<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended November 30, 1996
[_] 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 0-26784
SPEEDFAM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-2421613
- ---------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7406 West Detroit, Chandler, Arizona 85226
- ----------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 961-2175
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date (January 10, 1997).
Common Stock, no par value: 10,688,445 shares
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<PAGE>
SPEEDFAM INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
November 30, 1996 and May 31, 1996............................ 2
Condensed Consolidated Statements of Earnings
Three Months and Six Months Ended November 30, 1996 and 1995.. 3
Condensed Consolidated Statements of Cash Flows
Six Months Ended November 30, 1996 and 1995................... 4
Notes to Condensed Consolidated Financial Statements.......... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 8
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............. 13
Item 6. Exhibits and Reports on Form 8-K................................ 13
SIGNATURE.................................................................... 14
</TABLE>
EXHIBIT INDEX
Exhibit 10 Multi-Currency Revolving Line of Credit between the Registrant's
Subsidiary and the First National Bank of Chicago, dated
October 31, 1996
Exhibit 11 Computation of Net Earnings Per Share
Exhibit 27 Financial Data Schedule
-1-
<PAGE>
Part I - Financial Information
SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
NOVEMBER 30, MAY 31,
1996 1996
------------- --------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 7,446 $ 10,871
Trade accounts and notes receivable, net 34,016 34,693
Inventories 27,866 27,931
Other current assets 3,491 2,470
-------- --------
Total current assets 72,819 75,965
Investments in affiliates 23,099 20,450
Property, plant and equipment, net 13,877 9,969
Other assets 1,948 1,600
-------- --------
Total assets $111,743 $107,984
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current $ 650 $ 727
portion of long-term debt
Accounts payable and due to affiliates 19,679 26,460
Customer deposits 8,298 4,814
Other current liabilities 12,183 12,771
-------- --------
Total current liabilities 40,810 44,772
-------- --------
Long-term liabilities:
Long-term debt 2,200 2,593
Deferred income taxes 588 580
-------- --------
Total long-term liabilities 2,788 3,173
-------- --------
Shareholders' equity:
Common stock, no par value, 20,000,000 shares
authorized, 10,612,485 and 10,514,868 shares
issued and outstanding at November 30 and
May 31, 1996, respectively 1 1
Additional paid-in capital 26,787 26,174
Retained earnings 38,068 29,247
Foreign currency translation adjustment 3,289 4,617
-------- --------
Total shareholders' equity 68,145 60,039
-------- --------
Total liabilities and shareholders' equity $111,743 $107,984
======== ========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 1996 AND 1995
(dollars and shares in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
----------------------- -------------------
1996 1995 1996 1995
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenue:
Net sales $36,227 $24,637 $74,283 $42,270
Commissions from affiliate 2,892 801 4,564 984
------- ------- ------- -------
Total revenue 39,119 25,438 78,847 43,254
Cost of sales 24,092 18,420 49,873 31,186
------- ------- ------- -------
Gross margin 15,027 7,018 28,974 12,068
Research, development and engineering 4,114 2,302 7,895 3,497
Selling, general and administrative 6,675 3,380 13,481 6,862
------- ------- ------- -------
Operating profit 4,238 1,336 7,598 1,709
Interest expense (45) (254) (124) (525)
Other income (expense), net 24 (79) (342) (304)
------- ------- ------- -------
Earnings from consolidated companies before income
taxes 4,217 1,003 7,132 880
Income tax expense 1,703 413 2,766 386
------- ------- ------- -------
Earnings from consolidated companies 2,514 590 4,366 494
Equity in net earnings of affiliates 2,269 1,035 4,455 1,835
------- ------- ------- -------
Net earnings $ 4,783 $ 1,625 $ 8,821 $ 2,329
======= ======= ======= =======
Net earnings per share $ 0.42 $ 0.16 $ 0.78 $ 0.26
======= ======= ======= =======
Weighted average common and common
equivalent shares 11,315 9,937 11,296 9,084
======= ======= ======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED NOVEMBER 30, 1996 AND 1995
(dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
--------------------------
1996 1995
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 8,821 $ 2,329
Adjustments to reconcile net earnings to net cash used in
operating activities:
Equity in net earnings of affiliates (4,455) (1,835)
Depreciation and amortization 948 436
Discount on sale of stock to employees 191 --
Other 225 17
Changes in assets and liabilities:
(Increase) decrease in trade accounts and notes receivable 736 (4,330)
(Increase) decrease in inventories 11 (3,717)
Increase in other current assets (970) (3,389)
Decrease in accounts payable and due to affiliates (7,042) (1,348)
Increase in accrued expenses, customer deposits
and other liabilities 2,709 9,060
------- --------
Net cash provided by (used in) operating activities 1,174 (2,777)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4,832) (1,098)
Other investing activities 145 (250)
------- --------
Net cash used in investing activities (4,687) (1,348)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 28,284
Proceeds from exercise of stock options 150 --
Proceeds from sale of stock to employees 273 --
Treasury stock transactions -- 17
Increase in short-term borrowings -- 122
Proceeds from long-term debt -- 4,003
Principal payments on long-term debt (479) (11,677)
------- --------
Net cash provided by (used in) financing activities (56) 20,749
------- --------
Effects of foreign currency rate changes on cash 144 (248)
------- --------
Net increase (decrease) in cash and cash equivalents (3,425) 16,376
Cash and cash equivalents at beginning of year 10,871 1,095
------- --------
Cash and cash equivalents at November 30, 1996 and 1995 $ 7,446 $ 17,471
======= ========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE>
SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have
been prepared by management without audit. Certain information and
note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted, although management believes that the
disclosures made are adequate to make the information presented not
misleading. These condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements of
the Company for the year ended May 31, 1996, as filed with the
Securities and Exchange Commission on September 5, 1996 as part of its
Annual Report on Form 10-K/A. In the opinion of management the
information furnished herein reflects all adjustments (consisting of
normal recurring adjustments) necessary for a fair statement of
results for the interim periods presented. Results of operations for
the three months and six months ended November 30, 1996 are not
necessarily indicative of results to be expected for the full fiscal
year.
<TABLE>
<CAPTION>
(2) INVENTORIES
The components of inventory were:
November 30, May 31,
1996 1996
------------ -------
<S> <C> <C>
Raw materials $13,130 $14,626
Work-in-process 9,791 10,777
Finished goods 4,945 2,528
------- -------
$27,866 $27,931
======= =======
</TABLE>
(3) INVESTMENTS IN AFFILIATES
The Company owns a 50% interest in SpeedFam Co., Ltd. which is
translated in accordance with SFAS No. 52. The Company's equity
interest in SpeedFam Co., Ltd. was $20,328 and $18,545 at November 30,
1996 and at May 31, 1996, respectively, based on the balance sheet of
SpeedFam Co., Ltd. at October 31, 1996 and April 30, 1996,
respectively. The remaining equity interest included in investments in
affiliates relates to the Company's 50% ownership interest in Fujimi
Corporation. Condensed consolidated financial statements of SpeedFam
Co., Ltd., which are consolidated on a fiscal year that ends April 30,
are as follows:
-5-
<PAGE>
SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, APRIL 30,
1996 1996
----------- ---------
Assets
<S> <C> <C>
Total current assets $116,657 $ 98,492
Investment in affiliates 657 891
Property, plant and equipment, net 23,884 20,161
Deferred income taxes and other assets 7,912 7,007
-------- --------
Total assets $149,110 $126,551
======== ========
Liabilities and Stockholders' Equity
Total current liabilities $ 93,175 $ 74,966
Long-term debt 8,357 9,106
Other long-term liabilities 6,922 5,388
Stockholders' equity
Common stock 664 664
Retained earnings 33,596 26,943
Foreign currency translation adjustment 6,303 9,346
Unrealized gains on marketable securities 93 138
-------- --------
Total liabilities and stockholders' equity $149,110 $126,551
======== ========
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Three Months Ended Six Months Ended
October 31, October 31,
1996 1995 1996 1995
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $54,104 $24,727 $110,854 $62,144
Costs and operating expenses 46,256 21,101 95,048 54,726
------- ------- -------- -------
Earnings before income taxes 7,848 3,626 15,806 7,418
Income taxes 3,641 1,436 7,744 3,594
------- ------- -------- -------
Net earnings before minority interest 4,207 2,190 8,062 3,894
Minority interest 468 305 502 279
------- ------- -------- -------
Net earnings 3,739 1,885 7,560 3,545
Beginning retained earnings 29,857 19,696 26,943 18,036
Dividends -- (276) (907) (276)
Transfers to capital -- (454) -- (454)
------- ------- -------- -------
Ending retained earnings $33,596 $20,851 $ 33,596 $20,851
======= ======= ======== =======
</TABLE>
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<PAGE>
SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(4) In fiscal year 1996, the Company entered into an unsecured credit agreement
with two U.S. banks. The credit agreement includes a $22,500 revolving line
of credit maturing April 14, 1999. As of September 13, 1996, the Company had
negotiated an amendment to the credit facility, providing for an additional
$14,000 in a 5-year unsecured term loan to fund the construction of a new
corporate headquarters and manufacturing facility in Chandler, Arizona. The
term loan's principal is to be repaid in fifteen (15) quarterly installments
of $350 each beginning in October of 1997. The remaining outstanding balance
is to be repaid at the end of the loan's term. Interest on the term loan
accrues and is paid monthly on the outstanding balance at LIBOR plus 1.4%.
As of November 30, 1996, no amounts were outstanding on the term loan.
On October 31, 1996, SpeedFam Limited in the United Kingdom, a wholly owned
subsidiary of SpeedFam International, Inc., entered into a (Pounds)950
($1,546) Multi-Currency Revolving Line of Credit with the London branch of a
U.S. bank. The revolving line of credit is secured by property and equipment
of the subsidiary and is payable on demand. Interest accrues on the
outstanding balance at 2.0% above the bank's base rate (6.0% at November 30,
1996) and is payable monthly. As of November 30, 1996, no amounts were
outstanding on this credit facility.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEGMENTS
The Company's total revenue consists of net sales in two segments:
(i) equipment, parts and expendables, and (ii) slurries, as well as commissions
earned on the distribution in the U.S. and Europe of products produced by
SpeedFam Co., Ltd., the Company's Far East Joint Venture.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statements of
earnings data for the periods indicated as a percentage of total revenue:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------------ ----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Net sales 92.6% 96.9% 94.2% 97.7%
Commissions from affiliate 7.4 3.1 5.8 2.3
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
Cost of sales 61.6 72.4 63.3 72.1
----- ----- ----- -----
Gross margin 38.4 27.6 36.7 27.9
Research, development and engineering 10.5 9.0 10.0 8.1
Selling, general and administrative 17.1 13.3 17.1 15.9
----- ----- ----- -----
Operating profit 10.8 5.3 9.6 3.9
Interest expense (0.1) (1.0) (0.2) (1.2)
Other income (expense), net 0.1 (0.3) (0.4) (0.7)
----- ----- ----- -----
Earnings from consolidated companies before
income taxes 10.8 4.0 9.0 2.0
Income tax expense 4.4 1.6 3.5 0.9
----- ----- ----- -----
Earnings from consolidated companies 6.4 2.4 5.5 1.1
Equity in net earnings of affiliates 5.8 4.1 5.7 4.2
----- ----- ----- -----
Net earnings 12.2% 6.5% 11.2% 5.3%
===== ===== ===== =====
</TABLE>
-8-
<PAGE>
Net Sales. The Company's net sales for the three months ended November 30,
1996 were $36.2 million, an increase of 47.0% over net sales of $24.6 million
for the corresponding period in the prior year. This increase in net sales
resulted primarily from growth in the equipment, parts and expendables segment.
Sales of equipment, parts and expendables increased to $30.4 million or 83.9% of
net sales in the second three months of fiscal 1997 as compared to $18.8 million
or 76.2% of net sales in the same period of fiscal 1996. A significant portion
of the growth in this segment was attributable to higher sales of CMP
planarization equipment to the semiconductor industry, including the first four
shipments of the Auriga product, the next generation of the CMP-V system. Growth
in net sales was also due to an increase in sales to the thin film memory disk
media market. Sales of slurries decreased slightly to $5.8 million or 16.1% of
net sales in the second three months of fiscal 1997 from $5.9 million or 23.8%
of net sales in the comparable period of fiscal 1996.
