-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HgyIiOSS6jcPGgr1Nj10Y6XKtpLQXSbWGZCHb09avlP+YNgI0ia6cNbGFH7sOzMg oLlbxTBEbVcT40q4fc+6rQ== 0000950117-96-001412.txt : 19970430 0000950117-96-001412.hdr.sgml : 19970430 ACCESSION NUMBER: 0000950117-96-001412 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEMICONDUCTOR PACKAGING MATERIALS CO INC CENTRAL INDEX KEY: 0000880858 STANDARD INDUSTRIAL CLASSIFICATION: 3460 IRS NUMBER: 133584740 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-10938 FILM NUMBER: 96662472 BUSINESS ADDRESS: STREET 1: 431 FAYETTE AVE CITY: MAMARONECK STATE: NY ZIP: 10543 BUSINESS PHONE: 9146985353 MAIL ADDRESS: STREET 1: 431 FAYETTE AVE CITY: MAMARONECK STATE: NY ZIP: 10543 10QSB 1 SEMICONDUCTOR PACKAGING SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-10938 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. (Name of Small Business Issuer in its charter) Delaware 13-3584740 (State of other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 431 FAYETTE AVENUE, MAMARONECK, NEW YORK 10543 (Address of principal executive offices, including zip code) (914) 698-5353 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes [X] No [ ] (2) Yes [X] No [ ] The number of shares outstanding of the Registrant's sole class of common stock, as of September 30, 1996 was 5,979,266 shares. 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS.
INDEX TO FINANCIAL [ZW] STATEMENTS PAGE [ZW] Consolidated Balance Sheet at September 30, 1996 and December 31, [ZW] 1995. 3 Consolidated Statement of Income for the three and nine months ended September 30, 1996 and [ZW] 1995. 4 Consolidated Statement of Cash Flows for the three and nine months ended September 30, 1996 and [ZW] 1995. 5 Consolidated Statement of Shareholders' Equity for the nine months ended September 30, [ZW] 1996 6 Notes to Consolidated Financial [ZW] Statements 7 Management's Discussion and Analysis of Financial Condition and Results of [ZW] Operations 8-12 ITEM 2. PRO FORMA [ZW] INFORMATION 13 Pro Forma Consolidated Statement of Income for the three months ended September 30, 1995 [ZW] (Unaudited) 14 Notes to Unaudited Pro Forma Consolidated Statement of Income for the three months ended September 30, [ZW] 1995 15 Pro Forma Consolidated Statement of Income for the nine months ended September 30, 1995 [ZW] (Unaudited) 16 Notes to Unaudited Pro Forma Consolidated Statement of Income for the nine months ended September 30, [ZW] 1995 17 PART II OTHER [ZW] INFORMATION 18 SIGNATURE [ZW] PAGE 19 EXHIBITS [ZW] 20
2 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
SEPTEMBER [ZW] 30, DECEMBER 31, ASSETS [ZW] 1996 1995 (UNAUDITED) [ZW] Current Assets: [ZW] - - ----------- ------------ Cash and cash equivalents $ [ZW] 4,165,129 $ 4,244,075 Accounts receivable, less allowance for doubtful accounts of $134,000 and $86,000, respectively [ZW] 6,558,774 3,580,791 Inventories [ZW] 8,311,597 4,735,967 Prepaid expenses and other current assets [ZW] 730,805 561,395 [ZW] - - ----------- ----------- Total current assets [ZW] 19,766,305 13,122,228 [ZW] - - ----------- ----------- Property and Equipment-at cost, net of accumulated depreciation and amortization of $5,883,415 and $4,204,498, respectively [ZW] 14,651,917 11,042,546 [ZW] - - ----------- ----------- Other Assets-net of accumulated amortization Deferred financing costs [ZW] 7,506 30,007 Technology rights and intellectual property [ZW] 763,491 805,401 Goodwill [ZW] 14,637,507 10,724,346 Other [ZW] 1,701,353 346,253 [ZW] - - ----------- ---------- Total other assets [ZW] 17,109,857 11,906,007 [ZW] - - ----------- ----------- Total Assets $ [ZW] 51,528,079 $ 36,070,781 [ZW] =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ [ZW] 2,811,836 $ 1,478,946 Accrued expenses [ZW] 2,911,527 911,269 Current portion of obligations under capital leases [ZW] 1,093,959 588,351 Current portion of long-term debt [ZW] 1,365,000 343,333 Amounts due to related [ZW] parties 625,000 [ZW] - - ----------- ----------- Total current liabilities [ZW] 8,182,322 3,946,899 [ZW] - - ----------- ----------- Deferred income taxes [ZW] 676,760 563,460 Long-term debt [ZW] 5,085,000 600,833 Obligations under capital leases [ZW] 3,466,966 1,698,328 [ZW] - - ----------- ----------- Total Liabilities [ZW] 17,411,048 6,809,520 [ZW] - - ----------- ----------- Minority Interest 984,202 [ZW] - - ----------- ----------- Shareholders' Equity: Preferred stock-$.10 par value; authorized 1,000,000 shares, none issued Common stock-$.10 par value; authorized 10,000,000 shares, issued 6,279,266 and 6,190,066 shares, respectively [ZW] 627,927 619,007 Additional paid-in-capital [ZW] 27,550,796 27,214,097 Retained Earnings [ZW] 4,954,106 1,428,157 [ZW] - - ----------- ----------- [ZW] 33,132,829 29,261,261 Less: Treasury stock: 300,000 shares, at cost [ZW] - - ----------- ----------- Shareholders' Equity [ZW] 33,132,829 29,261,261 [ZW] - - ----------- ----------- Total Liabilities And Shareholders' Equity $ [ZW] 51,528,079 $ 36,070,781 [ZW] =========== ===========
See Notes to Consolidated Financial Statements 3 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1996 1995 1996 1995 ----------- ----------- ----------- [ZW] - - ----------- [ZW] Net Sales $ 8,665,927 $ 5,217,345 $24,862,210 [ZW] $14,728,768 Service Revenue 3,280,446 1,785,110 10,574,227 [ZW] 5,393,105 ----------- ----------- ----------- [ZW] - - ----------- Total Revenue 11,946,373 7,002,455 35,436,437 [ZW] 20,121,873 Cost of Goods Sold 5,835,571 3,432,422 17,691,894 [ZW] 9,753,908 Cost of Services Performed 1,899,562 902,280 5,515,298 [ZW] 2,491,558 ----------- ----------- ----------- [ZW] - - ----------- Cost of Goods Sold and Services Performed 7,735,133 4,334,702 23,207,192 [ZW] 12,245,466 ----------- ----------- ----------- [ZW] - - ----------- Gross Profit 4,211,240 2,667,75 12,229,245 [ZW] 7,876,407 Selling, General and Administrative Expenses 1,995,643 1,605,361 5,816,359 [ZW] 4,800,518 ----------- ----------- ----------- [ZW] - - ----------- Operating Income 2,215,597 1,062,392 6,412,886 [ZW] 3,075,889 Interest Expense (Net) 234,331 159,074 653,536 [ZW] 929,529 ----------- ----------- ----------- [ZW] - - ----------- Income Before Provision for Income Taxes 1,981,266 903,318 5,759,350 [ZW] 2,146,360 Provision for Income Taxes 717,470 206,912 2,233,401 [ZW] 456,763 ----------- ----------- ----------- [ZW] - - ----------- Net Income $ 1,263,796 $ 696,406 $ 3,525,949 $ [ZW] 1,689,597 =========== =========== =========== [ZW] =========== Income per Common Share $ .21 $ .13 $ .57 $ [ZW] .36 =========== =========== =========== [ZW] =========== Weighted Average Number of Common Shares Outstanding 6,156,671 5,529,272 6,145,586 [ZW] 4,745,754 =========== =========== =========== [ZW] ===========
See Notes to Consolidated Financial Statements 4 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE [ZW] THREE MONTHS FOR THE NINE MONTHS ENDED [ZW] SEPTEMBER 30, ENDED SEPTEMBER 30, [ZW] 1996 1995 1996 1995 [ZW] Cash Flows From Operating Activities: ----------[ZW] - - -- ------------ ------------ ------------ Net Income $ [ZW] 1,263,796 $ 696,406 $ 3,525,949 $ 1,689,597 Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities: Depreciation And Amortization Of Property And Equipment [ZW] 605,526 434,339 1,679,447 1,141,357 Other Amortization [ZW] 169,746 119,133 509,238 353,157 Deferred Income [ZW] Taxes [ZW] 113,300 Changes In Operating Assets And Liabilities: Increase In Accounts Receivable [ZW] (588,444) (126,971) (1,872,179) (562,843) Increase In Inventories [ZW] (831,320) (347,516) (1,817,318) (1,063,967) (Increase) Decrease In Prepaid Expenses And Other Current Assets [ZW] (109,114) 442,270 (166,645) 153,116 Increase (Decrease) In Accounts Payable [ZW] 764,310 (1,088,827) 558,960 (307,477) Increase In Accrued Expenses [ZW] 783,039 203,127 1,958,530 120,496 [ZW] - - ------------ ------------ ------------ ------------ Net Cash Provided By Operating Activities [ZW] 2,057,539 331,961 4,489,282 1,523,436 [ZW] - - ------------ ------------ ------------ ------------ Cash Flows From Investing Activities: Purchase Of Property And Equipment [ZW] (119,009) (1,945,534) (1,914,496) (4,382,090) (Increase) Decrease In Other Assets [ZW] (695,042) 172,943 (1,365,438) 36,561 Acquisition of [ZW] Subsidiary [ZW] (6,556,440) [ZW] - - ------------ ------------ ------------ ------------ Net Cash Used In Investing Activities [ZW] (814,051) (1,772,591) (9,836,374) (4,345,529) [ZW] - - ------------ ------------ ------------ ------------ Cash Flows From Financing Activities: Proceeds From Redemption Of Warrants [ZW] 2,400 2,400 1,133,884 Proceeds From Exercise Of Stock Options [ZW] 9,038 196,840 196,969 271,170 Proceeds From Public Stock [ZW] Offering [ZW] 16,861,538 16,861,538 Proceeds From Long-Term [ZW] Debt [ZW] 6,000,000 Payment Under Revolving [ZW] Credit [ZW] (2,000,000) (1,565,000) Payments Under Capital Leases [ZW] (265,405) (108,955) (644,259) (284,354) Payment Under Term Loan Agreements [ZW] (60,000) (8,585,833) (646,166) (9,007,500) Borrowing Under Equipment Line Of [ZW] Credit [ZW] 70,374 348,158 Decrease In Amounts Due Related [ZW] Parties (188,332) [ZW] (625,000) (500,887) Minority Interest Contribution [ZW] 984,202 984,202 [ZW] - - ------------ ------------ ------------ ------------ Net Cash Provided By Financing Activities [ZW] 670,235 6,245,632 5,268,146 7,257,009 [ZW] - - ------------ ------------ ------------ ------------ Net Increase (Decrease) In Cash [ZW] 1,913,723 4,805,002 (78,946) 4,434,916 Cash At Beginning Of Period [ZW] 2,251,406 197,628 4,244,075 567,714 [ZW] - - ------------ ------------ ------------ ------------ Cash At End Of Period $ [ZW] 4,165,129 $ 5,002,630 $ 4,165,129 $ 5,002,630 [ZW] ============ ============ ============ ============ Supplemental schedule of noncash investing and financing activity: Machinery and equipment acquired under capital leases $ [ZW] 1,606,627 225,032 $ 2,916,355 $ 243,881
See Notes To Consolidated Financial Statements 5 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
PREFERRED STOCK COMMON STOCK [ZW] ADDITIONAL TREASURY STOCK TOTAL ------------------- ------------------ [ZW] PAID-IN RETAINED ----------------- SHAREHOLDERS' SHARES AMOUNT SHARES AMOUNT [ZW] CAPITAL EARNINGS SHARES AMOUNT EQUITY ------ ------ ------ ------ [ZW] - - ---------- -------- ------ ------ ------------- [ZW] Balance at January 1, 1996 0 $0 6,190,066 $619,007 [ZW] $27,214,097 $1,428,157 300,000 $0 $29,261,261 Issuance Of Common Stock Through The Exercise Of Stock Warrants 1,200 120 [ZW] 2,280 2,400 Issuance Of Common Stock Through The Exercise Of Stock Options 73,000 7,300 [ZW] 189,669 196,969 Issuance Of Common Stock In Connection With The Acquisition Of A Subsidiary 15,000 1,500 [ZW] 144,750 146,250 Net [ZW] Income [ZW] 3,525,949 3,525,949 --------- ---------- --------- -------- [ZW] - - ----------- ---------- ------- -- ----------- Balance at September 30, 1996 0 $0 6,279,266 $627,927 [ZW] $27,550,796 $4,954,106 300,000 $0 $33,132,829 ========= ========== ========= ======== [ZW] =========== ========== ======= == ===========
See Notes To Consolidated Financial Statements 6 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its majority owned subsidiary. The consolidated balance sheet as of September 30, 1996, the consolidated statement of income for the three and nine months ended September 30, 1996 and 1995, the consolidated statement of cash flows for the three and nine months ended September 30, 1996 and 1995 and the consolidated statement of shareholders' equity for nine months ended September 30, 1996, have been prepared by the Company and are unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at September 30, 1996 and for all periods presented have been made. 2. Earnings per share - Earnings per share are computed using the weighted average number of common shares actually outstanding plus the shares that would be outstanding assuming the exercise of employee stock options and stock warrants during the periods presented. 3. See the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995 for additional disclosures relating to the Company's financial statements. 4. A provision for income taxes of $717,000 and $2,233,000 has been made for the three and nine month periods ended September 30, 1996, respectively, as compared to a $207,000 and $457,000 provision in the three and nine month periods ended September 30, 1995, respectively. In the three month and nine month periods ended September 30, 1996, the Company's earnings were taxed at an effective tax rate of 36.2% and 38.7%, respectively, as compared to an effective tax rate of 22.9% and 21.2% in the comparable three and nine month 1995 periods, respectively. The effective tax rates in the 1995 periods were lower than the effective tax rates in the 1996 periods due to the utilization of consolidated net operating loss carry forwards in the 1995 periods. 5. Effective January 2, 1996, the Company acquired all of the common stock of Retconn Incorporated ("Retconn"), a manufacturer of coaxial contacts and connectors for $5,750,000 in cash, subject to an adjustment of $192,000, based on the closing net worth as defined in the stock purchase agreement. This business combination was accounted for as a purchase. The Company also issued 15,000 of its common shares, valued at $146,250, in conjunction with the acquisition. In addition, the Company incurred approximately $618,000 in costs associated with the Retconn acquisition. The fair value of the assets acquired, including approximately $4,336,000 allocated to goodwill, which is being amortized over 25 years, amounted to $7,674,000 and liabilities assumed amounted to $968,000. 6. Effective August 28, 1996, the Company entered into a joint venture agreement to develop a silicon wafer polishing and reclaiming facility in Singapore. The jointly owned Singapore corporation, International Semiconductor Products Pte Ltd ("ISP"), is 50.1% owned by the Company and 49.9% owned by a holding company, Semiconductor Alliance Pte Ltd. Accordingly, the Company's consolidated balance sheet at September 30, 1996 and consolidated statement of cash flows for the three and nine month period ended September 30, 1996 reflect a $984,202 minority interest contribution made by the Company's joint venture partner for the periods presented. As of September 30, 1996, ISP did not have any revenues or expenses. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995) Total revenues for the three month period ended September 30, 1996 increased $4,944,000, or 71%, over the comparable 1995 period. The increase was primarily due to the inclusion of $2,939,000 of revenues from Retconn Incorporated ("Retconn"), which was acquired by the Company as of January 2, 1996, a 84% increase in revenues at American Silicon Products ("ASP"), primarily as a result of increased capacity; and a 31% increase in revenues at Polese Company, due to increased sales of its copper/tungsten heat dissipation products. Revenues at the parent company ("SPM")decreased 4% from prior year levels due to decreased orders from certain microelectronic customers. Total revenues for the nine month period ended September 30, 1996 increased $15,315,000, or 76%, over the comparable 1995 period. The increase was primarily due to the inclusion of $8,210,000 of revenues from Retconn; a 96% increase in revenues at ASP, a 29% increase in revenues at Polese Company and a 3% increase in revenues at SPM. For the nine month period ended September 30, 1996 and 1995, direct sales of the Company's products into foreign markets accounted for approximately 9.9% and 5.3%, respectively, of consolidated revenues. The Company does not currently maintain any foreign manufacturing operations. As of August 28, 1996, the Company entered into a joint venture agreement to develop a silicon wafer polishing and reclaiming facility in Singapore. Foreign sales are made through seventeen foreign manufacturer's representatives and are priced and paid for in U.S. dollars. Gross profit for the three month period ended September 30, 1996 increased $1,543,000, or 58%, from the comparable 1995 period. Approximately $1,124,000 of this increase was attributable to the inclusion of Retconn's gross profit. ASP's gross profit increased 56%, SPM's gross profit decreased 9% and Polese Company's gross profit increased 6% from the comparable 1995 period. The decrease in gross profit at SPM was attributable to lower sales volume. As a result of lower margins at SPM, Polese Company and ASP, and the inclusion of Retconn's operations in the 1996 period, (gross margins of Retconn are lower than historical margins of the Company) gross margin decreased to 35% in the three month period ended September 30, 1996 from 38% in the comparable 1995 period. Gross profit for the nine month period ended September 30, 1996 increased $4,353,000, or 55%, from the comparable 1995 period. Approximately $2,856,000 of this increase was attributable to the inclusion of Retconn's gross profit. ASP's gross profit increased 74%, SPM's gross profit decreased 7% and Polese Company's gross profit decreased 26% from the comparable 1995 period. Gross profit at Polese Company decreased primarily due to the temporary curtailment of operations at its plating facility in February caused by production difficulties, which difficulties have since been resolved. As a result of lower margins at SPM, Polese Company and ASP, and the inclusion of Retconn's operations, gross margin decreased to 35% in the nine month period ended September 30, 1996 from 39% in the comparable 1995 period. Selling, general and administrative ("SG&A") expenses in the three and nine month periods ended September 30, 1996 increased $390,000, or 24%, and $1,016,000, or 21%, respectively, over the comparable 1995 periods. The increase was due to the inclusion of Retconn's SG&A costs with the Company's in the 1996 periods. SG&A expenses as a percentage of sales decreased from 23% and 24%, respectively, in the three and nine month periods ended September 30, 1995 to 17% and 16%, respectively, in the comparable 1996 periods. Net interest expense for the three and nine month periods ended September 30, 1996 increased $75,000 and decreased $276,000, respectively, from the comparable 1995 periods. The increase in interest costs in the three month period ended September 30, 1996 related primarily to interest costs associated with term debt incurred in conjunction with the Retconn acquisition. The decrease in interest costs in the nine month period ended September 30, 1996 was primarily related to a decrease in interest expense at ASP from prior year levels. Debt incurred in the 8 ASP acquisition was retired using a portion of the proceeds from the Company's July 1995 public offering. A provision of $717,000 and $2,233,000 for income taxes has been made for the three and nine month periods ended September 30, 1996, respectively, as compared to a $207,000 and $457,000 provision in the three and nine month periods ended September 30, 1995, respectively. In the three month and nine month periods ended September 30, 1996, the Company's earnings were taxed at an effective tax rate of 36.2% and 38.7%, respectively, as compared to an effective tax rate of 22.9% and 21.2%, respectively, in the comparable three and nine month 1995 periods. The effective tax rates in the 1995 periods were lower than the effective tax rates in the 1996 periods due to the utilization of consolidated net operating loss carry forwards in the 1995 periods. As a result of the foregoing, net income increased by $567,000, or 81%, and $1,836,000, or 109%, respectively, in the three and nine month periods ended September 30, 1996 over the comparable 1995 periods. In the three month period ended September 30, 1996, all of the Company's operations were profitable. In the nine month period ended September 30, 1996, the parent company, Retconn and ASP were profitable, while Polese Company experienced approximately $212,000 in after tax losses, respectively. It is expected that Polese Company's profitability will continue to improve as it increases sales of its copper/tungsten heat dissipation products and improves its productivity. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its capital needs through the proceeds of its public offerings, its revolving credit facility and term loans from First Union Bank (the "Bank") and cash flow from operations. At September 30, 1996, the Company had cash and cash equivalents of $4,165,000, of which $1,968,000 related to cash at International Semiconductor Products Pte Ltd ("ISP"), and an available balance on its revolving credit facility of $5,000,000. Net cash provided by operating activities in the three and nine month periods ended September 30, 1996 amounted to $2,058,000 and $4,489,000, respectively, as compared to $332,000 and $1,523,000, respectively, in the comparable 1995 periods. Cash provided by operating activities in the 1996 periods increased over the 1995 periods primarily as the result of a $567,000 and $1,836,000 increase in net income in the three and nine month periods ended September 30, 1996, respectively, and a $783,000 and $1,959,000 increase in accrued expenses in the three and nine month periods ended September 30, 1996, respectively, primarily due to increased provisions for income taxes. In the three and nine month periods ended September 30, 1996, depreciation and amortization of property and equipment and other amortization in total increased $222,000 and $694,000, respectively, over the comparable 1995 periods. These increases were due to increased depreciation and amortization associated with investments made by the Company in property and equipment in 1995 and 1996 and from amortization of goodwill associated with the Retconn acquisition. In the nine month period ended September 30, 1996, the Company recorded a net deferred tax liability of $113,000 representing the tax effects of temporary differences between the Company's book and tax bases. In the three and nine month periods ended September 30, 1996, the Company used a total of $1,420,000 and $3,689,000, respectively, of cash derived from operations to fund increases in accounts receivable and inventories as compared to using a total of $474,000 and $1,627,000 to fund such increases in the comparable 1995 periods. The increases in the Company's accounts receivable and inventories were made to support increased revenues. Prepaid expenses and other current assets in the three and nine month periods ended September 30, 1996 increased $109,000 and $167,000, respectively, and decreased $442,000 and $153,000, respectively, in the comparable 1995 periods, primarily due to periodic fluctuations in refundable deposits for fixed asset additions. Accounts payable increased $764,000 and $559,000 in the three and nine month period ended September 30, 1996, respectively, as compared to decreasing $1,089,000 and $307,000, respectively, in the comparable 1995 periods. In the 1995 periods, the Company reduced its accounts payable days outstanding to be in line with industry standards. 9 To support the Company's growth and enhance its profitability, in the three and nine month periods ended September 30, 1996, the Company invested $119,000 and $1,914,000, respectively, in property, machinery, equipment, tooling and leasehold improvements, compared to an investment of $1,946,000 and $4,382,000, respectively, in the comparable 1995 periods. This investment excludes $1,607,000 and $2,916,000 invested in the three and nine month periods ended September 30, 1996, respectively, and excludes $225,000 and $244,000, respectively, invested the three and nine month periods ended September 30, 1995, for equipment acquired under capital leases. The majority of the capital lease arrangements which the Company and its subsidiaries have entered into have lease terms of five years and provide for a bargain purchase when the lease term expires. At September 30, 1996, the Company had capital commitments in the approximate amount of $4,789,000 for the acquisition of certain equipment to upgrade and enhance the Company's manufacturing capabilities. At September 30, 1996, the Company was also committed to purchase a $2,200,000 building to house SPM's operations, $1,760,000 of which was financed through term debt. The building was acquired by the Company on November 4, 1996. The Company believes that the lease financing available to it for certain equipment together with cash flow from operations will be sufficient to fund its capital needs. Other assets increased $695,000 and $1,365,000, respectively, in the three and nine month periods ended September 30, 1996 as compared to decreasing $173,000 and $37,000, respectively, in the comparable 1995 periods. These increases were primarily due to increases in deposits on equipment to be purchased by the Company. Of the $1,365,000 increase in other assets in the nine month period ended September 30, 1996, $1,205,000 related to increased deposits on equipment. Effective January 2, 1996, the Company acquired all of the common stock of Retconn, a manufacturer of coaxial contacts and connectors, for $5,750,000 in cash, subject to an adjustment of $192,000, based on the closing net worth as defined in the stock purchase agreement. This business combination was accounted for as a purchase. The Company also issued 15,000 of its common shares, valued at $146,250, in conjunction with the acquisition. In addition, to date, the Company has paid approximately $614,000 in costs associated with the Retconn acquisition. The fair value of the assets acquired, including approximately $4,336,000 allocated to goodwill, which is being amortized over 25 years, amounted to $7,674,000 and liabilities assumed amounted to approximately $968,000. As a result of the foregoing, the Company used $814,000 and $9,836,000 in its investing activities in the three and nine month periods ended September 30, 1996, respectively, as compared to using $1,773,000 and $4,346,000, respectively, in the comparable 1995 periods. On February 8, 1994, the Company registered 698,625 shares of common stock purchasable pursuant to the exercise of redeemable warrants. The redeemable warrants were distributed without cost as a distribution to the Company's stockholders of record as of February 8, 1994. Stockholders received one redeemable warrant for each share of common stock held by the stockholder. Each redeemable warrant was exercisable to purchase one-half (1/2) share of common stock at an exercise price of $2.00 per share. Certain stockholders of the Company, including, but not limited to, the Company's Chairman and three of its directors, agreed to contribute the redeemable warrants issued to them back to the Company. Consequently, the additional 831,000 shares which would have been issuable upon the exercise of such redeemable warrants were not issued or sold. The registration statement also related to shares of the Company's common stock issuable upon the exercise of warrants to purchase 170,250 shares held by the warrant solicitation agent and certain of its affiliates. On January 24, 1995, the Company called its Common Stock Purchase Warrants for redemption. As of the redemption date, February 23, 1995, all but 98,918 purchase warrants were exercised. In the nine month period ended September 30, 1995, the Company received net proceeds of $1,134,000 from the redemption of common stock purchase warrants and solicitation agent warrants. In the three and nine month periods ended September 30, 1996 the Company received proceeds of $2,400 from the exercise of solicitation agent warrants. 10 In the three and nine month periods ended September 30, 1996, the Company received $9,000 and $197,000, respectively, as compared to receiving $197,000 and $271,000, respectively, in the comparable 1995 periods, from the exercise of stock options. On August 1, 1995, the Company sold an aggregate of 1,654,500 shares of Common Stock in a public offering. The Company received net proceeds of approximately $16,900,000 after deducting underwriting discounts, commissions and expenses of the offering of approximately $2,300,000. The Company used the proceeds of the offering, among other things, to repay outstanding bank indebtedness in the amount of $8,250,000 incurred in connection with the ASP acquisition, to repay approximately $208,000 of the outstanding balance due on a $500,000 twelve month term loan and to repay the Company's borrowings under its revolving credit line. The Company used the balance of the proceeds of the offering to purchase and improve its new ASP facility, to purchase machinery and equipment for all of its operations and for general corporate and working capital purposes. In connection with the Retconn acquisition, on January 4, 1996, the Company entered into a term loan with the Bank in the principal amount of $6,000,000. The loan bears interest at the Bank's loan pricing rate (8.25% at September 30, 1996)and the principal is payable in 48 consecutive monthly installments of $125,000 commencing on February 1, 1997. Interest on the loan is payable monthly and commenced on February 1, 1996. On December 20, 1995, the Company entered into a $7,500,000 revolving credit facility, a $2,000,000 capital lease facility and a $10,000,000 uncommitted line of credit with the Bank. $5,000,000 of the revolving credit facility is available to the Company for working capital purposes and $2,500,000 is used for a standby letter of credit to support the Company's gold consignment arrangement with a financial institution. The revolving credit facility bears interest at .25% under the Bank's loan pricing rate and is unsecured with the exception of a first priority security interest in the Company's gold inventory in the event of a drawing under the letter of credit. The facility is also guaranteed by each of the Company's subsidiaries. A fee equal to one half percent of the $7,500,000 line was paid. The maturity date of the facility is September 30, 1997. The $2,000,000 capital lease facility is being used for equipment lease transactions which bear interest at prevailing rates at lease inception dates and provide for bargain purchases at the end of such leases. The Bank has a first priority security interest in the equipment which is leased under the facility. The Company did not pay any fee for the $10,000,000 uncommitted line and therefor the availability of the line is at the discretion of the Bank. The Company has utilized $6,000,000 of the $10,000,000 uncommitted line for the Retconn acquisition, and has paid a fee for the use of the loan facility. The loan agreement provides, among other things, that the Company maintain certain financial ratios. The Company is also subject to restrictions relating to incurring additional indebtedness, additional liens and security interests, capital expenditures and the payment of dividends. In the three and nine month periods ended September 30, 1996, the Company had not borrowed under its revolving credit facility. In the three and nine month periods ended September 30, 1995, the Company repaid $2,000,000 and $1,565,000, respectively, under its revolving credit facility. In conjunction with the Company's acquisition of Polese Company on May 27, 1993, the Company acquired from Frank J. Polese, the former sole shareholder of Polese Company, all of the rights, including a subsequently issued patent, for certain powdered metal technology and its application to the electronics industry for $250,000 in cash and $750,000 in notes, as modified, including interest at 7% per annum. The note was paid in full and as a result, in 1995 Mr. Polese received the balance of principal payments due under the note totaling $424,000. For a period of ten years, Mr. Polese has the right to receive 10% of (I) the pre-tax profit from the copper tungsten product line, after allocating operating costs and (ii) the proceeds of the sale, if any, by the Company of the powdered metal technology. To date, no payments have been made pursuant to this agreement. 11 To facilitate the acquisition by the Company of Polese Company on May 27, 1993, the Company entered into a $1,200,000 five year term loan agreement with the Bank. The term loan agreement calls for the repayment of the loan in twenty equal installments which commenced on October 1, 1993. Further, on December 16, 1993, the Company entered into a $465,000 five year term loan agreement with the Bank. The term loan agreement called for the repayment of such loan in eighteen equal installments which commenced on April 1, 1994. The term loans bore interest at the Bank's loan pricing rate plus 1.5%. The term loans are collateralized with a blanket lien on substantially all of the parent company's assets, excluding the common stock and assets of its subsidiaries. As of September 30, 1996, the Company had repaid all amounts due under the $465,000 term loan and had an outstanding balance of $450,000 due on the $1,200,000 term loan. The Company has, and expects to be able to continue to, meet its obligations to the Bank from cash generated from operations. As at September 30, 1996, the Company was in compliance with all of the covenants contained in its loan agreements. In conjunction with the ASP acquisition, certain of the former stockholders of ASP were to receive one-third of ASP's adjusted earnings before interest and taxes in excess of $650,000 per fiscal quarter, (the "Consulting Agreements"), through December 31, 1999. Payments and amounts due under the Consulting Agreements have been recorded on the Company's books as additional purchase price. In the fourth quarter of 1995, the Company bought out the remaining four years of payments due under the Consulting Agreements for $725,000 in cash and notes (of which $625,000 was outstanding at December 31, 1995) and 52,500 shares of the Company's common stock. In January 1996, the Company paid the $625,000 note in full. Effective August 28, 1996, the Company entered into a joint venture agreement to develop a silicon wafer polishing and reclaiming facility in Singapore. The jointly owned Singapore corporation, International Semiconductor Products Pte Ltd ("ISP), is 50.1% owned by the Company and 49.9% owned by a holding company, Semiconductor Alliance Pte Ltd. In the three and nine month periods ended September 30, 1996, the Company and its joint venture partner each made a $984,202 equity contribution into ISP. As a result of the above, in the three and nine month periods ended September 30, 1996, $670,000 and $5,268,000, respectively, of cash was provided by financing activities. This compares to net cash provided by financing activities of $6,246,000 and $7,257,000, respectively, in the three and nine month periods ended September 30, 1995. As a result of the Company's operations and equity financing activities, shareholders' equity increased $3,872,000 in the nine month period ended September 30, 1996. The Company continually seeks to broaden its product lines by various means, including through acquisitions. The Company intends to pursue only those acquisitions for which it will be able to arrange the necessary financing by means of the issuance of additional equity, the use of its cash or, through bank or other debt financing. The Company believes that it has the capacity for growth and that its working capital and internally generated funds, combined with its bank line of credit, the proceeds it has received from its public offerings, and from other sources of financing, will be sufficient to satisfy the Company's currently anticipated cash requirements on both a short-term and long-term basis. 12 PRO FORMA INFORMATION The following unaudited pro forma combined financial statements and explanatory notes are presented to reflect the acquisition of the business of Retconn Incorporated ("Retconn ") by Semiconductor Packaging Materials Co., Inc. (the "Company") effective as of January 2, 1996. The pro forma statements of income for the three and nine month periods ended September 30, 1995, give effect to these transactions as if they had occurred at the beginning of the periods presented. The pro forma information should be read in conjunction with (1) the historical financial statements for the Company, including the related notes thereto, included in the Company's Form 10-KSB for the fiscal year ended December 31, 1995, and included in the Company's Form 10-QSB for the three and six month periods ended March 31, 1996 and June 30, 1996, respectively (2) the historical financial statements of Retconn, including the related notes thereto and (3) the Company's Form 8-K and 8-K/A filed on January 5, 1996 and March 15, 1996, respectively. The pro forma information is not necessarily indicative of the combined results of operations or combined financial position that would have resulted had the acquisition been consummated as of the date noted above, nor is it necessarily indicative of the combined results of operations in any future period or of the future combined financial position. 13 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED [ZW] SEPTEMBER 30, 1995 [ZW] - - -------------------------------------------------------------------- HISTORICAL SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND [ZW] RETCONN PRO FORMA SUBSIDIARIES [ZW] INCORPORATED ADJUSTMENTS AS ADJUSTED ------------- [ZW] - - ------------- ------------- ------------- [ZW] Net sales $5,217,345 [ZW] $2,464,385 $7,681,730 Service revenue [ZW] 1,785,110 1,785,110 ---------- [ZW] - - ----------- ----------- ---------- Total revenue 7,002,455 [ZW] 2,464,385 9,466,840 Cost of goods Sold 3,432,422 [ZW] 1,735,458 (245)(1) 5,167,635 Cost of services performed [ZW] 902,280 902,280 ---------- [ZW] - - ----------- ----------- ---------- Total cost of goods sold and services performed 4,334,702 [ZW] 1,735,458 (245) 6,069,915 Gross profit 2,667,753 [ZW] 728,927 245 3,396,925 Selling, general and administrative expenses 1,605,361 [ZW] 213,016 44,054(4) 1,862,431 ---------- [ZW] - - ----------- ----------- ---------- Operating income 1,062,392 [ZW] 515,911 (43,809) 1,534,494 Interest expense (net) 159,074 [ZW] 4,435 129,271 (2) 288,345 [ZW] (4,435)(3) ---------- [ZW] - - ----------- ----------- ---------- Income before provision for income taxes 903,318 [ZW] 511,476 (168,645) 1,246,149 Provision for income taxes [ZW] 206,912 141,452 (5) 348,364 ---------- [ZW] - - ----------- ----------- ---------- Net income $696,406 [ZW] $511,476 $(310,097) $897,785 ========== [ZW] =========== =========== ========== Net income per common share $0.13 [ZW] $51,147.60 $0.16 ========== [ZW] =========== =========== ========== Weighted average number of [ZW] common (10)(6) shares outstanding 5,529,272 [ZW] 10 15,000 (6) 5,544,272 ========== [ZW] =========== =========== ==========
