subsidiaries
taken as a whole.
"Moody's" means Moody's Investors Service, Inc.
"Note" means a promissory note of the Borrower payable to the order of any
Lender, substantially in the form of Exhibit A hereto, evidencing the Debt of
the Borrower to such Lender resulting from the Advance made by such Lender.
"Other Taxes" has the meaning specified in Section 2.12(b).
"Performance Level" means Performance Level 1, Performance Level 11,
Performance Level III or Performance Level IV, as appropriate. For purposes of
determining the Performance Level as at the Change of Control Date, if the
Interest Coverage Ratio and the Leverage Ratio shall fall within different
Performance Levels at such date, the Performance Level shall be deemed to be the
lower of the two Performance Levels (i.e., Performance Level 11 being lower than
Performance Level 1, Performance Level III being lower than Performance Level 11
and Performance Level IV being lower than Performance Level 111) in effect at
such date.
"Performance Level I" means, at the date of determination, that the
Borrower and its Subsidiaries shall have maintained for the most recently
completed four consecutive fiscal quarters of the Borrower and its Subsidiaries
prior to such date (a) an Interest Coverage Ratio of greater than or equal to
7.0 to 1 and (b) a Leverage Ratio of less than or equal to 1.0 to 1.
"Performance Level II" means, at the date of determination, that (a) the
Performance Level does not meet the requirements of Performance Level I and (b)
the Borrower and its Subsidiaries shall have maintained for the most recently
completed four consecutive fiscal quarters of the Borrower and its Subsidiaries
prior to such date (i) an Interest Coverage Ratio of greater than or equal to
5.0 to 1 and (ii) a Leverage Ratio of less than or equal to 2.0 to 1.
"Performance Level III" means, at any date of determination, that (a) the
Performance Level does not meet the requirements of Performance Level I or
Performance Level II and (b) the Borrower and its Subsidiaries shall have
maintained for the most recently completed four consecutive fiscal quarters of
the Borrower and its Subsidiaries prior to such date (i) an Interest Coverage
Ratio of greater than or equal to 3.0 to 1 and (ii) a Leverage Ratio of less
than or equal to 3.0 to 1.
"Performance Level IV" means, at any date of determination, that the
Performance Level does not meet the requirements of Performance Level I,
Performance Level II or Performance Level III.
<PAGE> 5
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
"Reference Banks" means, collectively, no more than two banks designated by
the Agent and no more than two banks designated by the Borrower for the purpose
of determining the Applicable Margin.
"Register" has the meaning specified in Section 8.07(c).
"Repayment Date" means, with respect to the Advances comprising a
Borrowing, the date specified by the Borrower in the Borrowing Notice for such
Borrowing on which the Borrower agrees to repay the aggregate principal amount
of the Advances comprising such Borrowing; provided that such date shall not be
later than the Termination Date.
"Senior Debt Rating" means, as of the date of determination, the rating
assigned in writing by either S&P or Moody's, at the request of the Initial
Lender for the long-term senior unsecured debt of the Borrower.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries; provided,
however, that the term "Subsidiary" shall not include any joint venture of the
Borrower with respect to any action or decision of the board of directors of
such joint venture if, by written agreement, such action or decision requires a
vote in excess of the number of members of such board of directors elected or
controlled by the Borrower.
"Taxes" has the meaning specified in Section 2.12(a).
"Termination Date" means the earlier of (a) December 1, 2002 and (b) the
termination in whole of the Commitments pursuant to Section 2.04 or Section
6.01.
"United States" and "U.S." each means the United States of America.
The words " include, " " includes " and " including " shall be deemed to be
followed by the phrase "without limitation."
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means " from and including " and the words " to " and "until "
each means " to but excluding. "
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(e) ("GAAP").
<PAGE> 6
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make advances (each, an "Advance") to the
Borrower from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an amount not to exceed the amount
set forth opposite such Lender's name on the signature pages hereof or, if such
Lender has entered into any Assignment and Acceptance, set forth for such Lender
in the Register maintained by the Agent pursuant to Section 8.07(c), as such
amount may be reduced pursuant to Section 2.04 (such Lender's "Commitment").
Each Borrowing shall be in an aggregate amount of $10,000,000 or an integral
multiple of $5,000,000 in excess thereof and shall be made simultaneously by the
Lenders ratably according to their respective Commitments. The Borrower is not
entitled to reborrow any repaid or prepaid portion of any Advance.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made on
notice, given not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing by the Borrower to the
Agent, which shall give to each Lender prompt notice thereof by telecopier or
telex. Each notice of a Borrowing (a "Borrowing Notice") shall be by telephone,
confirmed immediately in writing, or telecopier or telex, in substantially the
form of Exhibit B hereto, specifying therein, among other things, the requested
date of such Borrowing, the amount of such Borrowing and the Repayment Date of
the Advances comprising such Borrowing. Each Lender shall, before 11: 00 A.M.
(New York City time) on the date of such Borrowing, make available for the
account of its Domestic Lending Office to the Agent at the Agent's Account, in
same day funds, such Lender's ratable portion of such Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to the
Borrower by depositing the proceeds of the Advances in such Dollar account of
the Borrower (or of such Person as the Borrower shall specify to the Lender in
the Borrowing Notice or by other written notice to the Lender given
simultaneously with or prior to such Borrowing Notice) maintained with such bank
as the Borrower shall specify to the Agent in such Borrowing Notice.
The parties hereto understand and agree that the Initial Lender may, in its
sole discretion (but shall have no obligation to), designate a financial
institution or another Person to perform the Initial Lender's obligations
hereunder in accordance with the terms hereof. The Borrower agrees that
performance of any such obligation by any such designee of the Initial Lender
shall be deemed to constitute performance by the Initial Lender for all purposes
of this Agreement and the Note and shall discharge the Initial Lender from such
obligation to the extent of such performance.
(b) Any Borrowing Notice delivered by the Borrower to the Agent shall be
irrevocable and binding on the Borrower. The Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Borrowing Notice
for such Borrowing the applicable conditions set forth in Article 111,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
(c) The Agent shall only make available to the Borrower on the date of any
Borrowing the ratable portion of such Borrowing of each Lender that such Lender
has made available to the Agent on or prior to the date of such Borrowing.
<PAGE> 7
(d) The failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
SECTION 2.03. Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Lender a commitment fee on the unused portion of such
Lender's Commitment from the Effective Date in the case of the Initial Lender
and from the effective date specified in the Assignment and Acceptance pursuant
to which it became a Lender in the case of each other Lender until the
Termination Date at a rate per annum equal to 1/8 of 1%, payable in arrears
quarterly on the last day of each March, June, September and December,
commencing March 31, 1997, and on the Termination Date.
SECTION 2.04. Optional Termination or Reduction of the Commitments. The
Borrower shall have the right, upon at least three Business Days' notice to the
Agent, to terminate in whole or reduce in part the unused Commitments of the
Lenders, provided that each partial reduction shall be in the amount of
$1,000,000 or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.05. Repayment. The Borrower shall repay to the Agent for the
ratable account of the Lenders the aggregate principal amount of the Advances
then outstanding comprising each Borrowing on the Repayment Date for such
Borrowing.
SECTION 2.06. Interest. (a) Interest on the Advances. The Borrower shall
pay interest on the unpaid principal amount of the Advances, if any, from the
date of the Advances until such principal amount shall be paid in full, payable
semiannually, at an interest rate per annum equal to the Base Rate plus 0.50%;
provided, however, that as of the date occurring 45 Business Days after the
Change of Control Date, the interest rate per annum shall be the Base Rate in
effect for such Advances plus the Applicable Margin.
(b) Interest on Overdue Amounts. In the event that any principal amount of
any Advance or any interest, fees, costs, expenses or other amounts payable
hereunder are not paid when due, the Borrower shall pay interest on such unpaid
amount from the date such amount is due until the date such amount is paid in
full, payable on demand, at an interest rate per annum equal to the interest
rate referred to in subsection (a) of this Section 2.06 then in effect plus 2%.
SECTION 2.07. Interest Rate Determination Upon Change of Control. (a) Upon
the occurrence of a Change of Control, the Lenders and the Borrower shall agree
to determine the Applicable Margin in accordance with subsection (a), (b) or (c)
of the definition of "Applicable Margin".
(i) If the Lenders and the Borrower agree to determined-nine the
Applicable Margin in accordance with subsection (a) of such definition, the
Agent shall request timely information from each Reference Bank for purposes of
determining such Applicable Margin. If the Borrower and the Lenders agree to
determine the Applicable Margin in accordance with subsection (b) of such
definition, the Agent shall promptly engage either S&P or Moody's to provide a
Senior Debt Rating of the Borrower as of the Change of Control Date. The Agent
shall provide each Reference Bank with such Senior Debt Rating and request
timely information from each Reference Bank for the purpose of determining such
Applicable Margin.
(ii) The Initial Lender and the Borrower agree to equally share the
expense of engaging S&P or Moody's to provide a Senior Debt Rating of the
Borrower; provided, however, that if either the Initial Lender or the Borrower
shall be the sole party to decline to determine the Applicable Margin in
accordance with subsection (a) of the definition of "Applicable Margin", then
such declining party shall pay the entire expense of any such engagement.
<PAGE> 8
(iii) If any one or more of the Reference Banks shall not furnish such
timely information to the Agent for the purpose of determining any such
Applicable Margin in accordance with subsection (b)(i) of this Section 2.07, the
Agent shall determine such Applicable Margin on the basis of timely information
furnished by the remaining Reference Banks.
(iv) The Agent shall give prompt notice, and in any event no later than
40 Business Days after the Change of Control Date, to the Borrower and the
Lenders of the Applicable Margin determined by the Agent for purposes of Section
2.06(a) together with (A) the Senior Debt Rating, if any, established by S&P or
Moody's, as the case may be, and (B) the rate, if any, furnished by each
Reference Bank for the purpose of determining such Applicable Margin in
accordance with the provisions of this Agreement.
(c) If the Lenders and the Borrower shall not agree to determine the
Applicable Margin in accordance with any of subsections (a) and (b) of the
definition of "Applicable Margin", then the Applicable Margin as of the date
occurring 45 Business Days after the Change of Control Date shall be the
percentage per annum determined in accordance with subsection (c) of such
definition.
(d) For all purposes hereof, the Agent shall determine the Applicable
Margin as of 40 Business Days after the Change of Control Date and such
Applicable Margin shall be effective from the date occurring 45 Business Days
after the Change of Control Date until the unpaid principal amount of the
Advances shall have been paid in full.
SECTION 2.08. Optional Prepayments and Reductions of Commitment. (a) The
Borrower may, upon at least three Business Days' notice to the Agent stating the
proposed date and the aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amount of
the Advances in whole or ratably in part, together with (i) accrued interest to
the date of such prepayment on the principal amount prepaid and (ii) any amount
payable pursuant to Section 8.04(c); provided, however, that each such partial
prepayment shall be in an aggregate principal amount of not less than $1,000,000
or an integral multiple of $1,000,000 in excess thereof.
(b) Upon the prepayment in whole or in part of the Advances in accordance
with subsection (a) of this Section 2.08, the Commitments of the Lenders shall
be automatically reduced ratably by the amount of such prepayment.
SECTION 2.09. Increased Costs, Etc. If due to either (a) the introduction
of or any change (including, without limitation, any change by way of imposition
or increase of reserve requirements) in or in the interpretation of any law or
regulation or (b) the compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to any Bank of agreeing to make or
making, funding or maintaining an Advance, then the Borrower shall from time to
time, upon demand by such Bank (with a copy of such demand to the Agent), pay to
the Agent for the account of such Bank additional amounts sufficient (as
applicable) to compensate such Bank for such increased cost. A certificate as to
the amount of such increased cost, submitted to the Borrower by such Bank, shall
be conclusive and binding for all purposes, absent manifest error.
SECTION 2.10. Illegality. Notwithstanding any other provision of this
Agreement, if any Bank shall notify the Borrower that any law or regulation, or
the introduction of or any change in or in the interpretation of any law or
regulation, makes it unlawful, or any central bank or other Governmental
Authority asserts that it is unlawful, for such Bank to perform its obligations
hereunder to make an Advance or to fund or maintain an Advance hereunder, (a)
the obligation of such Bank to make, fund and maintain any Advance shall be
suspended until such Bank shall notify the Borrower that the circumstances
causing such suspension no longer exist, (b) such Bank shall promptly notify the
Borrower of such circumstances and such suspension, and (c) unless the Borrower
and such Bank shall have otherwise agreed within ten Business Days of such
notice, the Borrower shall forthwith on such tenth Business Day prepay in full
the Advances then outstanding together with interest accrued thereon.
<PAGE> 9
SECTION 2.11. Payments and Computations. (a) The Borrower shall make each
payment hereunder and under the Notes not later than 1:00 P.M. (New York City
time) on the day when due in Dollars to the Agent at the Agent's Account, in
each case in immediately available funds. The Agent will promptly thereafter
cause to be distributed like funds relating to the payment of principal or
interest or fees ratably (other than amounts payable pursuant to Section 2.09,
2.12 or 8.04(c)) to the Lenders for the account of their respective Domestic
Lending Offices, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Domestic Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 8.07(d),
from and after the effective date specified in such Assignment and Acceptance,
the Agent shall make all payments hereunder and under the Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the parties
to such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) All computations of interest and of fees shall be made in good faith by
the Agent on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or fees are payable.
(c) Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be.
(d) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Lenders hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower hereunder or
under the Notes shall be made, in accordance with Section 2. 1 1, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, net income taxes
that are imposed by the United States and net income taxes (or franchise taxes
imposed in lieu thereof) that are imposed on such Lender or the Agent by the
state or foreign jurisdiction under the laws of which such Lender or the Agent
(as the case may be) is organized or any political subdivision thereof and, in
the case of each Lender, net income taxes (or franchise taxes imposed in lieu
thereof) that are imposed on such Lender by the state or foreign jurisdiction of
such Lender's Domestic Lending Office or any political subdivision thereof (all
such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note, (i) the sum payable shall be increased as may be necessary so that, after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.12), such Lender or the Agent receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law.
<PAGE> 10
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or other taxes, charges or levies that arise from
any payment made hereunder or under the Notes or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or the Notes
(hereinafter referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender and the Agent for the full
amount of Taxes or Other Taxes and for the full amount of Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.12 imposed
on or paid by such Lender or the Agent (as the case may be) or any liability
(including penalties, additions to tax, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. This indemnification shall be made within 30 days from the
date such Lender or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
shall furnish to the Agent, at its address referred to in Section 8.02, the
original receipt of payment or a certified copy of such receipt. If no Taxes are
payable in respect of any payment hereunder or under the Notes, the Borrower
shall furnish to the Agent, at such address, a certificate from each appropriate
taxing authority, or an opinion of counsel acceptable to the Lenders, in either
case stating that such payment is exempt from or not subject to Taxes.
(e) Each Lender organized under the laws of a jurisdiction outside the
United States shall, on the Effective Date in the case of the Initial Lender and
on the date of the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender, and from time to time thereafter if
requested in writing by the Borrower or the Agent (but only so long as such
Lender remains lawfully able to do so), provide each of the Borrower and the
Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or entitled to a reduced rate of United States
withholding tax on payments of interest pursuant to this Agreement or the Notes.
If the form provided by such Lender at the time such Lender becomes a party to
this Agreement indicates a United States interest withholding tax rate in excess
of zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Lender provides the appropriate form certifying that a
lesser rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender becomes a party to this Agreement, the Lender assignor was entitled to
payments under Section 2.12(a) in respect of United States withholding tax with
respect to interest paid at such date, then, to such extent, the term Taxes
shall include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includable in Taxes) United States withholding
tax, if any, applicable with respect to the Lender assignee on such date. If any
form or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender reasonably considers to be confidential, the Lender shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information.
(f) For any period with respect to which a Lender has failed to provide the
Borrower with the appropriate form described in Section 2.12(e) (other than if
such failure is due to a change in law occurring subsequent to the date on which
a form originally was required to be provided, or if such form otherwise is not
required under the first sentence of Section 2.12(e) above), such Lender shall
not be entitled to indemnification under Section 2.12(a) with respect to Taxes
imposed by the United States; provided, however, that should such Lender become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
<PAGE> 11
SECTION 2.13. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Advance owing to it (other than pursuant
to Section 2.09, 2.12 or 8.04(c)) in excess of its ratable share of payments on
account of the Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (a) the amount of such Lender's required repayment to (b) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.13 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) solely for
general corporate purposes of the Borrower and its Subsidiaries.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01.
Section 2.01 of this Agreement shall become effective on and as of the first
date (the "Effective Date") on which the following conditions precedent have
been satisfied:
(a) There shall have occurred no Material Adverse Change since December 31,
1995.
(b) There shall exist no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries pending or
threatened in writing before any court, governmental agency or arbitrator that
(i) may materially adversely affect the financial condition or operations of the
Borrower or any of its subsidiaries or (ii) purports to affect the legality,
validity or enforceability of this Agreement or any Note or the consummation of
the transactions contemplated hereby.
(c) On the Effective Date, the following statements shall be true and the
Agent shall have received a certificate signed by a duly authorized officer of
the Borrower, dated the Effective Date, stating that:
(i) the representations and warranties contained in Section 4.01 are
correct on and as of the Effective Date, and
(ii) no event has occurred and is continuing that constitutes a
Default.
(d) The Agent shall have received on or before the Effective Date the
following, each dated such date, in form and substance satisfactory to the
Antlers (except for the Notes):
(i) executed counterparts of this Agreement duly executed and
delivered by the Borrower;
(ii) the Notes to the order of the Lenders;
(iii)certified copies of the resolutions of the board of directors of
the Borrower approving this Agreement and the Notes, and of all
documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement
and the Notes; and
(iv) a certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers
of the Borrower authorized to sign this Agreement and the Notes
and the other documents to be delivered hereunder.
<PAGE> 12
SECTION 3.02. Conditions Precedent to each Borrowing. The obligation of
each Lender to make an Advance on the occasion of each Borrowing shall be
subject to the conditions precedent that the Effective Date shall have occurred
and on the date of such Borrowing the following statements shall be true (and
each of the giving of the applicable Borrowing Notice and the acceptance by the
Borrower of the proceeds of such Borrowing shall constitute a representation and
warranty by the Borrower that on the date of such Borrowing such statements are
true):
(a) the representations and warranties contained in Section 4.01 (other
than the last sentence of subsection (e) thereof) are correct on and as of the
date of such Borrowing, before and after giving effect to such Borrowing and to
the application of the proceeds therefrom, as though made on and as of such
date, and
(b) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, that constitutes a
Default.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Borrower,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Borrower's charter or by-laws or (ii) any law or any contractual restriction
binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority is required for the due execution,
delivery and performance by the Borrower of this Agreement and the Notes.
(d) This Agreement has been, and the Notes when delivered hereunder will
have been, duly executed and delivered by the Borrower. This Agreement is, and
each of the Notes when delivered hereunder will be, legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms.
(e) The Consolidated balance sheet of the Borrower and its Subsidiaries as
at December 31, 1995, and the related Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for the fiscal year then ended,
copies of which have been furnished to the Lenders, fairly present the financial
condition of the Borrower and its Subsidiaries as at such date and the results
of the operations of the Borrower and its Subsidiaries for the period ended on
such date, all in accordance with GAAP. Since December 31, 1995, there has been
no Material Adverse Change.
<PAGE> 13
(f) There is no pending or threatened action or proceeding affecting the
Borrower or any of its Subsidiaries before any court, governmental agency or
arbitrator, that (i) may materially adversely affect the financial condition or
operations of the Borrower or any of its Subsidiaries or (ii) purports to affect
the legality, validity or enforceability of this Agreement or the Notes or the
consummation of the transactions contemplated hereby.
(g) The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
(h) The Advances and all related obligations of the Borrower under this
Agreement and the Notes rank pari passu with all other unsecured obligations of
the Borrower that are not, by their terms, expressly subordinate to such other
obligations of the Borrower.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. On and after the Change of Control
Date and so long as any Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will, unless the Lenders shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries
to comply, in all material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without limitation,
compliance with ERISA and environmental laws.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its property and (ii) all lawful claims that, if unpaid, might by law
become a lien upon its property; provided, however, that neither the Borrower
nor any of its Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained, unless
and until any lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors.
(c) Preservation of Corporate Existence, Etc. Preserve and maintain, and
cause each of its Subsidiaries to preserve and maintain, its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that neither the Borrower nor any of its Subsidiaries shall be required to
preserve any right or franchise if the board of directors of the Borrower or
such Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Borrower or such Subsidiary, as
the case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lenders.
(d) Keeping of Books. Keep, and cause each of its Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Borrower
and each such Subsidiary in accordance with GAAP or, in the case of any
Subsidiary organized under the laws of a jurisdiction other than the United
States or any state thereof, the equivalent of GAAP applicable in such
jurisdiction.
<PAGE> 14
(e) Maintenance of Properties, Etc. Maintain and preserve, and cause each
of its Subsidiaries to maintain and preserve, all of its properties that are
used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
(f) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of
the Borrower, Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such quarter and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, duly
certified (subject to year-end audit adjustments) by the chief
financial officer of the Borrower as having been prepared in
accordance with GAAP and setting forth in reasonable detail the
calculations necessary to demonstrate compliance with subsections
(g), (h) and (i) of this Section 4.01;
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the annual
report for such year for the Borrower and its Subsidiaries,
containing Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case accompanied by an
opinion acceptable to the Lenders by KPMG Peat Marwick or other
independent public accountants reasonably acceptable to the
Lenders and setting forth in reasonable detail the calculations
necessary to demonstrate compliance with subsections (g), (h) and
(i) of this Section 4.01;
(iii)as soon as possible and in any event within ten days after the
occurrence of each Default continuing on the date of such
statement, a statement of the chief financial officer of the
Borrower setting forth details of such Default and the action
that the Borrower has taken and proposes to take with respect
thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its securityholders,
and copies of all reports and registration statements which the
Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange;
(v) promptly after the filing or receiving thereof, copies of all
reports and notices which the Borrower or any Subsidiary files
under ERISA with the Internal Revenue Service or the Pension
Benefit Guaranty Corporation or the U.S. Department of Labor or
which the Borrower or any Subsidiary receives from the Pension
Benefit Guaranty Corporation;
(vi) promptly after the commencement thereof, notice of all actions
and proceedings before any court, governmental agency or
arbitrator affecting the Borrower or any of its Subsidiaries of
the type described in Section 4.01(f); and
(vii)such other information respecting the Borrower or any of its
Subsidiaries as any Lender through the Agent may from time to
time reasonably request.
<PAGE> 15
(g) Working Capital. Maintain an excess of Consolidated current assets over
Consolidated current liabilities of the Borrower and its Subsidiaries of not
less than $50,000,000 and a ratio of Consolidated current assets to Consolidated
current liabilities of the Borrower and its Subsidiaries of not less than 1.25
to 1. Consolidated current liabilities shall include the current portion of the
Debt resulting from the Notes.
