-----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, EzE9cDQvhpg6UQGsfvVu4osNLc2gKUO+LqV9MdcGjYM2+Hllj4ft7RQa1Rm/Et+B 8uexRXDIZ6I+zyjzHoGkiw== 0000950146-98-000857.txt : 19980515 0000950146-98-000857.hdr.sgml : 19980515 ACCESSION NUMBER: 0000950146-98-000857 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEMX CORP CENTRAL INDEX KEY: 0000880858 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 133584740 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10938 FILM NUMBER: 98621112 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 FORMER COMPANY: FORMER CONFORMED NAME: SEMICONDUCTOR PACKAGING MATERIALS CO INC DATE OF NAME CHANGE: 19930328 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-10938 SEMX CORPORATION (formerly known as SEMICONDUCTOR PACKAGING MATERIALS CO., INC.) (Name of Business Issuer in its charter) Delaware 13-3584740 (State of other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1 LABRIOLA COURT, ARMONK, NY 10504 (Address of principal executive offices, including zip code) (914) 273-5500 (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 March 31, 1998 was 6,071,416 shares. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Index to Financial Statements Page ----------------------------- ---- Consolidated Balance Sheet at March 31, 1998 and December 31, 1997 3 Consolidated Statement of Operations and Comprehensive Income (Loss)for the three months Ended March 31, 1998 and 1997 4 Consolidated Statement of Cash Flows for the three months ended March 31, 1998 and 1997 5 Consolidated Statement of Shareholders' Equity for the three months ended March 31, 1998 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 PART II OTHER INFORMATION 12 Item 1 Legal Proceedings Items 2-5 N/A Item 6 Exhibits and Reports on Form 8-K (a) Exhibits (b) 8-K filed on January 6, 1998 SIGNATURE PAGE 13 EXHIBITS 2 SEMX Corporation and Subsidiaries Consolidated Balance Sheet
March 31 December 31, ASSETS 1998 1997 (Unaudited) ------------ ------------ Current Assets: Cash and cash equivalents $ 2,062,169 $ 2,260,427 Accounts receivable, less allowance for doubtful Accounts of $210,000 and $181,000 , respectively 11,391,736 10,788,224 Inventories 13,609,930 12,369,443 Prepaid expenses and other current assets 2,635,333 2,078,718 ------------ ------------ Total current assets 29,698,868 27,496,812 ------------ ------------ Property and Equipment-at cost, net of accumulated Depreciation and amortization of $11,494,390 And $10,163,430, respectively 42,719,536 42,030,917 ------------ ------------ Other Assets-net of accumulated amortization Technology rights and intellectual property 1,057,536 1,077,389 Goodwill 19,532,953 19,788,249 Other 1,440,430 1,471,719 ------------ ------------ Total other assets 22,030,919 22,337,357 ------------ ------------ Total Assets $ 94,449,323 $ 91,865,086 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 6,135,138 $ 7,322,131 Accrued expenses 4,517,979 2,601,902 Current portion of obligations under capital leases 2,251,846 2,142,363 Current portion of long-term debt 16,399,516 5,943,937 ------------ ------------ Total current liabilities 29,304,479 18,010,333 ------------ ------------ Deferred income taxes 2,005,081 2,143,031 Long-term debt 19,010,908 26,669,870 Obligations under capital leases 5,984,121 6,046,892 ------------ ------------ Total Liabilities 56,304,589 52,870,126 ------------ ------------ Minority Interest in Subsidiary 1,404,033 1,537,047 Shareholders' Equity: Preferred stock-$.10 par value; authorized 1,000,000 Shares, none issued Common stock-$.10 par value; authorized 20,000,000 Shares, issued 6,375,616 shares 637,562 637,562 Additional paid-in-capital 28,199,221 28,199,221 Accumulated other comprehensive income (431,600) (405,304) Retained earnings 8,367,829 9,026,434 ------------ ------------ 36,773,012 37,457,913 Less: Treasury stock:304,200 and 300,000 shares, respectively, at cost 32,311 0 ------------ ------------ Shareholders' Equity 36,740,701 37,457,913 ------------ ------------ Total Liabilities And Shareholders' Equity $ 94,449,323 $ 91,865,086 ============ ============
See Notes to Consolidated Financial Statements 3 SEMX Corporation and Subsidiaries Consolidated Statement of Operations and Comprehensive Income (Loss) (Unaudited)
For The Three Months Ended March 31, 1998 1997 ------------------------------ Net Sales $ 14,453,376 $ 9,038,374 Service Revenue 5,438,256 4,868,491 ------------ ------------ Total Revenue 19,891,632 13,906,865 ------------ ------------ Cost of Goods Sold 9,792,579 6,553,663 Cost of Services Performed 4,642,462 3,439,919 ------------ ------------ Total Cost of Goods Sold and Services Performed 14,435,041 9,993,582 ------------ ------------ Gross Profit 5,456,591 3,913,283 Selling, General and Administrative Expenses 3,931,417 2,711,051 Restructuring Charge 1,950,000 0 ------------ ------------ Operating Income (Loss) (424,826) 1,202,232 Interest Expense (Net) 818,404 516,250 ------------ ------------ Income (Loss) Before Provision (Credit) for Income Taxes and Minority Interest in Loss of Consolidated Subsidiary (1,243,230) 685,982 Provision (Credit) for Income Taxes (451,611) 280,572 ------------ ------------ Income (Loss) Before Minority Interest in Loss of Consolidated Subsidiary (791,619) 405,410 Minority Interest in Loss of Consolidated Subsidiary 133,014 75,832 ------------ ------------ Net Income (Loss) $ (658,605) $ 481,242 ============ ============ Other Comprehensive Income: Foreign currency translation net of tax benefit of $13,546 and $52,594, respectively (26,296) (78,891) ------------ ------------ Comprehensive Income $ (684,901) $ 402,351 ============ ============ Net Income (Loss) per Common Share (2) $ (.11) $ .08 ============ ============ Weighted Average Number of Common Shares Outstanding - Basic 6,075,616 6,065,534 Weighted Average Number of Common Shares Outstanding - Diluted 6,075,616 6,214,891
See Notes to Consolidated Financial Statements 4 SEMX Corporation and Subsidiaries Consolidated Statement of Cash Flows (Unaudited)
For The Three Months Ended March 31, 1998 1997 ---------- ----------- Cash Flows From Operating Activities: Net Income $ (658,605) $ 481,242 Adjustments To Reconcile Net Income To Net Cash Used In Operating Activities: Gain on Sales of Property and Equipment (45,657) Depreciation And Amortization of Property And Equipment 1,295,009 997,341 Other Amortization 260,782 183,563 Deferred Income Taxes (137,950) Minority Interest in Subsidiary Loss (133,014) (114,975) Changes In Operating Assets And Liabilities: Increase In Accounts Receivable (603,610) (374,047) Increase In Inventory (1,234,354) (516,838) (Increase) Decrease In Prepaid Expenses And Other Current Assets (100,851) 541,440 Increase (Decrease) In Accounts Payable (1,199,587) 1,102,990 Increase In Accrued Expenses 1,910,470 70,009 Decrease in Income Taxes Payable (489,867) (1,336,955) ---------- ----------- Net Cash Provided By (Used In) Operating Activities (1,091,487) 988,113 ---------- ----------- Cash Flows From Investing Activities: Purchase Of Property And Equipment (1,109,580) (7,047,773) Proceeds From Sale of Property and Equipment 260,105 (Increase) Decrease In Other Assets 47,697 (661,270) Acquisition of Subsidiary (13,023,013) ---------- ----------- Net Cash Used In Investing Activities (1,061,883) (20,471,951) ---------- ----------- Cash Flows From Financing Activities: Purchase of Treasury Stock (32,311) Proceeds From Exercise Of Stock Options 88,049 Proceeds From Long-Term Debt 15,000,000 Borrowing Under Revolving Credit 3,050,000 1,300,000 Payment Under Capital Leases (507,796) (343,677) Payment Under Term Loan Agreements (1,211,091) (454,000) Borrowing under Term Loan Agreements 620,900 1,995,073 Increase in Other Notes Payable 45,564 386,621 ---------- ----------- Net Cash Provided By Financing Activities 1,965,266 17,972,066 ---------- ----------- Effect of Exchange Rate Change on Cash (10,154) (57,228) Net Decrease In Cash (198,258) (1,569,000) Cash At Beginning Of Period 2,260,427 3,531,099 ---------- ----------- Cash At End Of Period $2,062,169 $ 1,962,099 ========== =========== Supplemental schedule of noncash investing and financing activity: Machinery and equipment acquired under capital leases $ 551,500 $ 0