14 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 (1) Adjustment which reflects three months of depreciation expense on Retconn Incorporated machinery and equipment and furniture and fixtures at appraised values amounting to $431,204, assuming an estimated useful life of seven years on a straight line basis adjusted by actual depreciation expense on machinery and equipment and furniture and fixtures recorded by Retconn Incorporated for the three months ended September 30, 1995, amounting to $15,645. (2) Adjustment which records interest expense on a $6,000,000 term note with a floating rate yielding an effective interest rate of approximately 8.5%. (3) Adjustment which records reduction in interest expense on $200,000 term note repaid concurrent with the acquisition. (4) Adjustment which records the amortization of the excess of the purchase price paid for the fair market value of all tangible and identifiable intangible assets acquired less liabilities assumed, totaling $4,405,430, amortized over an estimated useful life of twenty-five years. (5) Federal income taxes have been provided for the three month period ended September 30, 1995 primarily because Retconn Incorporated prior to its acquisition by the Company, was treated as an S corporation for federal income tax purposes. The income tax provision of $141,452 represents Retconn's pre-tax income of $511,476 less total pre-tax pro forma adjustments of $168,645 adjusted for Connecticut income taxes of 11% and federal income taxes of 34%. (6) Adjustment which reflects the issuance of 15,000 shares of the Company's common stock commensurate with the acquisition and the retirement of (10) S corporation shares. 15 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE NINE MONTHS ENDED [ZW] SEPTEMBER 30, 1995 [ZW] - - ------------------------------------------------------------------------ HISTORICAL SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND [ZW] RETCONN PRO FORMA SUBSIDIARIES [ZW] INCORPORATED ADJUSTMENTS AS ADJUSTED ------------- [ZW] - - ------------- ------------- ----------- [ZW] Net sales $14,728,768 [ZW] $6,754,600 $21,483,368 Service revenue [ZW] 5,393,105 5,393,105 ---------- [ZW] - - ---------- ------------- ----------- Total revenue 20,121,873 [ZW] 6,754,600 26,876,473 Cost of goods Sold 9,753,908 [ZW] 4,763,442 (735)(1) 14,516,615 Cost of services performed [ZW] 2,491,558 2,491,558 ---------- [ZW] - - ---------- ------------- ----------- Total cost of goods sold and services performed 12,245,466 [ZW] 4,763,442 (735) 17,008,173 Gross profit 7,876,407 [ZW] 1,991,158 735 9,868,300 Selling, general and administrative expenses 4,800,518 [ZW] 645,790 132,163(4) 5,578,471 ---------- [ZW] - - ---------- ------------- ----------- Operating income 3,075,889 [ZW] 1,345,368 (131,428) 4,289,829 Interest expense (net) 929,529 [ZW] 16,185 387,812 (2) 1,317,341 [ZW] (16,185)(3) ---------- [ZW] - - ---------- ------------- ----------- Income before provision for income taxes 2,146,360 [ZW] 1,329,183 (503,055) 2,972,488 Provision for income taxes [ZW] 456,763 2,825 338,035 (5) 797,623 ---------- [ZW] - - ---------- ------------- ----------- Net income $1,689,597 [ZW] $1,326,358 $ (841,090) $2,174,865 ========== [ZW] ========== ============= =========== Net income per common share $0.36 [ZW] $132,635.80 $0.46 ========== [ZW] ========== ============= =========== Weighted average number of [ZW] common [ZW] (10)(6) shares outstanding [ZW] 4,745,754 10 15,000 (6) 4,760,754 ========== [ZW] ========== ============= ===========
16 SEMICONDUCTOR PACKAGING MATERIALS CO., INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (1) Adjustment which reflects nine months of depreciation expense on Retconn Incorporated machinery and equipment and furniture and fixtures at appraised values amounting to $431,204, assuming an estimated useful life of seven years on a straight line basis adjusted by actual depreciation expense on machinery and equipment and furniture and fixtures recorded by Retconn Incorporated for the nine months ended September 30, 1995, amounting to $46,935. (2) Adjustment which records interest expense on a $6,000,000 term note with a floating rate yielding an effective interest rate of approximately 8.5%. (3) Adjustment which records reduction in interest expense on $200,000 term note repaid concurrent with the acquisition. (4) Adjustment which records the amortization of the excess of the purchase price paid for the fair market value of all tangible and identifiable intangible assets acquired less liabilities assumed, totaling $4,405,430, amortized over an estimated useful life of twenty-five years. (5) Federal income taxes have been provided for in the nine month period ended September 30, 1995 primarily because Retconn Incorporated prior to its acquisition by the Company, was treated as an S corporation for federal income tax purposes. The income tax provision of $338,035 represents Retconn's pre-tax income of $1,329,183 less total pre-tax pro forma adjustments of $503,055 adjusted for Connecticut income taxes of 11% and federal income taxes of 34%, less $2,825 of taxes recorded by Retconn Incorporated in the nine month period ended September 30, 1995. (6) Adjustment which reflects the issuance of 15,000 shares of the Company's common stock commensurate with the acquisition and the retirement of (10) S corporation shares. 17 PART II Item 5 - Other Information Effective August 28, 1996, the Company entered into a joint venture agreement to develop a silicon wafer polishing and reclaiming facility in Singapore. The jointly owned Singapore company, International Semiconductor Products Pte Ltd ("ISP") is 50.1% owned by the Company and 49.9% owned by a holding company, Semiconductor Alliance Pte Ltd. As of September 30, 1996, the Company and its joint venture partner each made a $984,202 equity contribution into ISP. Item 6(a) - Exhibits 10.55 - Joint Venture Agreement dated August 28, 1996 between Semiconductor Alliance Pte Ltd, the Company and International Semiconductor Products Pte Ltd. 10.56 - Intellectual Property License Agreement dated August 28, 1996 between American Silicon Products, Inc. And International Semiconductor Products Pte Ltd. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SEMICONDUCTOR PACKAGING MATERIALS CO., INC. DATE: NOVEMBER 13, 1996 By: /S/ GILBERT D. RAKER ------------------------------- Name: Gilbert D. Raker Title: Chairman of the Board and Chief Executive Officer DATE: NOVEMBER 13, 1996 By: /S/ ANDREW A. LOZYNIAK ------------------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary (Chief Accounting Officer) 19 EX-10 2 EXHIBIT 10.55 DATED THIS 28TH DAY OF AUGUST 1996 BETWEEN SEMICONDUCTOR ALLIANCE PTE LTD AND SEMICONDUCTOR PACKAGING MATERIALS CO. INC AND INTERNATIONAL SEMICONDUCTOR PRODUCTS PTE LTD AND THE PARTIES WHOSE NAMES ARE STATED IN SCHEDULE 4 OF THIS AGREEMENT =============================================== JOINT VENTURE AGREEMENT =============================================== MESSRS KOH & CHOO ADVOCATES & SOLICITORS SINGAPORE (KK/CYL/ts/3409/96) This Agreement is made on the 28th day of August 1996. BETWEEN (1) Semiconductor Alliance Pte Ltd, a company incorporated in Singapore with its registered office at 135 Middle Road #05-13/14, Bylands Building, Singapore 188975; ("SCA"); (2) Semiconductor Packaging Materials Co., Inc., a company incorporated in Delaware, United States of America with its principal place of business at 431 Fayette Avenue, Mamaroneck, New York 10543, U.S.A, ("SPM"); (3) International Semiconductor Products Pte Ltd, a company incorporated in Singapore with its registered office at 135 Middle Road #05-13/14, Bylands Building, Singapore 188975, (the "Company" or "ISP"); and (4) the parties whose names and addresses are stated at Schedule 4 of this Agreement. WHEREAS (A) SCA and SPM are desirous of establishing and operating a joint venture company in Singapore for the primary purpose of carrying on the Business (as defined below). (B) The parties referred to in Schedule 4 are selected directors and/or officers and/or shareholders of SCA and SPM and/or its subsidiary ASP and are executing this Agreement in order to be bound by clause 8 hereof. (C) For the purpose of cooperatively carrying out the aforesaid desire SCA has procured the formation of the Company with an authorised share capital of S$100,000.00 divided into 100,000.00 ordinary shares of S$1.00 each and an initial and paid-up capital of S$2.00. (D) SCA is beneficially entitled to the 2 ordinary shares in the Company constituting the initial issued and paid-up capital of $2.00 which are held by the nominees of SCA. (E) To give effect to the intention of the parties hereto as hereinbefore recited, and to regulate their relationship inter se as shareholders in the Company in the conduct of the Business and affairs of the Company in the spirit of mutual confidence and co-operation, the parties hereto have agreed to enter into this Agreement on the terms and conditions hereinafter set out. IT IS AGREED as follows:- 1. DEFINITIONS AND INTERPRETATION 1 (A) Definitions In this Agreement and the Schedules, unless the subject or context otherwise requires, the following words and expressions shall have the following meanings respectively ascribed to them:- "Act" means the Companies Act, Chapter 50; "Articles" means the articles of association for the time being of the Company; "Auditors" means the auditors for the time being of the Company; "ASP" means American Silicon Products, Inc., a corporation incorporated in the United States of America with its place of business at 15 Clarkson Street, Providence, Rhode Island, 02908, U.S.A; "Board" means the board of Directors for the time being of the Company; "Business" means the business of polishing and reclamation of semiconductor wafers and the brokering of semiconductor wafers used in the electronics industry; "Control" and any form thereof, such as Controlling means the possession by one person, directly or indirectly through one or more intermediaries, of the power to direct or cause the direction of the management or policies of another person; with respect to a corporation such power may be evidenced by the right to exercise, directly or indirectly, more than 50% of the voting rights attributable to the shares or interest of such corporation, partnership or other body corporate; "Directors" means the directors for the time being of the Company; "Exchange Rate" means the rate of exchange between the US$ and the S$ as published by the Asian Wall Street Journal; "Expert" means an independent merchant bank of international repute who shall be nominated by agreement between the Shareholders or failing such nomination within 14 days after the request of any Shareholder to the others therefor, nominated at the request of any Shareholder by the Chairman of the Singapore International Arbitration Centre; "Intellectual Property Rights" means any patent, copyright, registered design and unregistered designs, trade name, trade mark, logo, trade dress, or other similar industrial, commercial or intellectual property rights wherever in the world enforceable; "Knowhow" means all industrial, marketing and commercial information and techniques including without limitation to the foregoing, drawings, formulae, test 2 reports, operating and testing procedures, instruction manuals, tables of operating conditions, administrative procedures, lists and particulars of customers, marketing methods and procedures, advertising copy and computer software programmes relating to and/or used in connection with the Business; "Memorandum" means the memorandum of association for the time being of the Company; "Related Party" means in relation to any person, a person directly or indirectly (through one or more intermediaries) Controlling, Controlled by or under common Control with that person; "Shareholders" means SCA, SPM and any other person holding shares in the capital of the Company who shall have executed a deed of ratification and accession pursuant to clause 6(C); "Scheduled Board Meetings" means Board meetings referred to in clause 3(I); 'Specified Sum" means the sum of US$4,000,000.00 less S$100,000.00; "SCA Directors" means Directors nominated in accordance with clause 3B(i); "SPM Directors" means Directors nominated in accordance with clause 3B(ii); "S$" means the lawful currency of Singapore; "Territories" means all the countries listed in Schedule 1; "Unscheduled Board Meetings" means Board meetings referred to in clause 3(J); and "US$" means the lawful currency of the United States of America. (B) Interpretation (i) Any reference in this Agreement to:- (a) "clauses","paragraphs" "sub-paragraphs", and "schedules" are to the clauses, paragraphs and sub-paragraphs of, and the schedules to, this Agreement; and (b) "financial year" means a period in respect of which an audited profit and loss account of the Company has or is to be prepared for the purpose of laying before the Company at its annual general meeting, whether that period is a year or not. The accounting reference date of the Company shall be the first of January of each calendar year. (ii) The headings are for convenience only and shall not affect the interpretation 3 of this Agreement. (iii) The schedules form a material part to this Agreement and all references to the this Agreement shall include references to the schedules. (iv) Unless the context otherwise requires or permits, references to the singular number shall include references to the plural number and vice versa; references to natural persons shall include bodies corporate and incorporate and vice versa; and words denoting any gender shall include all genders. (v) The expression "related corporation" shall bear the meaning ascribed thereto in Section 6 of the Act. (vi) All references to time, days of the week and calendar months are references to Singapore time, days and calendar months. 2. COMPLETION On or before 5 September 96, or such other date as SCA and SPM shall agree in writing, SCA and SPM shall each take or cause to be taken the following steps at Directors' and Shareholders' meetings of the Company (as appropriate):- (i) the appointment of each of Messrs Andrew A. Lozyniak, Gilbert Raker ("SPM Directors") and Dr. Freddy Goh Hin Choon and Mr Lee Boon Leng ("SCA Directors") as Directors; (ii) the transfer of the 2 subscriber shares of S$1.00 each from the nominee shareholders of the Company to SCA; (iii) the subscription by each of SCA and SPM for 49,898.00 and 50,100.00 shares of S$1.00 each respectively in the Company at par and the allotment and issue of such shares by the Company to SCA and SPM respectively against payments in full in cash; (iv) the appointment of Dr Freddy Goh Hin Choon as Managing Director of the Company and the execution of the Service Agreement on the terms appearing on Schedule 2; and (v) the resignations of the nominee Directors Wong Yhui Kong and Low Kok Poo. Provided Always that the Shareholders' obligations under paragraph (iii) above shall be conditional upon the execution, by ASP and the Company, of the Intellectual Property License Agreement referred to in clause 14. In the event of the execution of the Intellectual Property License Agreement after 5 September 96, the date for the subscription by the Shareholders of shares in the Company referred to in paragraph (iii) above shall be agreed in writing 4 between SCA and SPM and in any event unless otherwise agreed in writing, shall be no later than the 7th day after the execution of the Intellectual Property License Agreement. 