(h) Net Worth. Maintain an excess of Consolidated total assets over
Consolidated total liabilities of the Borrower and its Subsidiaries of not less
than $400,000,000.
(i) Interest Coverage Ratio. Maintain an Interest Coverage Ratio of not
less than 4.0 to 1.
SECTION 5.02. Negative Covenants. On and after the Change of Control Date
and so long as any Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will not, unless the Lenders shall otherwise
consent in writing:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties, whether now owned or hereafter acquired,
or assign, or permit any of its Subsidiaries to assign, any right to receive
income, in each case to secure any Debt of any Person, other than:
(i) purchase money liens or purchase money security interests upon or
in any property acquired or held by the Borrower or any
Subsidiary in the ordinary course of business to secure the
purchase price of such property or to secure indebtedness
incurred solely for the purpose of financing the acquisition of
such property;
(ii) liens or security interests existing on such property at the time
of its acquisition (other than any such lien or security interest
created in contemplation of such acquisition);
(iii)liens for taxes, assessments and governmental charges or levies
to the extent not required to be paid under Section 5.01(b)
hereof;
(iv) liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar
liens arising in the ordinary course of business securing
obligations that are not overdue for a period of more than 30
days;
(v) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations; and
(vi) easements, rights of way and other encumbrances on title to real
property that do not render title to the property encumbered
thereby unmarketable or materially adversely affect the use of
such property for its present purposes;
provided that the aggregate principal amount of the Debt, other indebtedness,
taxes, assessments, governmental charges or levies and other obligations secured
by the liens or security interests referred to in clauses (i) through (vi) of
this Section 5.02(a) shall not exceed $45,000,000 in the aggregate at any time
outstanding.
(b) Accounting Changes. Make or permit, or permit any of its Subsidiaries
to make or permit, any change in accounting policies or reporting practices,
except as allowed by generally accepted accounting principles.
<PAGE> 16
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) the Borrower shall fail to pay (i) any principal of any Advance when
the same becomes due and payable or (ii) any interest on any Advance or any
other amount payable under this Agreement or any Note within ten days from the
date the same becomes due and payable; or
(b) any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) in connection with this Agreement shall prove
to have been incorrect in any material respect when made; or
(c) (i) the Borrower shall fail to perform or observe any term, covenant or
agreement contained in subsection (c), (g), (h) or (i) of Section 5.01 or in
Section 5.02 or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement or any Note on its part
to be performed or observed if such failure shall remain unremedied for 30 days
after written notice thereof shall have been given to the Borrower by the Agent
or any Lender; or
(d) the Borrower or any of its Subsidiaries shall fail to pay any principal
of or premium or interest on any Debt that is outstanding in a principal amount
of at least $5,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Subsidiary (as the case may be), when the
same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), redeemed, purchased
or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall
be required to be made, in each case prior to the stated maturity thereof; or
(e) the Borrower or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or the Borrower or any
of its Subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this Section 6.01(e); or
(f) any judgment or order for the payment of money in excess of $5,000,000
shall be rendered against the Borrower or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
<PAGE> 17
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Lenders, by notice to the Borrower, declare the obligation of
each Lender to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Lenders, by notice to the Borrower, declare the Notes, all interest thereon
and all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (A) the obligation of each Lender to make Advances shall automatically be
terminated and (B) the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Lenders, and such instructions shall be binding upon all Lenders and all
holders of Notes; provided, however, that the Agent shall not be required to
take any action that exposes the Agent to personal liability or that is contrary
to this Agreement or applicable law. The Agent agrees to give to each Lender
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (a) may treat the
payee of any Note as the holder thereof until the Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section
8.07; (b) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (d) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement on the part of the Borrower or
to inspect the property (including the books and records) of the Borrower; (e)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; and (t) shall incur
no liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
<PAGE> 18
SECTION 7.03. Huls. With respect to its Commitment, the Advance made by it
and the Note issued to it, Huls shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Huls in its individual capacity.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the Agent (to
the extent not reimbursed by the Borrower), ratably according to the respective
principal amounts of the Notes then held by each of them (or if no Notes are at
the time outstanding or if any Notes are held by Persons that are not Lenders,
ratably according to the respective amounts of their Commitments), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any action
taken or omitted by the Agent under this Agreement, provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower and may be removed at any
time with or without cause by the all of the Lenders. Upon any such resignation
or removal, the Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation or the Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States or of
any state thereof and having a long-term senior unsecured debt rating by S&P of
"A" or better. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VII shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
<PAGE> 19
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the Notes, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) waive any of
the conditions specified in Section 3.01, (b) increase the Commitments of the
Lenders or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Notes, or the number of Lenders, that shall be required for the
Lenders or any of them to take any action hereunder or (f) amend this Section
8.01; and provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this Agreement
or any Note.
SECTION 8.02. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telecopier, telegraphic or telex
communication) and mailed, telecopied, telegraphed, telexed or delivered, if to
the Borrower, at its address at 501 Pearl Drive, St. Peters, Missouri 63376,
Attention: Treasurer (telecopier number (314) 279-5163); if to the Initial
Lender or the Agent, at 13801 Riverport Drive, Suite 500, Maryland Heights,
Missouri 63043, Attention: President (telecopier number (314) 298-4185); if to
any other Lender or any Bank, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender; or, as to any
party, at such other address as shall be designated by such party in a written
notice to the other parties. All such notices and communications shall, when
mailed, telecopied, telegraphed or telexed, be effective when received by the
party to whom such notice is addressed, except that notices and communications
pursuant to Section 2.06 shall not be effective until confirmed in writing by
the party to whom such notice is addressed. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or
the Agent to exercise, and no delay in exercising, any right hereunder or under
any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on demand
all reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery, modification and amendment of this Agreement,
the Notes and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of counsel for the Agent with
respect thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay on
demand all costs and expenses of the Agent and the Lenders, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 8.04(a).
(b) The Borrower agrees to indemnify and hold harmless the Agent and each
Lender and each of their Affiliates and their officers, directors, employees,
agents and advisors (each, an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with the Notes, this Agreement, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Advances, whether or not such investigation, litigation or proceeding is
brought by the Borrower, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated, except to the extent such claim, damage, loss, liability or expense
is found in a final, nonappealable judgment by a court of competent jurisdiction
to have resulted from such Indemnified Party's gross negligence or willful
misconduct. The Borrower also agrees not to assert any claim against the Agent,
any Lender, any of their Affiliates, or any of their respective directors,
officers, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to the Notes, this Agreement, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Advances.
<PAGE> 20
(c) If any prepayment is made by the Borrower pursuant to Section 2.08, the
Borrower shall, upon demand by the Initial Lender, pay to the Initial Lender the
amount required to compensate the Initial Lender for any loss of anticipated
profit, if any, incurred by reason of such prepayment equal to the difference
(but not less than $O) between (i) the present value of the aggregate amount of
interest payments that would have become due on the principal amount prepaid had
such amount not been prepaid and (ii) the present value of the rate of return
anticipated in respect of the reemployment or investment of the proceeds of such
principal amount prepaid for the period of equal to the period from the date of
such prepayment to the Repayment Date. The Initial Lender shall use good faith
in the reemployment or investment of the proceeds of such prepayment and the
determination of any amount payable by the Borrower under this Section 8.04(c).
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.09, 2.12 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Setoff. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of each Lender and its Affiliates under this Section 8.05 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) that such Lender and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective (other
than Section 2.01, which shall only become effective upon satisfaction of the
conditions precedent set forth in Section 3.01) when it shall have been executed
by the Borrower, the Agent and the Initial Lender and thereafter shall be
binding upon and inure to the benefit of the Borrower, the Agent and the Initial
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may assign to
one or more Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advance owing to it and the Note or Notes held by it); provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement, (ii) except in
the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, (iii) each such assignment shall be to an Eligible Assignee, and (iv)
the parties to each such assignment shall execute and deliver to the Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Note subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (A) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (B) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).
<PAGE> 21
(b) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address referred to in Section 8.02 a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Note a new Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder, a new Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit A
hereto.
(e) Each Lender may sell participations to one or more banks or other
entities (other than the Borrower or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to any
departure by the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent subject
to such participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
<PAGE> 22
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 8.07, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any Confidential Information relating to the Borrower
received by it from such Lender.
(g) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and the Note held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
(h) In connection with the initial assignment or proposed initial
assignment by the Initial Lender pursuant to this Section 8.07, the Borrower
shall, upon the request of the Initial Lender, furnish to the Initial Lender a
favorable opinion of counsel for the Borrower acceptable to the Initial Lender,
in form and substance reasonably satisfactory to the Initial Lender.
SECTION 8.08. Confidentiality. Neither the Agent nor any Lender shall
disclose any Confidential Information to any Person without the consent of the
Borrower, other than (a) to the Agent's or such Lender's Affiliates and their
officers, directors, employees, agents and advisors and to actual or prospective
assignees and participants, and then, in each case, only on a confidential and
need-to-know basis, (b) as required by any law, rule or regulation or judicial
process and (c) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.
SECTION 8.09. Governing Law. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.10. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any New
York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
MEMC ELECTRONIC MATERIALS, INC., as Borrower
By: /s/ Kenneth L. Young
----------------------------
Kenneth L. Young
Title: Treasurer
HULS AG, as Agent
By: /s/ Heinz Willing
----------------------------
Heinz Willing
Title:
INITIAL LENDER
COMMITMENT
$75,000,000 HULS AG
By: /s/ Heinz Willing
-----------------------------
Heinz Willing
Title:
<PAGE> 1
EXHIBIT 10 - kkk
CREDIT AGREEMENT
Dated as of December 1, 1996
MEMC ELECTRONIC MATERIALS, INC., a Delaware corporation, as the
borrower (the "Borrower"), and HULS AG, a company formed under the laws of the
Federal Republic of Germany ("Huls"), as the initial lender (the "Initial
Lnder") and as agent (together with any successor appointed pursuant to Article
VII, the "Agent") for the Lenders (as hereinafter defined), hereby agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advance" has the meaning specified in Section 2.01.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the voting stock of such Person or
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting stock, by contract or otherwise.
"Agent" has the meaning specified in the recital of parties to this
Agreement.
"Agent's Account" means the Dollar account of the Agent maintained with
such bank as the Agent shall specify in writing to the Borrower and the Lenders
from time to time.
"Applicable Margin" means, as of the date occurring 45 Business Days after
the Change of Control Date,
(a) a percentage per annum equal to the average (rounded upward to the
nearest wholemultiple of 1/16 of 1 % per annum, if such average is not such a
multiple) of the ratesper annum in excess of the Base Rate at which each
Reference Bank would offer the Borrower the Advances outstanding or to be
outstanding for the Designated Maturity; or
(b) a percentage per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1 % per annum, if such average is not such a
multiple) of the rates per annum in excess of the Base Rate at which each
Reference Bank, based on the Senior Debt Rating of the Borrower as of the Change
of Control Date, would offer the Borrower the Advances outstanding or to be
outstanding for the Designated Maturity; or
(c) a percentage per annum equal to the applicable percentage set forth
below for the Performance Level set forth below:
PERFORMANCE APPLICABLE
LEVEL MARGIN
==================================== ====================================
I 0.450%
II 0.500%
III 0.625%
IV 1.000%
<PAGE> 2
In each case the Applicable Margin for the Advances shall be determined by the
Agent 40 Business Days after the Change of Control Date in accordance with the
provisions of Section 2.06.
"Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an Eligible Assignee and accepted by the Agent, in substantially
the form of Exhibit C hereto.
"Bank" means any Lender other than the Initial Lender or any Affiliate of
the Initial Lender.
"Base Rate" means, with respect to the Advances comprising a Borrowing for
the Designated Maturity, the interbank rate for Dollars for the period most
nearly comparable to the Designated Maturity that appears on the Dow Jones
Telerate Screen as of 11:00 A.M. (London time) two Business Days before the date
of such Borrowing.
"Borrower" has the meaning specified in the recital of parties to this
Agreement.
"Borrowing" means the borrowing consisting of the Advances made by the
Lenders.
"Borrowing Notice" has the meaning specified in Section 2.02(a).
"Business Day" means a day of the year on which banks are not required or
authorized by law to close in New York City.
"Change of Control" means the Initial Lender or any Affiliate of the
Initial Lender, through any transaction or series of transactions or otherwise,
no longer has beneficial ownership, directly or indirectly, of more than 50% of
the shares of common stock of the Borrower.
"Change of Control Date" means the date of occurrence of a Change of
Control.
"Commitment" has the meaning specified in Section 2.01.
"Confidential Information" means information that the Borrower furnishes to
the Agent or any Lender in a writing designated as confidential, but does not
include any such information that is or becomes generally available to the
public or that is or becomes available to the Agent or such Lender from a source
other than the Borrower, an Affiliate of the Borrower or an Affiliate of the
Initial Lender.
"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.
"Debt" means (a) indebtedness for borrowed money, (b) obligations evidenced
by bonds, debentures, notes or other similar instruments, (c) obligations to pay
the deferred purchase price of property or services, (d) obligations as lessee
under leases which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases, and (e) obligations
under direct or indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clause (a) through (d) of this definition; provided,
however, that, solely for purposes of calculating the Leverage Ratio at any
time, Debt shall not include obligations of the Borrower under direct or
indirect guaranties of indebtedness or obligations of any Subsidiary of the
Borrower, to the extent the inclusion of any such obligation results in
double-counting thereof.
<PAGE> 3
"Default" means any Event of Default or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.
"Designated Maturity" means, with respect to the Advances comprising a
Borrowing, the period from the date of such Borrowing until the Repayment Date
for such Advances.
"Dollars" and the sign "$" each means lawful money of the United States of
America.
"Domestic Lending Office" means, with respect to any Bank, the office of
such Bank specified as its "Domestic Lending Office" in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office of such
Bank as such Bank may from time to time specify to the Borrower and the Agent.
"EBIT" means, with respect to the Borrower and its Subsidiaries for any
period, the sum of (a) net income (or net loss), (b) interest expense and (c)
income tax expense, in each case determined in accordance with GAAP for such
period.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (a) an Affiliate of the Initial Lender approved
by the Borrower, such approval not to be unreasonably withheld; (b) a commercial
bank organized under the laws of the United States, or any state thereof, and
having a long-term senior unsecured debt rating by S&P of "A" or better and
total assets in excess of $20,000,000,000; (c) a commercial bank organized under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development or has concluded special lending arrangements with
the International Monetary Fund associated with its "General Arrangements to
Borrow" and having a long-term senior unsecured debt rating by S&P of "A" or
better and total assets in excess of $20,000,000,000, so long as such bank is
acting through a branch or agency located in the United States; and (d) any
other Person approved by all of the Lenders and the Borrower; provided, however,
that neither the Borrower nor any Subsidiary of the Borrower shall qualify as an
Eligible Assignee; provided, further, however, that, solely with respect to
assignments of the Advance owing to the Initial Lender, an Affiliate of the
Initial Lender shall qualify as an Eligible Assignee without the approval of the
Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Events of Default" has the meaning specified in Section 6.01.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"GAAP" has the meaning specified in Section 1.03.
<PAGE> 4
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any federal, state, local or foreign court or
governmental, executive, legislative, judicial, administrative or regulatory
agency, department, authority, instrumentality, commission, board or similar
body.
"Indemnified Party" has the meaning specified in Section 8.04(b).
"Initial Lender" has the meaning specified in the recital of parties to
this Agreement.
"Interest Coverage Ratio" means, with respect to the Borrower and its
Subsidiaries on a Consolidated basis for any period, a ratio of (a) Consolidated
EBIT of the Borrower and its Subsidiaries for such period to (b) interest
payable on all Debt during such period.
"Lender" means the Initial Lender and each Person that shall become a party
hereto pursuant to Section 8.07.
"Leverage Ratio" means, with respect to the Borrower and its Subsidiaries
at any date of determination, the ratio of (a) Consolidated Debt of the Borrower
and its Subsidiaries at such date to (b) Consolidated net worth of the Borrower
and its Subsidiaries at such date.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and its Subsidiaries
taken as a whole.
"Moody's" means Moody's Investors Service, Inc.
"Note" means a promissory note of the Borrower payable to the order of any
Lender, substantially in the form of Exhibit A hereto, evidencing the Debt of
the Borrower to such Lender resulting from the Advance made by such Lender.
"Other Taxes" has the meaning specified in Section 2.12(b).
"Performance Level" means Performance Level 1, Performance Level 11,
Performance Level III or Performance Level IV, as appropriate. For purposes of
determining the Performance Level as at the Change of Control Date, if the
Interest Coverage Ratio and the Leverage Ratio shall fall within different
Performance Levels at such date, the Performance Level shall be deemed to be the
lower of the two Performance Levels (i.e., Performance Level 11 being lower than
Performance Level 1, Performance Level III being lower than Performance Level 11
and Performance Level IV being lower than Performance Level 111) in effect at
such date.
"Performance Level I" means, at the date of determination, that the
Borrower and its Subsidiaries shall have maintained for the most recently
completed four consecutive fiscal quarters of the Borrower and its Subsidiaries
prior to such date (a) an Interest Coverage Ratio of greater than or equal to
7.0 to 1 and (b) a Leverage Ratio of less than or equal to 1.0 to 1.
"Performance Level II" means, at the date of determination, that (a) the
Performance Level does not meet the requirements of Performance Level I and (b)
the Borrower and its Subsidiaries shall have maintained for the most recently
completed four consecutive fiscal quarters of the Borrower and its Subsidiaries
prior to such date (i) an Interest Coverage Ratio of greater than or equal to
5.0 to 1 and (ii) a Leverage Ratio of less than or equal to 2.0 to 1.
<PAGE> 5
"Performance Level III" means, at any date of determination, that (a) the
Performance Level does not meet the requirements of Performance Level I or
Performance Level II and (b) the Borrower and its Subsidiaries shall have
maintained for the most recently completed four consecutive fiscal quarters of
the Borrower and its Subsidiaries prior to such date (i) an Interest Coverage
Ratio of greater than or equal to 3.0 to 1 and (ii) a Leverage Ratio of less
than or equal to 3.0 to 1.
"Performance Level IV" means, at any date of determination, that the
Performance Level does not meet the requirements of Performance Level I,
Performance Level II or Performance Level III.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
"Reference Banks" means, collectively, no more than two banks designated by
the Agent and no more than two banks designated by the Borrower for the purpose
of determining the Applicable Margin.
"Register" has the meaning specified in Section 8.07(c).
"Repayment Date" means, with respect to the Advances comprising a
Borrowing, the date specified by the Borrower in the Borrowing Notice for such
Borrowing on which the Borrower agrees to repay the aggregate principal amount
of the Advances comprising such Borrowing; provided that such date shall not be
later than the Termination Date.
"Senior Debt Rating" means, as of the date of determination, the rating
assigned in writing by either S&P or Moody's, at the request of the Initial
Lender for the long-term senior unsecured debt of the Borrower.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries; provided,
however, that the term "Subsidiary" shall not include any joint venture of the
Borrower with respect to any action or decision of the board of directors of
such joint venture if, by written agreement, such action or decision requires a
vote in excess of the number of members of such board of directors elected or
controlled by the Borrower.
"Taxes" has the meaning specified in Section 2.12(a).
"Termination Date" means the earlier of (a) December 1, 2004 and (b) the
termination in whole of the Commitments pursuant to Section 2.04 or Section
6.01.
"United States" and "U.S." each means the United States of America.
<PAGE> 6
The words " include, " " includes " and " including " shall be deemed to be
followed by the phrase "without limitation."
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means " from and including " and the words " to " and "until "
each means " to but excluding."
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(e) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make advances (each, an "Advance") to the
Borrower from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an amount not to exceed the amount
set forth opposite such Lender's name on the signature pages hereof or, if such
Lender has entered into any Assignment and Acceptance, set forth for such Lender
in the Register maintained by the Agent pursuant to Section 8.07(c), as such
amount may be reduced pursuant to Section 2.04 (such Lender's "Commitment").
Each Borrowing shall be in an aggregate amount of $10,000,000 or an integral
multiple of $5,000,000 in excess thereof and shall be made simultaneously by the
Lenders ratably according to their respective Commitments. The Borrower is not
entitled to reborrow any repaid or prepaid portion of any Advance.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made on
notice, given not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing by the Borrower to the
Agent, which shall give to each Lender prompt notice thereof by telecopier or
telex. Each notice of a Borrowing (a "Borrowing Notice") shall be by telephone,
confirmed immediately in writing, or telecopier or telex, in substantially the
form of Exhibit B hereto, specifying therein, among other things, the requested
date of such Borrowing, the amount of such Borrowing and the Repayment Date of
the Advances comprising such Borrowing. Each Lender shall, before 11: 00 A.M.
(New York City time) on the date of such Borrowing, make available for the
account of its Domestic Lending Office to the Agent at the Agent's Account, in
same day funds, such Lender's ratable portion of such Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to the
Borrower by depositing the proceeds of the Advances in such Dollar account of
the Borrower (or of such Person as the Borrower shall specify to the Lender in
the Borrowing Notice or by other written notice to the Lender given
simultaneously with or prior to such Borrowing Notice) maintained with such bank
as the Borrower shall specify to the Agent in such Borrowing Notice.
The parties hereto understand and agree that the Initial Lender may, in its
sole discretion (but shall have no obligation to), designate a financial
institution or another Person to perform the Initial Lender's obligations
hereunder in accordance with the terms hereof. The Borrower agrees that
performance of any such obligation by any such designee of the Initial Lender
shall be deemed to constitute performance by the Initial Lender for all purposes
of this Agreement and the Note and shall discharge the Initial Lender from such
obligation to the extent of such performance.
(b) Any Borrowing Notice delivered by the Borrower to the Agent shall be
irrevocable and binding on the Borrower. The Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Borrowing Notice
for such Borrowing the applicable conditions set forth in Article 111,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
<PAGE> 7
(c) The Agent shall only make available to the Borrower on the date of any
Borrowing the ratable portion of such Borrowing of each Lender that such Lender
has made available to the Agent on or prior to the date of such Borrowing.
(d) The failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
SECTION 2.03. Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Lender a commitment fee on the unused portion of such
Lender's Commitment from the Effective Date in the case of the Initial Lender
and from the effective date specified in the Assignment and Acceptance pursuant
to which it became a Lender in the case of each other Lender until the
Termination Date at a rate per annum equal to 1/8 of 1%, payable in arrears
quarterly on the last day of each March, June, September and December,
commencing March 31, 1997, and on the Termination Date.