Net sales for the six months ended November 30, 1996 were $74.3 million, up
75.7% over net sales of $42.3 million for the similar period in fiscal 1996.
Equipment, parts and expendables accounted for 83.0% of net sales in the first
six months of fiscal 1997 compared to 70.9% in the same period of fiscal 1996.
CMP planarization equipment accounted for a significant portion of this sales
growth. In addition to the significant increase in CMP equipment sales to
semiconductor manufacturers, net sales for the six month period have increased
due to higher levels of equipment shipments to the thin film memory disk media
market. As a result, sales of related equipment, parts and expendables have also
increased in fiscal 1997 over fiscal 1996. Sales of slurries as a percent of net
sales decreased to 17.0% in the first six months of fiscal 1997 from 29.1% in
the comparable period of fiscal 1996.
Commissions from Affiliate. Commissions from affiliate increased to $2.9
million during the second quarter of fiscal 1997 from $801,000 in the
corresponding period of fiscal 1996. Commissions from affiliate increased to
$4.6 million in the first six months of fiscal 1997 compared to $984,000 in the
first six months of fiscal 1996. The increases in the three and six month
periods, as compared to the respective periods in fiscal 1996, were due
primarily to the expanding demands in the silicon wafer industry for edge
polishing systems developed and manufactured by the Company's affiliate,
SpeedFam Co., Ltd. (Far East Joint Venture). In addition, sales of cleaning and
polishing systems, also produced by the Far East Joint Venture, to customers in
the thin film memory disk media market increased significantly in the second
quarter and first six months of fiscal 1997 over the same periods in the prior
year.
Gross Margin. Gross margin increased to $15.0 million or 38.4% of total
revenue for the three months ended November 30, 1996 from $7.0 million or 27.6%
of total revenue for the three months ended November 30, 1995. For the first six
months of fiscal 1997, gross margin was $29.0 million or 36.7% of total revenue
compared to $12.1 million or 27.9% of total revenue for the first six months of
fiscal 1996. The increase in gross margin for both the three and six months
ended November 30, 1996 is due to a continued shift in revenue mix to higher-
margin equipment, especially systems for CMP planarization of semiconductor
devices. Other factors which have increased gross margin included higher
commission revenue as well as continued improvement in manufacturing
efficiencies in the U.S. manufacturing plants.
Research, Development and Engineering. Research, development and
engineering expense increased to $4.1 million or 10.5% of total revenue in the
second quarter of fiscal 1997 from $2.3 million
-9-
<PAGE>
or 9.0% of total revenue in the second quarter of fiscal 1996. In the six months
ended November 30, 1996, research, development and engineering expense increased
to $7.9 million or 10.0% of total revenue compared to $3.5 million or 8.1% of
total revenue in the first six months of fiscal 1996. The increase in both the
dollar amount and the expense as a percent of total revenue is a result of the
continued investment in the development of the CMP process and other products
for key markets. Such expenditures have resulted in the development and sale of
the Auriga machine, the next generation of the CMP-V system, and the
introduction of the Capella post-CMP cleaning system.
Selling, General and Administrative. Selling, general and administrative
expense increased 97.5% to $6.7 million in the second quarter of fiscal 1997
from $3.4 million in the second quarter of fiscal 1996. For the three month
period ended November 30, 1996, selling, general and administrative expense as a
percent of total revenue increased to 17.1% compared to 13.3% of total revenue
in the similar period of fiscal 1996. Selling, general and administrative
expense increased 96.5% to $13.5 million in the first six months of fiscal 1997
from $6.9 million in the corresponding period in the prior year. As a percentage
of total revenue, selling, general and administrative expense increased to 17.1%
from 15.9% in the first six months of fiscal 1996. Higher levels of spending
were required to support the sales growth in the first six months of fiscal
1997. This increase in selling, general and administrative expense as a
percentage of revenue reflects continued investments in sales, support and
service organizations and administrative infrastructure, as well as increased
commissions paid to the Far East Joint Venture as a result of increased sales of
equipment produced by the Company and exported to Pacific Rim customers through
the joint venture affiliate.
Interest Expense. The decreases in interest expense for the three and six
months ended November 30, 1996, were due to the significant reduction of long-
term debt since the end of the first quarter of fiscal 1996 using funds received
primarily from the initial public offering completed in October 1995.
Other Income (Expense), Net. Other income increased to $24,000 in the first
three months of fiscal 1997 from $79,000 of other expense in the comparable
period of fiscal 1996. Other expense increased to $342,000 in the first six
months of fiscal 1997 from $304,000 in the comparable period of fiscal 1996.
Other expense for the first six months of fiscal 1997 consists primarily of
charges associated with the Company's secondary offering which was subsequently
canceled. These charges were partially offset by interest income.
Equity in Net Earnings of Affiliates. Equity in net earnings of affiliates
increased to $2.3 million for the three months ended November 30, 1996 from $1.0
million in the comparable period of fiscal 1996. Equity in net earnings of
affiliates increased to $4.5 million in the first six months of fiscal 1997 from
$1.8 million in the corresponding period in the prior year. Demand continued to
be strong for products sold to the thin film memory and semiconductor wafer
industries by the Far East Joint Venture. In addition, the Company's share of
the net earnings of its other joint venture, Fujimi Corporation, were
significantly higher than in the comparable period of fiscal 1996 due to
increased sales and improved margins realized during the first half of fiscal
1997 on slurry products sold by Fujimi Corporation to the U.S. silicon wafer
market.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the first six months ended November 30, 1996, $1.2 million in cash was
provided by operating activities primarily from net earnings. Cash from
operating activities was also provided by an increase in customer deposits since
the beginning of the fiscal year, as well as a reduction in both accounts
receivable and inventories. Manufacturing lead times for machines and equipment
are measured in weeks, and result in fluctuating inventory balances depending on
timing of shipments. Cash was used primarily to reduce accounts payable and
amounts due to affiliates, fund construction costs of the new corporate
headquarters and manufacturing facility, and pay down long-term debt.
Through November 30, 1996, the Company had spent approximately $6.9 million
in land and construction costs for a new corporate headquarters and
manufacturing facility in Chandler, Arizona. The Company presently estimates the
total costs to be incurred for the project will be approximately $20.3 million.
The current total estimated project cost has increased from previous estimates
due to changes in equipment production capacity and waste neutralization
requirements, power and HAVC demands.
As of September 13, 1996, the Company had successfully negotiated an
amendment to its then existing $22.5 million unsecured credit facility, in which
its U.S. bank group provided the Company an additional $14.0 million in an
unsecured term loan to fund the majority of the remaining costs to construct the
new corporate headquarters and manufacturing facility in Chandler, Arizona. At
November 30, 1996, no amounts were outstanding on the term loan as the Company
has, to date, funded the costs of this new building through working capital
generated by the business. The Company anticipates borrowing on this facility
beginning in the third quarter of fiscal 1997.
On October 31, 1996, a wholly owned subsidiary of SpeedFam International,
Inc. entered into a (pounds)950,000 ($1.5 million) Multi-Currency Revolving Line
of Credit. The credit facility was provided to support the operating and working
capital needs of the Company's British subsidiary. As of November 30, no amounts
were outstanding on this line of credit.
The Company believes that anticipated funds provided by operations,
current bank lines of credit and the term loan will be sufficient to meet the
Company's capital requirements during the next 12 months.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" was
issued in March 1995 and is effective for fiscal years beginning after December
15, 1995. Management has reviewed the Statement and determined that its
provisions do not have a material effect upon the financial condition or results
of operations of the Company.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation Plans" was issued in October 1995. The Statement will be
effective for the Company's fiscal year 1997. As allowed by the new Statement,
the Company plans to continue to use Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" in accounting for its stock options.
Certain pro forma and other information will be disclosed in the annual
financial statements as if the Company had measured compensation costs in a
manner consistent with the new Statement. Management has reviewed the Statement
and determined that its provisions do not have a material effect upon the
financial condition or results of operations of the Company.
Certain statements and information in this Form 10-Q constitute "forward-
looking statements" within the meaning of the federal securities laws. Such
forward-looking statements involve risks and uncertainties which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Factors that may affect the
Company's business and may therefore affect actual results include, among
others, the cyclical nature of the Company's business and the industries which
it serves, the Company's dependence on new product development and the effects
of rapid technological change in the semiconductor and disk media industries,
including the effects of significant competition in these industries, the normal
fluctuations in the Company's
-11-
<PAGE>
quarterly operating results, including the effects of the Far East Joint
Venture's results of operations. This is only a summary of some of the important
factors that could cause actual results to vary. For a more complete description
of these and other factors, refer to "Certain Factors Affecting the Company's
Business" in the Company's Form 10-K/A filed with the Securities and Exchange
Commission. The Company undertakes no obligation to update the information,
including the forward-looking statements, in the Form 10-Q.
-12-
<PAGE>
SPEEDFAM INTERNATIONAL, INC.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Shareholders held on October 11,
1996, shareholders elected Messrs. James N. Farley, Makoto Kouzuma,
Neil R. Bonke, Thomas J. McCook, Dr. Stuart Meyer, Robert M. Miller
and Carl S. Pedersen to serve the Company as directors for a one-year
term or until their respective successors have been elected. The
results of the voting for each director were as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
--------- --------
<S> <C> <C>
Farly 8,582,691 8,852
Kouzuma 8,582,691 8,852
Bonke 8,581,728 9,815
McCook 8,582,028 9,515
Meyer 8,582,728 8,815
Miller 8,582,728 8,815
Pedersen 8,582,028 9,515
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 10 - Multi-Currency Revolving Line of Credit between
the Registrant's Subsidiary and the First National
Bank of Chicago, dated October 31, 1996.
Exhibit 11 - Computation of Net Earnings Per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which
this report is filed.
-13-
<PAGE>
SpeedFam International, Inc.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SpeedFam International, Inc.
/s/ Roger K. Marach
----------------------------
Date: January 13, 1996 By Roger K. Marach
Treasurer and Chief Financial Officer
(As Chief Accounting Officer and Duly
Authorized Officer of SpeedFam
International, Inc.)
-14-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10 Multi-Currency Revolving Line of Credit between the
Registrant's Subsidiary and the First National Bank of
Chicago, dated October 31, 1996.
11 Computation of Net Earnings Per Share
27 Financial Data Schedule
</TABLE>
<PAGE>
MULTI-CURRENCY LOAN BOND AND 31st October 1996
GUARANTEE FACILITY SPECIFYING ACCELERATION EVENTS
To: SpeedFam Limited ("the Borrower")
Brindley Road
Dodwells Bridge Industrial Estate
Hinckley
Leicestershire
LE10 3BY
For the attention of: M.L. Allcoat, Esq.
Dear Sirs,
Uncommitted (pounds)950,000 Multi-currency Loan,
Bond and Guarantee Facility
We are pleased to offer you
an uncommitted credit facility of up to a maximum at any one time
outstanding of (pounds)950,000 (nine hundred and fifty thousand pounds
sterling) (or its equivalent) to include the issue of bonds and guarantees
of up to a maximum of (pounds)250,000 (two hundred and fifty thousand
pounds sterling) (the "Facility"). Any amount outstanding hereunder from
time to time is repayable on demand.