3. BOARD OF DIRECTORS (A) Number Unless otherwise unanimously agreed upon by the Shareholders in writing, the Board shall consist of 4 Directors. (B) Composition Save as hereinafter provided, the Board shall comprise:- (i) 2 persons nominated by SCA for the time being as Directors (who shall be designated as "SCA" Directors); and (ii) 2 persons nominated by SPM for the time being as Directors (who shall be designated as "SPM" Directors), so long as SCA and SPM shall each hold such numbers of shares for the time being in the total issued share capital of the Company as are not less than a 49.9% : 50.1% ratio respectively. (C) Right of Nomination The right to nomination conferred on a Shareholder under paragraph (B) above shall include the right of that Shareholder to request the removal at any time from office such person nominated by that Shareholder as a Director and the right of that Shareholder at any time and from time to time to determine the period during which such person shall hold the office of Director. (D) Notice in Writing Each nomination or request for removal of a Director pursuant to this clause shall be in writing and signed by or on behalf of the Shareholder nominating or requesting the removal of such Director and shall be delivered to the registered office for the time being of the Company. (E) Further Director Whenever for any reason a person nominated by a Shareholder ceases to be a Director, that Shareholder shall be entitled to nominate forthwith a further Director. (F) Alternate Director 5 A Director shall be entitled to any time and from time to time to appoint any person to act as his alternate and to terminate the appointment of such person and in that connection the provisions of the Articles shall be complied with. Such alternate Director shall be entitled while holding office as such to receive notices of meetings of the Board and to attend and vote as a Director at any such meetings at which the Director appointing him is not present and generally to exercise all the powers, rights, duties and authorities and to perform all functions of his appointor as Director. Further, such alternate Director shall be entitled to exercise his vote of the Director appointing him at any meetings of the Board and if such alternate Director represents more than one Director such alternative Director shall be entitled to one vote for every Director he represents. (G) Chairman The Chairman of the Board shall be an "SPM" Director, as designated from time to time by SPM. He shall have a second calling or casting vote in meetings of the Board. (H) Managing Director The Managing Director of the Company shall be an "SCA" Director appointed by SCA. He shall be responsible for the day to day running and management of the business of the Company within the limits imposed by the Board and this Agreement. The first Managing Director of the Company shall be Dr. Freddy Goh Hin Choon. SPM shall be consulted on all subsequent appointments of the post of Managing Director and shall have the right to veto SCA's selection provided that (i) this right is exercised in the best interest of the Company and (ii) SPM shall state the reasons for its objection in writing to SCA. (I) Scheduled Board Meetings (i) Unless otherwise agreed between the "SCA" Directors and the "SPM" Directors, there shall be a monthly telephone Board meeting held in accordance with the procedure described in clause 3(K) on the third Tuesday of every calendar month ("Scheduled Board Meetings"). The first Scheduled Board Meeting shall be held at 8.00 am. on the third Tuesday following 28 August 96. The time for all subsequent Scheduled Board Meetings shall alternate between 8.00 pm and 8.00 am. respectively. The quorum necessary for the transaction of any business of the Company at Scheduled Board Meetings shall be 2 Directors including at least one "SCA" Director and at least one "SPM" Director. All resolutions of the Directors at a Scheduled Board Meeting shall be adopted by a simple majority vote of the Directors present. (ii) If within 60 minutes from the time appointed for the holding of a Scheduled Board Meeting (but not an adjourned Scheduled Board Meeting) a quorum is not present, then the meeting shall stand adjourned to the same time 72 hours later and if at such adjourned Scheduled Board Meeting a quorum is not 6 present within 60 minutes from the time appointed for holding the meeting, any 2 Directors present shall form a quorum and any resolutions passed thereat shall be considered valid and binding Board resolutions. (J) Unscheduled Board Meetings (i) All meetings of the Board other than those referred to in clause 3(I) shall be Unscheduled Board Meetings. The quorum at an Unscheduled Board Meeting necessary for the transaction of any business of the Company shall be 2 Directors, including at least one "SCA" Director and at least one "SPM" Director. All resolutions of the Directors at an Unscheduled Board Meeting shall be adopted by a simple majority vote of the Directors present. (ii) With the exception of a Board meeting held in accordance with the clause 3 (K), no Unscheduled Board Meeting shall be held outside Singapore unless with the consent of both the "SCA" Directors and "SPM" Directors. (iii) No Unscheduled Board Meeting may be held unless 3 days' prior written notice setting out the agenda, time and place of the meeting has been given to all Directors and alternate Directors, including those not present in Singapore, unless all the Directors agree to a shorter period of notice. Such notice may be delivered personally or sent by prepaid registered post (unless it is sent from overseas in which case it shall be sent by telex or facsimile transmission or by Federal Express or similar courier service) or by facsimile transmission addressed to the Directors or alternate Directors to such address or facsimile number as the Directors or alternate Directors shall from time to time notify the company secretary. Meetings conducted in accordance with clause 3(K) below may be convened on such shorter period of notice as both the "SPM" and "SCA" Directors agree. Meetings conducted in accordance with clause 3(K) below may be summoned on verbal notice. (K) Telephone Board meetings The Directors may (unless otherwise required by the Act), meet together either in person or by telephone, radio conference, television or similar communication by which all persons participating in the meeting are able to hear and be heard by all other participants, for the despatch of business and adjourn and otherwise regulate their meetings as they think fit and the quorum for such teleconference meetings shall be the same as the quorum required by clauses 3 (I) and (J) above. A resolution passed by such a conference shall, notwithstanding that the Directors are not present together at one place at the time of the conference, be deemed to have been passed at a meeting of the Directors held on the day and at the time at which the conference was held and shall be deemed to have been held at the office of the Company, unless otherwise agreed, and all Directors participating at that meeting shall be deemed for all purposes of this Agreement to be present at that meeting. (L) Unanimous Consents 7 A resolution in writing signed by all Directors shall be as valid and effectual as if it had been passed at a Board meeting duly called and constituted. Such resolution may be signed in any number of counterparts and shall become effective when one or more counterparts have been signed by all of the Directors. 4. BUSINESS OF THE COMPANY (A) Business The Shareholders agree that the Company shall carry on the Business in the Territories and such other businesses as may from time to time be determined by the Board. (B) Shareholders' Obligations In consideration of the mutual obligations of the Shareholders herein contained, and except as the Shareholders may otherwise agree in writing or save as otherwise provided or contemplated in this Agreement, each of the Shareholders shall exercise its powers in relation to the Company so as to ensure that:- (i) the Company carries on its business and conducts its affairs in a proper and efficient manner; (ii) the Company, and the Directors appointed by that Shareholder, will comply strictly and expeditiously with the provisions of this Agreement and the Articles; (iii) the Business shall be carried on pursuant to the policies set out herein or laid down from time to time by the Board, which shall hold Board meetings in accordance with clauses 3(I) and 3(J) and the Articles; (iv) the Company shall cause to be kept full and proper accounting records relating to the business, undertakings and affairs of the Company, which records shall be made available at all reasonable times for inspection by the Directors by prior appointment during office hours; (v) the Company shall prepare annual accounts, in each case in accordance with generally accepted accounting principles and in compliance with all applicable legislation in respect of each accounting reference period, and shall procure that such accounts are audited as soon as practicable and shall supply copies of the same both in draft and final form, to each of the Shareholders immediately upon their issue; (vi) the Company shall do all that the Auditors may reasonably require by way of keeping records and accounts and provide the Auditors with all such information and explanation as they may reasonably require and 8 otherwise assist the Auditors in all reasonable ways; (vii) the Company continues to qualify as resident in Singapore for the purpose of taxation and is not resident elsewhere; (viii) the accounting reference date of the Company shall be the 1st of January of each calendar year; (ix) an additional set of financial statements be prepared by the Company in conformity with the Generally Accepted Accounting Principles as practised in the United States and with the United States Securities Exchange Commission's requirements to enable SPM to consolidate the Company's financial statements in accordance with United States legal requirements; and (x) the Board submits an annual budget for Shareholders' approval by the first day of December of each calendar year. 5. GENERAL MEETING (i) No business shall be transacted at any general meeting of the Company unless a quorum of Shareholders is present throughout the meeting; notwithstanding the provisions of the Articles, two Shareholders present in person or by proxy shall be a quorum. (ii) A resolution in writing signed by all Shareholders shall be as valid and effectual as if it had been passed at a general meeting of the company duly called and constituted. Such resolution may be signed in any number of counterparts and shall become effective when one or more counterparts have been signed by all of Shareholders. (iii) The Shareholders shall exercise all voting rights and other powers of control available to them in relation to the Company so as to procure (so far as they are able by the exercise of such rights and powers) that the Company shall not without the prior written consent of SCA and SPM or the affirmative votes of SCA and SPM at a general meeting of the Company carry out any of the following:- (a) acquiring or disposing any interest in any other company or carrying on any business that is outside the Business; (b) declaring any dividend distribution; (c) incurring aggregate capital commitments in excess of the lesser of S$250,000 or 5% of the sum provided in the annual budget for the financial year; (d) the creation or redemption of any fixed or floating charge, debenture, 9 mortgage, lien (other than a lien arising by operation of law) or other encumbrance over the whole or any part of the undertaking, property or assets of the Company; (e) the issuance, allotment, grant of option, over any of the Company's unissued share capital or other securities or the reorganisation of its share capital in any way; (f) obtaining any loan or the creation of any debt other than the shareholders' loans referred to in clause 7(A)(i); (g) terminating any service agreement between the Company and its Managing Director; (h) confirming the remuneration of any Director; and (i) confirming the terms of employment of the Managing Director and other key management personnel. 6. TRANSFER OF SHARES (A) Restrictions on Transfer (i) No Shareholder shall create or have outstanding any pledge, lien, charge or other encumbrance or security interest on or over any shares in the capital of the Company or any part of its interest in such shares. (ii) Subject to paragraph (xi) and paragraph (B) below, no Shareholder shall transfer shares held by it in the capital of the Company or otherwise sell, dispose of or deal with all or any part of its interest in such shares unless and until the rights of pre-emption conferred by this clause 6 have been exhausted. It shall be a pre-condition to any share transfer that the transferor shall transfer all but not part of his shares in the capital of the Company. (iii) Subject to paragraph (B) below, every Shareholder who desires to transfer its shares (the "Transferor") shall give to the Company notice in writing of such desire (a "Transfer Notice"). Subject as hereinafter mentioned, a Transfer Notice shall constitute the Company the Transferor's agent for the sale of all its shares (in the capital of the Company (the "Sale Shares") to the other Shareholder (the "Other Shareholder") at the Purchase Price. (iv) The Purchase Price shall be the market value of the Sale Shares as at the date of the Transfer Notice as determined by the Expert on the following assumptions and bases:- (a) valuing the Sale Shares as on an arm's length sale between a willing vendor and willing purchaser; 10 (b) if the Company is carrying on business as a going concern, on the assumption that it will continue to do so; (c) that the Sale Shares are capable of being transferred without restriction; and (d) valuing the Sale Shares as a rateable proportion of the total value of all the issued shares of the Company which value shall not be discounted or enhanced by reference to the number thereof. If any difficulty shall arise in applying any of the foregoing assumptions or bases then such difficulty shall be resolved by the Expert in such manner as he shall in his discretion think fit. The Company shall procure that the Expert determines the Purchase Price within 21 days of being requested to do so. In making such determination, the Expert shall be acting as an expert and not as an arbitrator and his decision shall be binding on all Shareholders. (v) The costs and expenses of the Expert in determining the Purchase Price shall be borne by the Company. (vi) Upon receipt of the Expert's written determination of the Purchase Price in writing, the Company shall within 2 days by notice in writing inform the Other Shareholder of the Purchase Price of the Sale Shares and invite the Other Shareholder to apply in writing to the Company within 21 days of the date of despatch of the notice (which date shall be specified therein) for such Sale Shares, subject however to such limitations as may be specified in the Transfer Notice and which the Expert took into account in his valuation. (vii) If the Other Shareholder shall within the period of 21 days apply for all of the Sale Shares, the Board shall notify in writing the Other Shareholder the place and time (being not earlier than 14 and not later than 28 days after the date of the Other Shareholder's application for the Sale Shares) at which the sale and purchase of the Sale Shares shall be completed. (viii) Subject to paragraph (vi) above, the Transferor shall be bound to transfer the Sale Shares to the Other Shareholder at the time and place therein specified by the delivery of duly executed transfer forms together with the relative share certificates in respect of the Sale Shares and, if it shall fail to do so, the Chairman of the Company or some other person appointed by the Board shall be deemed to have been appointed attorney of the Transferor with full power to execute, complete and deliver, in the name and on behalf of the Transferor, transfers of the Sale Shares to the Other Shareholder against payment of the price to the Company. On payment of the price to the Company the Other Shareholder shall be deemed to have obtained good quittance for such payment and on execution and delivery of the transfer the Other Shareholder 11 shall be entitled to insist upon its name being entered in the Register of Members as the holder by transfer of the Sale Shares. The Company shall forthwith pay the price into a separate bank account in the Company's name and shall hold such price in trust for the Transferor. (ix) If the Other Shareholder does not apply to purchase the Sale Shares the Transferor shall be entitled, during the 3 months following the expiry of the said period of 21 days referred to in paragraph (vi) above, to transfer to any third party and at any price (not being less than the Purchase Price fixed under paragraph (iv) above) and on the same terms the Sale Shares. (x) Notwithstanding paragraph (ix) above, if the Transferor receives a bona fide offer from a third party other than a Related Party (the "Third Party") during the 3 months following the expiry of the said period of 21 days referred to in paragraph (vi) above, to purchase the Sale Shares at a price (the "Third Party Price") less than the Purchase Price and if the Transferor desires to sell the Sale Shares to such Third Party at such Third Party Price, then the Transferor shall fully and fairly disclose in writing to the Other Shareholder the principal terms and conditions of the Third Party's proposal to purchase the Sale Shares. The Other Shareholder shall have 30 days from the date of such written presentation to it (the "Presentation Date") to decide whether to purchase the Sale Shares at the Third Party Price and on the same terms and conditions offered by such Third Party (the "Third Party Proposal Terms"). If the Other Shareholder accepts the Third Party Proposal Terms in writing within 30 days of the Presentation Date, then the Transferor shall be bound to transfer the Sale Shares to the Other Shareholder pursuant to the provisions of paragraph (viii) above. If the Other Shareholder fails to accept such offer to purchase the Sale Shares within the said 30 days from the Presentation Date, then the Transferor shall be entitled during the 3 months following the expiry of the said 30 day period, to transfer the Sale Shares to such Third Party and at any price not being less than the Third Party Price and on any terms and conditions not more favourable to the Third Party than the Third Party Proposal Terms. (xi) Notwithstanding anything in the foregoing paragraphs but subject to paragraph (C) below, a Shareholder being a company may transfer all or any part of its shares to any of its related corporations (the "Transferee Corporations"). It shall be a condition precedent to the right of such Shareholder to transfer shares to the Transferee Corporation that such Shareholder and the Transferee Corporation both execute, in such form as may be reasonably required and agreed between the other Shareholder, a deed of undertaking under which such Shareholder undertakes to repurchase, and the Transferee Corporation undertakes to sell, all the shares held by the Transferee Corporation in the capital of the Company in the event that the Transferee Corporation ceases to be a related corporation of such Shareholder. (B) Moratorium on Transfer Notwithstanding anything contained in this Agreement or the Articles but subject 12 to clause 2(ii), no Shareholder shall transfer all or any part of its shares in the capital of the Company to any person within a period of 30 months from the 28 August 96 unless with the prior written consent of the other Shareholder. (C) Supplementary Provisions It shall be a condition precedent to the right of any Shareholder to transfer shares in the capital of the Company that the purchaser or transferee (if not already bound by the provisions of this Agreement) executes in such form as may be reasonably required by and agreed between the other Shareholder a deed of ratification and accession under which the purchaser or transferee shall agree to be bound by and shall be entitled to be the benefit of this Agreement as if an original party hereto in place of or in addition to the transferring Shareholder (as the case may be). 7. FINANCE (A) Shareholders' Loans (i) The Shareholders shall provide to the Company, in proportion to their respective shareholdings in the Company, an aggregate sum up to the Specified Sum by way of unsecured shareholders' loans, on the terms and conditions set out in Schedule 3. (ii) In fulfilment of their obligations under paragraph (i) above, SCA and SPM shall each deposit the following percentages of the Specified Sum (base on the Exchange Rates on the following dates) at the following dates into the Company's bank accounts:-