SECTION 2.04. Optional Termination or Reduction of the Commitments. The
Borrower shall have the right, upon at least three Business Days' notice to the
Agent, to terminate in whole or reduce in part the unused Commitments of the
Lenders, provided that each partial reduction shall be in the amount of
$1,000,000 or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.05. Repayment. The Borrower shall repay to the Agent for the
ratable account of the Lenders the aggregate principal amount of the Advances
then outstanding comprising each Borrowing on the Repayment Date for such
Borrowing.
SECTION 2.06. Interest. (a) Interest on the Advances. The Borrower shall
pay interest on the unpaid principal amount of the Advances, if any, from the
date of the Advances until such principal amount shall be paid in full, payable
semiannually, at an interest rate per annum equal to the Base Rate plus 0.50%;
provided, however, that as of the date occurring 45 Business Days after the
Change of Control Date, the interest rate per annum shall be the Base Rate in
effect for such Advances plus the Applicable Margin.
(b) Interest on Overdue Amounts. In the event that any principal amount of
any Advance or any interest, fees, costs, expenses or other amounts payable
hereunder are not paid when due, the Borrower shall pay interest on such unpaid
amount from the date such amount is due until the date such amount is paid in
full, payable on demand, at an interest rate per annum equal to the interest
rate referred to in subsection (a) of this Section 2.06 then in effect plus 2%.
SECTION 2.07. Interest Rate Determination Upon Change of Control. (a) Upon
the occurrence of a Change of Control, the Lenders and the Borrower shall agree
to determine the Applicable Margin in accordance with subsection (a), (b) or (c)
of the definition of "Applicable Margin".
(i) If the Lenders and the Borrower agree to determined-nine the
Applicable Margin in accordance with subsection (a) of such definition, the
Agent shall request timely information from each Reference Bank for purposes of
determining such Applicable Margin. If the Borrower and the Lenders agree to
determine the Applicable Margin in accordance with subsection (b) of such
definition, the Agent shall promptly engage either S&P or Moody's to provide a
Senior Debt Rating of the Borrower as of the Change of Control Date. The Agent
shall provide each Reference Bank with such Senior Debt Rating and request
timely information from each Reference Bank for the purpose of determining such
Applicable Margin.
<PAGE> 8
(ii) The Initial Lender and the Borrower agree to equally share the
expense of engaging S&P or Moody's to provide a Senior Debt Rating
of the Borrower; provided, however, that if either the Initial Lender or
the Borrower shall be the sole party to decline to determine the Applicable
Margin in accordance with subsection (a) of the definition of "Applicable
Margin", then such declining party shall pay the entire expense of any such
engagement.
(iii) If any one or more of the Reference Banks shall not furnish
such timely information to the Agent for the purpose of
determining any such Applicable Margin in accordance with subsection (b)(i)
of this Section 2.07, the Agent shall determine such Applicable Margin on the
basis of timely information furnished by the remaining Reference Banks.
(iv) The Agent shall give prompt notice, and in any event no later
than 40 Business Days after the Change of Control Date, to the
Borrower and the Lenders of the Applicable Margin determined by the Agent for
purposes of Section 2.06(a) together with (A) the Senior Debt Rating, if any,
established by S&P or Moody's, as the case may be, and (B) the rate, if any,
furnished by each Reference Bank for the purpose of determining such
Applicable Margin in accordance with the provisions of this Agreement.
(c) If the Lenders and the Borrower shall not agree to determine the
Applicable Margin in accordance with any of subsections (a) and (b) of the
definition of "Applicable Margin", then the Applicable Margin as of the date
occurring 45 Business Days after the Change of Control Date shall be the
percentage per annum determined in accordance with subsection (c) of such
definition.
(d) For all purposes hereof, the Agent shall determine the Applicable
Margin as of 40 Business Days after the Change of Control Date and such
Applicable Margin shall be effective from the date occurring 45 Business Days
after the Change of Control Date until the unpaid principal amount of the
Advances shall have been paid in full.
SECTION 2.08. Optional Prepayments and Reductions of Commitment. (a) The
Borrower may, upon at least three Business Days' notice to the Agent stating the
proposed date and the aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amount of
the Advances in whole or ratably in part, together with (i) accrued interest to
the date of such prepayment on the principal amount prepaid and (ii) any amount
payable pursuant to Section 8.04(c); provided, however, that each such partial
prepayment shall be in an aggregate principal amount of not less than $1,000,000
or an integral multiple of $1,000,000 in excess thereof.
(b) Upon the prepayment in whole or in part of the Advances in accordance
with subsection (a) of this Section 2.08, the Commitments of the Lenders shall
be automatically reduced ratably by the amount of such prepayment.
SECTION 2.09. Increased Costs, Etc. If due to either (a) the introduction
of or any change (including, without limitation, any change by way of imposition
or increase of reserve requirements) in or in the interpretation of any law or
regulation or (b) the compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to any Bank of agreeing to make or
making, funding or maintaining an Advance, then the Borrower shall from time to
time, upon demand by such Bank (with a copy of such demand to the Agent), pay to
the Agent for the account of such Bank additional amounts sufficient (as
applicable) to compensate such Bank for such increased cost. A certificate as to
the amount of such increased cost, submitted to the Borrower by such Bank, shall
be conclusive and binding for all purposes, absent manifest error.
<PAGE> 9
SECTION 2.10. Illegality. Notwithstanding any other provision of this
Agreement, if any Bank shall notify the Borrower that any law or regulation, or
the introduction of or any change in or in the interpretation of any law or
regulation, makes it unlawful, or any central bank or other Governmental
Authority asserts that it is unlawful, for such Bank to perform its obligations
hereunder to make an Advance or to fund or maintain an Advance hereunder, (a)
the obligation of such Bank to make, fund and maintain any Advance shall be
suspended until such Bank shall notify the Borrower that the circumstances
causing such suspension no longer exist, (b) such Bank shall promptly notify the
Borrower of such circumstances and such suspension, and (c) unless the Borrower
and such Bank shall have otherwise agreed within ten Business Days of such
notice, the Borrower shall forthwith on such tenth Business Day prepay in full
the Advances then outstanding together with interest accrued thereon.
SECTION 2.11. Payments and Computations. (a) The Borrower shall make each
payment hereunder and under the Notes not later than 1:00 P.M. (New York City
time) on the day when due in Dollars to the Agent at the Agent's Account, in
each case in immediately available funds. The Agent will promptly thereafter
cause to be distributed like funds relating to the payment of principal or
interest or fees ratably (other than amounts payable pursuant to Section 2.09,
2.12 or 8.04(c)) to the Lenders for the account of their respective Domestic
Lending Offices, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Domestic Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 8.07(d),
from and after the effective date specified in such Assignment and Acceptance,
the Agent shall make all payments hereunder and under the Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the parties
to such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) All computations of interest and of fees shall be made in good faith by
the Agent on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or fees are payable.
(c) Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be.
(d) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Lenders hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate.
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower hereunder or
under the Notes shall be made, in accordance with Section 2. 1 1, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, net income taxes
that are imposed by the United States and net income taxes (or franchise taxes
imposed in lieu thereof) that are imposed on such Lender or the Agent by the
state or foreign jurisdiction under the laws of which such Lender or the Agent
(as the case may be) is organized or any political subdivision thereof and, in
the case of each Lender, net income taxes (or franchise taxes imposed in lieu
thereof) that are imposed on such Lender by the state or foreign jurisdiction of
such Lender's Domestic Lending Office or any political subdivision thereof (all
such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note, (i) the sum payable shall be increased as may be necessary so that, after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.12), such Lender or the Agent receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law.
<PAGE> 10
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or other taxes, charges or levies that arise from
any payment made hereunder or under the Notes or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or the Notes
(hereinafter referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender and the Agent for the full
amount of Taxes or Other Taxes and for the full amount of Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.12 imposed
on or paid by such Lender or the Agent (as the case may be) or any liability
(including penalties, additions to tax, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. This indemnification shall be made within 30 days from the
date such Lender or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
shall furnish to the Agent, at its address referred to in Section 8.02, the
original receipt of payment or a certified copy of such receipt. If no Taxes are
payable in respect of any payment hereunder or under the Notes, the Borrower
shall furnish to the Agent, at such address, a certificate from each appropriate
taxing authority, or an opinion of counsel acceptable to the Lenders, in either
case stating that such payment is exempt from or not subject to Taxes.
(e) Each Lender organized under the laws of a jurisdiction outside the
United States shall, on the Effective Date in the case of the Initial Lender and
on the date of the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender, and from time to time thereafter if
requested in writing by the Borrower or the Agent (but only so long as such
Lender remains lawfully able to do so), provide each of the Borrower and the
Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or entitled to a reduced rate of United States
withholding tax on payments of interest pursuant to this Agreement or the Notes.
If the form provided by such Lender at the time such Lender becomes a party to
this Agreement indicates a United States interest withholding tax rate in excess
of zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Lender provides the appropriate form certifying that a
lesser rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender becomes a party to this Agreement, the Lender assignor was entitled to
payments under Section 2.12(a) in respect of United States withholding tax with
respect to interest paid at such date, then, to such extent, the term Taxes
shall include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includable in Taxes) United States withholding
tax, if any, applicable with respect to the Lender assignee on such date. If any
form or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender reasonably considers to be confidential, the Lender shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information.
(f) For any period with respect to which a Lender has failed to provide the
Borrower with the appropriate form described in Section 2.12(e) (other than if
such failure is due to a change in law occurring subsequent to the date on which
a form originally was required to be provided, or if such form otherwise is not
required under the first sentence of Section 2.12(e) above), such Lender shall
not be entitled to indemnification under Section 2.12(a) with respect to Taxes
imposed by the United States; provided, however, that should such Lender become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
<PAGE> 11
SECTION 2.13. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Advance owing to it (other than pursuant
to Section 2.09, 2.12 or 8.04(c)) in excess of its ratable share of payments on
account of the Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (a) the amount of such Lender's required repayment to (b) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.13 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) solely for
general corporate purposes of the Borrower and its Subsidiaries.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01.
Section 2.01 of this Agreement shall become effective on and as of the first
date (the "Effective Date") on which the following conditions precedent have
been satisfied:
(a) There shall have occurred no Material Adverse Change since December 31,
1995.
(b) There shall exist no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries pending or
threatened in writing before any court, governmental agency or arbitrator that
(i) may materially adversely affect the financial condition or operations of the
Borrower or any of its subsidiaries or (ii) purports to affect the legality,
validity or enforceability of this Agreement or any Note or the consummation of
the transactions contemplated hereby.
(c) On the Effective Date, the following statements shall be true and the
Agent shall have received a certificate signed by a duly authorized officer of
the Borrower, dated the Effective Date, stating that:
(i) the representations and warranties contained in Section 4.01 are
correct on and as of the Effective Date, and
(ii) no event has occurred and is continuing that constitutes a
Default.
(d) The Agent shall have received on or before the Effective Date the
following, each dated such date, in form and substance satisfactory to the
Antlers (except for the Notes):
(i) executed counterparts of this Agreement duly executed and
delivered by the Borrower;
(ii) the Notes to the order of the Lenders;
(iii) certified copies of the resolutions of the board of directors
of the Borrower approving this Agreement and the Notes, and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the Notes; and
(iv) a certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and the Notes and
the other documents to be delivered hereunder.
<PAGE> 12
SECTION 3.02. Conditions Precedent to each Borrowing. The obligation of
each Lender to make an Advance on the occasion of each Borrowing shall be
subject to the conditions precedent that the Effective Date shall have occurred
and on the date of such Borrowing the following statements shall be true (and
each of the giving of the applicable Borrowing Notice and the acceptance by the
Borrower of the proceeds of such Borrowing shall constitute a representation and
warranty by the Borrower that on the date of such Borrowing such statements are
true):
(a) the representations and warranties contained in Section 4.01 (other
than the last sentence of subsection (e) thereof) are correct on and as of the
date of such Borrowing, before and after giving effect to such Borrowing and to
the application of the proceeds therefrom, as though made on and as of such
date, and
(b) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, that constitutes a
Default.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Borrower,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Borrower's charter or by-laws or (ii) any law or any contractual restriction
binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority is required for the due execution,
delivery and performance by the Borrower of this Agreement and the Notes.
(d) This Agreement has been, and the Notes when delivered hereunder will
have been, duly executed and delivered by the Borrower. This Agreement is, and
each of the Notes when delivered hereunder will be, legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms.
(e) The Consolidated balance sheet of the Borrower and its Subsidiaries as
at December 31, 1995, and the related Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for the fiscal year then ended,
copies of which have been furnished to the Lenders, fairly present the financial
condition of the Borrower and its Subsidiaries as at such date and the results
of the operations of the Borrower and its Subsidiaries for the period ended on
such date, all in accordance with GAAP. Since December 31, 1995, there has been
no Material Adverse Change.
<PAGE> 13
(f) There is no pending or threatened action or proceeding affecting the
Borrower or any of its Subsidiaries before any court, governmental agency or
arbitrator, that (i) may materially adversely affect the financial condition or
operations of the Borrower or any of its Subsidiaries or (ii) purports to affect
the legality, validity or enforceability of this Agreement or the Notes or the
consummation of the transactions contemplated hereby.
(g) The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
(h) The Advances and all related obligations of the Borrower under this
Agreement and the Notes rank pari passu with all other unsecured obligations of
the Borrower that are not, by their terms, expressly subordinate to such other
obligations of the Borrower.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. On and after the Change of Control
Date and so long as any Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will, unless the Lenders shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries
to comply, in all material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without limitation,
compliance with ERISA and environmental laws.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its property and (ii) all lawful claims that, if unpaid, might by law
become a lien upon its property; provided, however, that neither the Borrower
nor any of its Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained, unless
and until any lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors.
(c) Preservation of Corporate Existence, Etc. Preserve and maintain, and
cause each of its Subsidiaries to preserve and maintain, its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that neither the Borrower nor any of its Subsidiaries shall be required to
preserve any right or franchise if the board of directors of the Borrower or
such Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Borrower or such Subsidiary, as
the case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lenders.
(d) Keeping of Books. Keep, and cause each of its Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Borrower
and each such Subsidiary in accordance with GAAP or, in the case of any
Subsidiary organized under the laws of a jurisdiction other than the United
States or any state thereof, the equivalent of GAAP applicable in such
jurisdiction.
<PAGE> 14
(e) Maintenance of Properties, Etc. Maintain and preserve, and cause each
of its Subsidiaries to maintain and preserve, all of its properties that are
used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
(f) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of
the Borrower, Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such quarter and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter,
duly certified (subject to year-end audit adjustments) by the
chief financial officer of the Borrower as having been
prepared in accordance with GAAP and setting forth in
reasonable detail the calculations necessary to demonstrate
compliance with subsections (g), (h) and (i) of this Section
4.01;
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the annual
report for such year for the Borrower and its Subsidiaries,
containing Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case accompanied by
an opinion acceptable to the Lenders by KPMG Peat Marwick or
other independent public accountants reasonably acceptable to
the Lenders and setting forth in reasonable detail the
calculations necessary to demonstrate compliance with
subsections (g), (h) and (i) of this Section 4.01;
(iii)as soon as possible and in any event within ten days
after the occurrence of each Default continuing on the date of
such statement, a statement of the chief financial officer of the
Borrower setting forth details of such Default and the action
that the Borrower has taken and proposes to take with respect
thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its securityholders,
and copies of all reports and registration statements which the
Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange;
(v) promptly after the filing or receiving thereof, copies of all
reports and notices which the Borrower or any Subsidiary
files under ERISA with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation or the U.S. Department
of Labor or which the Borrower or any Subsidiary receives from
the Pension Benefit Guaranty Corporation;
(vi) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.01(f); and
(vii)such other information respecting the Borrower or any
of its Subsidiaries as any Lender through the Agent may
from time to time reasonably request.
(g) Working Capital. Maintain an excess of Consolidated current assets over
Consolidated current liabilities of the Borrower and its Subsidiaries of not
less than $50,000,000 and a ratio of Consolidated current assets to Consolidated
current liabilities of the Borrower and its Subsidiaries of not less than 1.25
to 1. Consolidated current liabilities shall include the current portion of the
Debt resulting from the Notes.
<PAGE> 15
(h) Net Worth. Maintain an excess of Consolidated total assets over
Consolidated total liabilities of the Borrower and its Subsidiaries of not less
than $400,000,000.
(i) Interest Coverage Ratio. Maintain an Interest Coverage
Ratio of not less than 4.0 to 1.
SECTION 5.02. Negative Covenants. On and after the Change of Control Date
and so long as any Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will not, unless the Lenders shall otherwise
consent in writing:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties, whether now owned or hereafter acquired,
or assign, or permit any of its Subsidiaries to assign, any right to receive
income, in each case to secure any Debt of any Person, other than :
(i) purchase money liens or purchase money security interests upon
or in any property acquired or held by the Borrower or any
Subsidiary in the ordinary course of business to secure the
purchase price of such property or to secure indebtedness
incurred solely for the purpose of financing the acquisition of
such property;
(ii) liens or security interests existing on such property at the
time of its acquisition (other than any such lien or security
interest created in contemplation of such acquisition);
(iii)liens for taxes, assessments and governmental charges or
levies to the extent not required to be paid under Section
5.01(b) hereof;
(iv) liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar
liens arising in the ordinary course of business securing
obligations that are not overdue for a period of more than 30
days;
(v) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure
public or statutory obligations; and
(vi) easements, rights of way and other encumbrances on title
to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely affect
the use of such property for its present purposes;
provided that the aggregate principal amount of the Debt, other
indebtedness, taxes, assessments, governmental charges or levies and other
obligations secured by the liens or security interests referred to in
clauses (i) through (vi) of this Section 5.02(a) shall not exceed
$45,000,000 in the aggregate at any time outstanding.
(b) Accounting Changes. Make or permit, or permit any of its Subsidiaries
to make or permit, any change in accounting policies or reporting practices,
except as allowed by generally accepted accounting principles.
<PAGE> 16
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) the Borrower shall fail to pay (i) any principal of any Advance when
the same becomes due and payable or (ii) any interest on any Advance or any
other amount payable under this Agreement or any Note within ten days from the
date the same becomes due and payable; or
(b) any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) in connection with this Agreement shall prove
to have been incorrect in any material respect when made; or
(c) (i) the Borrower shall fail to perform or observe any term, covenant or
agreement contained in subsection (c), (g), (h) or (i) of Section 5.01 or in
Section 5.02 or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement or any Note on its part
to be performed or observed if such failure shall remain unremedied for 30 days
after written notice thereof shall have been given to the Borrower by the Agent
or any Lender; or
(d) the Borrower or any of its Subsidiaries shall fail to pay any principal
of or premium or interest on any Debt that is outstanding in a principal amount
of at least $5,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Subsidiary (as the case may be), when the
same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), redeemed, purchased
or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall
be required to be made, in each case prior to the stated maturity thereof; or
(e) the Borrower or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or the Borrower or any
of its Subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this Section 6.01(e); or
<PAGE> 17
(f) any judgment or order for the payment of money in excess of $5,000,000
shall be rendered against the Borrower or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Lenders, by notice to the Borrower, declare the obligation of
each Lender to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Lenders, by notice to the Borrower, declare the Notes, all interest thereon
and all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (A) the obligation of each Lender to make Advances shall automatically be
terminated and (B) the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Lenders, and such instructions shall be binding upon all Lenders and all
holders of Notes; provided, however, that the Agent shall not be required to
take any action that exposes the Agent to personal liability or that is contrary
to this Agreement or applicable law. The Agent agrees to give to each Lender
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (a) may treat the
payee of any Note as the holder thereof until the Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section
8.07; (b) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (d) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement on the part of the Borrower or
to inspect the property (including the books and records) of the Borrower; (e)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; and (t) shall incur
no liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.03. Huls. With respect to its Commitment, the Advance made by it
and the Note issued to it, Huls shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Huls in its individual capacity.
<PAGE> 18
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the Agent (to
the extent not reimbursed by the Borrower), ratably according to the respective
principal amounts of the Notes then held by each of them (or if no Notes are at
the time outstanding or if any Notes are held by Persons that are not Lenders,
ratably according to the respective amounts of their Commitments), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any action
taken or omitted by the Agent under this Agreement, provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower and may be removed at any
time with or without cause by the all of the Lenders. Upon any such resignation
or removal, the Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation or the Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States or of
any state thereof and having a long-term senior unsecured debt rating by S&P of
"A" or better. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VII shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
<PAGE> 19
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the Notes, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) waive any of
the conditions specified in Section 3.01, (b) increase the Commitments of the
Lenders or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Notes, or the number of Lenders, that shall be required for the
Lenders or any of them to take any action hereunder or (f) amend this Section
8.01; and provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this Agreement
or any Note.
SECTION 8.02. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telecopier, telegraphic or telex
communication) and mailed, telecopied, telegraphed, telexed or delivered, if to
the Borrower, at its address at 501 Pearl Drive, St. Peters, Missouri 63376,
Attention: Treasurer (telecopier number (314) 279-5163); if to the Initial
Lender or the Agent, at 13801 Riverport Drive, Suite 500, Maryland Heights,
Missouri 63043, Attention: President (telecopier number (314) 298-4185); if to
any other Lender or any Bank, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender; or, as to any
party, at such other address as shall be designated by such party in a written
notice to the other parties. All such notices and communications shall, when
mailed, telecopied, telegraphed or telexed, be effective when received by the
party to whom such notice is addressed, except that notices and communications
pursuant to Section 2.06 shall not be effective until confirmed in writing by
the party to whom such notice is addressed. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or
the Agent to exercise, and no delay in exercising, any right hereunder or under
any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on demand
all reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery, modification and amendment of this Agreement,
the Notes and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of counsel for the Agent with
respect thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay on
demand all costs and expenses of the Agent and the Lenders, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 8.04(a).
(b) The Borrower agrees to indemnify and hold harmless the Agent and each
Lender and each of their Affiliates and their officers, directors, employees,
agents and advisors (each, an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with the Notes, this Agreement, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Advances, whether or not such investigation, litigation or proceeding is
brought by the Borrower, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated, except to the extent such claim, damage, loss, liability or expense
is found in a final, nonappealable judgment by a court of competent jurisdiction
to have resulted from such Indemnified Party's gross negligence or willful
misconduct. The Borrower also agrees not to assert any claim against the Agent,
any Lender, any of their Affiliates, or any of their respective directors,
officers, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to the Notes, this Agreement, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Advances.
<PAGE> 20
(c) If any prepayment is made by the Borrower pursuant to Section 2.08, the
Borrower shall, upon demand by the Initial Lender, pay to the Initial Lender the
amount required to compensate the Initial Lender for any loss of anticipated
profit, if any, incurred by reason of such prepayment equal to the difference
(but not less than $O) between (i) the present value of the aggregate amount of
interest payments that would have become due on the principal amount prepaid had
such amount not been prepaid and (ii) the present value of the rate of return
anticipated in respect of the reemployment or investment of the proceeds of such
principal amount prepaid for the period of equal to the period from the date of
such prepayment to the Repayment Date. The Initial Lender shall use good faith
in the reemployment or investment of the proceeds of such prepayment and the
determination of any amount payable by the Borrower under this Section 8.04(c).