See Notes to Consolidated Financial Statements 5 SEMX Corporation and Subsidiaries Consolidated Statement of Shareholders' Equity For the three months ended March 31, 1998 (Unaudited)
ACCUMULATED ADDITIONAL OTHER TOTAL COMMON STOCK PAID-IN COMPREHENSIVE RETAINED TREASURY STOCK SHAREHOLDERS' SHARES AMOUNT CAPITAL INCOME* EARNINGS SHARES AMOUNT EQUITY --------- --------- ------------ --------- ---------- -------- -------- ------------- Balance at January 1, 1998 6,375,616 $ 637,562 $ 28,199,221 $(405,304) $9,026,434 (300,000) $ 0 $37,457,913 Purchase of (4,200) (32,311) (32,311) Treasury Stock Net Income (Loss) (658,605) (658,605) Other Comprehensive Income * (26,296) (26,296) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at March 31, 1998 6,375,616 $ 637,562 $ 28,199,221 $(431,600) $8,367,829 (304,200) $(32,311) $36,740,701 ========= ========= ============ ========= ========== ======== ======== ===========
See Notes To Consolidated Financial Statements * Other Comprehensive Income is inclusive of the Foreign Currency Translation Adjustment. 6 SEMX Corporation 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 March 31, 1998, the consolidated statement of operations and comprehensive income for the three months ended March 31, 1998 and 1997, the consolidated statement of cash flows for the three months ended March 31, 1998 and 1997 and the consolidated statement of shareholders' equity for the three months ended March 31, 1998, 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 March 31, 1998 and for all periods presented have been made. 2. Earnings per share - Earnings per share for the periods presented are computed on a basic and diluted basis in accordance with SFAS No. 128. Basic earnings per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per common share is computed using the weighted average number of common shares outstanding plus the shares that would be outstanding assuming the exercise of employee stock options and stock warrants during the periods presented. Earnings per share for the periods ending March 31, 1998 and March 31, 1997 are the same for both basic and diluted earnings per share. 3. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, Reporting Comprehensive Income. The Company has elected to adopt SFAS 130 effective January 1, 1998. 4. See the Company's Annual Report and Form 10-K for the year ended December 31, 1997 for additional disclosures relating to the Company's financial statements. 5. On January 23, 1997, American Silicon Products, Inc. ("ASP"), a wholly owned subsidiary of the Company, acquired all of the assets of Silicon Materials Service of Garland, Texas and acquired 100% of the outstanding stock of Silicon Materials Service, B.V. (collectively "SMS"), a company which polishes and reclaims silicon wafers for a purchase price of approximately $12,972,000 in cash. This business combination was accounted for as a purchase. In addition, the Company incurred approximately $2,000,000 of costs associated with the acquisition of SMS. The fair value of the assets acquired, including approximately $2,923,000 allocated to goodwill, which is being amortized over 25 years, amounted to $15,609,000 and liabilities assumed amounted to $637,000. On April 17, 1998 the Company announced the restructuring of its Semiconductor Services Group, including the closing of the Garland, Texas plant of ASP, a wholly owned subsidiary of SEMX Corporation. A restructuring charge of $1,950,000 has been taken against Operating Income in the month of March 1998 and is reflected in the presented quarterly financials. 6. Effective July 30, 1997, Retconn Incorporated ("Retconn"), a wholly owned subsidiary of the Company, acquired 100% of the outstanding stock of S.T. Electronics, Inc. ("S.T."), a company which manufactures and markets custom cable and cable harness assemblies for $1,000,000 in cash plus approximately $54,000 based on S.T.'s closing net worth and $2,000,000 in notes. In addition, Retconn acquired certain proprietary rights from the S.T. shareholders for $200,010. The notes are payable in twenty equal quarterly installments which began on November 1, 1997 together with interest on the unpaid principal at the rate of 7% per annum. This business combination was accounted for as a purchase. In addition, the Company incurred approximately $300,000 in estimated closing expenses. The fair value of the assets acquired, including $2,788,000 allocated to goodwill, which is being amortized over 25 years, amounted to $4,231,000 and liabilities assumed amounted to $877,000. 7. 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, 39.9% owned by a holding company, Semiconductor Alliance Pte Ltd. and 10% owned by EDB Ventures 2 Pte Ltd. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING INFORMATION Portions of the narrative set forth in this 10-Q that are not historical in nature are forward looking statements. The Company's actual performance may differ materially from that contemplated by the forward looking statements as a result of a variety of factors that include, but are not limited to, the general economic or business climate, business conditions of the microelectronic and semiconductor markets and wireless communications industry which the Company serves, the timely and successful completion of the Company's capital and plant expansion programs, economic volatility in Asian markets and the ability of the Company to obtain necessary financing when required. RESULTS OF OPERATIONS (for the three month periods ended March 31, 1998 compared to the three month period ended March 31, 1997) Total revenue for the three month period ended March 31, 1998 increased $5,985,000, or 43%, over the comparable 1997 period. In the three month period ended March 31, 1998, sales by the Company's Materials Group increased $5,415,000, or 60%, over the comparable 1997 period. The sales growth at the Company's Materials Group was due to a $2,786,000, or 94% increase at Polese Company, an increase of $1,902,000, or 61% at Retconn, which includes sales of $1,158,000 from S.T. Electronics and an increase at the parent company of $727,000, or 24% from the comparable 1997 period. In 1998, the sales increase in the Materials Group was primarily due to an increase in demand for its products by the communication and computer industries. In the three month period ended March 31, 1998, revenue derived from the Company's Services Group increased $570,000, or 12% , over the comparable 1997 period. The Services Group revenue in the three month period ended March 31, 1998, from ASP's Rhode Island and Netherlands operations, increased a total of $423,000 while revenues at ASP's Texas operation decreased $90,000 from the comparable 1997 period. Further, ASP's Netherlands and Texas operations were