Date SPM SCA ---- --- --- 5 September 96 50.1% X (50% of Specified Sum) 49.9% X (50% of [ZW] Specified Sum) 1 October 96 50.1% X (25% of Specified Sum) 49.9% X (25% of [ZW] Specified Sum) 1 November 96 50.1% X (25% of Specified Sum) 49.9% X (25% of [ZW] Specified Sum)
SCA will deposit the S$ equivalent of the Specified Sum into the Company's bank account with the Development Bank of Singapore, Towner Road Branch, Account No. 025-011-826-0. SPM will deposit the US$ equivalent of the Specified Sum into the Company's US$ bank account with the said bank, Account No. 0099-319-049-581. Thereafter, the Shareholders shall have fulfilled their obligations under paragraph (i) above. The Company shall be entitled to draw on the Shareholders' loans as and when the same are deposited into its account, as working capital. (iii) If the Company requires further working capital, either party may provide further 13 loans to the Company at an interest rate of 15% per annum. Such loans shall have a priority of payment over loans referred to in paragraph (i) above. (iv) All Shareholders' loans shall be repaid by the Company in Singapore dollars. (B) Third Party Loans Additional financing requirements as the Company may require from time to time may, in addition to clause 7(A)(ii), be raised by way of loan, debenture, mortgage or in such other manner as the Shareholders may agree and such financing requirements shall be procured, wherever possible, without any additional security by way of guarantee or otherwise from the Shareholders. In the event that any such guarantee is required in order to secure financing requirements for the Company, the Shareholders shall provide the same. The legal costs incurred by the shareholders in providing any such guarantee shall be borne by the Company. (C) Proportionate Liability (i) As a separate and independent covenant, Shareholders agree with each other that the aggregate amount of any liability arising under guarantees, indemnities and covenants given to any bank or other financial institution at any time during the term of this Agreement by any Shareholder to secure the indebtedness and obligations of the Company to such bank or financial institution shall be borne between the Shareholders in proportion to the respective shareholdings in the Company. Any legal and other costs which a Shareholder may be ordered to pay or otherwise incurs in any action brought to enforce any such guarantees, indemnities or covenants shall similarly be borne by the other Shareholder in proportion to the their respective shareholdings in the Company. (ii) Paragraph (i) above shall apply irrespective of whether or not the Shareholders are liable as co-sureties to the creditor enforcing the relevant guarantee, indemnity or covenant and whether or not they are liable jointly and/or severally and by the same or different instruments. 8. FUTURE ACTIVITIES (A) Non-Competition (i) Save with the previous written consent of the other Shareholder:- (a) each of SCA and SPM hereby undertakes to the other that it will not, and will procure that each of its Related Parties and directors will not and; (b) SCA hereby undertakes to SPM that it will procure that its shareholders (with the exception of the Singapore Economic Development Board, 14 which may become a shareholder of SCA) and Excellent Scientific Instruments Pte Ltd will not; for so long as SCA or SPM, as the case may be, shall hold any shares in the issued share capital of the Company and for a period of 30 months from the date of transfer of the entirety of the relevant Shareholder's shares:- (aa) engage or be interested directly or indirectly (otherwise than by virtue of its interests as a shareholder of the Company) in the Business within the Territories; or (bb) solicit in the Territories in competition with the Business of the Company the custom of any person who is or has been at any time during the period it held any shares in the issued share capital of the Company, a customer of the Company; or (cc) solicit or entice away or attempt to solicit or entice away from the Company any person who is an officer, manager or employee of the Company whether or not such person would commit a breach of his contract of employment by reason of leaving such employment. (ii) (a) Save with the written previous consent of SPM, each of FG, XC and LBL undertakes to SPM that for so long as SCA shall hold any shares in the issued capital of the Company and for a period of 30 months from the date of the transfer of the entirety of SCA's shares he will not and; (b) save with the previous written consent of SCA, each of GR, AL and LJ undertakes to SCA and the Company that, for so long as they are employees of SPM or a wholly owned SPM subsidiary and SPM shall hold any shares in the issued share capital of the Company and, provided that they continue as employees of SPM or a wholly owned SPM subsidiary, for a period of 30 months from the date of transfer of the entirety of SPM's shares, he will not:- (aa) engage or be interested directly or indirectly (otherwise than by virtue of his interests as a shareholder of the Company) in the Business within the Territories; or (bb) solicit in the Territories in competition with the Business of the Company the custom of any person who is or has been at any time during the period SCA or SPM (as the case may be) held any shares in the issued share capital of the Company, a customer of the Company; or (cc) solicit or entice away or attempt to solicit or entice away from the Company any person who is an officer, manager or employee of the Company whether or not such person would commit a breach of his contract of employment by reason of leaving such 15 employment; or (dd) cause or permit any person directly or indirectly under his Control to do any of the acts or things specified above. (iii) The obligations of each of FG, XC, LBL, GR, AL and LJ shall survive the termination of this Agreement. (iv) Notwithstanding any and all aspects of this clause 8, and the Agreement, SPM and its wholly owned subsidiary ASP shall be entitled to continue to compete to the extent that they are conducting business in any of the Territories on or before the date on which ISP's facility becomes operational. (B) Several Obligations Each and every obligation under sub-clause (A) above shall be treated as a separate obligation and shall be severally enforceable as such. In the event of any obligation or obligations being or becoming unenforceable in whole or in part such part or parts as are unenforceable shall be deleted from this clause and any such deletion shall not affect the enforceability of all such parts of this clause as remain not so deleted. (C) Modifications to Restrictions While each of the Shareholders acknowledges that the restrictions contained in sub-clause (a) above are reasonable in all the circumstances it is recognised that restrictions of the nature in question may fail for technical reason unforeseen and accordingly, it is hereby agreed and declared that if any of such restrictions shall be adjudged by a court of competent jurisdiction to be void as going beyond what is reasonable in all the circumstances for the protection of the interests of the Company but would be valid if part of the wording thereof were deleted or the periods thereof reduced or the range of activities or area dealt with thereby reduced in scope, the said restrictions shall apply with such modifications as may be necessary to make it valid and effective. (D) Company's obligations The Company shall procure that its key employees enter into non-competition covenants similar to those stated in clause 8(A)(ii)(aa) to (dd) with the Company as part of their employment terms. 9. RIGHT OF FIRST REFUSAL (i) Save as provided in this clause, each of the Shareholders shall not, and shall procure and ensure that none of its Related Parties shall, make any Relevant Investment (as defined in paragraph (vi) below) unless such Shareholder or 16 Related Party (as the case may be) shall have first complied with the provisions of this clause. It shall be the duty of each Shareholder to procure and ensure that any Related Party of such Shareholder who wishes to make any Relevant Investment shall comply with the provisions of paragraphs (ii) to (vii) below and a breach of such provisions by a Related Party of a Shareholder shall be deemed to be a breach by that Shareholder of such provisions. (ii) In the event that any Shareholder or any of its Related Parties proposes to make any Relevant Investments (the "Proposing Party"), the Proposing Party shall first offer to the other Shareholder (the "Other Shareholder") the opportunity to participate in the Relevant Investment. The Proposing Party shall fully and fairly disclose in writing to the Other Shareholder the principal terms and conditions of the Relevant Investment. The Other Shareholder shall have 30 days from the date of such presentation in writing to it (the "Presentation Date") to decide whether to participate in the Relevant Investment. Any such participation shall be in one-half of the investment on the same terms and conditions as those applicable to the Proposing Party. If the Other Shareholder shall indicate to the Proposing Party an interest in considering a participation in the Relevant Investment, the Proposing Party and the Other Shareholder shall negotiate in good faith as to the terms of a definitive agreement between them in relation to such Relevant Investment. (iii) If after the making of such disclosure in relation to any Relevant Investment, the Other Shareholder shall indicate in writing to the Proposing Party that it does not wish to participate therein or the Proposing Party and the Other Shareholder shall fail to agree upon the terms of and enter into legally binding documentation in relation to their participation in the Relevant Investment within 60 days from the Presentation Date, the Proposing Party shall be free, during the next succeeding 90 days, to make such Relevant Investment on substantially the same terms and conditions as those disclosed to the Other Shareholder without the participation of the Other Shareholder therein. The making of a Relevant Investment pursuant to this clause 9 by a Shareholder or its Related Party shall not be a violation by that Shareholder of clause 8 provided that the operation of the Relevant Investment restricts its solicitation of business to the Territory in which its plants are located. (iv) If the Proposing Party and the Other Shareholder shall so agree, any such Relevant Investment may be taken up in its entirety by the Company. (v) For the purposes of this clause, the expression "Relevant Investment" shall mean:- (a) the acquisition of any shares in or an interest in or the assets of any entity principally and primarily engaged or proposing to engage in the Business in, or in relation to, one or more of the Territories other than Singapore; or (b) the investment in or formation of any joint venture, partnership or other 17 entity the purpose of which is to engage in the Business in, or in relation to, one or more of the Territories other than Singapore. provided, however, that the expression "Relevant Investment" shall not include any further acquisition of shares in, or assets of, or investment in any entity which itself was the subject of a Relevant Investment presented to the Other Shareholder in which the Other Shareholder declined or failed to participate. (vi) Nothing in this Agreement shall be construed so as to prohibit the Proposing Party from owning, operating or investing in any business or entity of any nature or description, independently or with others, provided that (a) such business or entity shall not be carrying on the Business in Singapore (and regardless whether such business or entity shall be carrying on the Business in the other countries in the Territories) and (b) if such Proposing Party shall have complied with the provisions of this clause including those with regard to offering such investment opportunity to the Other Shareholder which shall have declined or failed to participate therein, or such operation or investment does not fall within the definition of a Relevant Investment as set out herein. (vii) Any reference in this clause to a Proposing Party in any context, shall include a reference to any of its Related Parties and each Proposing Party shall be obliged to procure that each of its Related Party shall act accordingly. 10. GENERAL OBLIGATIONS OF SHAREHOLDERS Each Shareholder shall take all steps necessary on its part to give full effect to the provisions of this Agreement and to procure (so far as it is able by the exercise of voting rights or otherwise so to do) that the Company and the Directors shall perform and observe the provisions of this Agreement. 11. PREVALENCE OF AGREEMENT AND AMENDMENT OF THE ARTICLES (i) In the event of any inconsistency or conflict between the provisions of this Agreement and the provisions of the Articles, the provisions of this Agreement shall as between the Shareholders prevail. (ii) The Shareholders shall use their respective best endeavours to procure that new Articles in a form consistent in all respects with the terms of this Agreement are adopted by the Company as soon as reasonably practicable after the signing hereof. 12. DURATION AND TERMINATION (A) Duration This Agreement shall take effect from the date hereof and continue thereafter without limit in point of time but, upon the transfer by any Shareholder of the 18 entirety of its shares in the capital of the Company, it shall be released from all its obligations hereunder (other than under clauses 8 and 14) but, if at that time there are two or more Shareholders bound by the provisions of this Agreement, this Agreement shall continue in full force and effect as between the continuing Shareholders. (B) Termination The termination of this Agreement from any cause shall not release any Shareholder from any liability which at the time of termination has already accrued, or which thereafter may accrue and was related to the time period in which a Shareholder held its investment in ISP. 13. DEFAULT (A) Remedy of Breach of Default Where a Shareholder fails to perform its obligations hereunder or to comply with the terms and conditions of this Agreement, the other Shareholder shall be at liberty to issue to the defaulting Shareholder a notice specifying the breach or default and, in the case of a breach or default capable of remedy, stipulating a period of not less than 30 days during which such breach or default shall be remedied or steps taken in pursuance thereof. For the purposes of this paragraph (A), a breach or default shall be considered capable of remedy if the defaulting Shareholder can comply with the term or condition in question in all respects other than as to the time of performance. (B) Disposal of Shares by Defaulting Shareholder In the event that a breach of this Agreement or a default by a Shareholder has been admitted or established following upon the failure of that defaulting Shareholder to comply with the terms of a notice under paragraph (A) above, the other Shareholder shall, without prejudice to any other rights and remedies such a Shareholder may have, be entitled by notice in writing to the defaulting Shareholder to require such defaulting Shareholder to dispose of all its shares in the Company and upon receipt of such notice, the defaulting Shareholder shall be bound to forthwith give a Transfer Notice in accordance with the provisions of clause 6(A)(iii) and the provisions of clause 6(A)(iii) to clause 6(A)(viii) shall apply mutatis mutandis to such disposal. The restriction on transfer of shares contained in Clause 6(B) and in the Articles shall not apply to such disposal. (C) Default by Shareholders In the event that :- (i) any Shareholder shall become insolvent; or 19 (ii) a resolution is passed for the winding up of any Shareholder; or (iii) a proceeding has been instituted seeking a declaration that any Shareholder is bankrupt or insolvent or seeking bankruptcy, arrangement or composition with creditors, liquidation or the appointment of a trustee, receiver or liquidator or analogous procedure under any applicable law and such proceedings remain undismissed and unstayed for a period of 60 days or are being consented to by that Shareholder, then a breach of this Agreement or default shall have been committed by the Shareholder concerned and the provisions of paragraph (B) above shall apply mutatis mutandis as if a breach of this Agreement or default has been admitted or established. 14. KNOWHOW, INTELLECTUAL PROPERTY AND CONFIDENTIAL INFORMATION (A) Knowhow and Intellectual Property (i) During the term of this Agreement, SPM shall cause ASP to grant to the Company an exclusive and irrevocable licence to use the Knowhow and Intellectual Property Rights which exist in the Knowhow (the "Licensed Property"), for the purpose of carrying on the Business in the Territories upon fair and reasonable terms and conditions, and subject to the terms in paragraphs (ii), (iii) and (iv) below (the "Intellectual Property License Agreement"). (ii) The Intellectual Property License Agreement shall provide for an annual royalty based on the net sales of the Company as determined by the Auditors (the "Net Sales") and calculated as follows:- (aa) with effect from the date hereof to 31 December 1997, 0.5% of Net Sales; and (bb) with effect from 1 January 1998, 1% of Net Sales; provided that when the aggregate amount of royalty accrues to a sum equivalent to US$1,000,000.00 the Intellectual Property License shall be royalty free. (iii) The Intellectual Property License Agreement shall provide for the royalties be payable by the Company in 16 equal quarterly instalments, without interest, only after:- (aa) all shareholders' loans are repaid by the Company; and (bb) receipt of ASP's written notice specifying the due dates and amount of royalty payable. 