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.09, 2.12 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Setoff. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of each Lender and its Affiliates under this Section 8.05 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) that such Lender and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective (other
than Section 2.01, which shall only become effective upon satisfaction of the
conditions precedent set forth in Section 3.01) when it shall have been executed
by the Borrower, the Agent and the Initial Lender and thereafter shall be
binding upon and inure to the benefit of the Borrower, the Agent and the Initial
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may assign to
one or more Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advance owing to it and the Note or Notes held by it); provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement, (ii) except in
the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, (iii) each such assignment shall be to an Eligible Assignee, and (iv)
the parties to each such assignment shall execute and deliver to the Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Note subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (A) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (B) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).
<PAGE> 21
(b) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Lender.
(c) The Agent shall maintain at its address referred to in Section 8.02 a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Note a new Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder, a new Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit A
hereto.
<PAGE> 22
(e) Each Lender may sell participations to one or more banks or other
entities (other than the Borrower or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to any
departure by the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent subject
to such participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 8.07, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any Confidential Information relating to the Borrower
received by it from such Lender.
(g) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and the Note held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
(h) In connection with the initial assignment or proposed initial
assignment by the Initial Lender pursuant to this Section 8.07, the Borrower
shall, upon the request of the Initial Lender, furnish to the Initial Lender a
favorable opinion of counsel for the Borrower acceptable to the Initial Lender,
in form and substance reasonably satisfactory to the Initial Lender.
SECTION 8.08. Confidentiality. Neither the Agent nor any Lender shall
disclose any Confidential Information to any Person without the consent of the
Borrower, other than (a) to the Agent's or such Lender's Affiliates and their
officers, directors, employees, agents and advisors and to actual or prospective
assignees and participants, and then, in each case, only on a confidential and
need-to-know basis, (b) as required by any law, rule or regulation or judicial
process and (c) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.
SECTION 8.09. Governing Law. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.10. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
<PAGE> 23
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any New
York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
MEMC ELECTRONIC MATERIALS, INC., as Borrower
By: /s/ Kenneth L. Young
--------------------------
Kenneth L. Young
Title: Treasurer
HULS AG, as Agent
By: /s/ Heinz Willing
--------------------------
Heinz Willing
Title:
INITIAL LENDER
COMMITMENT
$75,000,000 HULS AG
By: /s/ Heinz Willing
----------------------------
Heinz Willing
Title:
<PAGE> 1
EXHIBIT 10 - lll
CREDIT AGREEMENT
Dated as of April 1, 1996
MEMC ELECTRONIC MATERIALS, INC., a Delaware corporation, as the borrower
(the "Borrower"), and HULS AG, a company formed under the laws of the Federal
Republic of Germany ("Huls"), as the initial lender (the "Initial Lnder") and as
agent (together with any successor appointed pursuant to Article VII, the
"Agent") for the Lenders (as hereinafter defined), hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Advance" has the meaning specified in Section 2.01.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the voting stock of such Person or
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting stock, by contract or otherwise.
"Agent" has the meaning specified in the recital of parties to this
Agreement.
"Agent's Account" means the Dollar account of the Agent maintained with
such bank as the Agent shall specify in writing to the Borrower and the Lenders
from time to time.
"Applicable Margin" means, as of the date occurring 45 Business Days after
the Change of Control Date,
(a) a percentage per annum equal to the average (rounded upward to the
nearest wholemultiple of 1/16 of 1 % per annum, if such average is not such a
multiple) of the ratesper annum in excess of the Base Rate at which each
Reference Bank would offer the Borrower the Advances outstanding or to be
outstanding for the Designated Maturity; or
(b) a percentage per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1 % per annum, if such average is not such a
multiple) of the rates per annum in excess of the Base Rate at which each
Reference Bank, based on the Senior Debt Rating of the Borrower as of the Change
of Control Date, would offer the Borrower the Advances outstanding or to be
outstanding for the Designated Maturity; or
(c) a percentage per annum equal to the applicable percentage set forth
below for the Performance Level set forth below:
PERFORMANCE APPLICABLE
LEVEL MARGIN
==================================== ====================================
I 0.450%
II 0.500%
III 0.625%
IV 1.000%
<PAGE> 2
In each case the Applicable Margin for the Advances shall be determined by the
Agent 40 Business Days after the Change of Control Date in accordance with the
provisions of Section 2.06.
"Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an Eligible Assignee and accepted by the Agent, in substantially
the form of Exhibit C hereto.
"Bank" means any Lender other than the Initial Lender or any Affiliate of
the Initial Lender.
"Base Rate" means, with respect to the Advances comprising a Borrowing for
the Designated Maturity, the interbank rate for Dollars for the period most
nearly comparable to the Designated Maturity that appears on the Dow Jones
Telerate Screen as of 11:00 A.M. (London time) two Business Days before the date
of such Borrowing.
"Borrower" has the meaning specified in the recital of parties to this
Agreement.
"Borrowing" means the borrowing consisting of the Advances made by the
Lenders.
"Borrowing Notice" has the meaning specified in Section 2.02(a).
"Business Day" means a day of the year on which banks are not required or
authorized by law to close in New York City.
"Change of Control" means the Initial Lender or any Affiliate of the
Initial Lender, through any transaction or series of transactions or otherwise,
no longer has beneficial ownership, directly or indirectly, of more than 50% of
the shares of common stock of the Borrower.
"Change of Control Date" means the date of occurrence of a Change of
Control.
"Commitment" has the meaning specified in Section 2.01.
"Confidential Information" means information that the Borrower furnishes to
the Agent or any Lender in a writing designated as confidential, but does not
include any such information that is or becomes generally available to the
public or that is or becomes available to the Agent or such Lender from a source
other than the Borrower, an Affiliate of the Borrower or an Affiliate of the
Initial Lender.
"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.
"Debt" means (a) indebtedness for borrowed money, (b) obligations evidenced
by bonds, debentures, notes or other similar instruments, (c) obligations to pay
the deferred purchase price of property or services, (d) obligations as lessee
under leases which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases, and (e) obligations
under direct or indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clause (a) through (d) of this definition; provided,
however, that, solely for purposes of calculating the Leverage Ratio at any
time, Debt shall not include obligations of the Borrower under direct or
indirect guaranties of indebtedness or obligations of any Subsidiary of the
Borrower, to the extent the inclusion of any such obligation results in
double-counting thereof.
<PAGE> 3
"Default" means any Event of Default or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.
"Designated Maturity" means, with respect to the Advances comprising a
Borrowing, the period from the date of such Borrowing until the Repayment Date
for such Advances.
"Dollars" and the sign "$" each means lawful money of the United States of
America.
"Domestic Lending Office" means, with respect to any Bank, the office of
such Bank specified as its "Domestic Lending Office" in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office of such
Bank as such Bank may from time to time specify to the Borrower and the Agent.
"EBIT" means, with respect to the Borrower and its Subsidiaries for any
period, the sum of (a) net income (or net loss), (b) interest expense and (c)
income tax expense, in each case determined in accordance with GAAP for such
period.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (a) an Affiliate of the Initial Lender approved
by the Borrower, such approval not to be unreasonably withheld; (b) a commercial
bank organized under the laws of the United States, or any state thereof, and
having a long-term senior unsecured debt rating by S&P of "A" or better and
total assets in excess of $20,000,000,000; (c) a commercial bank organized under
the laws of any other country that is a member of the Organization for Economic
Cooperation and Development or has concluded special lending arrangements with
the International Monetary Fund associated with its "General Arrangements to
Borrow" and having a long-term senior unsecured debt rating by S&P of "A" or
better and total assets in excess of $20,000,000,000, so long as such bank is
acting through a branch or agency located in the United States; and (d) any
other Person approved by all of the Lenders and the Borrower; provided, however,
that neither the Borrower nor any Subsidiary of the Borrower shall qualify as an
Eligible Assignee; provided, further, however, that, solely with respect to
assignments of the Advance owing to the Initial Lender, an Affiliate of the
Initial Lender shall qualify as an Eligible Assignee without the approval of the
Borrower.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Events of Default" has the meaning specified in Section 6.01.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"GAAP" has the meaning specified in Section 1.03.
<PAGE> 4
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any federal, state, local or foreign court or
governmental, executive, legislative, judicial, administrative or regulatory
agency, department, authority, instrumentality, commission, board or similar
body.
"Indemnified Party" has the meaning specified in Section 8.04(b).
"Initial Lender" has the meaning specified in the recital of parties to
this Agreement.
"Interest Coverage Ratio" means, with respect to the Borrower and its
Subsidiaries on a Consolidated basis for any period, a ratio of (a) Consolidated
EBIT of the Borrower and its Subsidiaries for such period to (b) interest
payable on all Debt during such period.
"Lender" means the Initial Lender and each Person that shall become a party
hereto pursuant to Section 8.07.
"Leverage Ratio" means, with respect to the Borrower and its Subsidiaries
at any date of determination, the ratio of (a) Consolidated Debt of the Borrower
and its Subsidiaries at such date to (b) Consolidated net worth of the Borrower
and its Subsidiaries at such date.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or the Borrower and its Subsidiaries
taken as a whole.
"Moody's" means Moody's Investors Service, Inc.
"Note" means a promissory note of the Borrower payable to the order of any
Lender, substantially in the form of Exhibit A hereto, evidencing the Debt of
the Borrower to such Lender resulting from the Advance made by such Lender.
"Other Taxes" has the meaning specified in Section 2.12(b).
"Performance Level" means Performance Level 1, Performance Level 11,
Performance Level III or Performance Level IV, as appropriate. For purposes of
determining the Performance Level as at the Change of Control Date, if the
Interest Coverage Ratio and the Leverage Ratio shall fall within different
Performance Levels at such date, the Performance Level shall be deemed to be the
lower of the two Performance Levels (i.e., Performance Level 11 being lower than
Performance Level 1, Performance Level III being lower than Performance Level 11
and Performance Level IV being lower than Performance Level 111) in effect at
such date.
"Performance Level I" means, at the date of determination, that the
Borrower and its Subsidiaries shall have maintained for the most recently
completed four consecutive fiscal quarters of the Borrower and its Subsidiaries
prior to such date (a) an Interest Coverage Ratio of greater than or equal to
7.0 to 1 and (b) a Leverage Ratio of less than or equal to 1.0 to 1.
"Performance Level II" means, at the date of determination, that (a) the
Performance Level does not meet the requirements of Performance Level I and (b)
the Borrower and its Subsidiaries shall have maintained for the most recently
completed four consecutive fiscal quarters of the Borrower and its Subsidiaries
prior to such date (i) an Interest Coverage Ratio of greater than or equal to
5.0 to 1 and (ii) a Leverage Ratio of less than or equal to 2.0 to 1.
<PAGE> 5
"Performance Level III" means, at any date of determination, that (a) the
Performance Level does not meet the requirements of Performance Level I or
Performance Level II and (b) the Borrower and its Subsidiaries shall have
maintained for the most recently completed four consecutive fiscal quarters of
the Borrower and its Subsidiaries prior to such date (i) an Interest Coverage
Ratio of greater than or equal to 3.0 to 1 and (ii) a Leverage Ratio of less
than or equal to 3.0 to 1.
"Performance Level IV" means, at any date of determination, that the
Performance Level does not meet the requirements of Performance Level I,
Performance Level II or Performance Level III.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
"Reference Banks" means, collectively, no more than two banks designated by
the Agent and no more than two banks designated by the Borrower for the purpose
of determining the Applicable Margin.
"Register" has the meaning specified in Section 8.07(c).
"Repayment Date" means, with respect to the Advances comprising a
Borrowing, the date specified by the Borrower in the Borrowing Notice for such
Borrowing on which the Borrower agrees to repay the aggregate principal amount
of the Advances comprising such Borrowing; provided that such date shall not be
later than the Termination Date.
"Senior Debt Rating" means, as of the date of determination, the rating
assigned in writing by either S&P or Moody's, at the request of the Initial
Lender for the long-term senior unsecured debt of the Borrower.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries; provided,
however, that the term "Subsidiary" shall not include any joint venture of the
Borrower with respect to any action or decision of the board of directors of
such joint venture if, by written agreement, such action or decision requires a
vote in excess of the number of members of such board of directors elected or
controlled by the Borrower.
"Taxes" has the meaning specified in Section 2.12(a).
"Termination Date" means the earlier of (a) April 1, 2001 and (b) the
termination in whole of the Commitments pursuant to Section 2.04 or Section
6.01.
<PAGE> 6
"United States" and "U.S." each means the United States of America.
The words " include, " " includes " and " including " shall be deemed to be
followed by the phrase "without limitation."
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means " from and including " and the words " to " and "until "
each means " to but excluding. "
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(e) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make advances (each, an "Advance") to the
Borrower from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an amount not to exceed the amount
set forth opposite such Lender's name on the signature pages hereof or, if such
Lender has entered into any Assignment and Acceptance, set forth for such Lender
in the Register maintained by the Agent pursuant to Section 8.07(c), as such
amount may be reduced pursuant to Section 2.04 (such Lender's "Commitment").
Each Borrowing shall be in an aggregate amount of $1,000,000 or an integral
multiple of $500,000 in excess thereof and shall be made simultaneously by the
Lenders ratably according to their respective Commitments. The Borrower is not
entitled to reborrow any repaid or prepaid portion of any Advance.
SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made on
notice, given not later than 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing by the Borrower to the
Agent, which shall give to each Lender prompt notice thereof by telecopier or
telex. Each notice of a Borrowing (a "Borrowing Notice") shall be by telephone,
confirmed immediately in writing, or telecopier or telex, in substantially the
form of Exhibit B hereto, specifying therein, among other things, the requested
date of such Borrowing, the amount of such Borrowing and the Repayment Date of
the Advances comprising such Borrowing. Each Lender shall, before 11: 00 A.M.
(New York City time) on the date of such Borrowing, make available for the
account of its Domestic Lending Office to the Agent at the Agent's Account, in
same day funds, such Lender's ratable portion of such Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to the
Borrower by depositing the proceeds of the Advances in such Dollar account of
the Borrower (or of such Person as the Borrower shall specify to the Lender in
the Borrowing Notice or by other written notice to the Lender given
simultaneously with or prior to such Borrowing Notice) maintained with such bank
as the Borrower shall specify to the Agent in such Borrowing Notice.
The parties hereto understand and agree that the Initial Lender may, in its
sole discretion (but shall have no obligation to), designate a financial
institution or another Person to perform the Initial Lender's obligations
hereunder in accordance with the terms hereof. The Borrower agrees that
performance of any such obligation by any such designee of the Initial Lender
shall be deemed to constitute performance by the Initial Lender for all purposes
of this Agreement and the Note and shall discharge the Initial Lender from such
obligation to the extent of such performance.
<PAGE> 7
(b) Any Borrowing Notice delivered by the Borrower to the Agent shall be
irrevocable and binding on the Borrower. The Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Borrowing Notice
for such Borrowing the applicable conditions set forth in Article 111,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
(c) The Agent shall only make available to the Borrower on the date of any
Borrowing the ratable portion of such Borrowing of each Lender that such Lender
has made available to the Agent on or prior to the date of such Borrowing.
(d) The failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
SECTION 2.03. Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Lender a commitment fee on the unused portion of such
Lender's Commitment from the Effective Date in the case of the Initial Lender
and from the effective date specified in the Assignment and Acceptance pursuant
to which it became a Lender in the case of each other Lender until the
Termination Date at a rate per annum equal to 1/8 of 1%, payable in arrears
quarterly on the last day of each March, June, September and December,
commencing June 30, 1996, and on the Termination Date.
SECTION 2.04. Optional Termination or Reduction of the Commitments. The
Borrower shall have the right, upon at least three Business Days' notice to the
Agent, to terminate in whole or reduce in part the unused Commitments of the
Lenders, provided that each partial reduction shall be in the amount of
$1,000,000 or an integral multiple of $500,000 in excess thereof.
SECTION 2.05. Repayment. The Borrower shall repay to the Agent for the
ratable account of the Lenders the aggregate principal amount of the Advances
then outstanding comprising each Borrowing on the Repayment Date for such
Borrowing.
SECTION 2.06. Interest. (a) Interest on the Advances. The Borrower shall
pay interest on the unpaid principal amount of the Advances, if any, from the
date of the Advances until such principal amount shall be paid in full, payable
semiannually, at an interest rate per annum equal to the Base Rate plus 0.50%;
provided, however, that as of the date occurring 45 Business Days after the
Change of Control Date, the interest rate per annum shall be the Base Rate in
effect for such Advances plus the Applicable Margin.
(b) Interest on Overdue Amounts. In the event that any principal amount of
any Advance or any interest, fees, costs, expenses or other amounts payable
hereunder are not paid when due, the Borrower shall pay interest on such unpaid
amount from the date such amount is due until the date such amount is paid in
full, payable on demand, at an interest rate per annum equal to the interest
rate referred to in subsection (a) of this Section 2.06 then in effect plus 2%.
SECTION 2.07. Interest Rate Determination Upon Change of Control. (a) Upon
the occurrence of a Change of Control, the Lenders and the Borrower shall agree
to determine the Applicable Margin in accordance with subsection (a), (b) or (c)
of the definition of "Applicable Margin".
<PAGE> 8
(b) (i) If the Lenders and the Borrower agree to determine the Applicable
Margin in accordance with subsection (a) of such definition, the Agent shall
request timely information from each Reference Bank for purposes of determining
such Applicable Margin. If the Borrower and the Lenders agree to determine the
Applicable Margin in accordance with subsection (b) of such definition, the
Agent shall promptly engage either S&P or Moody's to provide a Senior Debt
Rating of the Borrower as of the Change of Control Date. The Agent shall provide
each Reference Bank with such Senior Debt Rating and request timely information
from each Reference Bank for the purpose of determining such Applicable Margin.
(ii) The Initial Lender and the Borrower agree to equally share the expense
of engaging S&P or Moody's to provide a Senior Debt Rating of the Borrower;
provided, however, that if either the Initial Lender or the Borrower shall be
the sole party to decline to determine the Applicable Margin in accordance with
subsection (a) of the definition of "Applicable Margin", then such declining
party shall pay the entire expense of any such engagement.
(iii) If any one or more of the Reference Banks shall not furnish such
timely information to the Agent for the purpose of determining any such
Applicable Margin in accordance with subsection (b)(i) of this Section 2.07, the
Agent shall determine such Applicable Margin on the basis of timely information
furnished by the remaining Reference Banks.
(iv) The Agent shall give prompt notice, and in any event no later than 40
Business Days after the Change of Control Date, to the Borrower and the Lenders
of the Applicable Margin determined by the Agent for purposes of Section 2.06(a)
together with (A) the Senior Debt Rating, if any, established by S&P or Moody's,
as the case may be, and (B) the rate, if any, furnished by each Reference Bank
for the purpose of determining such Applicable Margin in accordance with the
provisions of this Agreement.
(c) If the Lenders and the Borrower shall not agree to determine the
Applicable Margin in accordance with any of subsections (a) and (b) of the
definition of "Applicable Margin", then the Applicable Margin as of the date
occurring 45 Business Days after the Change of Control Date shall be the
percentage per annum determined in accordance with subsection (c) of such
definition.
(d) For all purposes hereof, the Agent shall determine the Applicable
Margin as of 40 Business Days after the Change of Control Date and such
Applicable Margin shall be effective from the date occurring 45 Business Days
after the Change of Control Date until the unpaid principal amount of the
Advances shall have been paid in full.
SECTION 2.08. Optional Prepayments and Reductions of Commitment. (a) The
Borrower may, upon at least three Business Days' notice to the Agent stating the
proposed date and the aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay the outstanding principal amount of
the Advances in whole or ratably in part, together with (i) accrued interest to
the date of such prepayment on the principal amount prepaid and (ii) any amount
payable pursuant to Section 8.04(c); provided, however, that each such partial
prepayment shall be in an aggregate principal amount of not less than $1,000,000
or an integral multiple of $500,000 in excess thereof.
(b) Upon the prepayment in whole or in part of the Advances in accordance
with subsection (a) of this Section 2.08, the Commitments of the Lenders shall
be automatically reduced ratably by the amount of such prepayment.
<PAGE> 9
SECTION 2.09. Increased Costs, Etc. If due to either (a) the introduction
of or any change (including, without limitation, any change by way of imposition
or increase of reserve requirements) in or in the interpretation of any law or
regulation or (b) the compliance with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to any Bank of agreeing to make or
making, funding or maintaining an Advance, then the Borrower shall from time to
time, upon demand by such Bank (with a copy of such demand to the Agent), pay to
the Agent for the account of such Bank additional amounts sufficient (as
applicable) to compensate such Bank for such increased cost. A certificate as to
the amount of such increased cost, submitted to the Borrower by such Bank, shall
be conclusive and binding for all purposes, absent manifest error.
SECTION 2.10. Illegality. Notwithstanding any other provision of this
Agreement, if any Bank shall notify the Borrower that any law or regulation, or
the introduction of or any change in or in the interpretation of any law or
regulation, makes it unlawful, or any central bank or other Governmental
Authority asserts that it is unlawful, for such Bank to perform its obligations
hereunder to make an Advance or to fund or maintain an Advance hereunder, (a)
the obligation of such Bank to make, fund and maintain any Advance shall be
suspended until such Bank shall notify the Borrower that the circumstances
causing such suspension no longer exist, (b) such Bank shall promptly notify the
Borrower of such circumstances and such suspension, and (c) unless the Borrower
and such Bank shall have otherwise agreed within ten Business Days of such
notice, the Borrower shall forthwith on such tenth Business Day prepay in full
the Advances then outstanding together with interest accrued thereon.
SECTION 2.11. Payments and Computations. (a) The Borrower shall make each
payment hereunder and under the Notes not later than 1:00 P.M. (New York City
time) on the day when due in Dollars to the Agent at the Agent's Account, in
each case in immediately available funds. The Agent will promptly thereafter
cause to be distributed like funds relating to the payment of principal or
interest or fees ratably (other than amounts payable pursuant to Section 2.09,
2.12 or 8.04(c)) to the Lenders for the account of their respective Domestic
Lending Offices, and like funds relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Domestic Lending
Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording of
the information contained therein in the Register pursuant to Section 8.07(d),
from and after the effective date specified in such Assignment and Acceptance,
the Agent shall make all payments hereunder and under the Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the parties
to such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.
(b) All computations of interest and of fees shall be made in good faith by
the Agent on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or fees are payable.
(c) Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be.
(d) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Lenders hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate.