acquired on January 23, 1997 and, therefore, revenues in the first quarter of 1997 were only included from the time of acquisition as compared to a full three month period in 1998. Given the recent numerous announcements of semiconductor companies regarding reduced levels of business, closing of selected facilities and anticipation of a prolonged weak market, on April 17, 1998, the Company announced that it was closing its Texas operation and would consolidate all of ASP's domestic business in its Rhode Island facility. The Company decided to close its Texas operation to, among other things, improve the profitability of its Services Group. At March 31, 1998, the Company's consolidated backlog was $18,719,000, which represents a 9% decrease since the beginning of the year. The decrease in backlog occurred principally at Polese Company due to the seasonality of its recreational product line and from a slow down in orders from one of its customers who services the communications industry. For the three months ended March 31, 1998 and 1997, direct sales of the Company's products into foreign markets accounted for 13% and 15%, respectively, of consolidated revenue. The Company currently maintains foreign manufacturing operations in the Netherlands ("ASP B.V.") and in Singapore, International Silicon Products Pte. Ltd. ("ISP"). In the three month period ended March 31, 1998, the Company derived $803,000 of revenue from ASP B.V. and $237,000 of revenue from ISP. Foreign sales made through the Company's domestic operations are made through foreign manufacturer's representatives and are priced and paid for in U.S. dollars as well as the local currencies (Singapore Dollars and Dutch Guilders). The Company believes that its revenue has been, and will be, affected by the cyclical nature of the industries it serves. Gross profit for the three month period ended March 31, 1998 increased $1,543,000, or 39%, from the comparable 1997 period. Gross profit in the three month period ended March 31, 1998 from the Company's Materials Group, increased $2,176,000 or 88%, from the comparable 1997 period primarily due to increased sales volume and improved margins at Polese Company and Retconn. Gross profit from the Company's Services Group decreased $633,000, or 44%, from the comparable 1997 period. While gross profit increased at ASP's Rhode Island operation and remained constant at ASP's Netherlands operation, gross profit decreased $514,000 at ASP's Texas operation 8 and decreased $141,000 at ISP from the comparable 1997 period. As a result of the foregoing, gross margins in 1998 increased at the Materials Group from 27% to 32% and decreased from 29% to 15% at the Services Group from the comparable 1997 period. Selling, general and administrative ("SG&A") expenses in the three month period ended March 31, 1998 increased $3,170,000, or 117% over the comparable 1997 period. This increase includes a restructuring charge of $1,950,000 associated with the closing of ASP's Texas operation and the relocation of its equipment and other assets to ASP's operations in Rhode Island and the Netherlands. Excluding the restructuring charge, SG&A increased $1,220,000, or 45%, over the comparable 1997 period primarily due to higher revenues and additional organizational infrastructure in the 1998 period. SG&A expenses as a percentage of revenue increased to 20%, excluding the restructuring charge, in the three month period ended March 31, 1998 as compared to 19%, in the comparable 1997 period. Net interest expense for the three month period ended March 31, 1998 increased $302,000 from the comparable 1997 period primarily as the result of increased borrowings under the Company's revolving credit facility to support the working capital needs of the Company and due to increased interest costs associated with capital lease obligations. March 1998 results provide for a credit for income taxes amounting to $452,000, which includes a $759,000 income tax credit associated with the restructuring charge. This compares to a $320,000 provision in the comparable 1997 period. In the three month periods ended March 31, 1998 and 1997, the Company has included a loss associated with ISP in its income (loss) before minority interest in loss of consolidated subsidiary, net of tax. The Company has a 50.1% interest in the joint venture and has accordingly, excluded 49.9% of such loss from its consolidated net income. As a result of the foregoing, net income decreased $1,140,000 in the three month period ended March 31, 1998 from the comparable 1997 period and resulted in a loss for the period of $659,000. Excluding the restructuring charge, net of tax, net income in the 1998 period would have been $532,000 as compared to $481,000 in the comparable 1997 period. Year 2000 The Company is currently addressing the potential problems associated with Year 2000 computer compliance (some computers and software are unable to "read" the year 2000), and has designed a program, under the direction of the Information Technology (IT) Manager, to address compliance with Year 2000 both internally, including all subsidiaries, and externally, including critical suppliers and customers. All aspects of computer hardware and software are being reviewed and upgraded as required to meet the demands of Year 2000. Based on preliminary information, the cost of addressing the potential problem will not have a material impact on future revenue and earnings growth. However, if the Company, its suppliers or customers are unable to address and resolve the problem within set time constraints, it could result in a material impact on the Company's results of operations. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its capital needs through the proceeds of its public equity offerings, capital leases, its revolving credit facility and term loans from banks led by First Union Bank (the "Bank") and cash flow from operations. At March 31, 1998, the Company had cash and cash equivalents of $2,062,000 and had an available balance on its revolving credit facility of $1,971,000. Net cash used in operating activities in the three month period ended March 31, 1998 amounted to $1,091,000 as compared to net cash provided by operating activities $988,000 in the comparable 1997 period. While cash provided by net income and adjustments to reconcile net income to net cash used in operating activities in the 1998 period decreased $875,000, due to the $1,191,000 (net of tax) restructuring charge, from the comparable 1997 period, cash used to support changes in operating assets and liabilities increased $1,204,000 in the three month period ended March 31, 1998 from the comparable 1997 period. In the three month period ended March 31, 1998, 9 the Company used $1,838,000 as compared to using $891,000 in the three month period ended March 31, 1997 of cash derived from operations to fund increases in accounts receivable and inventory. The increases in the Company's account receivable and inventory were made to support increased revenues. In the three month period ended March 31, 1998, accounts payable decreased $1,200,000 primarily due to a reduction in payables at ISP and Retconn, which payables were higher than normal at December 31, 1997, as compared to increasing $1,103,000 in the comparable 1997 period. In the three month period ended March 31, 1998, accrued expenses increased $1,910,000 as compared to increasing $70,000 in the comparable 1997 period. The increase in the Company's accrued expenses was due primarily to the $1,950,000 restructuring charge for the closing and relocation of equipment and other assets of ASP's Texas operation. In the three month period ended March 31, 1998, the Company invested $1,110,000 as compared to $7,048,000, in the three month period ended March 31, 1997, in property and equipment to support its growth and expand its facilities and production capabilities. At March 31, 1998, the Company had capital commitments of approximately $853,000 for the ongoing upgrade of the Company's manufacturing equipment and facilities. The Company believes that the lease financing available to it for certain equipment together with cash flow from operations should be sufficient to fund its capital needs. 