The terms are:
1 Interpretation
1.1 In this Letter, unless the context otherwise requires:
"Advance" means each borrowing of a portion of the Facility
by the Borrower;
"Banking Day" means a day on which banks are open for business in London
(other than a Saturday or a Sunday) and (if payment in Dollars and/or an
Optional Currency is required to be made on such day) in New York City
or the principal financial centre for the Optional Currency concerned;
1
<PAGE>
"CONDITIONS PRECEDENT" means those conditions set out in paragraph 8.1 below;
"CURRENT ASSETS" means the aggregate at the date of computation of the
stock-in-trade and work in progress, marketable securities, cash and bank
balances of the Borrower and moneys owing to the Borrower (other than moneys due
or to become due from the Borrower) payable on demand or within one year from
the date of computation;
"CURRENT LIABILITIES" means the aggregate at the date of computation of the
obligations including contingent obligations of the Borrower to pay money on
demand or within one year from the date of computation (including the current
portion of long-term debt);
"DEBENTURE" means the debenture referred to in paragraph 8.1(a) below
in a form acceptable to the Bank;
"OPTIONAL CURRENCY" means any currency other than sterling which is freely
transferable and freely convertible into sterling and dealt in on the London
Interbank Market;
"PROPERTY" means the property known as Brindley Road, Dodwells Bridge Industrial
Estate, Hinckley, Leicestershire, LE10 3BY, title number LT 163667;
"TANGIBLE NET WORTH" means the aggregate of the amounts paid-up or credited as
paid-up on the Borrower's issued share capital and the amount of the capital and
revenue reserves of the Borrower (including any share premium account, capital
redemption reserve fund revaluation reserve and any credit balance on the profit
and loss account of the Borrower) all as shown by the latest audited or
management accounts as the case may be delivered under this Letter but after
(a) deducting any debt balance on the profit and loss account;
(b) deducting any amount shown in the balance sheet in respect of goodwill and
other intangible assets;
(c) deducting a sum equal to the aggregate of the amount by which the book
value of any fixed assets of the Borrower has been written up after the
date of this Letter by way of a revaluation unless such revaluation is
supported by a formal independent valuation addressed to the Bank.
2
<PAGE>
"Total Gross Liabilities" means the aggregate of all debts and liabilities
present and future, actual or contingent of whatever nature owing by the
Borrower from time to time including (without limitation) all tax
liabilities and sums due to trade creditors and any borrowings from the
Borrower from any source.
2 Multi-Currency Facility
-----------------------
2.1 Advances under the Facility will only be made following written
confirmation from the Bank's solicitors that the Conditions Precedent have
been satisfied. The offer of the facility shall lapse if the Conditions
Precedent have not been satisfied on or before 17th May 1996 unless the
Bank shall agree otherwise in writing.
2.2 An advance in any currency other than sterling will only be made to the
Borrower following receipt by the Bank from the Borrower of a request in
writing for such Advance not later than 10am, on the second Banking Day
before the date on which the Advance is to be made as set out in the
Borrowers' request for such Advance.
2.3 The Borrower shall not request Advances at any time which would result in
the aggregate amount of all Advances at any time exceeding the amount of:
(a) the total Facility; or
(b) the aggregate value of 80% of the Borrower's acceptable accounts
receivable (acceptable accounts receivable being those that are less
than 90 days past due date which have not been declared ineligible by
the Bank in writing, such ineligibility shall not be applied
unreasonably and shall be determined after consultation with the
Borrower where practical) and 50% of its marketable stock-in-trade
(taken at cost or market price whichever may be the lower according to
the best estimate that can be formed without it being necessary to
take stock for the purpose as determined by the Bank). For the
purposes of this sub-paragraph there shall be disregarded:
(i) any stock-in-trade which takes the aggregate value of stock-
in-trade over (Pounds)250,000;
(ii) any stock-in-trade the property in which remains in the seller
notwithstanding that the Borrower may have agreed to purchase
the same and notwithstanding that the same may be in the
possession order or disposition of the Borrower; and
(iii) any accounts receivable deriving from any such stock-in-trade
as is referred to in paragraph (ii) of this sub-paragraph,
whichever shall be the lower.
3
<PAGE>
2.4 Upon the Borrower's request in writing but subject to the Bank's
agreement in each case the Bank shall issue bonds and guarantees on
the Borrower's behalf in favour of third parties including guarantees
for Value Added Tax payments to H.M. Customs and Excise (together the
"Bonds" and each a "Bond"). Each Bond shall be in such form and
substance as the Bank may agree and shall specify an expiry date which
does not exceed 12 months. In any event, the aggregate amount of all
such Bonds shall not exceed a maximum of (Pounds)250,000.
3 CURRENCY
--------
3.1 Subject to the provisions of clause 3.2, if the Borrower so requests
in writing an Advance may be drawn down in an Optional Currency but if
no such request is received by the Bank such Advance will be drawn
down in Sterling. The sterling equivalent of such currency shall be
the sterling amount from time to time required to purchase the
relevant amount of such currency at our spot buying rate of exchange
in London.
3.2 An Advance may not be drawn down in or remain outstanding in an
Optional Currency if (a) in consequence thereof there would be
Advances outstanding in more than 5 different currencies or (b) the
Bank notifies the Borrower that deposits of such Optional Currency are
not readily available to the Bank in an amount comparable with the
relevant Advance or (c) the Bank determines that by reason of any
change in currency availability, currency exchange rates or exchange
controls it is or will be impracticable for such Advance to be drawn
down in or remain outstanding in that Optional Currency. Accordingly,
in any such event, the relevant Advance shall be drawn down in or be
converted into Sterling (unless the Borrower immediately notifies the
Bank otherwise).
3.3 If due to fluctuations in currency exchange rates or otherwise the
aggregate of Advances drawn on the Multi-Currency Facility exceeds
(Pounds)950,000 (using the conversion basis set out in paragraph 3.1
above) on any Banking Day whilst any such amount remains drawn then
the Borrower shall immediately pay such amount to the Bank as shall be
necessary to ensure that the aggregate of Advances does not exceed
(Pounds)950,000.
4
<PAGE>
4 INDEMNITY
---------
4.1 The Borrower shall indemnify the Bank against all losses costs damages
expenses and demands which the Bank may suffer incur sustain or
receive under or by reason of or in connection with the Bonds other
than such losses, costs, damages, expenses and demands arising out of
the gross negligence or wilful misconduct of the Bank. This indemnity
shall be continuing indemnity and shall be in addition to any security
or other right that the Bank may have against the Borrower and shall
not be wholly or partly discharged by any variation of the Bonds or of
this Letter or by anything done or omitted which would but for this
provision operates to exonerate the Borrower.
4.2 The Borrower irrevocably authorises the Bank to pay immediately any
amounts from time to time demanded or which the Bank may become liable
pursuant to any one or more of the Bonds which appear on their face to
be payable in accordance with the terms of the relevant Bond or Bonds
without reference to or further authority from the Borrower. The Bank
shall not be under any duty to investigate or enquire whether any
claim or demand on the Bank under a Bond shall have been properly made
notwithstanding that the Borrower may dispute the validity of such
claim or demand.
4.3 The Borrower agrees that a certificate signed by an officer of the
Bank to the effect that a sum has become due from the Bank in
connection with any Bond shall (in the absence of manifest error) be
conclusive as to the amount due and that a certificate signed by an
officer of the Bank as to the maximum amount of its liability under
any Bond shall (in the absence of manifest error) be conclusive.
4.4 The Borrower will indemnify the Bank on request against all loss or
expense that the Bank properly incurs under the Facility as a result
of:
(i) the Borrower's failure to pay any sum on the due date;
5
<PAGE>
(ii) the Bank's accepting instructions by facsimile in relation to
any matter purported to be authorised on the Borrower's behalf
notwithstanding that the signature(s) of the person(s) signing
such instructions appear only as facsimile copies and
notwithstanding that any such instructions may be forged or
unauthorised providing that such signatures appear on their
face to be the signatures of the persons notified to the Bank
as authorised by the Borrower in accordance with this letter;
(iii) the Bank's accepting instructions by telephone in relation to
any such matter from any person reasonably believed by the Bank
to be acting on the Borrower's behalf; or
(iv) the occurrence of any Event of Default.
4.5 If any sum due from the Borrower under this Letter or any order or judgment
given or made in relation hereto has to be converted from the currency (the
"first currency") in which the same is payable under this Letter or under
such order or judgment into another currency (the "second currency") for
the purpose of (a) making or filing a claim or proof against the Borrower,
(b) obtaining an order or judgment in any court or other tribunal or (c)
enforcing any order or judgment given or made in relation to this Letter,
the Borrower shall indemnify and hold harmless the Bank from and against
any loss suffered as a result of any difference between (i) the rate of
exchange used for such purpose to convert the sum in question from the
first currency into the second currency and (ii) the rate or rates of
exchange at which the Bank may in the ordinary course of business purchase
the first currency with the second currency upon receipt of a sum paid to
it in satisfaction, in whole or in part, of any such order, judgment, claim
or proof. Any amount due from the Borrower under this paragraph 4.5 shall
be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect to this Letter and the
term "rate of exchange" includes any premium and costs of exchange payable
in connection with the purchase of the first currency with the second
currency.
4.6 The Bank shall be entitled to rely on any instructions purported to be
signed (providing that such signatures appear on their face to be the
signatures of the persons notified to the Bank as authorised by the
Borrower in accordance with this letter) by any of the Borrower's
authorised representatives and the Borrower hereby waives all rights that
the Borrower may have to renounce forged or unauthorised instructions and
the Bank shall other than in the case of manifest error, have no liability
to the Borrower for acting on such instructions.
5 INTEREST ON THE FACILITY
------------------------
5.1 Interest shall be payable by the Borrower on each Advance from the date of
any Advance in the currency of the Advance at the rate per annum equivalent
to 2% above the Bank's base rate for Sterling advances as varied from time
to time. All payments of interest in respect of an Advance shall be made in
the Optional Currency in which such Advance is outstanding at the relevant
time. Any certificate or determination of the Bank as to any rate of
interest rate of exchange or any other amount pursuant to and for the
purposes of this Letter shall, in the absence of manifest error, be
conclusive and binding on the Borrower. If for any reason the Bank is
unable to apply its base rate
6
<PAGE>
in respect any particular currency then any relevant Advance shall be
converted into its sterling equivalent using the formula set out in
paragraph 3.1 in order to calculate the interest payable.
5.2 All interest shall accrue from day to day to the date of actual payment (as
well after as before judgement) on the basis of the actual number of days
elapsed and a 360 day year (or in the case of sterling a 365 year) and
shall be calculated and payable monthly in arrears.
5.3 Interest shall be paid on any sum payable under this letter (including any
amount payable pursuant to this paragraph 5.3) which is not paid on the due
date at the rate of 3% per annum over the cost of funds to the Bank (as
conclusively certified by the Bank).
6 PAYMENTS
--------
6.1 The Borrower shall pay to the Bank forthwith on request all moneys
whatsoever which may from time to time be outstanding under the Facility.
6.2 All sums from time to time payable by the Borrower in connection with this
Facility whether principal indemnity payment interest commission or
otherwise shall be paid to the Bank for value on the due date in the
currency in which it is due in freely transferable and immediately
available funds free and clear of any present or future taxes duties
charges fees or withholdings and without any set-off counterclaim or any
deduction whatsoever. If the Borrower is compelled by law to deduct any of
the foregoing the Borrower will pay the Bank such additional amount as
makes the net amount received by the Bank equal to the amount payable by
the Borrower had there been no deduction or withholding. Subject to the
Bank notifying the Borrower in writing after exercising its rights under
this paragraph, the Borrower irrevocably authorises the Bank to apply any
credit balance in any currency in reduction of sums from time to time due
to the Bank and to purchase with the currency of any credit balance the
currency in which amounts are owing.
7
<PAGE>
7 Representations and Warranties
The Borrower hereby represents and warrants to the Bank that:
7.1 the Borrower is duly incorporated and validly existing under the laws of
England, has power and all necessary corporate authorisations to enter
into and perform its obligations under this letter and the security to be
granted to the Bank pursuant to this Letter and has complied with all
material statutory and other legal requirements relative to its business;
7.2 all necessary governmental and other official consents and approvals for
the Borrower to accept the Facility and to make all payments in accordance
with the terms of this Letter have been obtained and are in full force and
effect;
7.3 on acceptance this Letter will and the Debenture will constitute valid and
binding obligations of the Borrower enforceable in accordance with their
terms;
7.4 no action, suit or proceeding is pending nor, to the Borrower's knowledge
after due enquiry, threatened against the Borrower or any of its assets
which could or might have a material adverse effect on its conditions,
financial or otherwise or on its ability to perform its obligations under
this Letter of the Debenture;
7.5 the Borrower is not (nor would with the giving of notice or passing of
time or both be) in default in respect of any indebtedness for borrowed
money, (including obligations under guarantees and indemnities) and the
borrowing and repayment of the sum advanced under this Letter and the
providing of the security to be provided by the Borrower to the Bank will
not contravene any existing applicable law or regulation or any
contractual or other restriction or limitation binding on the Borrower.