<PAGE> 10
SECTION 2.12. Taxes. (a) Any and all payments by the Borrower hereunder or
under the Notes shall be made, in accordance with Section 2.11, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender and the Agent, net income taxes
that are imposed by the United States and net income taxes (or franchise taxes
imposed in lieu thereof) that are imposed on such Lender or the Agent by the
state or foreign jurisdiction under the laws of which such Lender or the Agent
(as the case may be) is organized or any political subdivision thereof and, in
the case of each Lender, net income taxes (or franchise taxes imposed in lieu
thereof) that are imposed on such Lender by the state or foreign jurisdiction of
such Lender's Domestic Lending Office or any political subdivision thereof (all
such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note, (i) the sum payable shall be increased as may be necessary so that, after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.12), such Lender or the Agent receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or other taxes, charges or levies that arise from
any payment made hereunder or under the Notes or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or the Notes
(hereinafter referred to as "Other Taxes").
(c) The Borrower shall indemnify each Lender and the Agent for the full
amount of Taxes or Other Taxes and for the full amount of Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 2.12 imposed
on or paid by such Lender or the Agent (as the case may be) or any liability
(including penalties, additions to tax, interest and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. This indemnification shall be made within 30 days from the
date such Lender or the Agent makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
shall furnish to the Agent, at its address referred to in Section 8.02, the
original receipt of payment or a certified copy of such receipt. If no Taxes are
payable in respect of any payment hereunder or under the Notes, the Borrower
shall furnish to the Agent, at such address, a certificate from each appropriate
taxing authority, or an opinion of counsel acceptable to the Lenders, in either
case stating that such payment is exempt from or not subject to Taxes.
(e) Each Lender organized under the laws of a jurisdiction outside the
United States shall, on the Effective Date in the case of the Initial Lender and
on the date of the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender, and from time to time thereafter if
requested in writing by the Borrower or the Agent (but only so long as such
Lender remains lawfully able to do so), provide each of the Borrower and the
Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or entitled to a reduced rate of United States
withholding tax on payments of interest pursuant to this Agreement or the Notes.
If the form provided by such Lender at the time such Lender becomes a party to
this Agreement indicates a United States interest withholding tax rate in excess
of zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Lender provides the appropriate form certifying that a
lesser rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender becomes a party to this Agreement, the Lender assignor was entitled to
payments under Section 2.12(a) in respect of United States withholding tax with
respect to interest paid at such date, then, to such extent, the term Taxes
shall include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includable in Taxes) United States withholding
tax, if any, applicable with respect to the Lender assignee on such date. If any
form or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender reasonably considers to be confidential, the Lender shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information.
<PAGE> 11
(f) For any period with respect to which a Lender has failed to provide the
Borrower with the appropriate form described in Section 2.12(e) (other than if
such failure is due to a change in law occurring subsequent to the date on which
a form originally was required to be provided, or if such form otherwise is not
required under the first sentence of Section 2.12(e) above), such Lender shall
not be entitled to indemnification under Section 2.12(a) with respect to Taxes
imposed by the United States; provided, however, that should such Lender become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as such Lender shall reasonably request to
assist such Lender to recover such Taxes.
SECTION 2.13. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Advance owing to it (other than pursuant
to Section 2.09, 2.12 or 8.04(c)) in excess of its ratable share of payments on
account of the Advances obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (a) the amount of such Lender's required repayment to (b) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.13 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.14. Use of Proceeds. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) solely for
general corporate purposes of the Borrower and its Subsidiaries.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01.
Section 2.01 of this Agreement shall become effective on and as of the first
date (the "Effective Date") on which the following conditions precedent have
been satisfied:
(a) There shall have occurred no Material Adverse Change since December 31,
1995.
(b) There shall exist no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries pending or
threatened in writing before any court, governmental agency or arbitrator that
(i) may materially adversely affect the financial condition or operations of the
Borrower or any of its subsidiaries or (ii) purports to affect the legality,
validity or enforceability of this Agreement or any Note or the consummation of
the transactions contemplated hereby.
(c) On the Effective Date, the following statements shall be true and the
Agent shall have received a certificate signed by a duly authorized officer of
the Borrower, dated the Effective Date, stating that:
(i) the representations and warranties contained in Section 4.01
are correct on and as of the Effective Date, and
(ii) no event has occurred and is continuing that constitutes a
Default.
<PAGE> 12
(d) The Agent shall have received on or before the Effective Date the
following, each dated such date, in form and substance satisfactory to the
Antlers (except for the Notes):
(i) executed counterparts of this Agreement duly executed and
delivered by the Borrower;
(ii) the Notes to the order of the Lenders;
(iii)certified copies of the resolutions of the board of directors
of the Borrower approving this Agreement and the Notes, and of
all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to this
Agreement and the Notes; and
(iv) a certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of
the officers of the Borrower authorized to sign this Agreement
and the Notes and the other documents to be delivered hereunder.
SECTION 3.02. Conditions Precedent to each Borrowing. The obligation of
each Lender to make an Advance on the occasion of each Borrowing shall be
subject to the conditions precedent that the Effective Date shall have occurred
and on the date of such Borrowing the following statements shall be true (and
each of the giving of the applicable Borrowing Notice and the acceptance by the
Borrower of the proceeds of such Borrowing shall constitute a representation and
warranty by the Borrower that on the date of such Borrowing such statements are
true):
(a) the representations and warranties contained in Section 4.01 (other
than the last sentence of subsection (e) thereof) are correct on and as of the
date of such Borrowing, before and after giving effect to such Borrowing and to
the application of the proceeds therefrom, as though made on and as of such
date, and
(b) no event has occurred and is continuing, or would result from such
Borrowing or from the application of the proceeds therefrom, that constitutes a
Default.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Borrower,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.
<PAGE> 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Borrower's charter or by-laws or (ii) any law or any contractual restriction
binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority is required for the due execution,
delivery and performance by the Borrower of this Agreement and the Notes.
(d) This Agreement has been, and the Notes when delivered hereunder will
have been, duly executed and delivered by the Borrower. This Agreement is, and
each of the Notes when delivered hereunder will be, legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms.
(e) The Consolidated balance sheet of the Borrower and its Subsidiaries as
at December 31, 1995, and the related Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for the fiscal year then ended,
copies of which have been furnished to the Lenders, fairly present the financial
condition of the Borrower and its Subsidiaries as at such date and the results
of the operations of the Borrower and its Subsidiaries for the period ended on
such date, all in accordance with GAAP. Since December 31, 1995, there has been
no Material Adverse Change.
(f) There is no pending or threatened action or proceeding affecting the
Borrower or any of its Subsidiaries before any court, governmental agency or
arbitrator, that (i) may materially adversely affect the financial condition or
operations of the Borrower or any of its Subsidiaries or (ii) purports to affect
the legality, validity or enforceability of this Agreement or the Notes or the
consummation of the transactions contemplated hereby.
(g) The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), and no
proceeds of any Advance will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
(h) The Advances and all related obligations of the Borrower under this
Agreement and the Notes rank pari passu with all other unsecured obligations of
the Borrower that are not, by their terms, expressly subordinate to such other
obligations of the Borrower.
<PAGE> 14
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. On and after the Change of Control
Date and so long as any Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will, unless the Lenders shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries
to comply, in all material respects, with all applicable laws, rules,
regulations and orders, such compliance to include, without limitation,
compliance with ERISA and environmental laws.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its property and (ii) all lawful claims that, if unpaid, might by law
become a lien upon its property; provided, however, that neither the Borrower
nor any of its Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained, unless
and until any lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors.
(c) Preservation of Corporate Existence, Etc. Preserve and maintain, and
cause each of its Subsidiaries to preserve and maintain, its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that neither the Borrower nor any of its Subsidiaries shall be required to
preserve any right or franchise if the board of directors of the Borrower or
such Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Borrower or such Subsidiary, as
the case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower, such Subsidiary or the Lenders.
(d) Keeping of Books. Keep, and cause each of its Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Borrower
and each such Subsidiary in accordance with GAAP or, in the case of any
Subsidiary organized under the laws of a jurisdiction other than the United
States or any state thereof, the equivalent of GAAP applicable in such
jurisdiction.
(e) Maintenance of Properties, Etc. Maintain and preserve, and cause each
of its Subsidiaries to maintain and preserve, all of its properties that are
used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
(f) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of
the Borrower, Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such quarter and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter,
duly certified (subject to year-end audit adjustments) by the
chief financial officer of the Borrower as having been
prepared in accordance with GAAP and setting forth in
reasonable detail the calculations necessary to demonstrate
compliance with subsections (g), (h) and (i) of this Section
4.01;
<PAGE> 15
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the annual
report for such year for the Borrower and its Subsidiaries,
containing Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case accompanied by
an opinion acceptable to the Lenders by KPMG Peat Marwick or
other independent public accountants reasonably acceptable to
the Lenders and setting forth in reasonable detail the
calculations necessary to demonstrate compliance with
subsections (g), (h) and (i) of this Section 4.01;
(iii)as soon as possible and in any event within ten days after
the occurrence of each Default continuing on the date of such
statement, a statement of the chief financial officer of the
Borrower setting forth details of such Default and the action
that the Borrower has taken and proposes to take with respect
thereto;
(iv) promptly after the sending or filing thereof, copies of all
reports which the Borrower sends to any of its securityholders,
and copies of all reports and registration statements which the
Borrower or any of its Subsidiaries files with the Securities and
Exchange Commission or any national securities exchange;
(v) promptly after the filing or receiving thereof, copies of all
reports and notices which the Borrower or any Subsidiary
files under ERISA with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation or the U.S. Department
of Labor or which the Borrower or any Subsidiary receives from
the Pension Benefit Guaranty Corporation;
(vi) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.01(f); and
(vii)such other information respecting the Borrower or any
of its Subsidiaries as any Lender through the Agent may
from time to time reasonably request.
(g) Working Capital. Maintain an excess of Consolidated current assets over
Consolidated current liabilities of the Borrower and its Subsidiaries of not
less than $50,000,000 and a ratio of Consolidated current assets to Consolidated
current liabilities of the Borrower and its Subsidiaries of not less than 1.25
to 1. Consolidated current liabilities shall include the current portion of the
Debt resulting from the Notes.
(h) Net Worth. Maintain an excess of Consolidated total assets over
Consolidated total liabilities of the Borrower and its Subsidiaries of not less
than $400,000,000.
(i) Interest Coverage Ratio. Maintain an Interest Coverage Ratio of not
less than 4.0 to 1.
<PAGE> 16
SECTION 5.02. Negative Covenants. On and after the Change of Control Date
and so long as any Advance shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will not, unless the Lenders shall otherwise
consent in writing:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties, whether now owned or hereafter acquired,
or assign, or permit any of its Subsidiaries to assign, any right to receive
income, in each case to secure any Debt of any Person, other than:
(i) purchase money liens or purchase money security interests upon
or in any property acquired or held by the Borrower or any
Subsidiary in the ordinary course of business to secure the
purchase price of such property or to secure indebtedness
incurred solely for the purpose of financing the acquisition of
such property;
(ii) liens or security interests existing on such property at the
time of its acquisition (other than any such lien or security
interest created in contemplation of such acquisition);
(iii)liens for taxes, assessments and governmental charges or
levies to the extent not required to be paid under Section
5.01(b) hereof;
(iv) liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar
liens arising in the ordinary course of business securing
obligations that are not overdue for a period of more than 30
days;
(v) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure
public or statutory obligations; and
(vi) easements, rights of way and other encumbrances on title
to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely affect
the use of such property for its present purposes;
provided that the aggregate principal amount of the Debt, other indebtedness,
taxes, assessments, governmental charges or levies and other obligations secured
by the liens or security interests referred to in clauses (i) through (vi) of
this Section 5.02(a) shall not exceed $45,000,000 in the aggregate at any time
outstanding.
(b) Accounting Changes. Make or permit, or permit any of its Subsidiaries
to make or permit, any change in accounting policies or reporting practices,
except as allowed by generally accepted accounting principles.
<PAGE> 17
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) the Borrower shall fail to pay (i) any principal of any Advance when
the same becomes due and payable or (ii) any interest on any Advance or any
other amount payable under this Agreement or any Note within ten days from the
date the same becomes due and payable; or
(b) any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) in connection with this Agreement shall prove
to have been incorrect in any material respect when made; or
(c) (i) the Borrower shall fail to perform or observe any term, covenant or
agreement contained in subsection (c), (g), (h) or (i) of Section 5.01 or in
Section 5.02 or (ii) the Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement or any Note on its part
to be performed or observed if such failure shall remain unremedied for 30 days
after written notice thereof shall have been given to the Borrower by the Agent
or any Lender; or
(d) the Borrower or any of its Subsidiaries shall fail to pay any principal
of or premium or interest on any Debt that is outstanding in a principal amount
of at least $5,000,000 in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Subsidiary (as the case may be), when the
same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), redeemed, purchased
or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall
be required to be made, in each case prior to the stated maturity thereof; or
(e) the Borrower or any of its Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or the Borrower or any
of its Subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this Section 6.01(e); or
<PAGE> 18
(f) any judgment or order for the payment of money in excess of $5,000,000
shall be rendered against the Borrower or any of its Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Lenders, by notice to the Borrower, declare the obligation of
each Lender to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Lenders, by notice to the Borrower, declare the Notes, all interest thereon
and all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (A) the obligation of each Lender to make Advances shall automatically be
terminated and (B) the Notes, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the Agent by
the terms hereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Lenders, and such instructions shall be binding upon all Lenders and all
holders of Notes; provided, however, that the Agent shall not be required to
take any action that exposes the Agent to personal liability or that is contrary
to this Agreement or applicable law. The Agent agrees to give to each Lender
prompt notice of each notice given to it by the Borrower pursuant to the terms
of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (a) may treat the
payee of any Note as the holder thereof until the Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section
8.07; (b) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (d) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement on the part of the Borrower or
to inspect the property (including the books and records) of the Borrower; (e)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; and (t) shall incur
no liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
<PAGE> 19
SECTION 7.03. Huls. With respect to its Commitment, the Advance made by it
and the Note issued to it, Huls shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include Huls in its individual capacity.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 7.05. Indemnification. The Lenders agree to indemnify the Agent (to
the extent not reimbursed by the Borrower), ratably according to the respective
principal amounts of the Notes then held by each of them (or if no Notes are at
the time outstanding or if any Notes are held by Persons that are not Lenders,
ratably according to the respective amounts of their Commitments), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any action
taken or omitted by the Agent under this Agreement, provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower and may be removed at any
time with or without cause by the all of the Lenders. Upon any such resignation
or removal, the Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving of
notice of resignation or the Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States or of
any state thereof and having a long-term senior unsecured debt rating by S&P of
"A" or better. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VII shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
<PAGE> 20
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the Notes, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) waive any of
the conditions specified in Section 3.01, (b) increase the Commitments of the
Lenders or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, (e)
change the percentage of the Commitments or of the aggregate unpaid principal
amount of the Notes, or the number of Lenders, that shall be required for the
Lenders or any of them to take any action hereunder or (f) amend this Section
8.01; and provided further that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this Agreement
or any Note.
SECTION 8.02. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including telecopier, telegraphic or telex
communication) and mailed, telecopied, telegraphed, telexed or delivered, if to
the Borrower, at its address at 501 Pearl Drive, St. Peters, Missouri 63376,
Attention: Treasurer (telecopier number (314) 279-5163); if to the Initial
Lender or the Agent, at 13801 Riverport Drive, Suite 500, Maryland Heights,
Missouri 63043, Attention: President (telecopier number (314) 298-4185); if to
any other Lender or any Bank, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender; or, as to any
party, at such other address as shall be designated by such party in a written
notice to the other parties. All such notices and communications shall, when
mailed, telecopied, telegraphed or telexed, be effective when received by the
party to whom such notice is addressed, except that notices and communications
pursuant to Section 2.06 shall not be effective until confirmed in writing by
the party to whom such notice is addressed. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of a manually executed counterpart
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or
the Agent to exercise, and no delay in exercising, any right hereunder or under
any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to pay on demand
all reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery, modification and amendment of this Agreement,
the Notes and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of counsel for the Agent with
respect thereto and with respect to advising the Agent as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay on
demand all costs and expenses of the Agent and the Lenders, if any (including,
without limitation, reasonable counsel fees and expenses), in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 8.04(a).
<PAGE> 21
(b) The Borrower agrees to indemnify and hold harmless the Agent and each
Lender and each of their Affiliates and their officers, directors, employees,
agents and advisors (each, an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with the Notes, this Agreement, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Advances, whether or not such investigation, litigation or proceeding is
brought by the Borrower, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated, except to the extent such claim, damage, loss, liability or expense
is found in a final, nonappealable judgment by a court of competent jurisdiction
to have resulted from such Indemnified Party's gross negligence or willful
misconduct. The Borrower also agrees not to assert any claim against the Agent,
any Lender, any of their Affiliates, or any of their respective directors,
officers, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to the Notes, this Agreement, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Advances.
(c) If any prepayment is made by the Borrower pursuant to Section 2.08, the
Borrower shall, upon demand by the Initial Lender, pay to the Initial Lender the
amount required to compensate the Initial Lender for any loss of anticipated
profit, if any, incurred by reason of such prepayment equal to the difference
(but not less than $O) between (i) the present value of the aggregate amount of
interest payments that would have become due on the principal amount prepaid had
such amount not been prepaid and (ii) the present value of the rate of return
anticipated in respect of the reemployment or investment of the proceeds of such
principal amount prepaid for the period of equal to the period from the date of
such prepayment to the Repayment Date. The Initial Lender shall use good faith
in the reemployment or investment of the proceeds of such prepayment and the
determination of any amount payable by the Borrower under this Section 8.04(c).
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Sections 2.09, 2.12 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Setoff. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 6.01,
each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of each Lender and its Affiliates under this Section 8.05 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) that such Lender and its Affiliates may have.
<PAGE> 22
SECTION 8.06. Binding Effect. This Agreement shall become effective (other
than Section 2.01, which shall only become effective upon satisfaction of the
conditions precedent set forth in Section 3.01) when it shall have been executed
by the Borrower, the Agent and the Initial Lender and thereafter shall be
binding upon and inure to the benefit of the Borrower, the Agent and the Initial
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations. (a) Each Lender may assign to
one or more Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the Advance owing to it and the Note or Notes held by it); provided, however,
that (i) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement, (ii) except in
the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Commitment of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof, (iii) each such assignment shall be to an Eligible Assignee, and (iv)
the parties to each such assignment shall execute and deliver to the Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Note subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (A) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and (B) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that
by the terms of this Agreement are required to be performed by it as a Lender.
<PAGE> 23
(c) The Agent shall maintain at its address referred to in Section 8.02 a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Advances owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Note or Notes subject to such assignment, the Agent shall, if
such Assignment and Acceptance has been completed and is in substantially the
form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record
the information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Note a new Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder, a new Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit A
hereto.
(e) Each Lender may sell participations to one or more banks or other
entities (other than the Borrower or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to any
departure by the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent subject
to such participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 8.07, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any Confidential Information relating to the Borrower
received by it from such Lender.
(g) Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and the Note held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
<PAGE> 24
(h) In connection with the initial assignment or proposed initial
assignment by the Initial Lender pursuant to this Section 8.07, the Borrower
shall, upon the request of the Initial Lender, furnish to the Initial Lender a
favorable opinion of counsel for the Borrower acceptable to the Initial Lender,
in form and substance reasonably satisfactory to the Initial Lender.
SECTION 8.08. Confidentiality. Neither the Agent nor any Lender shall
disclose any Confidential Information to any Person without the consent of the
Borrower, other than (a) to the Agent's or such Lender's Affiliates and their
officers, directors, employees, agents and advisors and to actual or prospective
assignees and participants, and then, in each case, only on a confidential and
need-to-know basis, (b) as required by any law, rule or regulation or judicial
process and (c) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.
SECTION 8.09. Governing Law. This Agreement and the Notes shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.10. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted by law,
in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or
the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any New
York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
MEMC ELECTRONIC MATERIALS, INC., as Borrower
By: /s/ Kenneth L. Young
-----------------------
Kenneth L. Young
Title: Treasurer
HULS AG, as Agent
By: /s/ Heinz Willing
-----------------------
Heinz Willing
Title:
INITIAL LENDER
COMMITMENT
$10,000,000 HULS AG
By: /s/ Heinz Willing
-----------------------------
Heinz Willing
Title:
<PAGE> 1
EXHIBIT 10 - mmm
FOURTH SHORT-TERM LOAN AGREEMENT
LOAN AGREEMENT, dated as of March 31, 1996 between Huls Corporation located at
13801 Riverport Drive, Maryland Heights, Missouri/USA, ("HC") and MEMC
Electronic Materials, Inc., located at 501 Pearl Drive, O'Fallon, Missouri/USA
("MEMC").
MEMC desires to borrow on a day to day basis an original principal amount not to
exceed at any one time a total amount of $10,000,000.00 and HC is willing,
subject to and upon the terms and conditions herein set forth, to make such a
loan to MEMC.
NOW, THEREFORE IT IS AGREED:
1. Principal and Value:
From time to time, beginning March 31, 1996, HC shall lend to MEMC and
MEMC shall borrow from HC an amount to be designated by MEMC, not to
exceed $10,000,000.00 outstanding at any one time. The loan shall be
evidenced by a promissory note in substantially the form of Exhibit "A"
attached hereto.
2. Term and Maturity:
Subject to paragraph 6 below, the principal amount of the loan
outstanding together with any interest due and outstanding shall be
paid by MEMC to HC on March 31, 1997, or at such later date as may be
mutually agreed in writing by the parties.
3. Rollover Dates:
Any amount borrowed hereunder shall be on the basis of daily rollover
periods. Each rollover date shall be a banking day in Chicago, Illinois
("banking day"). However, should the designated bank designated by HC
in Section 5 be closed on a banking day, HC would not be required to
loan money to MEMC nor would MEMC have the option to repay a loan. On
the initial and each respective rollover date thereafter, MEMC shall
have the option to repay the full principal amount outstanding or any
portion thereof, rollover an amount outstanding, or borrow an
additional amount provided that the total principal amount will not
exceed $10,000,000.00. HC will issue wire transfer instructions for
same day funds for the account of MEMC. MEMC will do the same for HC,
in the case of repayment. Payments, draw-downs and rollovers shall be
evidenced by a telefax or memorandum or verbal notification, from MEMC
to HC by 9:30 a.m. Central time on the day money is to be borrowed, or
repaid. HC shall reply with a telefax, memorandum or verbal
notification confirming the rollover, the repayment or amount to be
borrowed, the interest rate and amount of interest due.
4. Interest Rates:
Interest shall be calculated daily at the FED Funds opening rate plus
.125% as quoted by VEBA Corporation ("VEBA") for corresponding loans on
that same day, based on the Reuters screen (FPRV) "FED FUNDS, Overnight
& Short Date". For loans outstanding on days other than banking days,
the interest shall be calculated at the FED Funds plus .125% rate for
the last preceding banking day. The interest rate shall be furnished
daily if there is a loan outstanding. MEMC shall pay all outstanding
interest on any day that it repays principal. Interest shall accrue on
all outstanding amounts (including unpaid interest).
