<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMKOR TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3674 23-292-5614
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
AMKOR TECHNOLOGY, INC.
1345 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
(610) 431-9600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
FRANK J. MARCUCCI
CHIEF FINANCIAL OFFICER
AMKOR TECHNOLOGY, INC.
1345 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
(610) 431-9600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
<TABLE>
<S> <C>
LARRY W. SONSINI, ESQ. ALAN L. BELLER, ESQ.
PAGE MAILLIARD, ESQ. YONG G. LEE, ESQ.
BRUCE M. MCNAMARA, ESQ. CLEARY, GOTTLIEB, STEEN & HAMILTON
WILSON SONSINI GOODRICH & ROSATI ONE LIBERTY PLAZA
PROFESSIONAL CORPORATION NEW YORK, NY 10006
650 PAGE MILL ROAD (212) 225-2000
PALO ALTO, CA 94304
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
==============================================================================================================
TITLE OF EACH PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED PRICE(1)(2) FEE
- --------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value....................... $402,500,000 $121,970
==============================================================================================================
</TABLE>
(1) Includes the aggregate value offered if the Underwriters exercise the
options to purchase shares of Common Stock to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) promulgated under the Securities Act of 1933, as
amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION
OCTOBER 6, 1997
PROSPECTUS
LOGO
SHARES
AMKOR TECHNOLOGY, INC.
COMMON STOCK
($.001 PAR VALUE)
Of the shares (the "Shares") of Common Stock, $.001 par value ("Common
Stock") of Amkor Technology, Inc. ("Amkor" or the "Company") offered hereby,
Shares are being sold by the Company and Shares are being
sold by certain stockholders of the Company (the "Selling Stockholders"). The
Company will not receive any proceeds from the sale of the Common Stock by the
Selling Stockholders.
Of the Shares offered hereby, Shares are being offered by
the U.S. Underwriters (as defined herein) in the United States and Canada (the
"U.S. Offering") and Shares are being offered by the International
Underwriters (as defined herein) in a concurrent offering outside the United
States and Canada (the "International Offering" and, together with the U.S.
Offering, the "Offerings"), subject to transfers between the U.S. Underwriters
and the International Underwriters (collectively, the "Underwriters"). The Price
to Public and Underwriting Discount per share will be identical for the U.S.
Offering and the International Offering. See "Underwriting." The closing of the
U.S. Offering and International Offering are conditioned upon each other.
Following the Offerings, certain members of management and their affiliates will
beneficially own % of the Company's outstanding Common Stock. See
"Principal and Selling Stockholders."
Prior to the Offerings, there has been no public market for the Common Stock. It
is currently estimated that the initial public offering price per share will be
between $ and $ per share. See "Underwriting" for a discussion of
factors to be considered in determining the initial public offering price.
Application has been made to have the Common Stock approved for listing on the
Nasdaq National Market under the symbol "AMKR."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO PROCEEDS TO SELLING
PUBLIC UNDERWRITING COMPANY(1) STOCKHOLDERS
DISCOUNT
<S> <C> <C> <C> <C>
Per Share................... $ $ $ $
Total(2).................... $ $ $ $
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Company, estimated at $ .
(2) The Company has granted the U.S. Underwriters and the International
Underwriters 30-day options to purchase up to and additional
Shares, respectively, solely to cover over-allotments, if any. If the
Underwriters exercise these options in full, the total Price to Public,
Underwriting Discount and Proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."
The Shares are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Shares will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1997.
SALOMON BROTHERS INC
BANCAMERICA ROBERTSON STEPHENS
COWEN & COMPANY
The date of this Prospectus is , 1997.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities
laws of any such State.
<PAGE> 3
[ARTWORK]
[Photograph of manufacturing facilities; pictures of products; and diagram
of wafer fabrication, packaging and test operations.]
PowerQuad(R) and SuperBGA(R) are registered trademarks of the Company and
ChipArray(TM) and PowerSOP(TM) are trademarks of the Company. MicroBGA(TM) is a
trademark of Tessera, Inc. This Prospectus includes other trademarks and trade
names of the Company and other entities.
