EXHIBIT 10.88
SUBCONTRACT MANUFACTURING AGREEMENT
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This is an agreement made on the 29th day of July in the year 1993 between
Microelectronic Packaging Inc. (herein referred to as MPI) with its corporate
office at 11065 Roselle Street, San Diego, California 92121 and PT Iron Hill
Micro Electronic Packaging Co. Ltd. (herein referred to as PT Iron Hill) with
its corporate office at Komplek Kebon Jerluk Baru, Blok A No. 13-14 Jakarta
Barial.
RECAPULATION
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WHEREAS it is the intention of MPI to sub-contract its pressed ceramic
production including all cerdips to PT Iron Hill in order to reduce
manufacturing costs verses current Singapore prevailing rates, and to make
available existing MPI Singapore facilities and infrastructure for new products
on a timely basis.
WHEREAS it is the intention of PT Iron Hill to set up a factory in Jakarta
Indonesia, to manufacture pressed ceramic production including all cerdips on
behalf of mPI for sales exclusively by MPI.
WHEREAS further, MPI and PT Iron Hill have agreed to enter into certain mutual
commitments and to requlate these rights in accordance with such agreements in
he manner appearing below.
THE PARTIES HERETO AGREE AS FOLLOWS:
1.1) This is a partnership program between MPI and PT Iron Hill to make the
subcontract manufacturing operation of PT Iron Hill at Jakarta successful
for both companies, and treat each as if they were partners in a single
cooperative venture.
1.2) MPI has technical know how and committed volume requirements for pressed
ceramic production including cerdips which MPI desires to transfer to
PT Iron Hill's sub-contract facility in Jakarta.
1.3) PT Iron Hill will set up a factory with appropriate facilities selective
start up equipment, provide labor, and management to produce required MPI
pressed ceramic products including cerdips to meet MPI's quality and
quantity requirements.
1.4) MPI will insure that all of its current pressed ceramic production
equipment and cerdip equipment will be made available to PT Iron Hill's
sub-contract facility, contingent upon availability of funds to finance the
one third of net book value required by the DBS Bank for release of such
equipment from Singapore to Innoventure's Jakarta facility.
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However, PT Iron Hill is responsible for capital and any additional
equipment including replacement beyond what MPI now requires for the current
level of business.
1.5) MPI will support PT Iron Hill in the start up of the sub-contract
operations in Jakarta with machinery and equipment, technology, engineering
support, and a fully paid up license to manufacture pressed ceramic
products and cerdips using MPI's technology currently available as well as
those developed fro such manufacturing in the future.
1.6) MPI will provide PT Iron Hill with raw materials and other consumables as
required for the start up of production and until a smooth transfer of
direct purchasing from approved MPI suppliers can be taken over by
PT Iron Hill. MPI will assure that PT Iron Hill receives all the negotiated
volume pricing and trade terms from all its suppliers.
1.7) MPI will buy back all of the output scheduled from the sub=contract
manufacturing agreement and PT Iron Hill agrees to sell to MPI all of the
output manufactured by PT Iron Hill unless otherwise agreed to in writing
by MPI.
1.8) Both parties agree to work together to expedite the start up and saving
benefits of this sub-contract manufacturing agreement/
THE PARTIES FURTHER AGREE TO THE FOLLOWING FINANCIAL TERMS:
2.1) PT Iron Hill will provide the necessary financing to establish and operate
the sub-contract manufacturing facility in Jakarta for producing MPI's
pressed ceramic and cerdip products which is estimated to require
approximately US $3.5M in equity and another US $3.5M in working capital.
2.2) PT Iron Hill will provide MPI the following payments for technology/license
fees and prepayment for equipment lease costs:
a) US $100,000 by August 31, 1993 to MPI/USA
b) US $400,000 by October 31, 1993 to MPI/USA
c) US $500,000 by December 31, 1993 to MPI/Singapore
2.3) MPI agrees to have PT Iron Hill obtain full payback of its equity
investment in this subcontract manufacturing project within five years of
project start up. The initial technology/license fee and prepayment for
equipment lease totaling US $1,000,000 will be included as equity
investment for purposes of payback.
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2.4) During the first five years of this agreement and/or until the equity
investment by PT Iron Hill is fully repaid by MPI, PT Iron Hill and MPI
will mutually agree upon a repayment schedule that will assist both
companies to achieve their financial objectives. After repayment of
equity investment, PT Iron Hill and MPI will share 50/50 on all savings
derived on manufacturing cost transfer from Singapore to Indonesia.
2.5) While it is MPI's responsibility to provide production equipment for the
transfer of sub-contract manufacturing from Singapore to Indonesia,
PT Iron Hill will help MPI in satisfying DBS Bank requirements to secure
the release of equipment necessary to meet planned production build up
at Jakarta.
2.6) MPI will pay for the products from PT Iron Hill by letter of credit or
alternatively by telegraphic transfer on a net ten days basis.
2.7) Both parties agree to provide each other financial information on an open
book basis to insure fair and equitable performance on he financial
agreements, herein agreed to between PT Iron Hill and MPI.
2.8) MPI agrees to provide PT Iron Hill collateral in MPI shares and/or other
agreed upon legal instruments to provide PT Iron Hill security for the
initial payments of section 2.2.
THE PARTIES CONFIRM THIS BINDING AGREEMENT:
3.1) Upon approval of this agreement by the Board of Directors of MPI and the
Board of Directors of PT Iron Hill it shall become binding on both parties.
3.2) Signing of this agreement by representatives of each party listed below
indicates that they have received all required approvals to execute this
agreement for their respective companies.
3.3) This overall agreement as written will be the basis for
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all other necessary legal documents required to fully transact
details of this subcontract manufacturing agreement.
3.4) This agreement shall be governed by the laws of Singapore.
Sign on behalf of MPI Sign on behalf of PT IRON HILL
MICRO ELECTRONIC CO LTD
/s/ TIMOTHY DA SILVA /s/ HADI WIDJAJA SIDHARTA
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Timothy da Silva Hadi Widjaja Sidharta
President and CEO President
July 29, 1993 July 29, 1993
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Date Date