5. Payment:
Payments of interest and principal shall be made by wire transfer, or
other method of same day settlement, only on banking days, not later
than 9:45 a.m. Central time, to the account(s) of HC, with First
National Bank of Chicago, Chicago, Illinois, or to such other account
of HC as it may designate.
<PAGE> 2
6. CANCELLATION:
HC has the right to cancel this loan agreement by giving MEMC fourteen
(14) days' written notice.
7. Copies:
This agreement is made up of two (2) identical copies, of which one
copy is for HC and the other for MEMC.
8. Applicable Law:
This agreement shall be governed by the laws of Missouri/U.S.A.
Agreed upon as of this 31st day of March, 1996.
Maryland Heights, Missouri O'Fallon, Missouri
Huls Corporation MEMC Electronic Materials, Inc.
By: /s/ Brian J. Sigg By: /s/ Kenneth L. Young
------------------------------- ------------------------------
Brian J. Sigg Kenneth L. Young
Vice President & Treasurer
Chief Financial Officer
<PAGE> 1
EXHIBIT 13
FIVE YEAR SELECTED FINANCIAL DATA
Dollars in thousands, except share data
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA
Net sales $1,119,500 $ 886,860 $660,807 $552,497 $483,705
Gross margin 250,185 223,279 143,210 112,665 86,446
(% of net sales) 22.3% 25.2% 21.7% 20.4% 17.9%
Marketing, administration and technology expenses 123,993 95,119 68,701 63,377 58,827
(% of net sales) 11.1% 10.7% 10.4% 11.5% 12.2%
Operating profit 126,192 128,160 74,509 49,288 27,619
(% of net sales) 11.3% 14.5% 11.3% 8.9% 5.7%
Income taxes 51,942 43,786 26,745 3,899 5,940
(Tax rate %) 40.0% 36.8% 38.8% 11.7% 26.2%
Equity in income (loss) of joint ventures 24,884 13,908 (6,783) (10,628) (2,390)
Net earnings(1) 101,556 87,273 34,076 8,875 17,749
(% of net sales) 9.1% 9.8% 5.2% 1.6% 3.7%
Net earnings per share 2.45 2.78(2) 1.43(2) --(2) --(2)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
Total assets 1,508,975 1,101,863 629,829 511,961 449,837
Long-term debt (including current portion) 304,589 91,451 165,230 142,697 115,651
Stockholders' equity 741,968 642,391 203,754 165,329 159,172
- ----------------------------------------------------------------------------------------------------------------------
OTHER DATA:
Capital expenditures 590,049 215,359 78,676 67,541 89,208
Equity infusions in joint ventures 14,698 29,904 20,922 -- --
Research and development costs 44,313 31,226 27,403 25,509 23,393
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company intends to retain all net earnings to fund the development of its
business, and does not anticipate paying dividends in the foreseeable future. In
April 1995, the Company paid a $100 million dividend to Huls Corporation, its
sole stockholder prior to the initial public offering.
(1)Net earnings in 1994 were affected by the adoption of Statement of Financial
Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment
Benefits." The effect of such change was a charge of $1.3 million. Net earnings
in 1993 were affected by the adoption of SFAS No. 109, "Accounting for Income
Taxes," and the adoption of SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." The cumulative effect of such
changes was a credit of $19.3 million and a charge of $29.3 million,
respectively.
(2)Pro forma earnings per share for 1995 was calculated based on the weighted
average number of shares outstanding, plus for the three months ended March 31,
1995, the number of shares that would have been required to be sold at the
initial public offering price to fund the excess of the $100 million dividend to
Huls Corporation in April 1995 over the Company's net earnings for the prior
twelve-month period.
Pro forma earnings per share for 1994 was calculated based on the actual number
of shares outstanding, plus the number of shares that would have been required
to be sold at the initial public offering price to fund the excess of the $100
million dividend to Huls Corporation over the Company's net earnings for the
prior twelve-month period.
Earnings per share for periods prior to 1994 are not meaningful.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
NET SALES. Net sales increased by 26.2% to $1.1 billion for 1996 from $886.9
million for 1995. The first half of the year saw record sales of $614.1 million
while the second half was marked by sequential sales declines as the Company's
customers moved to reduce their excess inventories. Overall, the increase in net
sales was driven by higher sales volume and prices and improved product mix.
Sales volume increased 8.6% in 1996, which was significantly impacted by the
inclusion of MEMC Southwest (the Company's 80% owned joint venture in Sherman,
Texas) for all of 1996 compared to only the second half of 1995 and the
continued expansion of 200mm wafer capacity. Additionally, the Company saw its
average selling price rise by 16.3% due to higher overall prices and improved
product mix. Advanced large diameter and epitaxial products represented 36.7% of
sales volume for 1996 compared to 26.5% for 1995.
MEMC operates in all major semiconductor producing regions of the world, with
almost half of the Company's 1996 net sales to customers located outside North
America. Net sales to North America increased 39.6% to 50.8% of 1996 sales
compared to 46.0% of 1995 sales due almost equally to the inclusion of MEMC
Southwest for all of 1996 and improved pricing and product mix. Expanded
manufacturing capacity and improved pricing and product mix resulted in a 24.9%
increase in net sales to Europe in 1996. Net sales to Europe comprised 22.9% of
1996 sales compared to 23.1% of 1995 sales. Net sales to Asia Pacific increased
7.4% and comprised 26.3% of 1996 sales compared to 30.9% of 1995 sales despite
the continued shift in sales to the South Korean market from the Company to
POSCO HULS Company, Ltd. (PHC), the Company's 40% owned, unconsolidated joint
venture in South Korea. Net sales to the Asia Pacific market experienced similar
improvements in volumes, pricing and product mix to the other geographic markets
served by the Company, offset by declining prices in Japan during the fourth
quarter of 1996 and the weakening of the yen relative to the U.S. dollar
throughout 1996.
Pricing is anticipated to decline on a per-specification basis in the single
digit percentage range on average during 1997, with somewhat larger decreases
expected in Japan accentuated by the softening of the yen to the U.S. dollar.
Given the continued shift to advanced large diameter and epitaxial products,
this decrease in pricing is expected to be partially offset and likely result in
a low to mid-single digit percentage decrease in the overall average selling
price in 1997. If the migration to larger diameter and epitaxial products does
not occur at anticipated rates, the average selling price could fall by more
than the low single digit level expected for 1997. Additionally, pricing may be
affected by continued and increasing competition.
GROSS MARGIN. Gross margin as a percentage of net sales decreased to 22.3% for
1996 from 25.2% for 1995. Higher sales volumes and improved pricing and product
mix were more than offset by operating at a lower rate of capacity utilization
caused by the industry slow down and inventory correction experienced by our
customers during the second half of 1996, and start-up and training costs
associated with the ramping-up of new facilities. Excluding the impact of
start-up and training costs, gross margin as a percentage of net sales would
have been 26.5% and 26.6% for 1996 and 1995, respectively.
MARKETING, ADMINISTRATION AND TECHNOLOGY EXPENSES. Marketing, administration and
technology expenses as a percentage of net sales increased to 11.1% for 1996
from 10.7% for 1995. Technology spending rose 41.9% during 1996, reflecting the
Company's commitment to maintain its competitive advantage and meet its
customers' needs. Marketing and administrative expenses increased 24.7% to
support the development of international markets and global growth.
NONOPERATING (INCOME) EXPENSE. Nonoperating income improved to $3.7 million for
1996 from $9.2 million in expense for 1995. The decrease in interest expense to
$0.5 million for 1996 from $11.0 million for 1995, resulted from lower
borrowings due to the Company's initial public offering and the capitalization
of interest related to the Company's capacity expansions.
<PAGE> 3
INCOME TAXES. The effective income tax rate increased to 40.0% for 1996 from
36.8% for 1995. This increase is primarily due to variations in the Company's
composition of worldwide income and the reduction of certain investment
incentives.
EQUITY IN INCOME (LOSS) OF JOINT VENTURES. Equity in income of joint ventures
increased to $24.9 million for 1996 from $13.9 million for 1995. This rise in
equity income is due to the significant improvement in PHC's contribution of
$31.5 million for 1996 resulting from a 53.9% increase in sales and improved
operating margins compared to $17.4 million for 1995. This increase was offset
by losses from Taisil Electronic Materials Corporation (Taisil), the Company's
45% owned, unconsolidated joint venture in Taiwan, resulting from the start-up
and qualification of its operations.
NET EARNINGS. The growth in net sales and improvement in equity in income of
joint ventures more than offset the reduction in gross margin and increase in
marketing, administration and technology expenses, yielding a 16.4% increase in
net earnings to $101.6 million for 1996 compared to $87.3 million for 1995. Net
earnings for 1996 were a record for the Company.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased 34.2% to $886.9 million for 1995 from $660.8
million for 1994. The increase in net sales was principally attributable to a
20.5% increase in sales volume and was significantly impacted by the addition of
MEMC Southwest which was formed on June 30, 1995. The base business, exclusive
of MEMC Southwest, recorded modest volume increases across all product lines. In
addition, the Company continued to experience higher overall average selling
prices driven by changes in the product mix, as sales of higher-priced epitaxial
and large diameter wafers increased as a percentage of total sales volume. The
proportion of sales volume represented by advanced large diameter and epitaxial
products increased to 26.5% of net sales, up from 20.5% in 1994.
Net sales to North America increased 53.9% to 46.0% of 1995 sales compared to
40.1% of 1994 sales, due to the addition of MEMC Southwest and increases in the
base business each accounting for approximately one-half of the increase.
Expanded capacity, improved operating efficiencies and the relative strength of
the European currencies against the Lire during 1995 led to an increase of 28.3%
in sales to Europe to 23.1% of 1995 sales compared to 24.2% of 1994 sales. Net
sales to Asia Pacific increased 16.1% principally as a result of increased sales
to Japan and Taiwan, and represented 30.9% of 1995 sales compared to 35.7% of
1994 sales. This decrease in percentage was mainly due to sales previously made
by MEMC being shifted to PHC as it expanded its production during 1995.
GROSS MARGIN. Gross margin as a percentage of net sales increased to 25.2% for
1995 from 21.7% for 1994. The higher gross margin in 1995 is attributable to
overall price increases, in addition to the increase in sales volume as
relatively fixed manufacturing costs were allocated over a larger production
volume. The margin also improved as a result of the increased proportion of net
sales represented by more advanced large diameter and epitaxial products and
efficiencies gained through improvements in the manufacturing process.
MARKETING, ADMINISTRATION AND TECHNOLOGY EXPENSES. Marketing, administration and
technology expenses as a percentage of net sales increased to 10.7% for 1995
from 10.4% for 1994. The most significant item causing this increase was a
charge of $5.8 million related to the accelerated vesting of restricted stock
granted in the Company's initial public offering during July 1995. Absent the
accelerated vesting charge, marketing, administration and technology expenses
would have been 10.1% of net sales for 1995.
<PAGE> 4
NONOPERATING (INCOME) EXPENSE. Nonoperating expense increased to $9.2 million
for 1995 from $5.6 million for 1994. This increase is primarily attributable to
an increase in other expenses to $11.5 million for 1995 from $3.2 million for
1994, which mainly resulted from the acceleration of $4.8 million of goodwill
amortization for SiBond (the Company's majority owned joint venture for the
development of silicon on insulator wafers). The rise in other expenses were
offset by an improvement in interest income to $7.3 million for 1995 from $1.9
million for 1994 due to interest earned on proceeds from the Company's initial
public offering.
INCOME TAXES. The effective income tax rate decreased to 36.8% for 1995 from
38.8% for 1994. This decrease resulted from certain Italian tax benefits related
to incremental capital investments and other incentives.
EQUITY IN INCOME (LOSS) OF JOINT VENTURES. Equity in income of joint ventures
improved to $13.9 million for 1995, a $20.7 million improvement from the $6.8
million in loss for 1994. The change from loss to income relates to a
significant improvement in PHC's operating results from 1994, partially offset
by losses for Taisil.
ACCOUNTING CHANGE. Net earnings were lower for 1994 due to the Company's
adoption of Statement of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits." The cumulative effect of
adopting SFAS No. 112 on years prior to 1994 is stated separately in the
consolidated statement of earnings as a one-time, after-tax charge of $1.3
million.
NET EARNINGS. The growth in net sales, improvement in gross margin and increase
in equity in income of joint ventures more than offset the slight increase in
marketing, administration and technology expenses and rise in nonoperating
expenses, resulting in a 156.0% increase in net earnings to $87.3 million for
1995 compared to $34.1 million for 1994.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had $35.1 million of cash and cash equivalents
compared to $77.2 million at December 31, 1995.
The Company's primary sources of liquidity historically have been cash flows
from operating activities and borrowings from affiliates and unrelated third
parties. The Company's principal uses of cash have been to support its operating
activities, capital expenditures and equity infusions in joint ventures.
Net cash provided by operating activities increased to $261.9 million for 1996
from $167.7 million for 1995. This $94.2 million increase was largely
attributable to higher net earnings, an increase in accounts payable and
customer deposits, and a decrease in accounts receivable, offset by an increase
in inventories and a decrease in income taxes payable.
Accounts receivable of $129.3 million at December 31, 1996 decreased $36.7
million, or 22.1%, from $166.0 million at the end of 1995. This decrease is
consistent with the 23.1% decline in fourth quarter sales between the two years.
Days' sales outstanding were 58.9 at December 31, 1996 compared to 58.2 at the
end of 1995 based upon annualized fourth quarter sales for the respective years.
Inventories rose $10.9 million, or 12.2%, over the prior year to $100.5 million
at December 31, 1996. This increase is primarily due to the ramping-up of 200mm
(8 inch) and epitaxial expansions and the purchase of related supplies and
consumable spare parts needed to support those operations.
<PAGE> 5
Accounts payable increased $15.4 million or 10.9% compared to the balance at the
end of 1995 due principally to increased capital expenditures during the fourth
quarter of 1996 compared to the year earlier period. The decrease in income
taxes payable of 119.7% or $23.5 million to a receivable of $3.9 million was
primarily attributable to reduced profitability in the second half of 1996.
Customer deposits represent advance payments by customers for future deliveries
of silicon wafers. These advance payments are being used to increase
manufacturing capacity, thereby enabling the Company to deliver greater
quantities of wafers to those customers than would otherwise be available. The
Company began to offer the advance payment program to customers in the fourth
quarter of 1995, with the first advance payment being received in the first
quarter of 1996. At December 31, 1996, $58.9 million in advance payments had
been received of $92.5 million in contractually committed funds.
Capital expenditures were significantly higher in 1996, increasing $374.7
million over the prior year period to $590.0 million. These capital expenditures
included construction of the 200mm facility at MEMC Southwest, expansion of MEMC
St. Peters' 200mm polished and epitaxial capacity, development of a 300mm pilot
line, expansion of MEMC Pasadena's granular polysilicon capacity and expansion
of 200mm capacity in Italy and Japan.
Equity infusions in joint ventures decreased $15.2 million to $14.7 million for
1996. The infusions in 1996 were entirely made in Taisil as it continued the
start-up and qualification of its operations and Phase II of its expansion.
At December 31, 1996, the Company had $186 million of committed capital
expenditures. The actual amount of capital expenditures will be adjusted based
on market conditions. These capital expenditures will be used primarily to equip
MEMC Southwest, build MEMC Kulim (the Company's 75% owned joint venture in
Malaysia) and expand the granular polysilicon operation at MEMC Pasadena. The
Company believes that cash flows from operations together with external and
affiliate financing will be sufficient to fund operations and capital
expenditures currently planned for 1997.
At December 31, 1996, the Company maintained $406.2 million of committed
long-term loan agreements, of which $304.6 million was outstanding. The Company
also maintained $185.1 million of short-term lines of credit, of which $27.2
million was outstanding at year-end. The Company's weighted average cost of
borrowing is 5.7%, due in part to favorable interest rates in Japan.
Total debt outstanding increased to $331.8 million at December 31, 1996 from
$105.1 million at December 31, 1995. The total debt to total capital ratio at
December 31, 1996 was 29.2%.
<PAGE> 6
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except share data
<S> <C> <C> <C>
Net sales $ 1,119,500 $ 886,860 $ 660,807
Cost of goods sold 869,315 663,581 517,597
- ----------------------------------------------------------------------------------------------------------------------------
Gross margin 250,185 223,279 143,210
Marketing, administration and technology expenses 123,993 95,119 68,701
- ----------------------------------------------------------------------------------------------------------------------------
Operating profit 126,192 128,160 74,509
- ----------------------------------------------------------------------------------------------------------------------------
Nonoperating (income) expense:
Interest expense 494 10,953 11,168
Interest income (5,436) (7,270) (1,930)
Royalty income (6,158) (5,934) (6,875)
Other, net 7,437 11,479 3,245
- ----------------------------------------------------------------------------------------------------------------------------
Total nonoperating (income) expense (3,663) 9,228 5,608
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes, equity in income (loss) of joint ventures,
minority interests and cumulative effect of change in accounting 129,855 118,932 68,901
Income taxes 51,942 43,786 26,745
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before equity in income (loss) of joint ventures, minority
interests and cumulative effect of change in accounting 77,913 75,146 42,156
Equity in income (loss) of joint ventures 24,884 13,908 (6,783)
Minority interests (1,241) (1,781) --
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change in accounting 101,556 87,273 35,373
Cumulative effect of change in accounting for postemployment benefits -- -- (1,297)
- ----------------------------------------------------------------------------------------------------------------------------
Net earnings $ 101,556 $ 87,273 $ 34,076
============================================================================================================================
Net earnings per share $ 2.45 $ -- $ --
============================================================================================================================
Pro forma net earnings per share before
cumulative effect of change in accounting $ -- $ 2.78 $ 1.48
============================================================================================================================
Pro forma net earnings per share $ -- $ 2.78 $ 1.43
============================================================================================================================
Weighted average shares used in computing net earnings/
pro forma net earnings per share 41,420,187 31,384,762 23,902,650
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1996 1995
- --------------------------------------------------------------------------------------------------------------
Dollars in thousands, except share data
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 35,096 $ 77,192
Deposit with affiliate -- 55,000
Accounts receivable, less allowance for doubtful accounts of
$2,299 and $2,040 in 1996 and 1995, respectively 129,325 165,994
Inventories 100,505 89,574
Prepaid and other current assets 49,329 41,413
- --------------------------------------------------------------------------------------------------------------
Total current assets 314,255 429,173
Property, plant and equipment, net 1,015,145 528,374
Investment in joint ventures 101,103 66,001
Excess of cost over net assets acquired, net of accumulated amortization of
$2,376 and $1,001 in 1996 and 1995, respectively 51,148 52,523
Other assets 27,324 25,792
- --------------------------------------------------------------------------------------------------------------
Total assets $1,508,975 $1,101,863
==============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 47,130 $ 15,407
Accounts payable 156,841 141,459
Accrued liabilities 45,386 29,242
Accrued wages and salaries 25,975 24,142
Income taxes payable (3,882) 19,665
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 271,450 229,915
Long-term debt, less current portion 284,701 89,698
Pension and similar liabilities 70,232 59,009
Customer deposits 48,174 --
Other liabilities 28,923 27,936
- --------------------------------------------------------------------------------------------------------------
Total liabilities 703,480 406,558
- --------------------------------------------------------------------------------------------------------------
Minority interests 63,527 52,914
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued or
outstanding in 1996 or 1995 -- --
Common stock, $.01 par value, 200,000,000 shares authorized, 41,470,971 and
41,399,998 issued and outstanding in 1996 and 1995, respectively 415 414
Additional paid-in capital 573,351 569,959
Retained earnings 171,143 69,587
Cumulative translation adjustment (396) 4,447
Unearned restricted stock awards (1,217) (2,016)
Treasury stock, at cost: 36,205 shares in 1996 (1,328) --
- --------------------------------------------------------------------------------------------------------------
Total stockholders' equity 741,968 642,391
- --------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,508,975 $1,101,863
==============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 101,556 $ 87,273 $ 34,076
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 91,660 67,241 50,834
Minority interests 1,241 1,781 --
Equity in (income) loss of joint ventures (24,884) (12,930) 7,874
Loss on sale of property, plant and equipment 610 1,494 391
Cumulative effect of change in accounting -- -- 1,297
Deferred compensation earned 1,001 6,601 --
Changes in assets and liabilities:
Accounts receivable 32,247 (39,636) (15,059)
Inventories (11,126) (3,980) 5,794
Prepaid and other current assets (10,638) (16,591) (3,626)
Accounts payable 19,221 59,258 25,332
Accrued liabilities 2,469 6,469 (3,049)
Accrued wages and salaries 1,749 7,639 2,131
Income taxes payable (24,127) (613) 9,962
Customer deposits 58,900 -- --
Other, net 22,026 3,675 16,633
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 261,905 167,681 132,590
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (590,049) (215,359) (78,676)
Purchase of assets of business -- -- (5,417)
Equity infusions in joint ventures (14,698) (29,904) (20,922)
Deposit with affiliate 55,000 (55,000) --
Notes receivable from affiliates 2,376 28,559 (30,863)
Proceeds from sale of property, plant and equipment 884 2,063 314
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (546,487) (269,641) (135,564)
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from initial public offering -- 441,194 --
Net short-term borrowings 14,898 (36,867) (17,757)
Proceeds from issuance of long-term debt 222,166 209,500 22,173
Principal payments on long-term debt (2,060) (340,000) (1,461)
Contribution from minority interest 7,731 -- --
Dividends paid -- (100,000) --
Stock options exercised 872 -- --
Repurchase of common stock (1,328) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 242,279 173,827 2,955
- ----------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 207 213 89
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (42,096) 72,080 70
Cash and cash equivalents at beginning of year 77,192 5,112 5,042
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 35,096 $ 77,192 $ 5,112
============================================================================================================================
Supplemental disclosures of cash flow information:
Interest payments, net of amount capitalized $ -- $ 13,007 $ 11,467
Income taxes paid 57,590 34,273 6,203
============================================================================================================================
Supplemental disclosure of noncash investing activity -
purchase of assets in exchange for notes payable $ -- $ 55,000 $ 13,882
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock
--------------------- Unearned
Number Additional Cumulative Restricted
of Shares Par Paid-in Retained Translation Stock Treasury
Outstanding Value Capital Earnings Adjustment Awards Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 21,490,942 $215 $158,884 $ 9,701 $(3,471) $ -- $ -- $165,329
Net earnings -- -- -- 34,076 -- -- -- 34,076
Net translation adjustment -- -- -- -- 4,349 -- -- 4,349
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 21,490,942 215 158,884 43,777 878 -- -- 203,754
Net earnings -- -- -- 87,273 -- -- -- 87,273
Issuance of 19,550,000
common shares in
public offering 19,550,000 196 440,998 -- -- -- -- 441,194
Stock plans, net 359,056 3 8,614 -- -- (8,617) -- --
Deferred compensation earned -- -- -- -- -- 6,601 -- 6,601
Net translation adjustment -- -- -- -- 3,569 -- -- 3,569
Dividend paid to Huls Corp. -- -- (38,537) (61,463) -- -- -- (100,000)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 41,399,998 414 569,959 69,587 4,447 (2,016) -- 642,391
Net earnings -- -- -- 101,556 -- -- -- 101,556
Stock plans, net 70,973 1 3,392 -- -- (202) -- 3,191
Deferred compensation earned -- -- -- -- -- 1,001 -- 1,001
Repurchase of common stock -- -- -- -- -- -- (1,328) (1,328)
Net translation adjustment -- -- -- -- (4,843) -- -- (4,843)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 41,470,971 $415 $573,351 $171,143 $ (396) $(1,217) $(1,328) $741,968
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except share data
1 ORGANIZATION
MEMC Electronic Materials, Inc. and subsidiaries (the Company) is a
manufacturer and leading worldwide supplier of electronic grade silicon
wafers for the semiconductor industry. The Company has production facilities
directly or through joint ventures in China, Italy, Japan, Malaysia, South
Korea, Taiwan and the United States. The Company's customers are located
throughout the world.