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, 39.9% owned by a holding company, Semiconductor Alliance Pte Ltd. and 10% owned by EDB Ventures 2 Pte. Ltd. In 1996, the Company and its joint venture partner made a total of $4,000,000 in equity contributions into ISP, which was contributed pro-ratably based on ownership. In addition, the Company has paid approximately $289,000 in costs associated with the establishment of the joint venture. On January 23, 1997, ASP completed the acquisition of the assets of Silicon Materials Service of Garland, Texas, and acquired 100% of the outstanding stock of Silicon Materials Service, B.V. of Helmond Netherlands. The purchase price of approximately $12,972,000 was paid in cash. The Company also incurred approximately $2,000,000 in costs associated with the acquisition. This business combination was accounted for as a purchase. Concurrent with the SMS acquisition, the Company entered into a $21,000,000 five year term loan with First Union Bank (the "Bank"). Fleet National Bank is also participating in the term loan facility and line of credit described below. The $21,000,000 term loan was principally used to finance the SMS acquisition and to refinance a $6,000,000 outstanding term loan with the Bank. The principal amount which is payable in 60 consecutive installments of $350,000, commenced on March 1, 1997. The loan bears interest at a Eurodollar rate plus 2.25%. In conjunction with the term loan agreement, the Company also entered into a $15,000,000 line of credit with the Bank, which is described herein. Pursuant to the term loan and line of credit agreements, the Bank has a first priority security interest in substantially all of the Company's assets. The loan agreements provide, 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. Effective July 30, 1997, Retconn Incorporated ("Retconn"), a wholly owned subsidiary of the Company, acquired 100% of the outstanding stock of S.T. Electronics, Inc. ("S.T."), for $1,000,000 in cash plus approximately $54,000 based on S.T.'s closing net worth and $2,000,000 in notes. In addition, Retconn acquired certain proprietary rights from the S.T. shareholders for $200,010. The notes are payable in twenty equal quarterly installments which began on November 1, 1997 together with interest on the unpaid principal at the rate of 7% per annum. In addition, the Company incurred approximately $300,000 in costs associated with the acquisition of S.T. This business combination was accounted for as a purchase. The S.T. acquisition was financed through drawings under the Company's line of credit facility with the Bank as described herein. Primarily as a result of the foregoing, the Company used $1,062,000 in the three month period ended March 31, 1998, as compared to $20,472,000 in the three month period ended March 31, 1997, in its investing activities. On December 18, 1997, the Board of Directors authorized the Company to repurchase up to $2,000,000 of its common stock on the open market. Repurchased shares are held as Treasury shares and may be reissued in the 10 future or may be reissued pursuant to the Company's stock option programs. During the three month period ended March 31, 1998, the Company repurchased 4,200 of its shares at a cost of $32,000. In conjunction with the SMS acquisition described above, the Company received proceeds of $15,000,000 under its $21,000,000 term loan facility during the three month period ended March 31, 1997. On January 23, 1997, the Company entered into a $15,000,000 line of credit with the Bank, which expires in February 1999, which includes a standby letter of credit for ISP in the amount of $3,104,000 at March 31, 1998. Interest is payable monthly at the lower of the Bank's loan pricing rate or a Eurodollar rate plus 2.25%. To support its working capital requirements and for general corporate purposes, the Company borrowed $3,050,000 and $1,300,000 under its line of credit during the three month periods ended March 31, 1998 and 1997, respectively. At March 31, 1998, the Company had borrowed $9,925,000 under its line of credit and did not have any drawings under the standby letter of credit. In 1997, ISP entered into a S$19,685,000 (approximately $14,000,000) credit facility with a Singapore financial institution in order to acquire certain equipment, acquire a building, and provide for an overdraft facility and to provide a multi currency letter of credit facility. Amounts borrowed under the facility bear interest at an average rate of approximately 6.75%. In the three month periods ended March 31, 1998 and 1997, ISP borrowed $621,000 and $1,995,000, respectively, under its credit facility. At March 31, 1998, ISP has borrowed S$8,228,000 (approximately $5,098,000) under the facility. In conjunction with the Company's acquisition of Polese Company in 1993, the Company entered into an agreement with Mr. Frank Polese, the former sole shareholder of Polese Company whereby, 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. The Company has, and expects to be able to continue to, meet its obligations to the Bank from cash generated from operations. As at March 31, 1998, the Company was in compliance with the covenants contained in its loan agreements, as amended. As a result of the above, in the three month period ended March 31, 1998, $1,965,000 was provided by the Company's financing activities as compared to $17,972,000 in the comparable 1997 periods. 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. 11 PART II Other Information Item 1. Legal Proceedings On May 5, 1998 a federal judge dismissed a shareholder class action brought against the Company, Gilbert D. Raker and Andrew A. Lozyniak (Blum et al. V. Semiconductor Packaging Materials Co., Inc. et. al. (97 CV 7078)), United States District Court, For the Eastern District of Pennsylvania. The plaintiffs have 30 days from entry of the order to appeal the decision. Items 2,3,4 and 5 are not applicable and have been omitted. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 First Amendment Agreement to Term Loan Agreement with First Union Bank of Connecticut. 10.2 Second Amendment Agreement to Term Loan Agreement with First Union Bank of Connecticut. 