8 Conditions Precedent
8.1 The Bank shall not be obliged to make any amount available under this
Letter unless it shall have received before drawdown the following:
(a) a first debenture over all the undertaking and assets including a
legal charge over the Property;
(b) a report on title from the Bank's Solicitors in respect of the
Property in such form as is satisfactory to the Bank;
(c) a valuation by Locke & England satisfactory to the Bank of the
Property and such valuation being signed by R.A. Promfret;
(d) a copy, certified as a true, complete and up-to-date copy by the
Borrower's Company Secretary of the Memorandum and Articles of
Association of the Borrower;
8
<PAGE>
(e) a copy, certified as a true copy by the Company Secretary of the
Borrower, of resolutions of the Board of Directors of the Borrower
evidencing approval or ratification of this Letter and authorising its
appropriate officers to execute and deliver this Letter or to ratify
the execution and delivery of this Letter and to give all notices and
take all other action required by the Borrower under this Letter;
(f) a comfort letter from Speedfam International, Inc in a form
satisfactory to the Bank.
8.2 The conditions specified in this paragraph 11 are inserted solely for the
benefit of the Bank and may be waived by the Bank in whole or in part and
with or without conditions without prejudicing the right of the Bank to
require fulfilment of such conditions in whole or in part at a later time.
9 UNDERTAKINGS BY THE BORROWER
----------------------------
9.1 While any amount (whether actual or contingent) is outstanding hereunder
the Borrower will not, without the prior written consent of the Bank;
(a) create or allow to subsist any debenture mortgage security pledge or
other encumbrance over any part of the Property or revenue therefrom
or asset present or future (other than a lien arising by operation of
law or in the ordinary course of trading as now conducted); or
(b) permit any of the Borrower's liabilities to have the benefit of any
guarantee indemnity bond or comfort letter unless the party giving the
same gives a like commitment in respect of this Facility.
9.2 The Borrower will supply the Bank with Annual Audited Accounts and
Directors' Report of the Borrower within 180 days of the end of the
relevant financial year and all other documents issued to the Borrower's
shareholders and creditors (forthwith upon their issue) and with such other
financial and other information as the Bank may from time to time
reasonably request.
9.3 The Borrower will procure that the Bank is supplied with the Annual Audited
Accounts of Speedfam International, Inc.
9.4 The Borrower will deliver to the Bank copies of each of the following
documents, in each case (unless stated otherwise) at the time of
distribution thereof or in the case of the certificate referred to in
paragraph 9.4(b) below together with the financial statements to be
supplied pursuant to paragraph 9.2 and 9.3 in respect of the financial
period to which such certificate relates:
(a) every report, circular, notice or like document issued by the Borrower
to its shareholders or creditors generally; and
9
<PAGE>
(b) a certificate addressed to the Bank from its auditors stating that the
Borrower as at the date of its latest audited financial statements was
in compliance with the covenants and undertakings in paragraph 12.8
(or if it was not in compliance indicating the extent of the breach);
(c) management accounts for the Borrower within 60 days of the end of the
quarter to which they relate in a standard format agreed with the
Bank;
(d) aged debtor reports and inventory certificates for the Borrower within
10 days of the end of the month to which they relate in a standard
format agreed with the Bank;
9.5 (a) the Borrower will insure the Property in the name of the Borrower with
the interest of the Bank endorsed or noted on the policies in such
manner as the Bank may require against loss or damage by fire and such
other risks as the Bank shall from time to time consider necessary to
not less than the full reinstatement value thereof (together with
additional amounts estimated as sufficient to cover architects and
surveyors fees and the costs of demolition site clearance and shoring
up) with such insurance office or underwriters as may from time to
time be approved by the Bank in writing.
(b) the Borrower will insure and keep insured all its properties (other
than those referred to in sub-paragraph 9.5(a) and assets with
underwriters or insurance companies of repute to such extent and
against such risks as prudent companies engaged in businesses similar
to those of the Borrower normally insure and produce to the Bank on
request copies of all insurance policies from time to time effected by
the Borrower and will procure that the Bank's interest is noted on the
insurance policies in respect of such properties;
9.6 the Borrower will comply, with the terms and conditions of all laws,
regulations, agreements, licenses and concessions material to the carrying
on of its businesses,
9.7 the Borrower will not sell, transfer, lend or otherwise dispose of or cease
to exercise direct control over any part of its present or future
undertaking, assets, rights or revenues (otherwise than by transfers, sales
or disposals at market value to any person) whether by one or a series of
transactions related or not, without the prior written consent of the Bank
(such consent not to be unreasonably withheld or delayed);
9.8 the Borrower will ensure that at all times:
(a) the ratio of Current Assets to Current Liabilities is not less than
1:1;
(b) the Tangible Net Worth is not less than (Pound)700,000;
(c) the ratio of Total Gross Liabilities to Tangible Net Worth does not
exceed 2.5:1.
10
<PAGE>
9.9 the Borrower will procure that no transfer of the shares in the Borrower
held by Speedfam International, Inc will be registered without the Bank's
prior written consent;
9.10 it will not make any change to its main objects clause in its Memorandum
of Association or to its borrowing powers or power to issue security
without the Bank's written consent (such consent not to be unreasonably
witheld or delayed);
9.11 the Borrower shall notify the Bank of any Event of Default (as hereinafter
defined) immediately upon becoming aware of its occurrence.
10 EVENTS OF DEFAULT
-----------------
The Bank may, without prejudice to its other rights hereunder, terminate
its obligation to make the Facility contemplated hereunder available and
declare that all outstanding amounts shall become immediately due and
payable and the Borrower shall place cash cover with the Bank in an amount
equal to the maximum amount of the Bank's liability under all Bonds then
outstanding on the Bank's so notifying the Borrower at any time after any
of the following events ("EVENTS OF DEFAULT") shall occur:
(a) if the Borrower fails to perform and observe any of its obligations
under this Letter or any agreement between the Borrower and the Bank,
and, in respect only of a failure which is capable of remedy, does
not remedy such failure within 5 Banking Days;
(b) if it becomes unlawful (or impossible) for the Bank to maintain fund
or provide the facilities as contemplated hereby;
(c) if any borrowed moneys of the Borrower exceeding in aggregate
(pounds)10,000 are not paid when due or become capable of being
declared due prior to their stated maturity or the security for any
such borrowed money becomes enforceable;
(d) if a petition is presented or an order made or a resolution passed
for the administration or winding-up of the Borrower or if any
execution or distress is levied or enforced against the Borrower;
(e) if the Borrower ceases to be wholly owned by Speedfam International,
Inc;
(f) any representation or warranty the Borrower has made or is deemed to
have made pursuant to this Letter proves to be incorrect in a
material respect unless previously disclosed to the Bank in writing
and such disclosure was accepted by the Bank;
(g) any governmental consent or approval at any time necessary to enable
the Borrower to comply with its obligations hereunder is revoked or
withheld or materially modified or is otherwise not granted or fails
to remain in full force and effect;
11
<PAGE>
(h) an encumbrancer takes possession of or a receiver or similar
officer is appointed of the whole or any part of the undertaking,
property, assets or revenues of the Borrower; or
(i) the Borrower is unable to, or admits its inability to, pay its
debts as they fall due, or enters into any composition or
arrangement with its creditors or proceedings are commenced in
relation to the Borrower under any law, regulation or procedure
relating to reconstruction or re-adjustment of debts;
(j) the Borrower ceases or threatens to cease to carry on business or a
substantial part of the undertaking, property or assets of the
Borrower is seized or appropriated;
(k) there occurs, in the opinion of the Bank, a material adverse change
in the financial condition of the Borrower by reference to the
financial statements referred to in paragraph 9.2, or any event,
which material adverse change or event in the reasonable opinion of
the Bank affects the ability of the Borrower to perform its
obligations under this Letter;
(l) the Borrower defaults under any loan agreement debenture or other
document or obligation relating to money borrowed from the Bank or
any third party;
(m) the Borrower defaults under any loan agreement debenture or other
document or obligation relating to money borrowed from any third
party but where such default is in respect of a monetary payment
only, it will only be an Event of Default if the sum not paid
exceeds (pounds)1,000.
11 ARRANGEMENT COMMISSION AND OTHER FEES AND EXPENSES IN RESPECT OF THE
--------------------------------------------------------------------
FACILITIES
----------
11.1 The Borrower will pay commission on each Bond at a rate of 2% (two
per cent) for advance payment and performance guarantees and 1% (one
per cent) per annum for VAT guarantees for the maximum amount of the
Bank's liability under each Bond calculated on a daily basis from the
date of issue until the expiry date of such Bond payable in full in
advance. Commission will be calculated on the basis of the actual
number of days elapsed and a 365 day year.
11.2 The Borrower shall pay to the Bank an arrangement fee of
(pounds)2,500.
11.3 The Borrower shall pay to the Bank upon demand all costs, charges and
expenses (including legal expenses, stamp, registration or other
duties and any VAT) incurred by the Bank in connection with the
preparation and execution of this Letter and documents ancillary
thereto and all costs, charges and expenses (including legal and
valuation expenses on a full indemnity basis and any V.A.T.) of the
Bank in connection with the enforcement of, or preservation of any
rights under this Letter or otherwise in connection with this
Facility or security to be granted by the Borrower.
11.4 The Borrower hereby authorises the Bank to deduct any fees or
expenses payable to it under the terms of this Letter and notified by
the Bank to the Borrower in
12
<PAGE>
accordance with its usual practice from such of its accounts maintained by
the Bank from time to time as the Bank shall choose.
12 ASSIGNMENT
----------
12.1 The Borrower agrees that the Bank may:
(a) assign all or any part of its rights or obligation under this letter
to any one or more members of the same group (as defined in Section
53(1) of the Companies Act 1989); or
(b) (with the Borrower's prior written consent, such consent not to be
unreasonably withheld or delayed) assign all or any part of its
rights or obligations under this Letter to any one or more other
banks or financial institutions
Providing such an assignment does not give rise to any withholding tax
liability on the part of the Borrower and after any such assignment the
expression the "BANK" shall be deemed to include such assignees to the
extent of their respective participation and provided also that the
assignment of all or part of the Bank's obligations may only be effected
if the assignee shall undertake to become bound by the terms of this
Letter and thereafter the assignee alone shall be obliged to perform that
portion of the Bank's obligations which corresponds to its participation.
12.2 The Bank may disclose to a prospective assignee, substitute or transferee
or to any other person who may propose entering into contractual relations
with the Bank in relation to this Letter such information about the
Borrower as the Bank shall consider appropriate subject to it obtaining an
appropriate confidentiality undertaking in a form approved by the Borrower
from such potential assignee, substitute or transferee.
13 LAW
---
13.1 This Letter shall be governed by English law and the Borrower hereby
irrevocably submits to the non-exclusive jurisdiction of the High Court of
Justice in England.
Yours faithfully
/s/ W. Stevenson
........................
for and on behalf of
The First National Bank of Chicago
ACCEPTED AND AGREED )
for and on behalf of )
SpeedFam Limited )
by ) /s/ R. R. Smith
on 31st October 1996 ) ......................