2 INITIAL PUBLIC STOCK OFFERING
On July 12, 1995, the Company completed an initial public stock offering of
19.55 million shares of common stock at an initial offering price of $24 per
share. Net proceeds from the offering were $441,194. Prior to the public
stock offering, the Company was a wholly owned subsidiary of Huls
Corporation. Huls Corporation, through Huls AG and other affiliates, is
wholly owned by VEBA AG, a publicly held industrial corporation in Germany.
As a result of the public stock offering, Huls Corporation's ownership of
the Company was reduced to 51.9%.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Certain amounts in prior period financial statements have been
reclassified to conform to the current year's presentation.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of MEMC
Electronic Materials, Inc. and its wholly and majority owned subsidiaries.
Investments of less than 50% in two joint venture companies are accounted for
using the equity method. All significant intercompany transactions have been
eliminated.
(c) Deposit with Affiliate
The Company placed on deposit with Huls AG a portion of the proceeds
from the initial public offering. These interest-bearing agreements provided
for return of the funds at their respective maturity dates, or upon three
days' notice. All deposits made during 1995 matured in 1996.
(d) Cash Equivalents
Cash equivalents consist of cash in banks, principally overnight
investments and short-term time deposits, with original maturities of three
months or less.
(e) Inventories
Inventories are stated at the lower of cost or market. Raw materials and
supplies inventories are valued using the first-in, first-out method. Goods
in process and finished goods inventory values are based upon standard costs
which approximate average costs.
(f) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed
principally using the straight-line method over estimated service lives as
follows:
Years
----------------------------------------------------------------------------
Land improvements 6-15
Buildings and building improvements 10-30
Machinery and equipment 3-12
============================================================================
<PAGE> 11
The Company capitalizes interest costs as part of the cost of constructing
major facilities and equipment. Interest costs of $8,957, $1,638 and $273
were capitalized in 1996, 1995 and 1994, respectively.
The recoverable value of property, plant and equipment approximates carrying
value at December 31, 1996.
(g) Excess of Cost Over Net Assets Acquired
Excess of cost over net assets acquired is amortized on a
straight-line basis over the periods estimated to be benefited, not
exceeding 40 years. The carrying value of such amounts are periodically
reviewed by management to determine whether they are recoverable, based upon
the undiscounted cash flows over the remaining amortization periods. The
recoverable value of excess of cost over net assets acquired approximates
carrying value at December 31, 1996.
(h) Revenue Recognition
Revenues are recognized when products are shipped.
(i) Foreign Currency Contracts
The Company operates internationally, giving rise to exposures to market
risks from changes in foreign currency exchange rates. Forward exchange
and option contracts are utilized by the Company to reduce those risks. The
Company does not hold or issue financial instruments for trading purposes.
(j) Translation of Foreign Currencies
Assets and liabilities of foreign subsidiaries whose functional
currency is other than the U.S. dollar are translated to U.S. dollars
using the exchange rates in effect at the balance sheet date. Results of
operations are translated using average rates during the period. Adjustments
resulting from the translation process are included as a separate component
of stockholders' equity.
(k) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to material differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in
earnings in the period that includes the enactment date. A valuation
allowance has been established for deferred tax assets that the Company
believes may not be realized.
No provision is made for U.S. income taxes on unremitted earnings of the
Company's non-U.S. subsidiaries, as the retention of such earnings is
considered essential for continuing operations, or the additional taxes are
considered to be minimal based upon available foreign tax credits.
Prior to July 12, 1995, the Company was a member of the VEBA Corporation and
affiliated companies' U.S. controlled tax group. During this period, the
Company's separate U.S. tax liability was computed on a stand-alone basis,
subject to various limitations involving consolidated group elections and
determinations, in accordance with the provisions of a tax sharing agreement
between the Company and VEBA Corporation and Huls Corporation. The Company,
however, was permitted to include the benefits of separate company regular
and alternative minimum tax loss carryforwards and separate company
generated tax credits, regardless of how they were treated in the
consolidated VEBA Corporation U.S. tax return. The Company paid Huls
Corporation $5.2 million under the tax sharing agreement for the period from
January 1 to July 12, 1995.
Effective July 12, 1995, the Company entered into a Tax Disaffiliation
Agreement with VEBA Corporation and Huls Corporation, under which the
Company agreed to pay to VEBA Corporation $13.1 million as a reimbursement
of federal income tax savings achieved by the Company through the use of
VEBA Corporation and affiliated companies' operating loss and alternative
minimum tax credit carryforwards. As a result of the Tax Disaffiliation
Agreement and such payment to VEBA Corporation, the Company received $34.1
million in loss carryforwards that were utilized on its separate
consolidated U.S. tax return for the short tax year of July 12, 1995 through
December 31, 1995.
<PAGE> 12
(l) Research and Development
Research and development costs are included in marketing, administration
and technology expenses in the year incurred. Such expenses were $44,313,
$31,226 and $27,403 in 1996, 1995 and 1994, respectively.
(m) Earnings Per Share
Net earnings per share for 1996 was calculated based on the actual weighted
average shares outstanding for the period. Pro forma net earnings per
share for 1995 was calculated based on the actual weighted average shares
outstanding, plus for the three months ended March 31, 1995, the number of
shares that would have been required to be sold at the initial public
offering price of $24 to fund the excess of the $100 million dividend paid
to Huls Corporation on April 28, 1995 over the Company's net earnings for
the prior twelve-month period.
Pro forma earnings per share for 1994 was calculated based on the actual
number of shares outstanding, plus the number of shares that would
have been required to be sold at the initial public offering price of $24 to
fund the excess of the $100 million dividend paid to Huls Corporation over
the Company's net earnings for the prior twelve-month period.
(n) Stock-Based Compensation
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." The adoption of SFAS No. 123 did not have a material effect
on pro forma net earnings and pro forma net earnings per share. The Company
continues to measure its compensation cost of equity instruments issued
under employee compensation plans under the provisions of Accounting
Principles Board Opinion No. 25 (Opinion 25) and related Interpretations.
Compensation expense related to restricted stock awards is recognized over
the applicable vesting periods, and the unamortized portion of deferred
compensation is reflected as a separate component of stockholders' equity.
4 INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995
------------------------------------------------------------
Dollars in thousands
<S> <C> <C>
Raw materials and supplies $ 47,209 $ 39,726
Goods in process 27,411 26,669
Finished goods 25,885 23,179
------------------------------------------------------------
$ 100,505 $ 89,574
============================================================
</TABLE>
5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995
------------------------------------------------------------
Dollars in thousands
<S> <C> <C>
Land and land improvements $ 13,782 $ 12,130
Buildings and building improvements 141,582 116,071
Machinery and equipment 744,485 581,087
------------------------------------------------------------
899,849 709,288
Less accumulated depreciation 372,680 295,228
------------------------------------------------------------
527,169 414,060
Construction in progress 487,976 114,314
------------------------------------------------------------
$1,015,145 $528,374
============================================================
</TABLE>
<PAGE> 13
On June 30, 1995, the Company and Texas Instruments formed a joint venture
company, MEMC Southwest, to own and operate Texas Instruments' existing
silicon wafer manufacturing facility in Sherman, Texas and to construct and
operate a new large diameter silicon wafer manufacturing facility. MEMC
Southwest is 80% owned by the Company and 20% owned by Texas Instruments.
This agreement generated an excess of cost over net assets acquired of
approximately $53,000 that is being amortized over 40 years.
On July 31, 1995, the Company acquired the polysilicon production operations
of Albemarle Corporation (Albemarle), including Albemarle's production
facility in Pasadena, Texas, for approximately $58,000. Based upon an
independent valuation, the purchase price was allocated to inventory,
property, plant and equipment, and technology rights.
6 INVESTMENT IN JOINT VENTURES
The Company has a 40% interest in POSCO HULS Company Limited (PHC), a joint
stock company formed to manufacture and sell silicon wafers in the Republic
of Korea, and a 45% interest in Taisil Electronic Materials Corporation
(Taisil), a joint stock company formed to manufacture and sell silicon
wafers in Taiwan.
During 1996, 1995 and 1994, the Company received $6,158, $5,934 and $6,875,
respectively, from these joint ventures under royalty agreements. Sales by
PHC of intermediate and finished product to the Company totaled $89,723,
$20,688 and $12,413 in 1996, 1995 and 1994, respectively.
The Company provides PHC and Taisil with debt guarantees totaling $6,905 and
$51,060, respectively. At December 31, 1996, PHC and Taisil had $6,905 and
$51,060, respectively, in standby letters of credit and borrowings
outstanding against these guarantees.
A summary of the results of operations for 1996, 1995 and 1994, and
financial position as of December 31, 1996 and 1995 of the Company's
unconsolidated investments follows:
<TABLE>
<CAPTION>
December 31, 1996 1995 1994
-------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C>
Total:
Net sales $ 282,764 $ 181,154 $ 95,994
Gross profit 110,644 57,691 10,618
Net earnings (loss) 64,058 34,873 (16,301)
=========================================================================
The Company's share:
Net earnings (loss) $ 24,884 $ 12,930 $ (7,874)
=========================================================================
Current assets $ 183,326 $ 121,040
Noncurrent assets 499,516 343,467
-----------------------------------------------------------
Total assets 682,842 464,507
-----------------------------------------------------------
Current liabilities (156,650) (122,497)
Noncurrent liabilities (288,237) (185,800)
-----------------------------------------------------------
Total liabilities (444,887) (308,297)
Interests of others 136,852 90,209
-----------------------------------------------------------
The Company's investment $ 101,103 $ 66,001
=========================================================================
</TABLE>
The Company's share of undistributed retained earnings of unconsolidated
investments was approximately $20,700 at December 31, 1996.
<PAGE> 14
7 SHORT-TERM BORROWING AGREEMENTS AND LINES OF CREDIT
The Company has unsecured, committed lines of credit available of
approximately $91,000 under short-term loan agreements with an affiliate,
renewable through 1998. The interest rate on borrowings is based on a
combination of U.S. federal funds and inter-bank offer rates. At December
31, 1996, the Company had approximately $6,000 of borrowings drawn against
these lines of credit with an interest rate of 7.6% per annum. Interest
expense related to short-term borrowings with an affiliate was $181, $485
and $263 in 1996, 1995 and 1994, respectively. Commitment fees associated
with these lines of credit were $94 and $46 in 1996 and 1995,
respectively.
The Company's foreign subsidiaries have unsecured borrowings from foreign
banks of approximately $21,000 at December 31, 1996, under approximately
$49,000 of short-term loan agreements which bear interest at various rates
ranging from 0.7% to 6.4% and are renewable annually.
The Company also has two unsecured, committed lines of credit available
with two banks totaling $45,000 under short-term borrowing agreements,
of which the Company had no borrowings drawn at December 31, 1996 or 1995.
The interest rate on the borrowings is negotiated at the time of the
borrowings.
8 LONG-TERM DEBT AND LONG-TERM DEBT WITH AFFILIATES
Long-term debt and long-term debt with affiliates consist of the following:
<TABLE>
<CAPTION>
December 31, 1996 1995
------------------------------------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C>
Owed to affiliates:
Note with interest payable semiannually at 6.7%, due in 1998 $ 25,000 $ -
Note with interest payable semiannually at 2.1%, due in 1999 8,750 9,820
Notes with interest payable semiannually at rates ranging from
2.5% to 6.4%, due in 2000 18,750 9,820
Notes with interest payable semiannually at rates ranging from
2.9% to 7.2%, due in 2001 108,750 19,820
Note with interest payable semiannually at 3.2%, due in 2002 8,750 9,820
Note with interest payable semiannually at 6.4%, due in 2003 40,000 -
Notes with interest payable semiannually at rates ranging from
7.0% to 7.2%, due in 2004 50,000 -
------------------------------------------------------------------------------------------------------
Total from affiliates 260,000 49,280
------------------------------------------------------------------------------------------------------
Owed to nonaffiliates:
Notes with interest payable semiannually at rates ranging from
3.5% to 5.0%, due in 1997 17,730 21,480
Note with interest payable quarterly at 4.1%, due in 1998 8,750 9,820
Other notes with interest payable semiannually at rates ranging
from 3.0% to 8.9%, due in 1998 through 2007 18,109 10,871
------------------------------------------------------------------------------------------------------
Total from nonaffiliates 44,589 42,171
------------------------------------------------------------------------------------------------------
Total long-term debt 304,589 91,451
Less current portion 19,888 1,753
------------------------------------------------------------------------------------------------------
$284,701 $ 89,698
======================================================================================================
</TABLE>
The Company has long-term committed loan agreements of $406 million at
December 31, 1996, of which approximately $305 million is outstanding.
Commitment fees associated with these agreements totaled $129 and $112 in
1996 and 1995, respectively.
<PAGE> 15
Interest expense related to long-term notes payable to affiliates was
$7,337, $4,888 and $8,399 in 1996, 1995 and 1994, respectively.
The aggregate amounts of long-term debt maturing subsequent to December 31,
1996 are as follows:
<TABLE>
<CAPTION>
Dollars in thousands
<S> <C>
1997 $ 19,888
1998 36,005
1999 11,100
2000 24,773
2001 110,736
Thereafter 102,087
---------------------------------------------------------------------------
$304,589
===========================================================================
</TABLE>
In October 1996, the Company entered into a financing arrangement with the
City of O'Fallon, Missouri related to the expansion of the Company's
St. Peters, Missouri facility. In total, approximately $252 million of
industrial revenue bonds will be issued to the Company by the City of
O'Fallon through 1997, of which $159 million of bonds were outstanding at
December 31, 1996.
The bonds are exchanged by the City of O'Fallon for the assets related to
the expansion, which are then leased by the Company for a period of 10
years for machinery and equipment and 15 years for building and building
improvements. The Company has the option to purchase the machinery and
equipment at the end of five years and the building and building
improvements at the end of 10 years. The industrial revenue bonds bear
interest at a rate of 6% per annum and mature concurrent with the annual
payments due under the terms of the lease.
The Company has classified the leased assets as property, plant and
equipment and has established a capital lease obligation equal to the
outstanding principal balance of industrial revenue bonds. Lease payments
may be made by tendering an equivalent portion of the industrial revenue
bonds. As the capital lease payments to the City of O'Fallon may be
satisfied by tendering industrial revenue bonds (which is the Company's
intention), the capital lease obligation, industrial revenue bonds and
related interest expense and interest income, respectively, have been
offset for presentation purposes in the consolidated financial statements.
9 STOCKHOLDERS' EQUITY
Preferred Stock
The Company has 50,000,000 authorized shares of $.01 per share par value
preferred stock. The Board of Directors is authorized, without further
action by the stockholders, to issue any or all of the preferred stock.
Common Stock
Holders of the $.01 per share par value common stock are entitled to one
vote for each share held on all matters submitted to a vote of the
stockholders. Subject to the rights of any holders of preferred stock,
holders of common stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors. In the event of liquidation,
dissolution or winding up of the Company, holders of the common stock are
entitled to share ratably in the distribution of all assets remaining
after payment of liabilities, subject to the rights of any holders of
preferred stock.
<PAGE> 16
Stock-Based Compensation
The Company has an Equity Incentive Plan (the Plan) that provides for the
award of incentive and non-qualified stock options, restricted stock and
performance shares. The Company applies Opinion 25 and related
Interpretations in accounting for the Plan. Accordingly, no compensation
cost has been recognized for non-qualified stock options granted under the
Plan.
Total shares available for grant under the Plan are 3,597,045; however, no
more than 1,692,727 shares may be awarded without the consent of the
Board of Directors. Non-qualified stock options are typically granted on
January 1 and vest at a rate of 25% annually over four years. The exercise
price of each option equals the market price of the Company's common stock
on the date of grant, and each option's maximum term is 10 years.
Remaining restricted stock awards granted in 1995 will vest on July 12,
1999. Restricted stock awards granted in 1996 will vest on January 1, 2000
if a certain net earnings per share target is met; provided, however that
25% of these restricted stock awards may vest on January 1, 1998 if a
certain interim net earnings per share target is met. Total restricted
shares awarded in 1996 and 1995 were 38,200 and 359,056, respectively.
A summary of the Company's Plan activity with respect to stock options as
of December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ------------------
Average Average
Option Option
Shares Price Shares Price
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 914,694 $24.00 - -
Granted 141,300 32.99 918,294 $24.00
Exercised (36,333) 24.00 - -
Canceled (53,823) 24.00 (3,600) 24.00
-------------------------------------------------------------------------
Outstanding at end of year 965,838 $25.32 914,694 $24.00
=========================================================================
Options exercisable at end of year 146,733 $24.53 - -
=========================================================================
</TABLE>
In the fourth quarter of 1995, restrictions lapsed on 263,056 shares of
restricted stock based upon the market price of the Company's common stock
appreciating 55% over the initial public offering price. This resulted in
a charge to compensation expense of approximately $5.8 million.
10 INCOME TAXES
Earnings before income taxes, equity in income (loss) of joint ventures,
minority interests and cumulative effect of change in accounting are as
follows:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
-------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C>
U.S. $ 57,200 $ 56,598 $ 23,150
Foreign 72,655 62,334 45,751
-------------------------------------------------------------------------
$ 129,855 $ 118,932 $ 68,901
=========================================================================
</TABLE>
<PAGE> 17
Income tax expense consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
- ------------------------------------------------------------------------------
Dollars in thousands
Year ended December 31, 1996:
<S> <C> <C> <C>
U.S. federal $ 5,425 $ 5,420 $10,845
State and local 2,778 (133) 2,645
Foreign 33,756 4,696 38,452
- ------------------------------------------------------------------------------
$ 41,959 $ 9,983 $51,942
==============================================================================
Year ended December 31, 1995:
U.S. federal $ 20,117 $ 29 $20,146
State and local 2,370 2 2,372
Foreign 27,960 (6,692) 21,268
- ------------------------------------------------------------------------------
$ 50,447 $ (6,661) $43,786
==============================================================================
Year ended December 31, 1994:
U.S. federal $ 6,900 $ 2,005 $ 8,905
State and local 2,195 (760) 1,435
Foreign 13,403 3,002 16,405
- ------------------------------------------------------------------------------
$ 22,498 $ 4,247 $26,745
==============================================================================
</TABLE>
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 35% in 1996, 1995 and 1994 to earnings before income
taxes, equity in income (loss) of joint ventures, minority interests and
cumulative effect of change in accounting as a result of the following:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C>
Income tax at federal statutory rate $ 45,449 $ 41,626 $24,115
Increase (reduction) in income taxes
resulting from:
Change in the balance of the valuation
allowance for deferred tax assets
allocated to income tax expense (3,200) (1,811) 406
Foreign tax rate differences 12,323 6,479 6,289
Amortization and depreciation
recorded for acquired assets with
different financial reporting and
historical tax bases (636) (1,083) (991)
State income taxes, net
of federal benefit 1,719 1,542 933
Investment incentives (1,809) (7,903) (945)
Other, net (1,904) 4,936 (3,062)
- ------------------------------------------------------------------------------
$ 51,942 $ 43,786 $26,745
==============================================================================
</TABLE>
<PAGE> 18
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995
- ----------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C>
Deferred tax assets:
Inventory, principally due to additional costs inventoried for
tax purposes and/or financial reserves recorded to state
inventories at net realizable values $ 3,660 $ 5,727
Accruals for expenses currently not deductible for tax purposes 7,759 7,248
Pension, medical, and other employee benefits, principally due
to accrual for financial reporting purposes 29,575 27,705
Net operating loss carryforwards 3,439 3,240
Investment tax credit carryforwards 1,456 1,456
Alternative minimum tax credit carryforwards -- 629
Foreign tax credit carryforwards -- 946
Accounts receivable, principally due to allowances for
doubtful accounts 334 308
Other 37 88
- ----------------------------------------------------------------------------------------------------------------
Total gross deferred tax assets 46,260 47,347
Less valuation allowance (16,298) (19,791)
- ----------------------------------------------------------------------------------------------------------------
Net deferred tax assets 29,962 27,556
- ----------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment, principally due to differences
in depreciation and capitalized interest (16,532) (3,759)
Other (710) (666)
- ----------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities (17,242) (4,425)
- ----------------------------------------------------------------------------------------------------------------
Net deferred tax asset $ 12,720 $ 23,131
================================================================================================================
Net deferred tax assets were classified in the consolidated balance sheets as follows:
December 31, 1996 1995
- ----------------------------------------------------------------------------------------------------------------
Dollars in thousands
Current deferred tax assets, net $ 14,861 $ 13,499
Noncurrent deferred tax assets (liabilities), net (2,141) 9,632
- ----------------------------------------------------------------------------------------------------------------
$ 12,720 $ 23,131
================================================================================================================
</TABLE>
As of December 31, 1996, the Company has regular tax net operating loss
carryforwards for federal and state income tax purposes of $7,675 and $18,819,
respectively. The Company also has net investment tax credit carryforwards
available of $1,456. Utilization of the loss carryforward and the investment tax
credit carryforward are subject to limitation under Internal Revenue Code
Sections 382 and 383, respectively. Pursuant to these Internal Revenue Code
Sections, the amount of combined loss and credit carryforward that may be
utilized is limited to approximately $2,000 per year. Under Internal Revenue
Service regulations, the investment tax credit carryforward is not permitted to
reduce income tax expense until the year 2000.