10.3 Third Amendment Agreement to Term Loan Agreement with First Union Bank of Connecticut. (b) Reports on Form 8-K; Filed on January 6, 1998 - Item 5. Other Events: Shareholders class action, private investigation by the Securities and Exchange Commission 12 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. SEMX CORPORATION Date: May 14, 1998 By: /s/ Gilbert D. Raker -------------------- Name: Gilbert D. Raker Title: Chairman of the Board and Chief Executive Officer Date: May 14, 1998 By: /s/ Douglas G. Sages -------------------- Name: Douglas G. Sages Title: Treasurer and Secretary (Chief Accounting Officer) 13 EX-10.1 2 FIRST AMENDMENT AGREEMENT 10.1 First Amendment Agreement to Term Loan Agreement with First Union Bank of Connecticut. FIRST AMENDMENT AGREEMENT ------------------------- AGREEMENT, dated as of July 31, 1997, among SEMICONDUCTOR PACKAGING MATERIALS CO., INC., a Delaware corporation, ASP REALTY COMPANY, a Delaware corporation, AMERICAN SILICON PRODUCTS, INC., a Delaware corporation, POLESE COMPANY, INC., a California corporation, RETCONN INCORPORATED, a Connecticut corporation, SPM HOLDINGS CORPORATION, a Delaware corporation, TYPE III, INC., a California corporation and FIRST UNION BANK OF CONNECTICUT, a Connecticut banking corporation. Background ---------- A. Capitalized terms not otherwise defined shall have the meanings ascribed to them in the Credit Agreement dated January 23, 1997, between Semiconductor Packaging Materials Co., Inc. and First Union Bank of Connecticut (as modified, amended, restated or supplemented from time to time, the "Credit Agreement") B. The Borrower and the Subsidiary Guarantors have requested that the Lender modify certain terms and conditions of the Credit Documents, among other things, to allow Retconn Incorporated to purchase all of the issued and outstanding capital stock of S.T. Electronics, Inc. C. The Lender has agreed to the Borrower's and the Subsidiary Guarantor's requests subject to the terms and conditions of this Agreement. Agreement --------- In consideration of the Background, which is incorporated by reference, the parties, intending to be legally bound, agree as follows: 1. Modifications. All of the terms and provisions of the Credit Agreement and the other Credit Documents shall remain in full force and effect except as follows: (a) The word "and" contained in Section 9.5 (f) of the Credit Agreement is deleted, the period at the end of Section 9.5 (g) of the Credit Agreement is deleted and ";and" is substituted therefor, and the following is added as Section 9.5 (h) to the Credit Agreement: (h) the ST Acquisition Indebtedness (b) The word "and" contained in Section 9.6 (g) of the Credit Agreement is deleted, the period at the end of Section 9.6 (h) of the Credit Agreement is deleted and ";and" is substituted therefor, and the following is added as Section 9.6 (i) to the Credit Agreement: (i) Retconn Incorporated may effect the ST Acquisition pursuant to the ST Acquisition Documents (and the Borrower may guaranty the ST Acquisition Indebtedness) (c) Section 9.10 of the Credit Agreement is deleted and the following is substituted therefor: 9.10 Maximum Leverage Ratio. The Borrower, on a consolidated basis, shall maintain: (a) as at March 31, 1997and June 30, 1997, a Leverage Ratio of not more than 2.50 to 1.00; (b) as at September 30, 1997, a Leverage Ratio of not more than 3.40 to 1.00; (c) as at December 31, 1997, and March 31, 1998, a Leverage Ratio of not more than 3.00 to 1.00; (d) as at June 30, 1998 and September 30, 1998 a Leverage Ratio of not more than 2.25 to 1.00; and (f) as at the end of each subsequent fiscal quarter, a Leverage Ratio of not more than 2.00 to 1.00. 14 (d) The following terms are added after the definition of "SEC" in Section 11.1 of the Credit Agreement: "ST Acquisition" shall mean the acquisition by Retconn Incorporated of all of the issued and outstanding capital stock of S.T. Electronics, Inc., a California corporation pursuant to the ST Acquisition Documents for the purchase price of not more than $3,450,000. "ST Acquisition Documents" shall mean the Stock Purchase Agreement dated as of July 30, 1997, as amended by the First Amendment dated July 31, 1997, and all other agreements executed in connection therewith which shall be assigned to the Lender to secure the Obligations. "ST Acquisition Indebtedness" shall mean the principal amount of $2,000,000 to be incurred by Retconn Incorporated plus the amount of the net worth adjustment, if any, as provided in the ST Acquisition Documents (and guaranteed by the Borrower) in connection with the ST Acquisition, evidenced by a promissory note bearing interest at a rate of 7% per annum which indebtedness shall be unsecured and shall be payable quarterly based on a straightline amortization basis over a five-year term. (e) The definition of "Subsidiary Guarantor" contained in Section 11.1 of the Credit Agreement is deleted and the following is substituted therefor: "Subsidiary Guarantor" shall mean initially, ASP Realty Company, American Silicon Products, Inc., Polese Company, Inc., Retconn Incorporated, SPM Holdings Corporation and Type III, Inc. (f) The following is added after the current language of Section 9.3 of the Credit Agreement: Notwithstanding the foregoing, the Borrower shall have the right to implement a share repurchase program under which on or prior to December 31, 1998, it shall have the right to repurchase its publicly traded common stock from time to time from its shareholders for an aggregate purchase price of not more than $2,000,000. 2. Conditions Precedent. The Lender's obligations under this Agreement are contingent upon the Lender's receipt of the following, all in form, scope and content acceptable to the Lender in its sole discretion: (a) Amendment Agreement. This Agreement duly executed by the parties hereto; (b) ST Documents. The Stock Purchase Agreement dated as of July 30, 1997, among Retconn Incorporated, the Borrower, Niwatana Chaimongkol, Somnuk Thongkumthamachart and S.T. Electronics, Inc. and all agreements executed in connection therewith; (c) Amendment Fee. Payment to Lender of the amendment fee in the amount of $12,500; (d) Legal Fees. Payment to the Lender of all legal fees and expenses incurred by the Lender in connection with this Agreement; and (e) Other. Such other agreements and instruments as the Lender shall require. 15 3. Reaffirmation By Borrower. The Borrower acknowledges and agrees, and reaffirms, that it is legally, validly and enforceably indebted to the Lender under the Notes without defense, counterclaim or offset, and that it is legally, validly and enforceably liable to the Lender for all costs and expenses of collection and attorneys' fees related to or in any way arising out of this Agreement, the Credit Agreement, the Notes and other Credit Documents. The Borrower hereby restates and agrees to be bound by all covenants contained in the Credit Agreement and the other Credit Documents and hereby reaffirms that all of the representations and warranties contained in the Credit Agreement remain true and correct in all material respects. The Borrower represents that except as set forth in the Credit Agreement, there are not pending or to the Borrower's knowledge threatened, legal proceedings to which the Borrower or any of the Subsidiary Guarantors is a party or which materially or adversely affect the transactions contemplated by this Agreement or the ability of the Borrower or any of the Subsidiary Guarantors to conduct its business. The Borrower acknowledges and represents that the resolutions of the Borrower dated January 23, 1997, remain in full force and effect and have not been amended, modified, rescinded or otherwise abrogated. 4. Reaffirmation by the Subsidiary Guarantors. Each of the Subsidiary Guarantors acknowledges that each is legally and validly indebted to the Lender under the Subsidiary Guaranty of each without defense, counterclaim or offset. Each of the Subsidiary Guarantors affirms that the Subsidiary Guaranty of each remains in full force and effect and acknowledges that the Subsidiary Guaranty of each encompasses, without limitation, the amount of the Loan, as modified herein. 