13
<PAGE>
Private & Confidential
DATED 31st October 1996
-----------------------
SPEEDFAM LIMITED (1)
and
THE FIRST NATIONAL BANK OF CHICAGO (2)
---------------------------
DEBENTURE
---------------------------
Wragge & Co
Birmingham
<PAGE>
CONTENTS
--------
Clause Heading Page
1 Interpretation....................................................... 1
2 Covenant to Pay...................................................... 3
3 Charges.............................................................. 4
4 Set-off.............................................................. 6
5 Undertakings......................................................... 7
6 Further Assurance.................................................... 11
7 Certain powers of the Bank: Enforcement.............................. 12
8 Appointment and Powers of Receiver................................... 13
9 Application of Proceeds; Purchasers................................. 16
10 Indemnities; Costs and Expenses...................................... 16
11 Power of Attorney.................................................... 17
12 Continuing Security and Other Matters................................ 18
13 Representations and Warranties....................................... 18
14 Miscellaneous........................................................ 20
15 Notices.............................................................. 21
16 Law.................................................................. 21
The Schedule
Part A - Properties....................................................... 22
Part B - Fixed Plant and Machinery........................................ 23
Part C - Intellectual Property Rights..................................... 24
<PAGE>
THIS DEBENTURE dated ,19
BETWEEN:
(1) SPEEDFAM LIMITED (No. 1175211) whose registered office is at Brindley Road,
Dodwells Industrial Estate, Hinckley, Leicestershire LE10 3BY (the
"Company"); and
(2) THE FIRST NATIONAL BANK OF CHICAGO whose office is at First Chicago House,
90 Long Acre, London, WC2E 9RB (the "Bank")
WITNESSES as follows:
1 INTERPRETATION
1.1 DEFINITIONS: In this Deed, unless the context otherwise requires:
"CHARGED ASSETS" means all the undertaking, goodwill, property, assets and
rights of the Company described in clauses 3.1 and 3.2;
"COLLATERAL INSTRUMENTS" means negotiable and non-negotiable instruments,
guarantees, indemnities and other assurances against financial loss and any
other documents or instruments which contain or evidence an obligation
(with or without security) to pay, discharge or be responsible directly or
indirectly for, any liabilities of any person and includes any document or
instrument creating or evidencing an Encumbrance;
"DEBTS" means the assets of the Company described in clause 3.1(d);
"DISPOSAL" includes any sale, lease, sub-lease, assignment or transfer, the
grant of an option or similar right, the grant of any easement, right or
privilege, the creation of a trust or other equitable interest in favour of
a third party, a sharing or parting with
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possession or occupation whether by way of licence or otherwise and the granting
of access to any other person over any intellectual property, and "dispose" and
"disposition" shall be construed accordingly;
"ENCUMBRANCE" means any mortgage, charge (whether fixed or floating), pledge,
lien, hypothecation, standard security, assignment by way of security or other
security interest of any kind;
"ENFORCEMENT DATE" means the date on which the Bank demands the payment or
discharge of all or any part of the Secured Obligations or if earlier, the date
on which a petition for an administration order is presented in relation to the
Company;
"EVENT OF DEFAULT" means any of the events or circumstances described in
paragraph 13 of the Facility Agreement;
"FACILITY AGREEMENT" means the facility agreement dated 31st October 1996 made
between Speedfam Limited and the Bank.
"FLOATING CHARGE ASSETS" means the assets of the Company from time to time
expressed to be charged by this Debenture by way of floating charge;
"INSURANCES" means all present and future contracts or policies of insurance
(including life policies) in which the Company from time to time has an
interest;
"INTELLECTUAL PROPERTY RIGHTS" means the assets of the Company described in
clause 3.1 (g);
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"PERMITTED ENCUMBRANCE" means any Encumbrance arising by the way of
retention of title of goods by the supplier of such goods where such goods
are supplied on credit and are acquired in the ordinary course of trading
of the Company;
"PROPERTIES" means the assets of the Company described in clause 3.1(a) and
all present and future heritable and leasehold property of the Company
situate in Scotland (including without limitation the properties specified
in Part B of the schedule) and all liens, charges, options, agreements,
rights and interests in or over land or the proceeds of sale of land
situate in Scotland and all buildings, fixtures (including trade fixtures)
and fixed plant and machinery from time to time on such property or land
together with all rights, easements, servitudes and privileges appurtenant
to, or benefitting, the same, in all cases both present and future;
"RECEIVER" means any one or more receivers and/or managers or
administrative receivers appointed by the Bank pursuant to this Deed in
respect of the Company or over all or any of the Charged Assets;
"SECURED OBLIGATIONS" means all moneys, obligations and liabilities
covenanted to be paid or discharged by the Company under or pursuant to
clause 2;
"SECURITIES" means the assets of the Company described in clause 3.1(c).
1.2 Successors and assigns: the expressions "Bank" and "Company" include, where
the context admits, their respective successors, and, in the case of the
Bank, its transferees and assignees, whether immediate or derivative.
1.3 Headings: Clause headings and the contents page are inserted for
convenience of reference only and shall be ignored in the interpretation of
this Deed.
1.4 Construction of certain terms: In this Deed, unless the context otherwise
requires:
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(a) references to clauses and the schedule are to be construed as
references to the clauses of, and the schedule to, this Deed and
references to the Deed include its schedule;
(b) reference to (or to any specified provision of) this Deed or any other
document shall be construed as references to this Deed, that provision
or that document as in force for the time being and as amended in
accordance with the terms thereof or, as the case may be, with the
agreement of the relevant parties and (where such consent is, by the
terms of this Deed or the relevant document, required to be obtained
as a condition to such amendment being permitted) the prior written
consent of the Bank;
(c) words importing the plural shall include the singular and vice versa;
(d) references to a person shall be construed as including references to
an individual, firm, company, corporation, unincorporated body of
persons or any State or any agency thereof;
(e) references to statutory provisions shall be construed as references to
those provisions as replaced, amended or re-enacted from time to time.
1.5 Effect as a deed: This deed is intended to take effect as a deed
notwithstanding that the Bank may have executed it under hand only.
1.6 Facility Agreement definitions: Unless the context otherwise requires or
unless otherwise defined in this Deed, words and expressions defined in the
Facility Agreement shall have the same meaning when used in this Deed.
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2 COVENANT TO PAY
2.1 Secured obligations: The Company hereby convenants that it will on demand
pay to the Bank all moneys and discharge all obligations and liabilities
now or hereafter due, owing or incurred to the Bank when the same become
due for payment or discharge whether by acceleration or otherwise, and
whether such moneys, obligations or liabilities are express or implied;
present, future or contingent; joint or several; incurred as principal or
surety; originally owing to the Bank or purchased or otherwise acquired by
it; denominated in sterling or in any other currency; or incurred on any
banking account or in any other manner whatsoever.
2.2 Certain liabilities: The liabilities referred to in clause 2.1 shall,
without limitation, include:
(a) all liabilities under or in connection with foreign exchange
transactions, interest rate swaps and other arrangements entered into
for the purpose of limiting exposure to fluctuations in interest or
exchange rates,
(b) all liabilities arising from the issue, acceptance, endorsement,
confirmation or discount of any negotiable or non-negotiable
instruments, documentary or other credits, bonds, guarantees,
indemnities or other instruments of any kind; and
(c) interest (both before and after judgment) to date of payment at such
rates and upon such terms as may from time to time be agreed,
commission, fees and other charges and all legal and other costs,
charges and expenses on a full and unqualified indemnity basis which
may be incurred by the Bank in relation to any such moneys,
obligations or liabilities or generally in respect of the Company.
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3 CHARGES
-------
3.1 Fixed Charge: The Company with full title guarantee hereby charges to the
Bank by way of first fixed charge (and as regards all those parts of the
freehold and leasehold property in England and Wales now vested in the
Company by way of first legal mortgage) as a continuing security for the
payment and discharge of the Secured Obligations the following assets, both
present and future, from time to time owned by the Company or in which the
Company may from time to time have an interest:
(a) Properties: all freehold and leasehold property of the Company situate
in England and Wales (including without limitation the property
specified in Part A of the schedule) and all liens, charges, options,
agreements, rights and interests in or over land or the proceeds of
sale of land situate in England and Wales and all buildings, fixtures
(including trade fixtures) and fixed plant and machinery from time to
time on such property or land together with all rights, easements and
privileges appurtenant to, or benefitting, the same;
(b) Plant and Machinery: all plant, machinery, vehicles, computers and
office and other equipment including, without limitation, those listed
in Part B of the schedule and the benefit of all contracts and
warranties relating to the same;
(c) Securities: all stocks, shares, bonds and securities of any kind
whatsoever whether marketable or otherwise and all other interests
(including but not limited to loan capital) in any person, including
all allotments, rights, benefits and advantages whatsoever at any time
accruing, offered or arising in respect of or incidental to the same
and all money or property accruing or offered at any time by way of
conversion, redemption, bonus, preference, option, dividend,
distribution, interest or otherwise in respect thereof;
(d) Debts: all book and other debts, revenues and claims, whether actual
or contingent, whether arising under contracts or in any other manner
whatsoever
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and whether originally owing to the Company or purchased or otherwise
acquired by it including, without limitation, any amount from time to
time standing to the credit of any bank or other account with the Bank
or with any other person and all things in action which may give rise
to any debt, revenue or claim, together with the full benefit of any
Encumbrances, Collateral Instruments and any other rights relating
thereto including, without limitation, reservations of proprietary
rights, rights of tracing and unpaid vendor's liens and associated
rights;
(e) Insurances: all moneys from time to time payable to the Company under
or pursuant to the Insurances including without limitation the refund
of any premiums;
(f) Goodwill and uncalled capital: all goodwill and uncalled capital;
(g) Intellectual Property Rights: all patents, patent applications, trade
marks and service marks (whether registered or not) trade mark
applications, service mark applications, trade names, registered
designs, design rights, copyrights, computer programmes, know how and
trade secrets and all other industrial or intangible property or
rights and all licences, agreements and ancillary and connected rights
relating to, intellectual and intangible property including, without
limitation, those listed in Part C of the schedule.
3.2 Floating Charge: The Company with full title guarantee hereby charges to
the Bank by way of first floating charge as a continuing security for the
payment and discharge of the Secured Obligations its undertaking and all
its property, assets and rights whatsoever and wheresoever both present and
future, other than any property or assets from time to time effectively
charged by way of legal mortgage or fixed charge or assignment pursuant to
clause 3.1 or otherwise pursuant to this Deed but including (without
limitation and whether or not so effectively charged) any of its property
and assets situated in Scotland and such assets or any part or parts
thereof as may be
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released from such fixed charges either in writing by the Lender or
pursuant to the provisions of clause 5.1(a)(i).
3.3 Restrictions on dealing with Charged Assets: The Company hereby covenants
that it will not without the prior consent in writing of the Bank:
(a) dispose of, or create or attempt to create or permit to subsist or
arise any Encumbrance on or over, the Debts or any part thereof or
release, set off or compound or deal with the same otherwise than in
accordance with clause 5.1(a);
(b) create or attempt to create or permit to subsist in favour of any
person other than the Bank any Encumbrance (except a Permitted
Encumbrance) and a lien arising by operation of law in the ordinary
course of trading over property other than land) on or affecting the
Charged Assets or any part thereof; or
(c) dispose of the Charged Assets or any part thereof or attempt or agree
so to do except in the case of:
(i) stock-in-trade, which may, subject to the other provisions of
this Deed, be sold at full market value in the usual course of
trading as now conducted and for the purpose of carrying on the
Company's business; and
(ii) other Floating Charge Assets which may, subject to the other
provisions of this Deed, be disposed of in the ordinary course
of business); and
(iii) plant and equipment for full value in cash if the proceeds of
such sale are reinvested in the Company's business.
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3.4 Automatic conversion of floating charge: Notwithstanding anything expressed
or implied in this Deed, if the Company creates or attempts to create any
Encumbrance over all or any of the Floating Charge Assets without the prior
consent in writing of the Bank or if any person levies or attempts to levy
any distress, execution, sequestration or other process or does or attempts
to do any diligence in execution against any of the Floating Charge Assets,
the floating charge created by clause 3.2 over the property or asset
concerned shall thereupon automatically without notice be converted into a
fixed charge.
3.5 Conversion of floating charge by notice: Notwithstanding anything expressed
or implied in this Deed but without prejudice to clause 3.4, the Bank shall
be entitled at any time by giving notice in writing to that effect to the
Company to convert the floating charge over all or any part of the Floating
Charge Assets into a fixed charge as regards the assets specified in such
notice.