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information found elsewhere in this Prospectus, including under "Risk Factors"
and the Consolidated Financial Statements and Notes thereto. Certain statements
contained in "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business,"
including statements regarding the anticipated growth in the market for the
Company's products, the Company's anticipated capital expenditures and financing
needs, the Company's expected provision of wafer fabrication services, the
Company's expected capacity utilization rates, the Company's anticipated
assumption of marketing rights in Japan and Korea, the belief of the Company as
to its future operating performance and other statements contained in this
Prospectus that are not historical facts are "forward-looking" statements within
the meaning of the U.S. federal securities laws. Because such statements include
risks and uncertainties, actual results may differ materially from those
anticipated in such forward-looking statements as a result of certain factors,
including those set forth in "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." These
forward-looking statements are made as of the date of this Prospectus and the
Company assumes no obligation to update such forward-looking statements or to
update the reasons why actual results could differ materially from those
anticipated in such forward-looking statements
THE COMPANY
Amkor is the world's largest independent provider of semiconductor
packaging and test services. The Company believes that it is also one of the
leading developers of advanced semiconductor packaging and test technology in
the industry. The Company offers a complete and integrated set of packaging and
test services including integrated circuit ("IC") package design, leadframe and
substrate design, IC package assembly, final testing, burn-in, reliability
testing, and thermal and electrical characterization. As of June 30, 1997, the
Company had in excess of 150 customers, including many of the largest
semiconductor companies in the world. Such customers include, among others,
Advanced Micro Devices, Inc., International Business Machines Corp., Intel
Corporation, Lucent Technologies, Inc., Motorola, Inc., National Semiconductor
Corp., Philips Electronics N.V., SGS-THOMSON Microelectronics N.V., Siemens AG
and Texas Instruments, Inc. ("TI").
Today, nearly all of the world's major semiconductor companies outsource
some or all of their packaging and test needs. The increasing complexities,
investment requirements and time to market pressures associated with IC design
and production, combined with the growth in the number of ICs being produced and
sold, are driving increasing demand for independent packaging and test services.
This demand is expected to grow faster than that of the semiconductor industry
as a whole. According to industry estimates, independent packaging foundry
revenues are expected to grow at a compound annual rate of 20.3% over the next
five years from an estimated $5.0 billion in 1996 (32% of the world's IC
packaging needs) to $12.5 billion in 2001 (45% of the world's IC packaging
needs).
The Company provides packaging and test services through its three
factories in the Philippines as well as four factories of Anam Industrial Co.,
Ltd. ("AICL") in Korea pursuant to a supply agreement between the Company and
AICL. The Company and AICL have had a long-standing relationship. In 1996 and
the six months ended June 30, 1997, approximately 72% and 68%, respectively, of
the Company's revenues were derived from sales of services performed for the
Company by AICL. In addition, substantially all of the revenues of AICL in 1996
and the six months ended June 30, 1997 were derived from services sold by the
Company. The Company expects that the businesses of the Company and AICL will
continue to remain highly interdependent by virtue of their supply relationship,
family ties between their respective shareholders and management, financial
relationships, coordination of product and operation plans, joint research and
development activities and shared intellectual property rights.
In the first half of 1998, the Company is scheduled to begin offering wafer
fabrication services through AICL's new deep submicron CMOS foundry. The Company
expects that this foundry will be capable of producing up to 25,000 8" wafers
per month by the end of 1998. Through a strategic
3
<PAGE> 5
relationship with TI, the Company and AICL are currently qualifying .25 micron
CMOS process technology, and AICL is negotiating with TI to obtain the
technology necessary to migrate to .18 micron CMOS process technology during
1998. AICL's foundry will primarily manufacture DSPs, ASICs and other logic
devices. By leveraging the Company's leading position in semiconductor packaging
and test services, the new wafer fabrication services will enable the Company to
become one of the first providers of a fully integrated, turnkey semiconductor
fabrication, packaging and test service solution.
The Company's strategy is to: (i) maintain its product technology
leadership by continuing to design and produce leading-edge packaging
technology; (ii) maintain advanced manufacturing capabilities through continuous
advancement and refinement of its process technology; (iii) leverage the scale
and scope of its packaging and test capabilities to provide Amkor with several
competitive advantages, including procurement of key materials and manufacturing
equipment, the ability to capitalize on economies of scale and the ability to
offer an industry-leading breadth of product offerings; (iv) establish industry
packaging standards to bolster sales of leading-edge, high margin and high
growth product lines; (v) enhance customer and supplier relationships; (vi)
continue to focus on customer support; and (vii) provide an integrated, turnkey
solution comprised of wafer fabrication, packaging and test services.
The Company was organized under the laws of Delaware in September 1997 as a
holding company for several affiliated entities under common control and
management. See "Reorganization." The Company's principal executive offices are
located at 1345 Enterprise Drive, West Chester, PA 19380 and its telephone
number at that address is (610) 431-9600.
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company
U.S. Offering.................................... shares
International Offering........................... shares
-------------------
Total.................................... shares
Common Stock offered by Selling Stockholders
U.S. Offering.................................... shares
International Offering........................... shares
-------------------
Total.................................... shares
Common Stock to be outstanding after the
Offerings(1)..................................... shares
Use of Proceeds.................................... For repayment of approximately $240
million of short-term debt, capital
expenditures, and other general
corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol............. AMKR
</TABLE>
- ---------------
(1) Excludes shares of Common Stock issuable upon exercise of options to
be granted prior to the Offerings under the Company's 1997 Stock Plan at a
price of $ per share. Also excludes an aggregate of
additional shares reserved for future issuance under the Company's 1997
Stock Plan and 1997 Director Option Plan. See "Management" and "Description
of Capital Stock" and Notes 1 and 15 of Notes to Consolidated Financial
Statements.