<PAGE> 19
11 COMMITMENTS AND CONTINGENCIES
The Company leases buildings, equipment, and automobiles under operating
leases. Rental expense under these leases was $17,262, $7,527 and $3,605
in 1996, 1995 and 1994, respectively. Minimum aggregate future rental
obligations under leases having remaining terms of one year or more at
December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Dollars in thousands
<S> <C>
1997 $20,446
1998 17,610
1999 12,792
2000 4,897
2001 4,362
Thereafter 17,000
----------------------------------------------------------------------------
$77,107
============================================================================
</TABLE>
12 PENSION PLANS AND OTHER RETIREMENT BENEFITS
The Company has noncontributory defined benefit plans covering most U.S.
employees. Benefits for these plans are based on years of service and
qualifying compensation during the final years of employment. The Company
complies with federal funding requirements.
The Company also has a nonqualified plan under the Employee Retirement
Income Security Act of 1974, which provides benefits not otherwise payable
under the above plans due to Internal Revenue Code restrictions.
Eligibility for participation in this plan requires coverage under the
above plans and other specific circumstances.
Net periodic pension cost consists of the following:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
----------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C>
Service cost (benefits
earned during the period) $ 6,449 $ 4,336 $ 4,656
Interest cost on projected
benefit obligation 6,121 4,677 3,395
Actual return on plan assets (8,663) (8,870) (185)
Net amortization and deferral 3,858 5,568 (1,567)
----------------------------------------------------------------------------
Net periodic pension cost $ 7,765 $ 5,711 $ 6,299
============================================================================
</TABLE>
<PAGE> 20
The following table summarizes the actuarial present value of benefit
obligations and the funded status of the Company's plans:
<TABLE>
<CAPTION>
Accumulated Benefits Assets Exceed
Exceed Assets Accumulated Benefits
-------------------- --------------------
December 31, 1996 1995 1996 1995
--------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $7,832 $3,806 $55,868 $42,529
==========================================================================
Accumulated benefit obligation $9,061 $5,241 $67,191 $53,978
==========================================================================
Projected benefit obligation $9,897 $6,719 $92,182 $76,370
Plan assets at fair value 552 519 76,747 63,725
--------------------------------------------------------------------------
Projected benefit obligation in
excess of plan assets 9,345 6,200 15,435 12,645
Unrecognized net loss from
past experience (4,095) (1,701) (7,268) (5,674)
Unrecognized prior service costs (374) (451) 52 57
Unrecognized net transition asset - - 35 40
Additional minimum liability 3,982 1,138 - -
--------------------------------------------------------------------------
Accrued pension expense $8,858 $5,186 $ 8,254 $ 7,068
==========================================================================
</TABLE>
The assumed discount rate, rate of increase in compensation levels and the
expected long-term rate of return on assets used in the actuarial
calculations in 1996 were 7.5%, 4.5% and 8.0%, respectively, and in
1995 were 7.5%, 4.0% and 8.0%, respectively. Plan assets consist
principally of insurance contracts, marketable securities including
common stocks, bonds and interest-bearing deposits.
The Company has pension plans for its foreign subsidiaries. The aggregate
pension expense and liability are not material to the consolidated
financial statements.
13 OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS
The Company sponsors a health care plan that provides postretirement
medical benefits to full-time U.S. employees who meet minimum age and
service requirements. The plan is contributory, with retiree
contributions adjusted annually, and contains other cost-sharing
features such as deductibles and coinsurance. The Company's policy is
to fund the cost of medical benefits in amounts determined at the
discretion of management.
Net periodic postretirement benefit cost consists of the following:
<TABLE>
<CAPTION>
Year ended December 31, 1996 1995 1994
--------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C>
Service cost $2,552 $1,832 $1,839
Interest cost 3,435 3,055 2,725
Amortization of (gains) losses 3 (111) 3
--------------------------------------------------------------------------
Net periodic postretirement benefit
cost $5,990 $4,776 $4,567
==========================================================================
</TABLE>
<PAGE> 21
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
December 31, 1996 1995
-----------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 4,852 $ 4,776
Fully eligible active plan participants 10,541 9,242
Other active plan participants 35,664 30,229
Unrecognized prior service cost 922 --
Unrecognized net gain (loss) relating to changes
in actuarial assumptions (1,993) 162
-------------------------------------------------------------------------------
Accrued postretirement benefit cost $ 49,986 $ 44,409
===============================================================================
</TABLE>
For measurement purposes, an 8.5% annual rate of increase in the per
capita cost of covered benefits (i.e., health care cost trend rate) was
assumed for 1996; the rate was assumed to decrease gradually to 5.5% by
the year 2001 and remain at that level thereafter. For 1995, a 9.5% annual
rate of increase was assumed, decreasing gradually to 6.0% by the year
2002. The health care cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed health care
cost trend rates by 1% in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996 and 1995 by
$4,702 and $4,325, respectively; and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for
1996 and 1995 by $708 and $568, respectively.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at December 31, 1996 and 1995.
Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 requires the accrual
of postemployment benefits which include salary continuation, disability,
and continuation of health care benefits to former employees after
employment but before retirement. The Company provides certain long-term
disability, medical and life insurance benefits. Substantially all full-
time domestic employees are eligible for benefits. The Company elected to
recognize the cumulative effect of this accounting change by recording the
postemployment benefit obligation immediately as a one-time accounting
adjustment as of January 1, 1994. The cumulative effect of adopting SFAS
No. 112 was $1,297. The net periodic postemployment benefit cost was $553,
$557 and $492 for 1996, 1995 and 1994, respectively.
14 RETIREMENT SAVINGS PLANS
The Company sponsors two defined contribution plans under Section 401(k)
of the Internal Revenue Code covering all U.S. salaried and hourly
employees with more than one year of service. Company contributions
charged against income totaled $3,656, $3,091 and $2,590 for 1996, 1995
and 1994, respectively.
15 MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The Company sells products to customers in the semiconductor industry
which are located in various geographic regions including the United
States, Europe and Asia Pacific. The primary customers in this industry
are well capitalized and the concentration of credit risk is considered
minimal due to the Company's customer base. Sales to the Company's largest
customer was 16.8% of net sales in 1996. No other customer constituted 10%
or more of net sales in 1996, 1995 or 1994.
<PAGE> 22
16 DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's cash, deposit with affiliate, accounts
receivable, accounts payable and accrued liabilities approximates fair
value due to the short maturity of these instruments. Consequently, such
instruments are not included in the table below which provides information
regarding the estimated fair values of other financial instruments, both
on and off balance sheet, as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995
--------------------------------------------------------------------------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C> <C>
Long-term debt $304,589 $303,441 $91,451 $92,985
Foreign currency contracts,
including options 1,998 1,105 547 1,828
============================================================================================
</TABLE>
The fair value of each long-term debt facility is based upon the amount of
future cash flows associated with each instrument discounted at the
Company's current borrowing rate for similar debt instruments of
comparable terms.
The Company has entered into forward exchange and option contracts with
Huls AG to manage foreign currency exchange risk relating to current trade
sales with its foreign subsidiaries and current trade sales with its
customers denominated in foreign currencies (primarily Japanese yen and
German marks), and relating to foreign currency denominated intercompany
loans. The Company believes that its hedging arrangements with Huls AG
allow for transactions on a basis that is comparable to terms available
from unrelated third party financial intermediaries.
The terms of the forward exchange and option contracts range from one month
to seven years, depending on the transactions to which they relate. The
purpose of the Company's foreign currency hedging activities is to protect
the Company from the risk that the eventual dollar net cash inflows
resulting from foreign currency transactions will be adversely affected by
changes in exchange rates.
The Company's forward exchange and option contracts are accounted for as
hedges and, accordingly, gains and losses on the contracts are deferred and
recognized at the time of settlement of the related receivables and loans.
Deferred gains and losses are included on a net basis in the consolidated
balance sheet as either other assets or other liabilities. At December 31,
1996, the Company had forward contracts outstanding with a total contract
value of $41,786. The fair value of the forward contracts was a net
premium to the Company of $1,105, as measured by the amount that would
have been paid to liquidate and repurchase all open forward contracts as
of December 31, 1996. Net deferred losses relating to these contracts
totaled $1,998 at December 31, 1996.
<PAGE> 23
17 UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
First Second Third Fourth
1996: Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except share data
<S> <C> <C> <C> <C>
Net sales $289,811 $324,331 $303,525 $201,833
Gross margin 79,322 90,833 66,491 13,539
Earnings (loss) before equity
in income of joint ventures
and minority interests 32,230 36,242 19,423 (9,982)
Equity in income of joint ventures 8,911 11,134 1,460 3,379
Minority interests (1,515) (890) 270 894
Net earnings (loss) 39,626 46,486 21,153 (5,709)
Net earnings (loss) per share 0.96 1.12 0.51 (0.14)
Market price:
High 37 1/4 55 40 5/8 28 1/2
Low 26 1/2 36 1/4 20 1/4 16 3/4
<CAPTION>
1995:
- --------------------------------------------------------------------------------------------------------------------
Net sales $173,288 $199,980 $251,210 $262,382
Gross margin 39,822 51,116 62,727 69,614
Earnings before equity in
income of joint ventures
and minority interests 12,194 14,986 23,738 24,228
Equity in income of joint ventures 202 1,662 4,207 7,837
Minority interests - - (568) (1,213)
Net earnings 12,396 16,648 27,377 30,852
Net earnings per share .52(1) .77 .71 .75
Market price:
High - - 34 1/2 40
Low - - 26 1/8 22 1/2
Dividend - 100,000 - -
</TABLE>
(1) Pro forma net earnings per share.
The Company intends to retain all net earnings to fund the development of
its business, and does not anticipate paying dividends in the foreseeable
future. The declaration and payment of future dividends by the Company, if
any, will be at the sole discretion of the Board of Directors. In April
1995, the Company paid a $100 million dividend to Huls Corporation.
<PAGE> 24
18 GEOGRAPHIC SEGMENTS
The Company is engaged in one line of business-the design, manufacture and
sale of electronic grade silicon wafers for the semiconductor industry.
Geographic financial information is as follows:
<TABLE>
<CAPTION>
United Asia
States Europe Pacific Eliminations Total
--------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S> <C> <C> <C> <C> <C>
Net sales to customers:
1996 $ 729,950 $262,311 $127,239 $ - $1,119,500
1995 545,652 216,084 125,124 - 886,860
1994 372,750 170,067 117,990 - 660,807
===============================================================================================================
Transfers between geographic areas:
1996 $ 132,119 $ 40,834 $ 50,478 $(223,431) $ -
1995 114,843 34,281 40,673 (189,797) -
1994 118,648 45,867 45,872 (210,387) -
===============================================================================================================
Operating profit:
1996 $ 44,137 $ 70,819 $ 11,236 $ - $ 126,192
1995 65,725 58,052 4,383 - 128,160
1994 27,319 38,954 8,236 - 74,509
===============================================================================================================
Identifiable assets:
1996 $1,791,827 $231,214 $231,790 $(745,856) $1,508,975
1995 1,250,692 221,939 205,366 (576,134) 1,101,863
1994 419,885 150,129 205,256 (145,441) 629,829
===============================================================================================================
</TABLE>
Net sales to customers are based upon the location of the Company's
subsidiary, not the location of the customer. Identifiable assets are the
Company's assets in the respective geographic area.
The United States segment had export sales to the Asia Pacific region of
$161,918, $139,627 and $108,982 for 1996, 1995 and 1994, respectively.
The Company expects that international sales will continue to represent a
significant percentage of its total sales. In addition, a significant
portion of its manufacturing operations is located outside of the United
States. International sales and operations may be adversely affected by
the imposition of governmental controls, fluctuations in the U.S. dollar
that could affect the sales prices and manufacturing costs in local
currencies of the Company's products in foreign markets, export license
requirements, restrictions on the export of technology, political
instability, trade restrictions, changes in tariffs and difficulties in
staffing and managing international operations.
<PAGE> 25
Independent Auditors' Report
The Board of Directors
MEMC Electronic Materials, Inc.:
We have audited the accompanying consolidated balance sheets of MEMC
Electronic Materials, Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MEMC
Electronic Materials, Inc. and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
January 24, 1997
<PAGE> 26
STOCKHOLDER INFORMATION
CORPORATE ADDRESS
MEMC Electronic Materials, Inc.
501 Pearl Drive (City of O'Fallon)
St. Peters, Missouri 63376
(314) 279-5500
STOCK QUOTATION SYMBOL
The Company's common stock trades on the New York Stock Exchange under
the symbol "WFR." On December 31, 1996, the last business day of the
year, there were 831 holders of record of the Company's common stock.
ANNUAL MEETING
The Annual Meeting of Stockholders will be held at the Ritz-Carlton
Hotel in St. Louis, Missouri on May 14, 1997 at 10:00 a.m. local time.
Notice of the meeting, proxy statement and proxy were sent to
stockholders with this annual report.
TRANSFER AGENT AND REGISTRAR
Boatmen's Trust Company
P.O. Box 14768
St. Louis, Missouri 63178
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1010 Market Street
St. Louis, Missouri 63101
FORM 10-K
A copy of MEMC's 1996 Annual Report on Form 10-K filed with the
Securities and Exchange Commission and related financial statement
schedule is available to stockholders upon written request without
charge. Exhibits to Form 10-K are also available upon written request
and payment of copying or other reproduction expenses.
INVESTOR RELATIONS
For other investor-related information, interested parties should
contact the Investor Relations Department at (314) 279-5920 or visit us
on the world wide web at www.memc.com. We welcome questions from
potential and existing stockholders.
SAFE HARBOR STATEMENT
Certain statements set forth in this Annual Report regarding MEMC's
operating performance and future prospects, pricing and the outlook for
the silicon wafer and semiconductor industries are forward-looking. Such
statements are based on current expectations and involve certain risks
and uncertainties that could cause actual results to differ materially
from the forward-looking statements. Potential risks and uncertainties
include such factors as demand for the Company's silicon wafers,
utilization of manufacturing capacity, demand for semiconductors
generally, competitors' actions and other risks described in the
Company's filings with the Securities and Exchange Commission, including
its Form 10-K for the year ended December 31, 1996.
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
--------------------
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
MEMC Japan Limited ........................... Japan
MEMC Electronic Materials, S.p.A ............. Italy
MEMC Electronic Materials, SDN BHD ........... Malaysia
MEMC Electronic Materials Sales, SDN BHD ..... Malaysia
MEMC Kulim Electronic Materials, SDN BHD ..... Malaysia
MEMC Huls Korea Company ...................... South Korea
*POSCO Huls Co. Ltd. ......................... South Korea
*Taisil Electronic Materials Corporation ..... Taiwan
SiBond, L.L.C ................................ Delaware
MEMC-CSMC Electronic Materials, Ltd. ......... China (PRC)
MEMC Southwest Inc. .......................... Delaware
MEMC Pasadena, Inc. .......................... Delaware
MEMC Foreign Sales Corp., Inc. ............... Barbados
*The inclusion of these entities on this Exhibit 21 does not constitute an
admission by the Company that the Company "controls" these entities for purposes
of the Federal Securities Laws.
<PAGE> 1
EXHIBIT 23-a
------------
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
MEMC Electronic Materials, Inc.:
We consent to incorporation by reference in the registration
statement (Nos. 33-96420 and 333-19159) on Form S-8 of MEMC
Electronic Materials, Inc. of our reports dated January 24, 1997,
relating to the consolidated balance sheets of MEMC Electronic
Materials, Inc. and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the years in the three-year
period ended December 31, 1996, and related schedule, which
reports appear in or are incorporated therein in the December 31,
1996, annual report on Form 10-K of MEMC Electronic Materials,
Inc.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
March 21, 1997
<PAGE> 1
EXHIBIT 23-b
------------
INDEPENDENT AUDITORS' CONSENT
To the Stockholders and Board of Directors
POSCO HULS Co., Ltd.
We consent to incorporation by reference in the registration
statement (Nos. 33-96420 and 333-19159) on Form S-8 of MEMC
Electronic Materials, Inc. of our report dated January 12, 1997,
relating to the balance sheet of POSCO HULS Co., Ltd as of
December 31, 1996, and the statements of earnings, (proposed)
appropriation (disposition) of retained earnings (deficit) and
cash flows for the year ended December 31, 1996, which report
appears in the December 31, 1996 annual report on Form 10-K of
MEMC Electronic Materials, Inc.
/s/ KPMG San Tong & Co.
Seoul, Korea
March 21, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Dr. H. Jurgen Biangardi, Director of MEMC Electronic Materials,
Inc. (the "Company"), a Delaware corporation, hereby constitute and appoint
James M. Stolze, Helene F. Hennelly, and Ludger H. Viefhues, or any of them,
severally, my true and lawful attorney or attorneys and agent or agents with
full power of substitution and resubstitution to sign in my name, place and
stead the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and documents and exhibits in connection therewith, and to
file the same with the Securities and Exchange Commission, each of said
attorneys to have power to act with or without the other, and to have full power
and authority to do and perform, in my name and on my behalf and on the name and
behalf of the Company every act whatsoever which said attorneys, or any of them,
may deem necessary, appropriate or desirable to be done in connection therewith
as fully and to all intents and purposes as I might or could do in person or the
Company might or could do by a properly authorized agent.
Witness my hand this 21st day of February, 1997.
/s/ H. J. Biangardi
-----------------------------------
Dr. H. Jurgen Biangardi
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Mr. Armin-Peter Bode, Director of MEMC Electronic Materials, Inc.
(the "Company"), a Delaware corporation, hereby constitute and appoint James M.
Stolze, Helene F. Hennelly, and Ludger H. Viefhues, or any of them, severally,
my true and lawful attorney or attorneys and agent or agents with full power of
substitution and resubstitution to sign in my name, place and stead the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, and documents and exhibits in connection therewith, and to file the same
with the Securities and Exchange Commission, each of said attorneys to have
power to act with or without the other, and to have full power and authority to
do and perform, in my name and on my behalf and on the name and behalf of the
Company every act whatsoever which said attorneys, or any of them, may deem
necessary, appropriate or desirable to be done in connection therewith as fully
and to all intents and purposes as I might or could do in person or the Company
might or could do by a properly authorized agent.
Witness my hand this 25th day of February, 1997.
/s/ Armin-Peter Bode
-----------------------------------
Mr. Armin-Peter Bode
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Mr. Willem D. Maris, Director of MEMC Electronic Materials, Inc.
(the "Company"), a Delaware corporation, hereby constitute and appoint James M.
Stolze, Helene F. Hennelly, and Ludger H. Viefhues, or any of them, severally,
my true and lawful attorney or attorneys and agent or agents with full power of
substitution and resubstitution to sign in my name, place and stead the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, and documents and exhibits in connection therewith, and to file the same
with the Securities and Exchange Commission, each of said attorneys to have
power to act with or without the other, and to have full power and authority to
do and perform, in my name and on my behalf and on the name and behalf of the
Company every act whatsoever which said attorneys, or any of them, may deem
necessary, appropriate or desirable to be done in connection therewith as fully
and to all intents and purposes as I might or could do in person or the Company
might or could do by a properly authorized agent.
Witness my hand this 27th day of February, 1997.
/s/ Willem D. Maris
-----------------------------------
Mr. Willem D. Maris
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Dr. Alfred Oberholz, Director of MEMC Electronic Materials, Inc.
(the "Company"), a Delaware corporation, hereby constitute and appoint James M.
Stolze, Helene F. Hennelly, and Ludger H. Viefhues, or any of them, severally,
my true and lawful attorney or attorneys and agent or agents with full power of
substitution and resubstitution to sign in my name, place and stead the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, and documents and exhibits in connection therewith, and to file the same
with the Securities and Exchange Commission, each of said attorneys to have
power to act with or without the other, and to have full power and authority to
do and perform, in my name and on my behalf and on the name and behalf of the
Company every act whatsoever which said attorneys, or any of them, may deem
necessary, appropriate or desirable to be done in connection therewith as fully
and to all intents and purposes as I might or could do in person or the Company
might or could do by a properly authorized agent.
Witness my hand this 13th day of March, 1997.
/s/ Alfred Oberholz
-----------------------------------
Dr. Alfred Oberholz
<PAGE> 5
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Mr. Paul T. O'Brien, Director of MEMC Electronic Materials, Inc.
(the "Company"), a Delaware corporation, hereby constitute and appoint James M.
Stolze, Helene F. Hennelly, and Ludger H. Viefhues, or any of them, severally,
my true and lawful attorney or attorneys and agent or agents with full power of
substitution and resubstitution to sign in my name, place and stead the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, and documents and exhibits in connection therewith, and to file the same
with the Securities and Exchange Commission, each of said attorneys to have
power to act with or without the other, and to have full power and authority to
do and perform, in my name and on my behalf and on the name and behalf of the
Company every act whatsoever which said attorneys, or any of them, may deem
necessary, appropriate or desirable to be done in connection therewith as fully
and to all intents and purposes as I might or could do in person or the Company
might or could do by a properly authorized agent.
Witness my hand this 21st day of February, 1997.
/s/ Paul T. O'Brien
-----------------------------------
Mr. Paul T. O'Brien
<PAGE> 6
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, Ambassador Michael B. Smith, Director of MEMC Electronic Materials,
Inc. (the "Company"), a Delaware corporation, hereby constitute and appoint
James M. Stolze, Helene F. Hennelly, and Ludger H. Viefhues, or any of them,
severally, my true and lawful attorney or attorneys and agent or agents with
full power of substitution and resubstitution to sign in my name, place and
stead the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and documents and exhibits in connection therewith, and to
file the same with the Securities and Exchange Commission, each of said
attorneys to have power to act with or without the other, and to have full power
and authority to do and perform, in my name and on my behalf and on the name and
behalf of the Company every act whatsoever which said attorneys, or any of them,
may deem necessary, appropriate or desirable to be done in connection therewith
as fully and to all intents and purposes as I might or could do in person or the
Company might or could do by a properly authorized agent.
Witness my hand this 21st day of February, 1997.
/s/ Michael B. Smith
-----------------------------------
Ambassador Michael B. Smith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of December 31, 1996 and the consolidated
statement of earnings for the year ended December 31, 1996, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 35,096
<SECURITIES> 0
<RECEIVABLES> 128,145
<ALLOWANCES> 2,299
<INVENTORY> 100,505
<CURRENT-ASSETS> 314,255
<PP&E> 1,387,825
<DEPRECIATION> 372,680
<TOTAL-ASSETS> 1,508,975
<CURRENT-LIABILITIES> 271,450
<BONDS> 284,701
0
0
<COMMON> 415
<OTHER-SE> 741,553
<TOTAL-LIABILITY-AND-EQUITY> 1,508,975
<SALES> 1,119,500
<TOTAL-REVENUES> 1,119,500
<CGS> 869,315
<TOTAL-COSTS> 869,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 295
<INTEREST-EXPENSE> 494
<INCOME-PRETAX> 129,855
<INCOME-TAX> 51,942
<INCOME-CONTINUING> 101,556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,556
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.45
</TABLE>