3.6 H.M. Land Registry: The Company hereby applies to the Chief Land Registrar
for the registration of the following restriction against each of the
registered titles specified in Part A of the schedule (and against any
title to any unregistered property specified in Part A of the schedule
which is or ought to be the subject of a first registration of title at
H.M. Land Registry at the date of this Deed):
"Except under an Order of the Registrar no disposition or charge or
other security interest is to be registered or noted without the
consent of the proprietor for the time being of Charge No. ".
4 SET-OFF
-------
4.1 Set-off: The Company hereby agrees that the Bank may at any time without
notice, notwithstanding any settlement of account or other matter
whatsoever, combine or consolidate all or any of its then existing accounts
wheresoever situate (including accounts in the name of the Bank or of the
Company jointly with others), whether
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such accounts are current, deposit, loan or of any other nature whatsoever,
whether they are subject to notice or not and whether they are denominated
in sterling or in any other currency, and set-off or transfer any sum
standing to the credit of any one or more of such accounts in or towards
satisfaction of the Secured Obligations which, to the extent not then
payable, shall automatically become payable to the extent necessary to
effect such set-off.
4.2 Purchase of currencies: For the purpose of clause 4.1, the Company
authorises the Bank to purchase with the moneys standing to the credit of
such accounts such other currencies as may be necessary to effect such
applications.
5 UNDERTAKINGS
------------
5.1 The Company hereby undertakes with the Bank that during the continuance of
this security the Company will:
(a) Debts:
(i) deal with the Debts in accordance with such directions as may be
given by the Bank in writing from time to time (subject only to
such rights if any as Lloyds Bank Plc or such other clearing bank
as the Company and the Bank shall agree in writing from time to
time ("the Clearing Bank") may have in respect thereof) and
subject to such directions as may be given from time to time
shall enforce payment and realise the Debts in the ordinary
course of its business (which shall not without the prior written
consent of the Bank extend to the selling or assigning or in any
other way factoring or discounting the same) and pay the proceeds
of the enforcement and realisation of the Debts:
(A) into the Company's current account with the Clearing Bank;
or
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(B) into such other separate account with the Clearing Bank as
the Bank may in writing from time to time specify;
and in either case pay or otherwise deal with such proceeds
standing in such account (subject to such rights if any as the
Clearing Bank may have in respect thereof) in accordance with any
directions given in writing from time to time by the Bank; or
(C) if so requested by the Bank to the Bank itself;
PROVIDED THAT where no directions have been given by the Bank in
respect of the proceeds of the enforcement and realisation of any
Debts such proceeds shall on payment into such accounts as are
specified in clauses 5.1(a)(i)(A) and 5.1(a)(i)(B) stand released
from the fixed charge hereby created but shall nonetheless remain
subject to the floating charge hereby created PROVIDED FURTHER
that such release shall be limited to the proceeds of such assets
in respect of which no directions have been given by the Bank and
shall not derogate from the fixed charge in respect of all the
other Debts;
(ii) if so requested by the Bank pay to the Bank all monies which the
Company may receive in respect of the Securities.
(b) Deposit of deeds: deposit with the Bank (to be held at the risk of the
Company):
(i) all deeds and documents of title relating to the Properties and
to any subordinate interest in any of them and the insurance
policies relating thereto;
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(ii) all certificates and documents of title relating to the Securities
and such deeds of transfer in blank and other documents as the Bank
may from time to time require for perfecting the title of the Bank to
the Securities (duly executed by or signed on behalf of the
registered holder) or for vesting or enabling it to vest the same in
itself or its nominees or in any purchaser; and
(iii) all such other documents relating to the Charged Assets as the Bank
may from time to time reasonably require;
(c) Calls etc: duly and promptly pay all calls, instalments or other moneys
which may from time to time become due in respect of any of its Securities,
it being acknowledged by the Company that the Bank shall not in any
circumstances incur any liability whatsoever in respect of any such calls,
instalments or other moneys;
(d) Provision of information: provide the Bank with such financial and other
information relating to the Company, and its business as the Bank may from
time to time reasonably require;
(e) Conduct of business: conduct and carry on its business, and procure that
each of its Subsidiaries conducts and carries on its business, in a proper
and efficient manner and keep or cause or procure to be kept proper books
of account relating to such business and not make any material alteration
in the nature or mode of conduct of any such business;
(f) Compliance with covenants etc: observe and perform all covenants, burdens,
stipulations, requirements and obligations from time to time affecting the
Charged Assets and/or the use, ownership, occupation, possession,
operation, repair, maintenance or other enjoyment or exploitation of the
Charged Assets whether imposed by statute, contract, lease, license, grant
or otherwise, carry
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out all registrations or renewals and generally do all other acts and
things (including the taking of legal proceedings) necessary or
desirable to maintain, defend or preserve its right, title and
interest to and in the Charged Assets without infringement by any
third party and not without the prior consent in writing of the Bank
(such consent not to be unreasonably withheld or delayed) enter into
any onerous or restrictive obligations affecting any of the same or
agree any rent review relating to any interest in any of the
Properties;
(g) Alteration or development of Properties: not make without the prior
written consent of the Bank, whose consent shall not be unreasonably
withheld, any structural or material alteration to or to the user of
any of its Properties or do or permit to be done anything which is a
"development" within the meaning of the Town and Country Planning Acts
from time to time or any orders or regulations under such Acts or do
or permit or omit to be done any act, matter or thing as a consequence
of which any provision of any statute, bye-law, order or regulation or
any condition of any consent, licence, permission or approval (whether
of a public or private nature) from time to time in force affecting
any of the Properties is or may be infringed;
(h) Maintenance of buildings, machinery and plant: keep all its buildings,
machinery, plant, fixtures, vehicles, computers and office and other
equipment in good and substantial repair and in good working order and
condition and on receipt of reasonable notice permit the Bank and its
agents or representatives to enter and view their state and condition;
(i) Insurance:
(i) insure the Property listed in Part A of the Schedule in the name
of the Company with the interest of the Bank endorsed or noted on
the policies in such manner as the Bank may require against loss
or damage by fire and such other risks as the Bank shall from
time to
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time consider necessary to not less than the full reinstatement
value thereof (together with additional amounts estimated as
sufficient to cover architects and surveyors fees and the costs
of demolition, site clearance and shoring up) with such insurance
office or underwriters as may from time to time be approved by
the Bank in writing;
(ii) insure and keep insured all its properties (other than referred
to above) and assets with underwriters or insurance companies of
repute to such extent and against such risks is prudent companies
engaged in businesses similar to those of the Company normally
insure and produce to the Bank on request copies of all insurance
policies from time to time effected by the Company and will
procure that the Bank's interest is noted on the insurance
policies in respect of such properties.
(j) Property outgoings: punctually pay, or cause to be paid, and indemnify
the Bank and any Receiver (on a several basis) against, all present
and future rent, rates, taxes, duties, charges, assessments,
impositions and outgoings whatsoever (whether imposed by agreement,
statute or otherwise) now or at any time during the continuance of
this security payable in respect of the Properties or any part thereof
or by the owner or occupier thereof;
(k) Possession of Properties: without prejudice to the generality of
clause 3.3(c), not without the prior consent in writing of the Bank
grant any lease, part with possession or share occupation of the whole
or any part of any of the Properties or confer any licence, right or
interest to occupy or grant any licence or permission to assign,
underlet or part with possession of the same or any part thereof or
permit any person:
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(i) to be registered (jointly with the Company or otherwise) as
proprietor under the Land Registration Acts of any of the
Properties nor create or permit to arise any overriding interest
affecting the same within the definition in those Acts or within
the meaning of the Land Registration (Scotland) Act 1979; or
(ii) to become entitled to any right, easement, covenant, interest or
other title encumbrance which might adversely affect the value or
marketability of any of the Properties;
(l) Variation of leasehold interests: not without the prior consent in
writing of the Bank vary, surrender, cancel or dispose of, or permit
to be forfeit, any leasehold interest in any of the Properties or any
credit sale, hire purchase, leasing, rental, licence or like agreement
for any equipment used in its business;
(m) Acquisition of property: immediately inform the Bank before
contracting to purchase any estate or interest in freehold, leasehold
or heritable property and supply the Bank with such details of the
purchase as the Bank may from time to time request;
(n) Access: procure that representatives designated by the Bank and its
representatives will be allowed access at reasonable times and on
reasonable notice to inspect the Properties;
(o) Intellectual Property Rights: without prejudice to the generality of
clause 5.1(f):
(i) take all necessary action to safeguard and maintain its rights,
present and future, in or relating to all Intellectual Property
Rights including, without limitation, observing all covenants and
stipulations relating
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thereto, paying all renewal fees and taking all other steps
necessary to maintain all registered design, patent, trade mark
and service mark registrations held by it;
(ii) use all reasonable efforts to effect registration of
applications for registration of any registered design, patent,
trade mark and service mark and keep the Bank informed of events
relevant to any such application and not without the prior
consent in writing of the Bank permit any Intellectual Property
Rights to be abandoned or cancelled, to lapse or to be liable to
any claim of abandonment for non-use or otherwise;
(iii) notify the Bank forthwith of any infringement or material
suspected infringement or any challenge to the validity of any
of its present or future Intellectual Property Rights which may
come to its notice, supply the Bank with all information in its
possession relating thereto and take all steps necessary to
prevent or bring to an end any such infringement and to defend
any challenge to the validity of any such rights;
(p) Purchase of Shares: not (without the prior consent in writing of the
Bank) redeem or purchase any of its own shares or pay any dividend;
(q) Disposals to connected persons: without prejudice to the generality of
clause 3.3(c), not (without the prior consent in writing of the Bank)
dispose of any Charged Assets to any person who is connected (within
the meaning of section 249 Insolvency Act 1986) with the Company save
on terms previously approved in writing by the Bank;
(r) Report on title: forthwith on request by the Bank, provide the Bank
with a report from solicitors approved by the Bank in such form as the
Bank may
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require as to the title of the Company to such of the Properties as
the Bank shall specify;
(s) Jeopardy: not do or cause or permit to be done anything which may in
any way depreciate, jeopardise or otherwise prejudice the value to the
Bank of any of the Charged Assets; and
(t) No Subsidiaries to be formed or acquired: not (without the prior
consent in writing of the Bank) form or acquire any Subsidiary.
5.2 Power to remedy: If the Company at any time defaults in complying with any
of its obligations contained in this Deed, the Bank shall, without
prejudice to any other rights arising as a consequence of such default, be
entitled (but not bound) to make good such default and the Company hereby
irrevocably authorises the Bank and its employees and agents by way of
security to do all such things (including, without limitation, entering the
Company's property) necessary or desirable in connection therewith. Any
moneys so expended by the Bank shall be repayable by the Company to the
Bank on demand together with interest at the Default Rate from the date of
payment by the Bank until such repayment, both before and after judgment.
No exercise by the Bank of its powers under this clause 5.2 shall make it
liable to account as a mortgagee in possession.
6 FURTHER ASSURANCE
-----------------
6.1 Further assurance: The Company shall if and when at any time required by
the Bank execute such further Encumbrances and assurances in favour of the
Bank and do all such acts and things as the Bank shall from time to time
reasonably require over or in relation to all or any of the Charged Assets
to secure the Secured Obligations or to perfect or protect the security
intended to be created by this Deed over the Charged Assets or any part
thereof or to facilitate the realisation of the same. Such further
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Encumbrances and assurances shall be prepared by or on behalf of the
Bank at the expense of the Company and shall be in a form reasonably
acceptable to the Bank.
6.2 Specific security documents required: Without prejudice to the
generality of the provision of clause 6.1 the Company shall execute as
and when so required by the Bank;
(a) a mortgage, charge, standard security or hypothecation (as specified
by the Bank) over any heritable property in Scotland owned, or any
recorded lease of heritable property in Scotland held, by it at the
date of this Deed, any leasehold or freehold property in Northern
Ireland or the Republic of Ireland owned by it at the date of this
Deed, and any and all heritable fixtures and fittings and fixed plant
and machinery at any time situate thereon including (without prejudice
to the generality of the foregoing) tenants fixtures and fittings in
and upon any such leased property; and/or
(b) a legal mortgage, legal charge, standard security or hypothecation (as
specified by the Bank) over any freehold, leasehold and heritable
properties acquired by it after the date of this Deed (including all
or any of the Properties as and when the same are conveyed,
transferred, or let to it) and over any and all fixtures, trade
fixtures and fixed plant and machinery at any time and from time to
time situate thereon.