5. Reaffirmation re: Collateral. The Borrower and the Subsidiary Guarantors reaffirm the liens, security interest and pledges encumbering the Security Agreement Collateral to secure the obligations of each thereunder. 6. Other Representations by Borrower and Subsidiary Guarantors. The Borrower and the Subsidiary Guarantors each represents and confirms that (a) no Default or Event of Default has occurred and is continuing and the Lender has not given its consent to or waived any Default or Event of Default and (b) the Credit Agreement and the other Credit Documents are in full force and effect and enforceable against the Borrower and the Subsidiary Guarantors in accordance with the terms thereof. The Borrower and the Subsidiary Guarantors each represents and confirms that as of the date hereof, each has no claim or defense (and the Borrower and the Subsidiary Guarantors each hereby waive every claim and defense) against the Lender arising out of or relating to the Credit Agreement and the other Credit Documents or the making, administration or enforcement of the Loans and the remedies provided for under the Credit Agreements. 7. No Waiver By Lender. The Borrower and the Subsidiary Guarantors each acknowledges that (a) by the execution by each of this Agreement, the Lender is not waiving any Default, whether now existing or hereafter occurring, disclosed or undisclosed, by the Borrower under the Credit Documents and (b) the Lender reserves all rights and remedies available to it under the Credit Documents and otherwise. 8. Miscellaneous (a) This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of 16 said counterparts taken together shall be deemed to constitute one and the same instrument. (b) This Agreement and the rights and the obligations of the parties hereunder shall be governed by, and construed in accordance with, the laws of the State of Connecticut. (c) This Agreement shall be deemed a Credit Document under the Credit Agreement for all purposes. 17 The parties have executed this agreement as of the date first written above. SEMICONDUCTOR PACKAGING MATERIALS CO., INC. By: /s/ Andrew A. Lozyniak --------------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary ASP REALTY COMPANY By: /s/ Andrew A. Lozyniak --------------------------- Name: Andrew A. Lozyniak Title: Assistant Treasurer and Assistant Secretary AMERICAN SILICON PRODUCTS, INC. By: /s/ Andrew A. Lozyniak --------------------------- Name: Andrew A. Lozyniak Title: Assistant Treasurer and Assistant Secretary POLESE COMPANY, INC. By: /s/ Andrew A. Lozyniak --------------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary RETCONN INCORPORATED By: /s/ Andrew A. Lozyniak --------------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary SPM HOLDINGS CORPORATION By: /s/ Andrew A. Lozyniak --------------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary TYPE III, INC. By: /s/ Andrew A. Lozyniak --------------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary 18 Lender: FIRST UNION BANK OF CONNECTICUT By --------------------------- Name: Title: 19 EX-10.2 3 SECOND AMENDMENT AGREEMENT 10.2 Second Amendment Agreement to Term Loan Agreement with First Union Bank of Connecticut. SECOND AMENDMENT AGREEMENT AGREEMENT, dated as of October 16, 1997, to be effective as of June 30, 1997, among SEMICONDUCTOR PACKAGING MATERIALS CO., INC., a Delaware corporation, ASP REALTY COMPANY, a Delaware corporation, AMERICAN SILICON PRODUCTS, INC., a Delaware corporation, POLESE COMPANY, INC., a California corporation, RETCONN INCORPORATED, a Connecticut corporation, SPM HOLDINGS CORPORATION, a Delaware corporation, TYPE III, INC., a California corporation, S.T. ELECTRONICS, INC. a California corporation and FIRST UNION BANK OF CONNECTICUT, a Connecticut banking corporation. Background ---------- A. Capitalized terms not otherwise defined shall have the meanings ascribed to them in the Credit Agreement dated January 23, 1997, between Semiconductor Packaging Materials Co., Inc. and First Union Bank of Connecticut (as amended, modified or supplemented from time to time, the "Credit Agreement") B. The Borrower has requested that the Lender modify the Interest Coverage Ratio contained in the Credit Agreement. C. The Lender has agreed to the Borrower's and the Subsidiary Guarantors' requests subject to the terms and conditions of this Agreement. Agreement --------- In consideration of the Background, which is incorporated by reference, the parties, intending to be legally bound, agree as follows: 1. Modifications. All of the terms and provisions of the Credit Agreement shall remain in full force and effect except that Section 9.11 of the Credit Agreement is deleted and the following is substituted therefor: 9.11 Interest Coverage Ratio. The Borrower, on a consolidated basis, shall maintain: (a) as at March 31, 1997, computed for the period beginning on the first day of the 1997 fiscal year and ending on March 31, 1997, an Interest Coverage Ratio of not less than 3.75 to 1.00; and (b) as at June 30, 1997, computed for the period beginning April 1, 1997 and ending on June 30, 1997, an Interest Coverage Ratio of not less than 3.25 to 1.00; (c) as at September 30, 1997, computed for the period beginning July 1, 1997 and ending on September 30, 1997, an Interest Coverage Ratio of not less than 3.25 to 1.00; (d) as at December 31, 1997 computed for the period beginning October 1, 1997 and ending on December 31, 1997, an Interest Coverage Ratio of not less than 3.75 to 1.00; (e) as at the end of each subsequent fiscal quarter, computed for the period beginning on the first day of the fiscal year in which such quarter occurs and ending on the last day of such fiscal quarter, an Interest Coverage Ratio of not less than 4.00 to 1.00. 2. Conditions Precedent. The Lender's obligations under this Agreement are contingent upon the Lender's receipt of the following, all in form, scope and content acceptable to the Lender in its sole discretion: 20 (a) Amendment Agreement. This Agreement duly executed by the parties hereto; (b) Deleted (c) Legal Fees. Payment to the Lender of all legal fees and expenses incurred by the Lender in connection with this Agreement; and (e) Other. Such other agreements and instruments as the Lender shall require. 3. Reaffirmation By Borrower. The Borrower acknowledges and agrees, and reaffirms, that it is legally, validly and enforceably indebted to the Lender under the Notes without defense, counterclaim or offset, and that it is legally, validly and enforceably liable to the Lender for all costs and expenses of collection and attorneys' fees related to or in any way arising out of this Agreement, the Credit Agreement, the Notes and other Credit Documents. The Borrower hereby restates and agrees to be bound by all covenants contained in the Credit Agreement and the other Credit Documents and hereby reaffirms that all of the representations and warranties contained in the Credit Agreement remain true and correct in all material respects. The Borrower represents that except as set forth in the Credit Agreement, there are not pending or to the Borrower's knowledge threatened, legal proceedings to which the Borrower or any of the Subsidiary Guarantors is a party or which materially or adversely affect the transactions contemplated by this Agreement or the ability of the Borrower or any of the Subsidiary Guarantors to conduct its business. The Borrower acknowledges and represents that the resolutions of the Borrower dated January 23, 1997, remain in full force and effect and have not been amended, modified, rescinded or otherwise abrogated. 