20 (iv) The Intellectual Property License Agreement shall also require the Company to grant, at the request of a Proposing Party under clause 9, a non-exclusive licence (but without the right to sub-license) to the Licensed Property to any entity which is the subject of a Relevant Investment proposal by such Proposing Party, (the "Relevant Investment Entity'), but only in the country or countries in which such Relevant Investment Entity establishes a facility utilizing the Licensed Property. (v) SPM warrants that ASP has the power, right and authority to grant the aforesaid licence to the Company and that SPM has not received any notice or have any knowledge that the Licensed Property infringes the intellectual property rights or knowhow of third parties and no claims of such infringement have been made or are the subject of litigation actual or threatened. (vi) Where SPM ceases to be a Shareholder the Company shall be entitled to continue with the use of the Knowhow and Intellectual Property Rights which exist in the Knowhow on the same terms to enable the Company to continue the Business without interruption. (vii) Any and all Knowhow and Intellectual Property Rights throughout the world resulting from any work carried out exclusively by the Company or relating to an improvement to the products exclusively generated by the Company shall vest exclusively in the Company. The Company shall grant an irrevocable non-exclusive licence free of royalty or any other payment upon fair and reasonable terms without limit in time but excluding the power to grant sub-licences of such Intellectual Property Rights to ASP or any successor and any Proposing Party for the purpose of carrying out the Relevant Investments in accordance with the provisions of clause 9. (B) Communications Confidential All communications between the Company and the Shareholders or any of them and all information and other material supplied to or received by any of them from any one or more of the others which it either marked "confidential" or is by its nature intended to be exclusively for the knowledge of the recipient alone, or to be used by the recipient only for the benefit of the Company, any information concerning the business transactions or the financial arrangements, including without limitation, trade secrets, customer lists, know-how, designs, processes, drawings and specifications, of the Company or of the Shareholders or any of them, or of any person with whom any of them is in a confidential relationship with regard to the matter in question coming to the knowledge of the recipient shall be kept confidential by the recipient and shall be used by the recipient solely and exclusively for the benefit of the Company unless disclosure is required by law or unless or until any party can reasonably demonstrate that it is or part of it is, in the public domain through no act or default on the part of the recipient, its servants and/or agents, whereupon, to the extent that it is 21 public, this obligation shall cease. (C) Indemnity The Shareholders shall indemnify each other from and against any loss, damages, charges, costs and expenses of whatever nature (including legal costs on a full indemnity basis) suffered or incurred by the other Shareholder arising from the breach of that Shareholder of any provision of this clause or the unauthorised use or disclosure of any Knowhow, Intellectual Property Rights or confidential information referred to in paragraphs (A) and (B) above by any director, employee, shareholder or Related Party of that Shareholder. (D) Shareholders' Obligations The Shareholders shall procure the observance of the abovementioned restrictions by the Company and shall take all reasonable steps to minimise the risk of disclosure of confidential information, by ensuring that only their employees and directors and those of the Company whose duties will require them to possess any of such information shall have access thereto, and that they shall be instructed to treat the same as confidential. The Shareholders shall in addition procure that such employees of the Company whose duties will require them to possess, or have access to, confidential information, shall sign confidentiality agreements with the Company respecting the confidentiality of such information. (E) Obligations to Continue The obligations contained in this clause shall endure, even after the termination of this Agreement, without limit in point of time except and until any confidential information enters the public domain as set out above. 15. MANAGERIAL EXPERTISE (i) SCA shall provide the necessary management and consultancy expertise to operate and manage the Business and may in its discretion second any number of its employees to the Company, the terms and condition of such secondment to be approved by the Board. (ii) The Company shall pay management and consultancy fees the amount and payment date of which shall be determined by SCA provided that SPM's prior written consent is required if the management and consultancy fees charged exceed the amount of royalties accruing to ASP under the Intellectual Property License Agreement referred to under clause 14(A). (iii) The management and consultancy fee shall be invoiced and payable after all Shareholders' loans are repaid and shall be paid in 16 equal quarterly instalments, but without interest, on such dates as SCA may in its discretion determine but in any event no earlier than the repayment dates for the 22 Intellectual Property License Agreement. 16. DIVIDEND DISTRIBUTION POLICY In respect of any financial year if all outstanding Shareholders' loans have been repaid in full, and if the Company has profits available for distribution within the meaning of the Act, the Shareholders shall procure that the maximum amount of dividends in cash shall be paid after taking into account the Company's capital and working capital requirements for the next financial year. 17 FURTHER UNDERTAKINGS (A) The Company undertakes with each of the Shareholders to be bound by and comply with the terms and conditions of this Agreement insofar as the same relate to the Company and to act in all respects as contemplated by this Agreement. (B) The Shareholders undertake with each other to exercise their powers in relation to the Company so as to ensure that the Company fully and promptly observes, performs and complies with its obligations under this Agreement. 18. NO PARTNERSHIP The relationship between the Shareholders shall not constitute a partnership. No Shareholder has the power or the right to bind, commit or pledge the credit of the other Shareholder or the Company. 19. INDULGENCE, WAIVER ETC. No failure on the part of any Shareholder to exercise and no delay on the part of any Shareholder in exercising any right hereunder will operate as a release or waiver thereof, nor will any single or partial exercise of any right under this Agreement preclude any other or further exercise of it. The rights and remedies provided in this Agreement are cumulative and not exclusive of any right or remedy provided by law. 20. COSTS Each of the Shareholders shall bear its own legal and other professional costs and expenses incurred by it in the negotiation and preparation of this Agreement. To the extent legally permissible the Shareholders shall cause the Company to bear such costs related to the formation of the Company as shall be mutually agreed between the Shareholders. 21. COUNTERPARTS This Agreement may be entered into in any number of counterparts, all of 23 which taken together shall constitute one and the same instrument. Any party may enter into this Agreement by signing any such counterpart. 22. NOTICES AND GENERAL (A) Notices All notices, demands or other communications required or permitted to be given or made hereunder shall be in writing and delivered personally or by overseas courier or sent by prepaid registered post (by air-mail if to or from an address outside Singapore) with recorded delivery, or by facsimile transmission addressed to the intended recipient thereof at its address or at its facsimile number set out in this Agreement (or to such other address or facsimile number as a party to this Agreement may from time to time duly notify the others in writing). Any such notice, demand or communication shall be deemed to have been served (if delivered personally or given or made by facsimile) immediately or (if given or made by letter or by overseas courier) 96 hours after posting or delivery to the courier or (if made or given by air-mail) ten days after posting and in proving the same it shall be sufficient to show that the envelope containing the same was duly addressed, stamped and posted. The addresses and facsimile numbers of the parties hereto for the purpose of this Agreement are:- Semiconductor Alliance Pte Ltd 135 Middle Road #05-13/14 Singapore 188975 Facsimile Number: 3385633 Semiconductor Packaging Materials Co., Inc. 431 Fayette Avenue, Mamaroneck, N.Y. 10543 U.S.A Facsimile Number: 914-698-5386 International Semiconductor Products Pte Ltd 135 Middle Road #05-13/14 Singapore 188975 Facsimile Number:3385633 Freddy Goh Hin Choon Blk 202, Clementi Avenue 6, #05-63 Singapore 120202 Xavier Chong Fook Choy Blk 96, Lorong 3, Toa Payoh, #01-48 24 Singapore 310096 Lee Boon Leng Blk 868, Woodlands St. 83, #02-341 Singapore 730868 Gilbert Raker/Andrew Lozyniak/Leonard Johnson c/o Semiconductor Packaging Materials Co. Inc., 431 Fayette Avenue, Mamaroneck, New York 10543, U.S.A. (B) Remedies No remedy conferred by any of the provisions of this Agreement is intended to be exclusive of any other remedy which is otherwise available at law, in equity, by statute or otherwise, and each and every other remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity, by statute or otherwise. The election of any one or more of such remedies by any of the Shareholders shall not constitute a waiver by such Shareholder of the right to pursue any other available remedies. (C) Severance If any provision of this Agreement or any part thereof is rendered void, illegal or unenforceable by any legislation to which it is subject, it shall be rendered void, illegal or unenforceable to that extent and it shall in no way affect or prejudice the enforceability of the remainder of such provision or the provisions of this Agreement. (D) Entire Agreement This Agreement embodies all the terms and conditions agreed upon between the Shareholders as to the subject matter of this Agreement and supersedes and cancels in all respects all previous agreements and undertakings, if any, between the Shareholders with respect to the subject matter hereof, whether such be written or oral. Any amendment to or variation of this Agreement shall be effective only if it is in writing and duly signed and confirmed in writing by the authorised representative of each Shareholder. (E) Governing Law and Dispute Resolution (i) This Agreement shall be governed by, and construed in accordance with the laws of Singapore. Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in Singapore in accordance with the Rules of the Singapore International Arbitration Centre. 25 (ii) The winning party to the arbitration shall be awarded costs of the arbitration, such costs such include reimbursement of reasonable costs of carrying on the arbitration including costs of travel, accommodation and related expenses necessary for that party's personnel and professionals to arbitrate the issues. 26 SCHEDULE 1 The Territories Territories currently constituting:- 1. Bangladesh, People's Republic of 2. Bhutan 3. Brunei Darussalam Negara 4. Cambodia, People's Republic of 5. China, People's Republic of 6. Hong Kong 7. India, Republic of 8. Indonesia, Republic of 9. Korea, Democratic People's Republic of (North Korea) 10. Korea, Republic of (South Korea) 11. Laos, People's Democratic Republic 12. Malaysia 13. Pakistan, Islamic Republic of 14. Philippines, Republic of the 15. Singapore, Republic of 16. Sri Lanka, Democratic Socialist Republic of 17. Taiwan (Republic of China) 18. Thailand, Kingdom of 19. Vietnam, Socialist Republic of 27 SCHEDULE 2 Managing Director's Service Agreement An Agreement made the day of August 1996 BETWEEN (A) INTERNATIONAL SEMICONDUCTOR PRODUCTS PTE LTD, a company incorporated in Singapore with its registered office at 135 Middle Road, #05-13/14, Bylands Building, Singapore (188975), Facsimile No. , (hereinafter called the "Company") of the one part; and (B) DR. FREDDY GOH HIN CHOON of Blk 202, Clementi Avenue 6, #05-63, Singapore (120202) (hereinafter called the "Managing Director") of the other part. WHEREBY IT IS AGREED as follows:- TERM OF EMPLOYMENT 1. The Company shall employ Freddy Goh Hin Choon and he shall serve the Company as Managing Director of the Company and subject to the provision for determination of this agreement hereinafter contained, such employment shall be for a period of 5 years 4 months commencing on the 1st day of September 1996 until the 31st day of December 2001 and shall continue thereafter unless and until this agreement shall be determined by either party hereto giving to the other 3 months' notice in writing of such intended determination (or pay in lieu of such notice), such notice to expire on the day after the end of the said period. DUTIES 2. As managing director of the Company the Managing Director shall:- (a) undertake such duties and exercise such powers in relation to the Company and its business as the Board of Directors of the Company (hereinafter referred to as the "Board") shall from time to time assign to or vest in him; (b) in the discharge of such duties and in the exercise of such powers observe and comply with all resolutions, regulations and directions from time to time made or given by the Board; and (c) devote substantially the whole of his time and attention during business hours to the discharge of his duties hereunder. 28 NON-DISCLOSURE OF TRADE SECRETS 3. The Managing Director shall not, except as authorised or required by his duties, reveal to any person or company any of the trade secrets, secret or confidential operations, processes or dealings or any information concerning the organisation, business, finances, transactions or affairs of the Company or any subsidiary company of the Company (if any) which may come to his knowledge during his employment hereunder and shall keep with complete secrecy, all confidential information entrusted to him and shall not use or attempt to use any such information in any manner which may injure or cause loss either directly or indirectly to the Company or its business or may be likely so to do. This restriction shall cease to apply to information or knowledge which may come into the public domain, except through the default of the Managing Director. KEEPING OF NOTES, ETC. DURING EMPLOYMENT 4. The Managing Director shall not during the continuance of this agreement make otherwise than for the benefit of the Company any notes or memoranda relating to any matter within the scope of the business of the Company or concerning any of its dealings or affairs nor shall the Managing Director either during the continuance of this agreement or afterwards use or permit to be used any such notes or memoranda otherwise than for the benefit of the Company it being the intention of the parties hereto that all such notes or memoranda made by the Managing Director shall be the property of the Company and left at its registered office upon the termination of the Managing Director's employment hereunder. MANAGING DIRECTOR'S DUTY TO DISCLOSE PATENTS, ETC. 5.1 Any discovery or invention or secret process or improvement in procedure made or discovered by the Managing Director while in the service of the Company, in connection with or in any way affecting or relating to the business of the Company or any subsidiary company of the Company (if any) or capable of being used or adapted for use therein or in connection therewith shall forthwith be disclosed to the Company and shall belong to and be the absolute property of the Company or any such subsidiary company as the Company may nominate for the purpose. 5.2 The Managing Director if and whenever required so to do (whether during or after the termination of his appointment) shall at the expense of the Company or its nominee apply or join in applying for letters patent or other similar protection for any such discovery, invention, process or improvement as aforesaid and execute all instruments and do all things necessary for vesting the said letters patent or other similar protection when obtained and all right and title to and interest in the same in the Company (or its nominee) absolutely and as sole beneficial owner or in such other person as the Company may require. SALARY 29 6. Subject as hereinafter provided the Company shall pay to the Managing Director during the continuance of his employment hereunder a salary at the following rates:-
Date: Salary ----- ------ 1. 1.9.96 to 31.12.96 S$7,500.00 per month 2. 1.1.97 to 31.12.9 S$8,000.00 per month 3. 1.1.98 to 31.12.98 S$8,600.00 per month 4. 1.1.99 to 31.12.99 S$9,200.00 per month 5. 1.1.2000 to 31.12.2000 S$10,000.00 per month 6. 1.1.2001 to 31.12.2001 S$10,800.00 per month
The salary shall be payable in arrears on the last day of each month. BONUS 7.1 The Managing Director shall be entitled to an National Wage Counsel (NWC) 13th month wage supplement every financial year (as the term is defined in clause 8.1). 7.2 The Managing Director shall also be entitled, depending on the performance of the Company, to a variable bonus of between 1 to 3 months' salary every financial year or portion thereof ending on 31 December) subject to the Board's approval. The Board may further award additional variable bonus of up to 2 months' salary. PROFIT SHARING 8.1 By way of further remuneration in respect of every financial year during the continuance of the employment of the Managing Director hereunder, the Managing Director shall be entitled to profit sharing on the Net Profit of the Company based on the % Return on Investment of the Company and its subsidiaries (if any) in accordance with the following rates:-
% Return on Investment Percentage of Net Profit to [ZW] be given --------------------- [ZW] - - ------------------------------------ 10% - 15% 10% >15% - 20% 9%
30 >20% - 25% 8% >25% - 50% 7% >50% - 75% 6% >75% 5%