7 CERTAIN POWERS OF THE BANK; ENFORCEMENT
---------------------------------------
7.1 The Securities: The Company will if so requested by the Bank transfer all
or any of the Securities to such nominees or agents as the Bank may select.
7.2 Powers on enforcement: At any time on or after the Enforcement Date or if
requested by the Company, the Bank may, without further notice, without the
restrictions contained in section 103 Law of Property Act 1925 (or in the
case of
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property in Northern Ireland section 20 of the Conveyancing and Law of
Property Act 1881) and whether or not a Receiver shall have been appointed,
exercise all the powers conferred upon mortgages by the Law of Property Act
1925 (or in the case of property in Northern Ireland the Conveyancing and
Law of Property Act 1881) as varied or extended by this Deed and all the
powers and discretions conferred by this Deed on a Receiver either
expressly or by reference.
7.3 Subsequent Encumbrances: If the Bank receives notice of any subsequent
Encumbrance affecting the Charged Assets or any part thereof, the Bank may
open a new account for the Company. If it does not do so then, unless the
Bank gives express written notice to the contrary to the Company, it shall
nevertheless be treated as if it had opened a new account at the time when
it received such notice and as from that time all payments made by or on
behalf of the Company to the Bank shall be credited or be treated as having
been credited to the new account and shall not operate to reduce the amount
due from the Company to the Bank at the time when it received such notice.
7.4 Statutory power of leasing: The Bank shall have the power to lease and
make agreements for leases at a premium or otherwise, to accept surrenders
of leases and to grant options on such terms as the Bank shall consider
expedient and without the need to observe any of the provisions of sections
99 and 100 Law of Property Act 1925 (or in the case of property in Northern
Ireland section 18 of the Conveyancing and Law of Property Act 1881).
7.5 Contingencies: If the Bank enforces the security constituted by this Deed
at a time when no amount in respect of the Secured Obligations is due and
payable, the Bank (or the Receiver) may pay the proceeds of any recoveries
effected by it into an interest-bearing suspense account. The Bank may
(subject to the payment of any claims having priority to this security)
withdraw amounts standing to the credit of such suspense account for
application as follows:
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(a) paying all costs, charges and expenses incurred and payments made by
the Bank (or the Receiver) in the course of such enforcement;
(b) paying remuneration to the Receiver as and when the same becomes due
and payable; and
(c) paying amounts due and payable in respect of the Secured Obligations
as and when the same become due and payable.
8 APPOINTMENT AND POWERS OF RECEIVER
----------------------------------
8.1 Appointment: At any time on or after the Enforcement Date or if requested
by the Company, the Bank may by instrument in writing executed as a deed or
under the hand of any director or other duly authorised officer appoint any
qualified person to be a Receiver of the Charged Assets or any part
thereof. Where more than one Receiver is appointed, each joint Receiver
shall have power to act severally, independently of any other joint
Receivers, except to the extent that the Bank may specify to the contrary
in the appointment. The Bank may (subject, where relevant, to section 45
Insolvency Act 1986) remove any Receiver so appointed and appoint another
in his place. In this clause 8 a "qualified person" is a person who, under
the Insolvency Act 1986, is qualified to act as a receiver of the property
of any company with respect to which he is appointed or, as the case may
be, an administrative receiver of any such company.
8.2 Receiver as agent: A Receiver shall be the agent of the Company and the
Company shall be solely responsible for his acts or defaults and for his
remuneration.
8.3 Powers of Receiver: A Receiver shall have all the powers conferred from
time to time on receivers and administrative receivers by statute (in the
case of powers conferred by the Law of Property Act 1925, without the
restrictions contained in section 103 of that Act) and power on behalf and
at the expense of the Company
20
<PAGE>
(notwithstanding liquidation of the Company) to do or omit to do anything which
the Company could do or omit to do in relation to the Charged Assets or any part
thereof. In particular (but without limitation) a Receiver shall have power to
do all or any of the following acts and things:
(a) Take possession: take possession of, collect and get in all or any of the
Charged Assets and exercise in respect of the Securities all voting or
other powers or rights available to a registered holder thereof in such
manner as he may think fit;
(b) Carry on business: carry on, manage, develop, reconstruct, amalgamate or
diversify the business of the Company or any part thereof or concur in so
doing; lease or otherwise acquire and develop or improve properties or
other assets without being responsible for loss or damage;
(c) Borrow money: raise or borrow any money from or incur any other liability
to the Bank or others on such terms with or without security as he may
think fit and so that any such security may be or include a charge on the
whole or any part of the Charged Assets ranking in priority to this
security or otherwise;
(d) Dispose of assets: without the restrictions imposed by section 103 Law of
Property Act 1925 (or in the case of property in Northern Ireland section
20 of the Conveyancing and Law of Property Act 1881) or the need to observe
any of the provisions of sections 99 and 100 of such Act (or section 18 of
the Conveyancing and Law of Property Act 1881 in the case of Northern
Ireland), sell by public auction or private contract, let, surrender or
accept surrenders, grant licences or otherwise dispose of or deal with all
or any of the Charged Assets or concur in so doing in such manner for such
consideration and generally on such terms and conditions as he may think
fit with full power to convey, let, surrender, accept surrenders or
otherwise transfer or deal with
21
<PAGE>
such Charged Assets in the name and on behalf of the Company or otherwise
and so that covenants and contractual obligations may be granted and
assumed in the name of and so as to bind the Company (or other the estate
owner) if he shall consider it necessary or expedient so to do; any such
sale, lease or disposition may be for cash, debentures or other
obligations, shares, stock, securities or other valuable consideration and
be payable immediately or by instalments spread over such period as he
shall think fit and so that any consideration received or receivable shall
ipso facto forthwith be and become charged with the payment of all the
Secured Obligations; plant, machinery and other fixtures may be severed and
sold separately from the premises containing them and the Receiver may
apportion any rent and the performance of any obligations affecting the
premises sold without the consent of the Company;
(e) Form subsidiaries: promote the formation of companies with a view to the
same becoming a subsidiary of the Company and purchasing, leasing,
licensing or otherwise acquiring interests in all or any of the Charged
Assets or otherwise, arrange for such companies to trade or cease to trade
and to purchase, lease, license or otherwise acquire all or any of the
Charged Assets on such terms and conditions whether or not including
payment by instalments secured or unsecured as he may think fit;
(f) Compromise contracts: make any arrangements or compromise or enter into or
cancel any contracts which he shall think expedient;
(g) Repair and maintain assets: make and effect such repairs, renewals and
improvements to the Charged Assets or any part thereof as he may think fit
and maintain, renew, take out or increase insurances;
(h) Appoint employees: appoint managers, agents, officers and employees for
any of the purposes referred to in this clause 8.3 or to guard or protect
the
22
<PAGE>
Charged Assets at such salaries and commissions and for such periods
and on such terms as he may determine and may dismiss the same;
(i) Make calls: make calls conditionally or unconditionally on the
members of the Company in respect of uncalled capital;
(j) Exercise statutory leasehold powers: without any further consent by or
notice to the Company exercise for and on behalf of the Company all
the powers and provisions conferred on a landlord or a tenant by the
Landlord and Tenant Acts, the Rent Acts, the Housing Acts or the
Agricultural Holdings Act or any other legislation from time to time
in force in any relevant jurisdiction relating to rents or agriculture
in respect of any part of the Properties but without any obligation to
exercise any of such powers and without any liability in respect of
powers so exercised or omitted to be exercised;
(k) Legal proceedings: institute, continue, enforce, defend, settle or
discontinue any actions, suits or proceedings in relation to the
Charged Assets or any part thereof or submit to arbitration as he may
think fit;
(l) Execute documents: sign any document, execute any deed and do all
such other acts and things as may be considered by him to be
incidental or conducive to any of the matters or powers aforesaid or
to the realisation of the security created by or pursuant to this Deed
and to use the name of the Company for all the purposes aforesaid; and
(m) Insolvency Act powers: do all the acts and things described in
Schedule 1 to the Insolvency Act 1986 as if the words "he" and "him"
referred to the Receiver and "company" referred to the Company.
8.4 Remuneration: The Bank may from time to time determine the remuneration of
any Receiver and section 109(6) Law of Property Act 1925 (or in the case of
property in
23
<PAGE>
Northern Ireland section 24(6) of the Conveyancing and Law of Property Act
1881) shall be varied accordingly. A Receiver shall be entitled to
remuneration appropriate to the work and responsibilities involved upon the
basis of charging from time to time adopted by the Receiver in accordance
with the current practice of his firm.
9 APPLICATION OF PROCEEDS; PURCHASERS
9.1 Application of proceeds: All moneys received by the Bank or by any
Receiver shall be applied, after the discharge of the remuneration and
expenses of the Receiver and all liabilities having priority to the Secured
Obligations, in or towards satisfaction of such of the Secured Obligations
and in such order as the Bank in its absolute discretion may from time to
time conclusively determine, except that the Bank may credit the same to a
suspense account for so long and in such manner as the Bank may from time
to time determine and the Receiver may retain the same for such period as
he and the Bank consider expedient.
9.2 Insurance proceeds: all moneys receivable by virtue of any of the
Insurances shall be paid to the Bank (or if not paid by the insurers
directly to the Bank shall be held on trust for the Bank) and shall at the
option of the Bank be applied in replacing, restoring or reinstating the
property or assets destroyed, damaged or lost (any deficiency being made
good by the Company).
9.3 Protection of purchasers: No purchaser or other person shall be bound or
concerned to see or enquire whether the right of the Bank or any Receiver
to exercise any of the powers conferred by this Deed has arisen or be
concerned with notice to the contrary or with the propriety of the exercise
or purported exercise of such powers.
10 INDEMNITIES; COSTS AND EXPENSES
10.1 Enforcement costs: The Company hereby undertakes with the Bank to pay on
demand all costs, charges and expenses incurred by the Bank or by any
Receiver in
24
<PAGE>
or about the enforcement, preservation or attempted preservation of any
of the security created by or pursuant to this Deed or any of the Charged
Assets on a full indemnity basis, together with interest at the Default
Rate from the date on which such costs, charges or expenses are so
incurred until the date of payment by the Company (both before and after
judgment).
10.2 No liability as mortgagee in possession: Neither the Bank nor any Receiver
shall be liable to account as mortgagee or heritable creditor in
possession in respect of all or any of the Charged Assets or be liable for
any loss upon realisation or for any neglect or default of any nature
whatsoever for which a mortgagee or heritable creditor in possession may
be liable as such.
10.3 Indemnity from Charged Assets: The Bank and any Receiver, attorney, agent
or other person appointed by the Bank under this Deed and the Bank's
officers and employees (each an "INDEMNIFIED PARTY") shall be entitled to
be indemnified out of the Charged Assets in respect of all costs, losses,
actions, claims, expenses, demands or liabilities whether in contract,
tort, delict or otherwise and whether arising at common law, in equity or
by statute which may be incurred by, or made against, any of them (or by
or against any manager, agent, officer or employee for whose liability,
act or omission any of them may be answerable) at any time relating to or
arising directly or indirectly out of or as a consequence of:
(a) anything done or omitted in the exercise or purported exercise of
the powers contained in this Deed; or
(b) any breach by the Company of any of its obligations under this Deed;
or
(c) an Environmental Claim made or asserted against an Indemnified Party
which would not have arisen if this Deed had not been executed and
which was not caused by the (negligence or) wilful default of the
relevant Indemnified Party.