4. Reaffirmation by the Subsidiary Guarantors. Each of the Subsidiary Guarantors acknowledges that each is legally and validly indebted to the Lender under the Subsidiary Guaranty of each without defense, counterclaim or offset. Each of the Subsidiary Guarantor affirms that the Subsidiary Guaranty of each remains in full force and effect and acknowledges that the Subsidiary Guaranty of each encompasses, without limitation, the amount of the Loan, as modified herein. 5. Reaffirmation re: Collateral. The Borrower and the Subsidiary Guarantors reaffirm the liens, security interests and pledges encumbering the Security Agreement Collateral to secure the obligations of each thereunder. 6. Other Representations by Borrower and Subsidiary Guarantors. The Borrower and the Subsidiary Guarantors each represents and confirms that (a) no Default or Event of Default has occurred and is continuing and that the Lender has not given its consent to or waived any Default or Event of Default and (b) the Credit Agreement and the other Credit Documents are in full force and effect and enforceable against the Borrower and the Subsidiary Guarantors in accordance with the terms thereof. The Borrower and the Subsidiary Guarantors each represents and confirms that as of the date hereof, each has no claim or defense (and the Borrower and the Subsidiary Guarantors each hereby waive every claim and defense) against the Lender arising out of or relating to the Credit Agreement and the other Credit Documents or the making, administration or enforcement of the Loans and the remedies provided for under the Credit Documents. 7. No Waiver By Lender. The Borrower and the Subsidiary Guarantors each acknowledges that (a) by the execution by each of this Agreement, the Lender is not waiving any Default, whether now 21 existing or hereafter occurring, disclosed or undisclosed, by the Borrower under the Credit Documents and (b) the Lender reserves all rights and remedies available to it under the Credit Documents and otherwise. 8. Miscellaneous. (d) This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (e) This Agreement and the rights and the obligations of the parties hereunder shall be governed by, and construed in accordance with, the laws of the State of Connecticut. (f) This Agreement shall be deemed a Credit Document under the Credit Agreement for all purposes. 22 The parties have executed this agreement as of the date first written above. SEMICONDUCTOR PACKAGING MATERIALS CO., INC. By: /s/ Andrew A. Lozyniak ----------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary ASP REALTY COMPANY By: /s/ Andrew A. Lozyniak ----------------------- Name: Andrew A. Lozyniak Title: Assistant Treasurer and Assistant Secretary AMERICAN SILICON PRODUCTS, INC. By: /s/ Andrew A. Lozyniak ----------------------- Name: Andrew A. Lozyniak Title: Assistant Treasurer and Assistant Secretary POLESE COMPANY, INC. By: /s/ Andrew A. Lozyniak ---------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary RETCONN INCORPORATED By: /s/ Andrew A. Lozyniak ----------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary SPM HOLDINGS CORPORATION By: /s/ Andrew A. Lozyniak ----------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary TYPE III, INC. By: /s/ Andrew A. Lozyniak ----------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary 23 S.T. ELECTRONICS, INC. By: /s/ Andrew A. Lozyniak ----------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary FIRST UNION BANK OF CONNECTICUT By: /s/ Reyno A. Giallongo ----------------------- Name: Reyno A. Giallongo Title: Senior Vice President 24 EX-10.3 4 THIRD AMENDMENT AGREEMENT 10.3 Third Amendment Agreement to Term Loan Agreement with First Union Bank of Connecticut THIRD AMENDMENT AGREEMENT ------------------------- AGREEMENT, made as of March 20, 1998, to be effective as of December 31, 1997, between SEMICONDUCTOR PACKAGING MATERIALS CO., INC., a Delaware corporation, AMERICAN SILICON PRODUCTS, INC., a Delaware corporation, POLESE COMPANY, INC., a California corporation, RETCONN INCORPORATED, a Connecticut corporation, TYPE III, INC., a California corporation, S.T. ELECTRONICS, INC., a California corporation, SPM HOLDINGS CORPORATION, a Delaware corporation, and FIRST UNION NATIONAL BANK, a national banking association, successor in interest to First Union Bank of Connecticut. Background ---------- A. Capitalized terms not otherwise defined shall have the meanings ascribed to them in the Credit Agreement dated January 23, 1997, between Semiconductor Packaging Materials Co., Inc. and First Union Bank of Connecticut (as modified, amended, restated or supplemented from time to time, the "Credit Agreement") B. The Bank has extended the Loan to the Borrower in the aggregate principal amount of up to $36,000,000. C. On or about September 30, 1997, ASP Realty Company was merged into American Silicon Products, Inc. D. The Borrower has requested, among other things, that the Lender modify certain covenants contained in the Credit Agreement. E. The Lender has agreed to the requests of the Borrower subject to the terms and conditions of this Agreement. Agreement --------- In consideration of the foregoing Background, which is incorporated by reference, the parties, intending to be legally bound, agree as follows: 1. Modifications to Credit Agreement. All of the terms and conditions contained in the Credit Agreement and the other Credit Documents shall remain in full force and effect except as follows: (a) Sections 9.8(a), 9.9, 9.10 and 9.11 of the Credit Agreement are deleted and the following are substituted therefor: 9.8 Capital Expenditures. (a) The Borrower,, on a consolidated basis, shall not make any capital expenditures in excess of $18,000,000 for the 1997 fiscal year (excluding any Capital Expenditures related to the Acquisition and incurred during the 1997 fiscal year), and in excess of $8,000,000 for each fiscal year thereafter. 25 9.9 Fixed Charge Coverage Ratio. The Borrower, on a consolidated basis, shall maintain a Fixed Charge Coverage Ratio of not less than 1.2 to 1.0 for the fiscal year ending December 31, 1997 and, for each fiscal year end subsequent to December 31, 1997, the Borrower shall maintain a Fixed Charge Coverage Ratio of not less than an amount to be determined between the Borrower and the Lender; notwithstanding the foregoing, if the Borrower and the Lender are unable, prior to March 31, 1998 to agree to a Fixed Charge Coverage Ratio for subsequent fiscal years end, then such failure shall constitute an Event of Default hereunder. 9.10 Maximum Leverage Ratio. The Borrower, on a consolidated basis, shall maintain: (a) as at March 31, 1997, June 30, 1997, and September 30, 1997, a Leverage Ratio of not greater than 2.50 to 1.00; (b) as at December 31, 1997, a Leverage Ratio of not greater than 3.25 to 1.00; and (c) for each fiscal year end subsequent to December 31, 1997, the Borrower shall maintain a Leverage Ratio of not greater than an amount to be determined between the Borrower and the Lender; notwithstanding the foregoing, if the Borrower and the Lender are unable, prior to March 31, 1998, to agree to a Leverage Ratio for subsequent fiscal years end, then such failure shall constitute an Event of Default hereunder. 