where:- "Net Profit" of the Company means the profits shown by the audited consolidated profit and loss accounts of the Company and its subsidiaries (if any) for the relevant financial year with the following adjustments unless already taken into account in such profit and loss accounts:- (a) after deducting all expenses of the Company, including depreciation, interest and employees and managerial bonuses, but excluding profit sharing under this clause 8.1; (b) after deducting income tax on profits (including corporation tax and any similar or additional or substituted tax); (c) without taking into account profits and losses of a capital nature arising on a disposal of fixed assets, investments, plant or any other property of the Company or of any subsidiary company of the Company (if any); (d) after deducting such part of the profits or adding back such part of the losses (as the case may be) of any subsidiary company (if any) as shall be proportionate to such part (if any) of such subsidiary as shall not be in the ownership of the Company or of any subsidiary company of the Company on the last day of such financial year; and (e) after making any further adjustments which the auditors of the Company shall consider fair and reasonable or as may be agreed. "% Return on Investment" means the rate of return of shareholders' investment (consisting of share capital contribution and unsecured shareholders' loans) in the Company and shall be calculated as follows:- % Return on Investment = (Net Profit) / (total shareholders' investment) X 100. "financial year" means a year or other period for which the Company's accounts are made up ending on 31 December. 8.2 The said profit sharing shall be paid not later than fourteen days after the 31 accounts for the relevant financial year have been made up and audited and the certificate of the said auditors as to the amount of the said profit sharing for any financial year (or part thereof) shall be conclusive and binding. 8.3 Unless the Managing Director is terminated for cause, with respect to any period of the Managing Director's appointment embracing only part of a financial year, the Company shall pay to the Managing Director for every week or part thereof such period a bonus and/or profit sharing entitlement equal to one fifty second part of the bonus and/or profit sharing entitlement which would have been payable hereunder if he had served the Company during the whole of the financial year. MAXIMUM REMUNERATION 9. The maximum remuneration payable to the Managing Director for a financial year, under this agreement, shall not exceed the sum of S$1,000,000.00. PROVISION OF MOTOR CAR 10. The Company shall provide and maintain for the sole use of the Managing Director a motor car and shall pay all reasonable expenses in connection with such use of such motor car (including without limitation, road tax, service, repairs and maintenance, insurance and cost of petrol), such vehicle to be changed from time to time in accordance with the Company's policy regarding vehicle replacements. EXPENSES 11. The Managing Director shall be reimbursed all travelling hotel and other out-of-pocket expenses reasonably incurred by him in or about the discharge of his duties hereunder. ANNUAL LEAVE 12.1 The Managing Director shall be entitled to 21 days' annual leave, exclusive of statutory and public holidays in each calendar year. 12.2 The Managing Director shall be entitled to 60 days hospitalisation and medical leave each calendar year. TERMINATION OF AGREEMENT 13.1 This agreement may be terminated forthwith by the Company without prior notice if the Managing Director shall at any time:- (a) commit any serious or persistent breach of any of the provisions herein 32 contained; (b) be guilty of any grave misconduct or wilful neglect in the discharge of his duties hereunder; (c) become bankrupt or make any arrangements or composition with his creditors; or (d) become permanently incapacitated by accident or ill-health from performing his duties under this agreement and for the purposes of this sub-clause, incapacity for six consecutive months in any period of twelve calender months shall be deemed to be permanent incapacity. 13.2 If the Managing Director shall cease to be a director of the Company this agreement shall thereupon automatically terminate. If such cessation shall be caused by any act or omission of either party without the consent concurrence or complicity of the other such act or omission shall be deemed a breach of this agreement and determination hereunder shall be without prejudice to any claim for damages in respect of such breach. 13.3 The Company may terminate this agreement by giving the Managing Director 3 months' prior written notice or 3 months' salary in lieu thereof provided that all shareholders of the Company agree to the termination pursuant to this clause 13.3. In addition, the Managing Director shall be entitled to compensation in the sum equivalent to 9 months' salary if this agreement is terminated pursuant to this clause 13.3. 13.4 The Managing Director may terminate this agreement by giving to the Company 3 months' prior written notice. 13.5 Upon the termination of this agreement for whatsoever reason the Managing Director shall upon the request of the Company resign from office as a Managing Director of the Company and from all offices held by him in any subsidiary. RESTRICTIVE COVENANTS; INTERPRETATION 14 Save with the previous consent of the Company, the Managing Director will not whilst acting as Managing Director and for a period of 30 months thereafter:- (a) engage or be interested directly or indirectly (otherwise than by virtue of his interests as a shareholder of the Company) in any business which is in competition with the business of the Company within Singapore; or (b) solicit in Singapore in competition with the business of the Company the custom of any person, firm or company who is or has been at any time during the period it held any shares in the issued share capital of the 33 Company, a customer of the Company; (c) solicit or entice away or attempt to solicit or entice away from the Company any person who is an officer, manager or employee of the Company whether or not such person would commit a breach of his contract of employment by reason of leaving such employment; or (d) cause or permit any person directly or indirectly under his control to do any of the acts and things specified above (and for the purpose of this clause, "control" means the possession by one person, directly or indirectly through one or more intermediaries, of the power to direct or cause the direction of the management or policies of another person; with respect to a corporation such power may be evidenced by the right to exercise, directly or indirectly, more than 50% of the voting rights attributable to the shares or interest of such corporation, partnership or other body corporate). (iii) Each of the undertakings in paragraphs (a), (b) and (c) above shall be treated as independent of the other undertakings so that, if one or more is held to be invalid as an unreasonable restraint of trade or for any other reason, the remaining undertakings shall be valid to the extent that they are not affected. (iv) Whilst the undertakings in paragraphs (i) and (ii) above are considered by all parties to be reasonable in all circumstances, if one or more is held invalid as an unreasonable restraint of trade or for any other reason but would have been held valid if part of the wording had been deleted, the period reduced or the range of activities or area dealt with reduced in scope, the undertakings shall apply with such modifications as may be necessary to make them valid. SERVICE OF NOTICES 15. All notices, demands or other communications required or permitted to be given or made under this agreement shall be in writing and delivered personally or sent by prepaid registered post (by air-mail if to or from an address outside Singapore) with recorded delivery, or by fax addressed to the intended recipient thereof at his address or fax number set out in this agreement (or to such other address or fax number as either party may from time to time duly notify the other) Any such notice, demand or communication shall be deemed to have been duly served (if given or made by fax) on the day of despatch or (if given or made by letter) 48 hours after posting or (if made or given to or from an address outside Singapore) 10 days after posting and in proving the same it shall be sufficient to show that the envelope containing the same was duly addressed, stamped and posted. EFFECT OF TERMINATION ON UNDERTAKINGS 34 16. The expiration or termination of this agreement howsoever arising shall not affect such of the provisions hereof as are expressed to operate or have effect thereafter and shall be without prejudice to any right of action already accrued to either party in respect of any breach of this agreement by the other party. GOVERNING LAW 17. This agreement shall be governed by and construed in accordance with the laws of Singapore. Each of the parties hereto hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of the Courts of Singapore for all purposes in relation to this agreement. IN WITNESS WHEREOF this agreement has been entered into on the day and year first above written. Signed by ) for and on behalf of INTERNATIONAL SEMICONDUCTOR ) PRODUCTS PTE LTD in the presence of :- ) Signed by DR. FREDDY GOH HIN CHOON ) in the presence of:- ) 35 SCHEDULE 3 Terms And Conditions Of Shareholder Loans The following terms and conditions shall apply in respect of the loans referred to in clause 7(A) (each a "Shareholder Loan"). 1. Proportionality Shareholder Loans shall be provided by the Shareholders on the same time and on the same terms and conditions. 2. Availability Shareholder Loans shall be provided to the Company at such time or times during the term of this Agreement and in such amounts as are set out in clause 7(A)(ii) of the Agreement. No Shareholder Loan repaid by the Company shall be available for re-drawing. 3. Ranking All Shareholder Loans shall constitute unsecured obligations of the Company which rank pari passu with all other unsecured obligations of the Company. All Shareholder Loans shall be designated in Singapore Dollars and shall be repayable in such currency unless the Shareholders decide otherwise. 4. Interest Save as provided in clause 7(A)(iii) of the Agreement, no interest shall be payable in respect of any Shareholder Loans, unless the Shareholders unanimously decide otherwise. 5. Repayment The Shareholder Loans shall be repayable on the occurrence of the earlier of the following dates (and not otherwise) :- (a) the date on which an order shall be made or a resolution shall be passed (whichever shall first occur) for the winding-up or dissolution of the Company. (b) the date on which the Board shall have determined, in its absolute discretion, such Shareholder Loans or any part thereof shall be repayable provided, however, that the Board shall make such determination in respect of Shareholder Loans only on a proportionate 36 basis as between the Shareholders. 6. Transferability (a) No amount of Shareholder Loans may be transferred except in accordance with the following provisions. (b) If any of the Shareholders (a "Transferor") shall at any time hereafter sell, transfer or otherwise dispose of any shares it holds in the capital of the Company ("a Disposal"), such Transferor on the occasion of any such Disposal shall be entitled and obliged to transfer to the party to whom it shall make such disposal of such shares a proportion of the Shareholder Loans held by it equal to the proportion which the number of shares the subject of such Disposal shall bear to the aggregate number of such shares held by the Transferor immediately prior to such Disposal. (c) Each of the Shareholders agree that the restrictions set out in paragraph (a) and (b) above shall fully and effectively bind it in respect of all of the shares at any time held by it in the capital of the Company in addition of its obligations under the Articles and that also it will not make any Disposal of any such shares to any person unless prior thereto such Shareholder and the person to whom such Disposal is proposed to be made (the "Transferee") shall be entered into a legally binding commitment (in form and content to the reasonable satisfaction of the other Shareholders) to the effect that the Transferee shall be fully and effectively bound by the restrictions set out in this Clause in respect of all shares held or to be held by it in the capital of the Company at any time in the same manner as if it had been an original party hereto (without prejudice to such obligations of the Transferor in respect of any shares in the capital of the Company retained by it). 7. Register The Company shall maintain a register of the holders of Shareholder Loans and the amount of Shareholder Loans held by them and details of any permitted transfers thereof. Unless otherwise specifically agreed by the Company in any particular case, the Company shall be entitled to treat the persons registered as the holders of Shareholder Loans as the absolute owners thereof to such persons or at their order without any obligation to make any enquiry of any nature. 37 SCHEDULE 4 SCA directors/shareholders/officers:- 1. Freddy Goh Hin Choon of Blk 202, Clementi Avenue 6, #05-63, Singapore (120202) (referred to as "FG" in the Agreement); 2. Xavier Chong Fook Choy of Blk 96, Lorong 3, Toa Payoh, #01-48, Singapore 310096, (referred to as "XC" in the Agreement); 3. Lee Boon Leng of Blk 868, Woodlands St 83, #02-341, Singapore 730868, (referred to as "LBL" in the Agreement"); SPM and/or ASP directors/shareholders/officers:- 4. Gilbert Raker c/o Semiconductor Packaging Materials Co. Inc., 431 Fayette Avenue, Mamaroneck, New York 10543, U.S.A., (referred to as "GR" in the Agreement); 5. Andrew Lozyniak c/o Semiconductor Packaging Materials Co. Inc., 431 Fayette Avenue, Mamaroneck, New York 10543, U.S.A., (referred to as "AL") in the Agreement; and 6. Leonard Johnson c/o Semiconductor Packaging Materials Co. Inc., 431 Fayette Avenue, Mamaroneck, New York 10543, U.S.A., (referred to as "LJ") in the Agreement. 38 IN WITNESS WHEREOF this Agreement has been entered into on the date stated at the beginning. Signed by Xavier Chong Fook Choy ) for and on behalf of ) XAVIER CHONG FOOK CHOY Semiconductor Alliance Pte Ltd ) in the presence of:- ) CHAN YUEN LENG Chan Yuen Leng Advocate & Solicitor Singapore Signed by Gilbert D. Raker ) for and on behalf of ) GILBERT D. RAKER Semiconductor Packaging ) Materials Co. Inc. in the presence of:- ) MAXINE BARR Notary Public, State of New York No. 4699017 Qualified in Westchester County Commission Expires 3/30/97 MAXINE BARR Signed by Freddy Goh Hin Choon ) for and on behalf of International ) FREDDY GOH HIN CHOON Semiconductor Products Pte Ltd ) in the presence of:- ) CHAN YUEN LENG Chan Yuen Leng Advocate & Solicitor Singapore Signed by Freddy Goh Hin Choon in ) FREDDY GOH HIN CHOON the presence of:- ) CHAN YUEN LENG Chan Yuen Leng Advocate & Solicitor Singapore Signed by Xavier Chong Fook Choy ) XAVIER CHONG FOOK CHOY in the presence of:- ) CHAN YUEN LENG Chan Yuen Leng Advocate & Solicitor Singapore Signed by Lee Boon Leng ) LEE BOON LENG in the presence of:- ) CHAN YUEN LENG Chan Yuen Leng Advocate & Solicitor Singapore Signed by Gilbert D. Raker ) GILBERT D. RAKER in the presence of:- ) MAXINE BARR Notary Public, State of New York No. 4699017 Qualified in Westchester County Commission Expires 3/30/97 MAXINE BARR Signed by Andrew Lozyniak ) ANDREW LOZYNIAK in the presence of:- ) MAXINE BARR Notary Public, State of New York No. 4699017 Qualified in Westchester County Commission Expires 3/30/97 MAXINE BARR Signed by Leonard Johnson ) LEONARD JOHNSON in the presence of:- ) EX-10 3 EXHIBIT 10.56 INTELLECTUAL PROPERTY LICENSE AGREEMENT THIS AGREEMENT, made as of this 28th day of August, 1996 by and between AMERICAN SILICON PRODUCTS, INC., a Rhode Island corporation ("Licensor") and INTERNATIONAL SEMICONDUCTOR PRODUCTS PTE LTD., a company incorporated in Singapore ("Licensee") W I T N E S E T H: WHEREAS, Licensee has been formed by Semiconductor Packaging Materials Co., Inc., the parent of Licensor, and Semiconductor Alliance Pte Ltd. pursuant to a Joint Venture Agreement dated August 28, 1996 (the "Joint Venture Agreement") to engage in the business of polishing and reclamation of semiconductor wafers and the brokering of semiconductor wafers used in the electronic industry (the "Business"); WHEREAS, Licensor is engaged in the Business in the United States and elsewhere and possesses valuable industrial, marketing and commercial information regarding the conduct of the Business to be conducted by Licensee including, without limitation, drawings, formulae, test reports, operating and test procedures, instruction manuals, tables of operating conditions, administration procedures, marketing methods and procedures, advertising copy and computer software programs relating to and/or used in connection with the Business (the "Licensor's Wafer Technology"); WHEREAS, Licensee desires to obtain a license to use the Wafer Technology in the countries listed in Schedule 1 annexed hereto (the "Territories") and Licensor is willing to grant such a license to Licensee, upon the terms and conditions hereinafter set forth; and WHEREAS, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Joint Venture Agreement. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, Licensee and Licensor agree as follows: SECTION 1 - GRANT 1.1 Licensor hereby grants Licensee an exclusive license in the Territories to use Licensor's Wafer Technology to carry on its Business. Except as provided in subsection 1.2 below, Licensee may not sublicense Licensor's Wafer Technology without first obtaining the written consent of Licensor. 1.2 The provisions of Section 1.1 above notwithstanding, (i) Licensor and SPM may use Licensor's Wafer Technology to the extent that they are conducting business in the Territories on or before the date on which Licensee's facility in Singapore commences commercial production and (ii) a Proposing Party may require Licensee to grant a non-exclusive sublicense (but without the right to sublicense) of Licensor's Wafer Technology licensed to Licensee hereunder and to Licensee's Wafer Technology (defined in Section 1.3 hereof) to a Relevant Investment Entity, but only for use in such country or countries in the Territories in which such Relevant Investment Entity establishes a facility which uses Licensor's Wafer Technology and Licensee's Wafer Technology. 1.3 (a) Licensor shall permit representatives of Licensee upon reasonable notice to visit Licensor's silicon wafer reclamation facility in Rhode Island during regular business hours and shall provide at Licensee's request copies of any and all written materials included in Licensor's Wafer Technology and shall answer all reasonable questions concerning Licensor's Wafer Technology, provided that Licensor may restrict such visits as to duration and number of people as it reasonably determines is necessary for the orderly transfer of the Wafer Technology given the operating requirements of Licensor. All out-of-pocket costs and expenses incurred by Licensor in transferring Licensor's Wafer Technology to Licensee shall be borne by Licensee. (b) Unless otherwise agreed by Licensor, all such visits shall be completed within six (6) months from the date hereof and the total number of visitor-days shall not exceed thirty (30) days. Licensor shall not be required to create any manuals or other written information regarding the operation of Licensor's facility or Licensor's Wafer Technology for the purpose of providing the same to Licensee. (c) Licensor represents that Licensor's Wafer Technology disclosed or to be disclosed by Licensee hereunder is or will be, to the best of Licensor's knowledge and belief, accurate (provided always that the Licensor will promptly advise Licensee of any significant errors which subsequently come to its attention) with respect to the information disclosed to Licensee hereunder. However, Licensee acknowledges that due to differences in the facility operated by Licensor and the facility to be equipped and operated by Licensee that there is no guaranty that Licensor's Wafer Technology will be able to be used without modification by Licensee. All information provided to Licensee under this Section or otherwise pursuant to this Agreement whether orally or in writing shall be deemed 2 confidential information except only to the extent such information is or becomes publically available without fault of the Licensee. SECTION 2 - CROSS-LICENSING 2.1 Any and all Knowhow and Intellectual Property Rights throughout the world resulting from any work carried out exclusively by the Licensee or relating to an improvement to the products produced or processes employed by Licensee for the purpose of carrying on the Business which are exclusively generated by Licensee ("Licensee's Wafer Technology") shall belong exclusively to Licensee. Licensee does hereby grant to Licensor or any successor owner of Licensor's Wafer Technology an irrevocable non-exclusive worldwide license to Licensee's Wafer Technology (whether or not patentable or copyrightable) free of royalty or other payment and without limit of time, but excluding the right to grant sublicenses without first obtaining the written consent of Licensee. 