25
<PAGE>
11 POWER OF ATTORNEY
11.1 Power of attorney: The Company by way of security hereby irrevocably
appoints each of the Bank and any Receiver severally to be its attorney
in its name and on its behalf:
(a) to execute and complete any documents or instruments which the
Bank or such Receiver may require for perfecting the title of the
Bank to the Charged Assets or for vesting the same in the Bank,
its nominees or any purchaser;
(b) to sign, execute, seal and deliver and otherwise perfect any further
security document referred to in clause 6; and
(c) otherwise generally to sign, seal, execute and deliver all deeds,
assurances, agreements and documents and to do all acts and things
which may be required for the full exercise of all or any of the
powers conferred on the Bank or a Receiver under this Deed or which
may be deemed expedient by the Bank or a Receiver in connection with
any disposition, realisation or getting in by the Bank or such
Receiver of the Charged Assets or any part thereof or in connection
with any other exercise of any power under this Deed.
11.2 Recovery of Debts: The Bank and any manager or officer of the Bank or of
any branch is hereby irrevocably empowered to receive all Debts and on
payment to give an effectual discharge therefor and on non-payment to take
(if the Bank in its sole discretion so decides) all steps and proceedings
either in the name of the Company or in the name of the Bank for the
recovery thereof and also to agree accounts and to make allowances and to
give time to any surety. The Bank shall have no liability or
responsibility of any kind to the Company arising out of the exercise or
non exercise of such rights and shall not be obliged to make any enquiry
as to the sufficiency of any sums received by it in respect of any Debts
or to make any claims or take any other action to collect or enforce the
same.
26
<PAGE>
11.3 Ratification: The Company ratifies and confirms and agrees to ratify
and confirm all acts and things which any attorney as is mentioned in
clause 11.1 shall do or purport to do in the exercise of his powers
under such clause.
12 CONTINUING SECURITY AND OTHER MATTERS
12.1 Continuing security: This Deed and the obligations of the Company
under this Deed shall:
(a) secure the ultimate balance from time to time owing to the Bank
by the Company and shall be a continuing security notwithstanding
any settlement of account or other matter whatsoever;
(b) be in addition to, and not prejudice or affect, any present or
future Collateral instrument, Encumbrance, right or remedy held
by or available to the Bank; and
(c) not merge with or be in any way prejudiced or affected by the
existence of any such Collateral Instruments, Encumbrance, rights
or remedies or by the same being or becoming wholly or in part
void, voidable or unenforceable on any ground whatsoever or by
the Bank dealing with, exchanging, releasing, varying or failing
to perfect or enforce any of the same, or giving time for payment
or indulgence or compounding with any other person liable.
12.2 Collateral Instruments: The Bank shall not be obliged to resort to any
Collateral Instrument or other means of payment now or hereafter held
by or available to it before enforcing this Deed and no action taken
or omitted by the Bank in connection with any such Collateral
Instrument or other means of payment shall discharge, reduce,
prejudice or affect the liability of the Company nor shall the Bank be
obliged to account for any money or other property received or
recovered in consequence of
27
<PAGE>
any enforcement or realisation of any such Collateral Instrument or
other means of payment.
12.3 Settlements Conditional: Any release, discharge or settlement between
the Company and the Bank shall be conditional upon no security,
disposition or payment to the Bank by the Company or any other person
being void, set aside or ordered to be refunded pursuant to any
enactment or law relating to liquidation, administration or insolvency
or for any other reason whatsoever and if such condition shall not be
fulfilled the Bank shall be entitled to enforce this Deed subsequently
as if such release, discharge or settlement had not occurred and any
such payment had not been made.
13 REPRESENTATIONS AND WARRANTIES
13.1 Representations: The Company represents and warrants to the Bank that:
(a) Due incorporation: it is duly incorporated and validly existing
under the laws of England and Wales and has power to carry on its
business as it is now being conducted and to own its property and
other assets;
(b) Corporate Power: it has power to execute, deliver and perform its
obligations under this Deed; all necessary corporate, shareholder
and other action has been taken to authorise the execution,
delivery and performance of the same and no limitation on the
powers of the Company will be exceeded as a result of the
execution and delivery of this Deed or the performance of its
obligations under this Deed;
(c) Binding obligations: this Deed constitutes valid and legally
binding obligations of the Company enforceable in accordance with
its terms;
28
<PAGE>
(d) No conflict with other obligations: the execution and delivery
of, the performance of its obligations under, and compliance with
the provisions of, this Deed by the Company will not (i)
contravene any existing applicable law, statute, rule or
regulation or any judgment or permit to which it is subject, (ii)
conflict with, or result in any breach of any of the terms of, or
constitute a default under, any agreement or other instrument to
which it or any of its Subsidiaries is a party or is subject or
by which it or any of its property is bound, (iii) contravene or
conflict with any provision of its Memorandum and Articles of
Association, or (iv) result in the creation of or oblige the
Company or any of its Subsidiaries to create an Encumbrance in
favour of any person other than the Bank;
(e) No Litigation: no litigation, arbitration or administrative
proceeding is taking place, pending or, to the knowledge of the
officers of the Company, threatened against it which could have a
material adverse effect on the business, assets or financial
condition of the Company;
(f) No default in relation to other indebtedness: the Company is not
(nor would with the giving of notice or lapse of time or both be)
in breach of or in default under any agreement relating to
indebtedness for borrowed money in excess in aggregate of
(Pounds)10,000 to which it is a party or by which it may be bound
other than where the indebtedness is being disputed in good
faith;
(g) Title to Charged Assets: it has good and marketable title to its
Charged Assets and has full power and authority to grant to the
Bank the security interest in its Charged Assets created pursuant
to this Deed and to execute, deliver and perform its obligations
in accordance with the terms of this Deed without the consent or
approval of any other person other than any consent or approval
which has been obtained;
29
<PAGE>
(h) Ownership of Charged Assets: the Charged Assets are beneficially
owned by it free and clear of any Encumbrance other than
Encumbrances created by this Deed;
(i) Accuracy of the schedule: each part of the schedule which
describes Charged Assets beneficially owned by it is a true,
accurate and complete list of such assets so owned by it at the
date of this Deed;
(j) No other properties owned: except for the Properties specified in
Part A of the schedule and any other properties acquired
hereafter with the consent of the Bank, the Company does not own
any freehold, leasehold or heritable property; the Company is the
beneficial owner of the Properties save as disclosed in
certificates as to title prepared by solicitors to the Company
from time to time delivered to the Bank, so far as the Company is
aware, the title to each of the Properties is good and
marketable.
13.2 Repetition: The representations and warranties in clause 13.1 shall be
deemed to be repeated by the Company on each day until all the Secured
Obligations have been paid or discharged in full as if made with
reference to the facts and circumstances existing on each such day.
14 MISCELLANEOUS
14.1 Remedies Cumulative: No failure or delay on the part of the Bank to
exercise any power, right or remedy shall operate as a waiver thereof
nor shall any single or any partial exercise or waiver of any power,
right or remedy preclude its further exercise or the exercise of any
other power, right or remedy.
14.2 Statutory power of leasing: During the continuance of this security
the statutory and any other powers of leasing, letting, entering into
agreements for leases or lettings
30
<PAGE>
and accepting or agreeing to accept surrenders of leases or tenancies
shall not be exercisable by the Company in relation to the Charged
Assets or any part thereof.
14.3 Successors and assigns: Any appointment or removal of a Receiver under
clause 8 and any consents under this Deed may be made or given in
writing signed or sealed by any successors or assigns of the Bank and
accordingly the Company hereby irrevocably appoints each successor and
assign of the Bank to be its attorney in the terms and for the
purposes set out in clause 11.
14.4 Consolidation: Section 93 Law of Property Act 1925 shall not apply to
the security created by this Deed or to any security given to the Bank
pursuant to this Deed.
14.5 Reorganisation of the Bank: This Deed shall remain binding on the
Company notwithstanding any change in the constitution of the Bank or
its absorption in, or amalgamation with, or the acquisition of all or
part of its undertaking by, any other person, or any reconstruction or
reorganisation of any kind. The security granted by this Deed shall
remain valid and effective in all respects in favour of any assignee,
transferee or other successor in title of the Bank in the same manner
as if such assignee, transferee or other successor in title had been
named in this Deed as party instead of, or in addition to, the Bank.
14.6 Unfettered discretion: Any liability or power which may be exercised
or any determination which may be made under this Deed by the Bank may
be exercised or made in its absolute and unfettered discretion and it
shall not be obliged to give reasons therefore.
14.7 Provisions severable: Each of the provisions of this Deed is severable
and distinct from the others and if any time one or more of such
provisions is or becomes invalid, illegal or unenforceable the
validity, legality and enforceability of the remaining provisions of
this Deed shall not in any way be affected or impaired thereby.
31
<PAGE>
14.8 Law of Property (Miscellaneous Provisions) Act 1989: For the purposes
of the Law of Property (Miscellaneous Provisions) Act 1989 any
provisions of the Facility Agreement and any other relevant loan
agreements relating to any disposition of any interest in land shall
be deemed to be incorporated in this Deed.
15 NOTICES
-------
15.1 Mode of service: Any notice or demand for payment by the Bank under this
Deed shall, without prejudice to any other effective mode of making the
same, be deemed to have been properly served on the Company if served on
any one of its Directors or on its Secretary or delivered or sent by
letter, telex or telefax to the Company at its registered office or any of
its principal places of business for the time being.
15.2 Time of service: Any such notice or demand shall be deemed to have been
served (in the case of a letter) when delivered, (in the case of a telex)
at the time of despatch with the correct answerback appearing at the
beginning and end of the transmission and (in the case of a telefax) when
received in complete and legible form.
15.3 Notices conclusive: Any such notice or demand or any certificate as to the
amount at any time secured by the Deed shall, save for manifest error be
conclusive and binding upon the Company if signed by an officer of the
Bank.
16 LAW
---
16.1 This Deed shall be governed by and shall be construed in accordance with
English law.
IN WITNESS whereof this Deed has been executed and delivered by or on behalf of
the parties on the date stated at the beginning of this Deed.
32
<PAGE>
The Schedule
-------------
Part A Properties
------------------
================================================================================
Address County/District/London Borough Title Number or Root of
------- ------------------------------ -----------------------
Title
-----
- -------------------------------------------------------------------------------
Brindley Road Leicestershire LT163667
Dodwells Bridge
Industrial Estate
Hinckley LE10
3BY
===============================================================================
33
<PAGE>
Part B - Fixed Plant and Machinery
----------------------------------
None specifically listed.
34
<PAGE>
Part C - Intellectual Property Rights
-------------------------------------
None specifically listed
35
<PAGE>
EXECUTED and DELIVERED as a DEED )
by SPEEDFAM LIMITED )
Director /s/ James N. Farley
Secretary /s/ R. R. Smith
SIGNED for and on behalf )
of FIRST NATIONAL BANK OF CHICAGO )/s/ Wragge & Co.
36
<PAGE>
Exhibit 11
SpeedFam International, Inc.
Computation of Net Earnings Per Share
Three Months and Six Months Ended November 30, 1996 and 1995
(dollars and shares in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
-----------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $ 4,783 $1,625 $ 8,821 $2,329
======= ====== ======= ======
Weighted average shares:
Common shares outstanding 10,596 9,093 10,565 8,272
Common equivalent shares
issuable upon exercise of
employee stock options using 719 844 731 812
the treasury stock method ------- ------ ------- ------
Shares used in net earnings per share 11,315 9,937 11,296 9,084
======= ====== ======= ======
Net earnings per share $ 0.42 $ 0.16 $ 0.78 $ 0.26
======= ====== ======= ======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 7,446
<SECURITIES> 0
<RECEIVABLES> 34,016
<ALLOWANCES> 0
<INVENTORY> 27,866
<CURRENT-ASSETS> 72,819
<PP&E> 13,877
<DEPRECIATION> 0
<TOTAL-ASSETS> 111,743
<CURRENT-LIABILITIES> 40,810
<BONDS> 0
<COMMON> 1
0
0
<OTHER-SE> 68,144
<TOTAL-LIABILITY-AND-EQUITY> 111,743
<SALES> 74,283
<TOTAL-REVENUES> 78,847
<CGS> 49,873
<TOTAL-COSTS> 71,249
<OTHER-EXPENSES> 342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124
<INCOME-PRETAX> 7,132
<INCOME-TAX> 2,766
<INCOME-CONTINUING> 4,366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,821
<EPS-PRIMARY> .78
<EPS-DILUTED> 0
</TABLE>