9.11. Interest Coverage Ratio. The Borrower, on a consolidated basis, shall maintain: (a) for the fiscal quarter ending March 31, 1997, an Interest Coverage Ratio of not less than 2.50 to 1.00; and (b) for the portion of the fiscal year ending June 30, 1997, and September 30, 1997, an Interest Coverage Ratio of not less than 3.75 to 1.00; (c) for the fiscal year ending December 31, 1997, an Interest Coverage Ratio of not less than 3.5 to 1.00; and (d) for each fiscal quarter and portion of the fiscal year ending on such quarter subsequent to December 31,1997, the Borrower shall maintain an Interest Coverage Ratio of not less than an amount to be determined between the Borrower and the Lender; notwithstanding the foregoing, if the Borrower and the Lender are unable, prior to March 31, 1998, to agree to an Interest Coverage Ratio for such subsequent periods, then such failure shall constitute an Event of Default hereunder. (b) The definition of "Lender" contained in Section 11 of the Credit Agreement is deleted and the following is substituted therefor: "Lender" shall mean First Union National Bank, a national banking association, and its successors and assigns. 2. Modification Fee. In consideration of the Lender's execution, delivery and performance of this Agreement, the Borrower is simultaneously paying to the Lender a modification fee of $15,000 in immediately available funds (the "Modification Fee"). 3. Conditions Precedent. The obligation of the Lender under this Agreement is subject to the receipt and review, to the satisfaction of the Lender, of the following: (a) this Agreement duly executed by the parties hereto; (b) the consent of Fleet National Bank to this Agreement; (c) the Modification Fee; and (d) such other agreements and instruments as the Lender deems necessary. 26 4. Reaffirmation by the Borrower. The Borrower acknowledges that it is legally, validly and enforceably indebted to the Lender under the Revolving Note and the Term Note, without defense, counterclaim or offset, and that it is legally, validly and enforceably liable to the Lender for all costs and expenses of collection and attorneys' fees related to or in any way arising out of this Agreement, the Credit Agreement, the Revolving Note, the Term Note, and the other Credit Documents. Except as modified by this Agreement, the Borrower hereby remakes all representations, warranties and covenants contained in the Credit Documents and acknowledges that the liens and security interests granted pursuant to the Security Documents encompass the indebtedness of the Revolving Note and the Term Note. The Borrower represents that except as described on Current Report on Form 8-K dated January 6, 1998 of the Borrower which was filed with the Securities and Exchange Commission, there are no pending, or to the Borrower's knowledge threatened, legal proceedings to which the Borrower is a party, which materially or adversely affect the transactions contemplated by this Agreement or the ability of the Borrower to conduct its business. 5. Reaffirmation by the Subsidiary Guarantors. Each Subsidiary Guarantor acknowledges that it is legally and validly indebted to the Lender under the Subsidiary Guaranty without defense, counterclaim or offset, and affirms that the Subsidiary Guaranty remains in full force and effect and includes, without limitation, the indebtedness, liabilities and obligations arising under, or in any way connected with, the Credit Agreement, the Revolving Note, the Term Note, this Agreement and the other Credit Documents, whether now existing or hereafter arising. 6. Other Representations by Borrower and Subsidiary Guarantors. The Borrower and each of the Subsidiary Guarantors represents and confirms that no Default or Event of Default has occurred and is continuing, and that the Lender has not given its consent to or waived any Default or Event of Default and the Credit Agreement and the other Credit Documents are in full force and effect and enforceable against the Borrower and the Subsidiary Guarantors in accordance with the terms thereof. The Borrower and each of the Subsidiary Guarantors represents and confirms that as of the date hereof, neither the Borrower nor any of the Subsidiary Guarantors has any claim or defense (and the Borrower and the Subsidiary Guarantors each hereby waives every claim and defense) against the Lender arising out of or relating to the Credit Agreement, this Agreement and the other Credit Documents or the making, administration or enforcement of the Revolving Note, the Term Note and the Loans and the remedies provided for under the Credit Agreements. 7. Prejudgment Remedy Waiver: Waivers. THE BORROWER AND EACH OF THE SUBSIDIARY GUARANTORS ACKNOWLEDGES THAT THE LOANS AND THE TRANSACTIONS EVIDENCED BY THE REVOLVING NOTE, THE TERM NOTE, THE CREDIT AGREEMENT, THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS ARE COMMERCIAL TRANSACTIONS AND EACH WAIVES ITS RIGHTS TO NOTICE AND HEARING PRIOR TO THE ISSUANCE OF ANY PREJUDGMENT REMEDY, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE LENDER MAY DESIRE TO USE, AND FURTHER WAIVES DILIGENCE, DEMAND, PRESENTMENT FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF ANY RENEWALS OR EXTENSIONS. THE BORROWER AND EACH OF THE SUBSIDIARY GUARANTORS ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, WILLINGLY, VOLUNTARILY AND WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. 27 8. Jury Trial Waiver THE BORROWER AND EACH OF THE SUBSDIARY GUARANTORS WAIVES TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH, OR IN ANY WAY RELATED TO, THE FINANCING TRANSACTIONS OF WHICH THE CREDIT AGREEMENT, THE REVOLVING NOTE, THE TERM NOTE, THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS IS A PART OR THE ENFORCEMENT OF ANY OF THE LENDER'S RIGHTS. THE BORROWER AND EACH OF THE SUBSIDIARY GUARANTORS ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, WILLINGLY, VOLUNTARILY AND WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMEFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. 9. Governing Law. The Agreement shall be governed by, and construed in accordance with, the laws of the State of Connecticut. 28 The parties have executed this Agreement as of the date first written above. Borrower: SEMICONDUCTOR PACKAGING MATERIALS CO., INC. By: /s/ Andrew A. Lozyniak ---------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary Subsidiary Guarantors: ---------------------- AMERICAN SILICON PRODUCTS, INC. By: /s/ Andrew A. Lozyniak ---------------------- Name: Andrew A. Lozyniak Title: Assistant Treasurer and Assistant Secretary POLESE COMPANY, INC. By: /s/ Andrew A. Lozyniak ---------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary RETCONN INCORPORATED By: /s/ Andrew A. Lozyniak ---------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary TYPE III, INC. By: /s/ Andrew A. Lozyniak ---------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary S.T. ELECTRONICS, INC. By: /s/ Andrew A. Lozyniak ---------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary 29 SPM HOLDINGS CORPORATION By: /s/ Andrew A. Lozyniak ---------------------- Name: Andrew A. Lozyniak Title: Treasurer and Secretary Lender: ------- FIRST UNION NATIONAL BANK By: /s/ Kristin H. Murphy ---------------------- Name: Kristin H. Murphy Title: Vice President EX-27 5 ARTICLE 5 FDS FOR FIRST QUARTER 10Q
5 1,000 3-MOS DEC-31-1998 MAR-31-1998 2,062 0 11,602 210 13,610 29,699 54,214 11,494 94,449 29,304 24,995 0 0 638 36,103 94,449 14,453 19,892 9,793 14,435 5,881 0 818 (1,243) (452) (659) 0 0 0 (659) (0.11) (0.11)
-----END PRIVACY-ENHANCED MESSAGE-----