2.2 Licensee shall promptly notify Licensor of the development of Licensee's Wafer Technology and shall provide such reasonable assistance as may be necessary to enable Licensor to effectively use such Licensee's Wafer Technology as Licensor may request. All out-of-pocket expenses incurred by Licensee in transferring Licensee's Wafer Technology to Licensor shall be borne by Licensor. 2.3 The provisions of Sections 1.3(a) and (c), 4.2(a), (b) and (c) and 5 hereof shall apply to Licensee and Licensor with respect to the cross-licensing of Licensee Wafer Technology mutatis mutandis. SECTION 3 - ROYALTIES 3.1 Licensee shall pay to Licensor a royalty on the net sales of Licensee as determined by Licensee's Auditors ("Net Sales") as follows: (i) with effect from the date hereof to December 31, 1997, one-half of one (0.5%) percent of Net Sales; and (ii) with effect from January 1, 1998, one (1%) percent of Net Sales; provided that when the aggregate amount of royalties accrues hereunder to a sum equivalent to One Million (U.S.$1,000,000) Dollars, this license shall be royalty free thereafter. The amount of royalty due hereunder shall be computed annually commencing with the period ending December 31, 1996 and shall be converted to U.S.$ from S$ at the exchange rate published by the Asian Wall Street Journal on December 3 31 of the year in question. The determination of Net Sales by the Auditors of Licensee shall be conclusive and binding upon the parties. Licensee shall provide to Licensor an annual statement of Licensee's Net Sales certified by its Auditors. 3.2 Royalties which accrue hereunder shall be due and payable without interest in sixteen (16) equal quarter-annual installments commencing on the first day of the month only after: (i) all loans owing by Licensee to its shareholders have been paid in full; and (ii) receipt of written notice from Licensor requesting Licensee to commence making payments of the accrued royalty. SECTION 4 - TERMS AND DEFAULT 4.1 Subject to earlier termination by reason of default of Licensee, this Agreement shall commence as the date hereof and shall continue without limit of time. 4.2 (a) If Licensee fails to perform its obligations hereunder or to comply with the terms and conditions of this Agreement, Licensor shall be at liberty to issue to the Licensee a notice specifying the breach or default and, in the case of a breach or default capable of remedy, stipulating a period of not less than thirty (30) days during which such breach or default shall be remedied. For the purpose of this subsection 4.2(a), a breach or default shall be considered capable of remedy if the Licensee can comply with the term or condition in question in all respects other than as to the time of performance. If a breach or default capable of remedy is not timely cured or if a breach or default not capable of remedy shall occur, then the Licensor may terminate this Agreement forthwith. (b) In the event that: (i) the Licensee shall become insolvent; or (ii) a resolution is passed for the winding up of Licensee; or (iii) a proceeding has been instituted seeking a declaration that the Licensee is bankrupt or insolvent or seeking bankruptcy, arrangement or composition with creditors, liquidation or the appointment of a trustee, receiver or liquidator 4 or analogous procedure under any applicable law and such proceedings remain undismissed and unstayed for a period of sixty (60) days or are consented to by Licensee, then a breach of this Agreement shall be deemed to have been committed by Licensee and this Agreement shall terminate without any further action upon the part of Licensor. (c) Termination of this Agreement by Licensor shall be without prejudice to its other rights or remedies hereunder with respect to damages accrued prior to termination. (d) All unpaid royalties shall, notwithstanding the provisions of Section 3.2 to the contrary, become immediately due and payable in full upon termination of this Agreement. SECTION 5 - LICENSOR'S REPRESENTATIONS; INDEMNIFICATION 5.1 Licensor represents that it has the power, right and authority to grant this license to Licensee and that Licensor has not received any notice nor does it have any knowledge that Licensor's Wafer Technology infringes the intellectual property rights or knowhow of third parties and no claims of such infringement have been made or are the subject of litigation actual or threatened. 5.2 Except as specifically set forth in Section 5.1 above, Licensor makes no representation or warranty with respect to Licensor's Wafer Technology. In no event shall Licensor be liable for lost profits or consequential damages even if advised of the possibility thereof. 5.3 Licensee shall indemnify and hold Licensor harmless with respect to any claims asserted by third parties against Licensor including legal fees incurred by Licensor in defending against such claim arising out of the use by Licensee of Licensor's Wafer Technology except for claims arising out of a breach of the representations set forth in Section 5.1 and as to such claims Licensor shall indemnify and hold Licensee harmless with respect thereto including legal fees incurred by Licensee in defending against such claims. SECTION 6 - COMMUNICATIONS CONFIDENTIAL 6.1 All communications between Licensor and Licensee and all information and other material supplied to or received by either of them from the other which is either marked "confidential" or is by its nature intended to be 5 exclusively for the knowledge of the recipient alone, or to be used by the recipient only for the benefit of the other or in furtherance of the purposes of this Agreement or the Joint Venture Agreement, including, without limitation, Licensor's Wafer Technology or Licensee's Wafer Technology, any information concerning the business transactions or the financial arrangements between Licensor and Licensee, , or of any person with whom either of them is in a confidential relationship with regard to the matter in question coming to the knowledge of the recipient shall be kept confidential by the recipient and shall be used by the recipient solely and exclusively for the purposes of this Agreement unless disclosure is required by law or unless or until either party can reasonably demonstrate that it is in the public domain through no act or default on the part of the recipient, its servants and/or agents, whereupon, to the extent that it is public, this obligation shall cease. In the event either party is served with legal process requiring it to disclose any such confidential information it shall promptly notify the other party hereto and shall assist the other party in preventing or restricting such disclosure. 6.2 The parties shall indemnify each other from and against any loss, damages, charges, costs and expenses of whatever nature (including legal costs on a full indemnity basis) suffered or incurred by the other arising from the breach of that party of any provision of this Section or the unauthorized use or disclosure of any confidential information by any director, employee, agent, shareholder or Related Party of that party. 6.3 The parties shall take all reasonable steps to minimize the risk of disclosure of confidential information, by ensuring that only their directors and employees whose duties will require them to possess any of such information shall have access thereto, and that they shall be instructed to treat the same as confidential. The parties shall in addition procure that such of its employees whose duties will require them to possess, or have access to, confidential information, shall sign confidentially agreements with it respecting the confidentiality of such information. 6.4 The obligations contained in this Section shall endure, even after the termination of this Agreement, without limit in point of time except and until any confidential information enters the public domain as set out above. SECTION 7 - GENERAL PROVISIONS (a) Each party acknowledges to the other that it has not entered into this Agreement in reliance upon any warranties, 6 representations or assurances (whether express or implied and whether written or oral) other than those contained in this Agreement. (b) The parties hereto agree and declare that this Agreement constitutes the entire agreement concerning the subject matter hereof and supersedes all earlier agreements concerning the same. (c) This Agreement may not be altered, modified or amended unless such alteration, modification or amendment is in writing and signed by the parties to this Agreement nor, except as otherwise specifically set forth herein, may this Agreement be terminated except by a writing signed by the parties to this Agreement; and no waiver of any breach, condition, provision or term of this Agreement on any one occasion shall be deemed to be a waiver of any subsequent breach, condition, provision or term of this agreement on any other occasion whether of like or different nature. (d) This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York applicable to agreements executed in and to be performed entirely within the State of New York without giving effect to the principles of conflict of laws thereof. (e) (i) The captions set forth in this Agreement are for convenience only and shall not be considered as part of this Agreement or as in any way limiting or amplifying the terms and provisions hereof. (ii) This Agreement shall be construed according to its fair meaning as if prepared jointly by the parties hereto. (iii) Each section, subsection and lesser section of this Agreement constitutes a separate and distinct undertaking, covenant and/or provision hereof. (iv) If any provision of this Agreement is held invalid, such invalidity shall not affect the other provisions hereof which can be given effect without the invalid provisions, and, to this end, the provisions of this Agreement are intended and shall be deemed severable. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive 7 any provision of law which render any provision of this Agreement prohibited or unenforceable in any way. In the event any such provision is found to be unlawful or otherwise unenforceable, the parties hereto agree to negotiate in good faith to modify the void or unenforceable provision, but only to the extent necessary to make such provision valid and enforceable having full regard for all applicable laws and the interests and purposes of the parties in entering into this Agreement. In the event the parties cannot agree upon such modification then such dispute shall be submitted to expedited arbitration pursuant to Section 7(j) hereof. (v) This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument which may be sufficiently evidenced by one counterpart. (f) (i) In the event that a change, occurring after the date first set forth above, in the governmental laws and regulations to which either party is subject requires such party to alter its performance under this Agreement in any material respect or in the event that performance by one of the parties is substantially hindered or prevented by force majeure such as Acts of God, strikes, failure of suppliers to perform or other acts beyond the reasonable control of the party effected thereby, such party shall give immediate written notice to the other party specifying the manner in which such performance is to be altered and the reasons for such alteration. (ii) No later than thirty (30) days after receipt of written notice pursuant to Section 7(f)(i) the party receiving such notice shall, upon written notice to the other party to this Agreement, be entitled to an equitable adjustment of its rights and obligations under this Agreement. In the event the parties cannot agree on such equitable adjustment, then such dispute shall be submitted to expedited arbitration pursuant to the provisions of Section 7(j) hereof. (g) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns; provided, however, that no party may make any assignment of this Agreement or any interest therein or sublicense its rights hereunder (except as specifically provided above) by operation of law or otherwise, without the prior written consent of the other party except if a party desires to assign this Agreement to a Related Party, such consent shall not be unreasonably withheld and provided 8 further that Licensor may assign this Agreement without the consent of Licensee to any entity which acquires Licensor's Wafer Technology. (h) Each party hereto shall bear its own legal and other costs in connection with the preparation and negotiation of this Agreement. (i) Nothing herein will create an agency relationship or a partnership relationship between the parties, and neither party shall be entitled to legally bind the other with respect to any obligation other than as expressly set forth in this Agreement, which is entered into for the limited purposes described herein. (j) The parties agree to arbitrate any and all claims, controversies or disputes arising under or out of this Agreement or relating in any way thereto. All such claims, controversies or disputes shall be submitted to arbitration in the City of New York, State of New York, to three (3) arbitrators designated under and pursuant to the Rules of the American Arbitration Association, and the arbitration shall be heard under the auspices of said Association and subject to its rules. The arbitrators shall have the power to award costs and counsel fees. The parties consent to the jurisdiction of the Courts of the State of New York located in the County of New York or the United States District Court for the Southern District of New York with respect to any and all proceedings relating to any such arbitration, and further agree that any and all process and notices of motion or applications in relation to any such arbitration may be served upon a party as provided in Section 7(k) hereof. Such service may be accomplished either within or without the State of New York, and such notice shall be given of all applications and hearings as is provided by the laws of the State of New York. The award of the arbitrators shall be final and binding upon the parties and judgment thereon may be entered as provided by the laws of the State of New York. The foregoing notwithstanding, either party may apply to any court of competent jurisdiction for an injunction pending the award of the arbitrators. (k) All notices, demands or other communications required or permitted to be given or made hereunder shall be in writing and delivered personally or by overseas courier or sent by prepaid registered post (by air-mail if to or from an address outside Singapore) with recorded delivery, or by facsimile transmission addressed to the intended recipient thereof at its address or at its facsimile number set out in this Agreement (or to such other address or facsimile number as a party to this Agreement may from time to time duly notify the others in writing). Any such notice, demand or 9 communication shall be deemed to have been served (if delivered personally or given or made by facsimile) immediately or (if given or made by letter or by overseas courier) 96 hours after posting or delivery to the courier or (if made or given by air-mail) ten days after posting and in proving the same it shall be sufficient to show that the envelope containing the same was duly addressed, stamped and posted. The addresses and facsimile numbers of the parties hereto for the purpose of this Agreement are: American Silicon Products, Inc. c/o Semiconductor Packaging Materials Co., Inc. 431 Fayette Avenue Mamaroneck, New York 10543 U.S.A. Facsimile Number: (914) 698-5386 Attention: President International Semiconductor Products Pte Ltd 135 Middle Road #05-13/14 Singapore 188975 Facsimile Number: 3385633 Attention: Managing Director (l) No remedy conferred by any of the provisions of this Agreement is intended to be exclusive of any other remedy which is otherwise available at law, in equity, by statute or otherwise, and each and every other remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity, by statute or otherwise. The election of any one or more of such remedies by either of the parties shall not constitute a waiver by such party of the right to pursue any other available remedies. IN WITNESS WHEREOF, the parties have executed this Agreement as of the year and date first above written. INTERNATIONAL SEMICONDUCTOR AMERICAN SILICON PRODUCTS, PRODUCTS PTE LTD INC. By: ___________________________ By: _________________________ 10 SCHEDULE 1 THE TERRITORIES Territories currently constituting: 1. Bangladesh, People's Republic of 2. Bhutan 3. Brunei Darussalam Negara 4. Cambodia, People's Republic of 6. Hong Kong 7. India, Republic of 8. Indonesia, Republic of 9. Korea, Democratic People's Republic of (North Korea) 10. Korea, Republic of (South Korea) 11. Laos, People's Democratic Republic 12. Malaysia 13. Pakistan, Islamic Republic of 14. Philippines, Republic of 15. Singapore, Republic of 16. Sri Lanka, Democratic Socialist Republic of 17. Taiwan (Republic of China) 18. Thailand, Kingdom of 19. Vietnam, Socialist Republic of 11 EX-27 4 ARTICLE 5 FDS FOR THIRD QUARTER 10QSB
5 1,000 9-MOS DEC-31-1996 SEP-30-1996 4,165 0 6,693 134 8,312 19,766 20,535 5,883 51,528 8,182 8,552 0 0 628 34,473 51,528 24,862 35,436 17,692 23,207 0 0 654 5,759 2,233 3,526 0 0 0 3,526 0.57 0.57
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