RISK FACTORS
See "Risk Factors" beginning on page 6 for a discussion of certain factors
that should be considered by potential investors.
4
<PAGE> 6
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues.......................... $303,654 $442,101 $572,918 $932,382 $1,171,001 $542,590 $663,489
Gross profit.......................... 29,418 70,778 58,270 149,047 148,923 80,244 76,948
Operating income (loss)............... (14,114) 26,374 13,843 84,855 71,368 45,687 26,168
Net income (loss)..................... (16,430) 17,236 11,574 59,124 34,188 29,633 3,878
Pro forma adjustment for income
taxes(1)............................ 800 2,900 200 10,400 2,900 2,500 2,700
Pro forma net income (loss)(1)........ (17,230) 14,336 11,374 48,724 31,288 27,133 1,178
Pro forma net income (loss) per common
share............................... (.21) .17 .14 .59 .38 .33 .01
Shares used in per share
calculation......................... 82,610 82,610 82,610 82,610 82,610 82,610 82,610
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------------
DECEMBER 31, 1996 ACTUAL PRO FORMA(2) AS ADJUSTED(3)
------------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 49,644 $ 60,943 $ 49,143 $
Working capital (deficit)..................... 36,785 (6,461) (18,261)
Total assets.................................. 797,613 933,657 921,857
Long-term debt and due to affiliate
(non-current)............................... 402,338 436,922 436,922
Stockholders' equity.......................... 38,560 45,548 23,748
</TABLE>
- ---------------
(1) Prior to the reorganization of the Company, Amkor Electronics, Inc. ("AEI"),
one of the Company's principal subsidiaries, elected to be taxed as an S
Corporation under the Internal Revenue Code of 1986 and comparable state tax
laws. Accordingly, AEI did not recognize any provision for federal income
tax expense during the periods presented herein. The pro forma adjustment
for income taxes reflects the additional U.S. federal income taxes which
would have been recorded by the Company if AEI had not been an S Corporation
during these periods. See "Reorganization" and Note 1 of Notes to
Consolidated Financial Statements.
(2) Pro forma balance sheet data reflects (i) the termination of AEI's S
Corporation status which resulted in the recording of a deferred tax
liability of $10.0 million (ii) a distribution prior to the Offerings of
undistributed earnings of AEI through June 30, 1997 of $11.8 million to
shareholders of AEI prior to the Reorganization of the Company (as defined
in "Reorganization") and (iii) the reclassification of the remaining
retained earnings of AEI of $11.7 million to additional paid-in capital. The
amount actually distributed by the Company to such stockholders of AEI will
increase to reflect any undistributed net income earned by AEI following
June 30, 1997 and prior to such Reorganization. See
"Reorganization -- Termination of S Corporation status and Distributions"
and Notes 1 and 16 of Notes to Consolidated Financial Statements.
(3) As adjusted to give effect to the application of the estimated net proceeds
to the Company of the Offerings based on an assumed initial public offering
price of $ per share. See "Use of Proceeds." Also reflects the
elimination of the minority interest liability and recording of goodwill
related to the issuance of 2,390,000 shares to AICL in exchange for its 40%
interest in Amkor/Anam Pilipinas, Inc. See "Reorganization" and Note 1 of
Notes to Consolidated Financial Statements.
------------------------
Capitalized terms used in this summary have the meanings ascribed to such
terms elsewhere in this Prospectus. Unless the context otherwise requires, all
references in this Prospectus to the "Company" or "Amkor" are to Amkor
Technology, Inc. and its subsidiaries. Unless otherwise indicated, all
information in this Prospectus (i) gives effect to the Reorganization (as
defined under "Reorganization"), including the issuance of 85,000,000 shares of
Common Stock in connection therewith, and (ii) assumes that the Underwriters
have not exercised the over-allotment options. See "Reorganization,"
"Description of Capital Stock," "Underwriting," and Note 1 of Notes to
Consolidated Financial Statements. References in this Prospectus to "Korea" are
to the Republic of Korea, and references to "won" or "W" are to the currency of
the Republic of Korea. Solely for the convenience of the reader, this Prospectus
contains translations of certain won amounts into U.S. dollars. Unless otherwise
indicated, all such translations were made at the base rate under the market
average exchange rate system, as announced by the Korea Financial
Telecommunications and Clearings Institute in Seoul, Korea (the "Market Average
Exchange Rate"), in effect on June 30, 1997, which was W 888 to $1.00. No
representation is made that the won or U.S. dollar amounts referred to herein
could have been or could be converted into U.S. dollars or won, as the case may
be, at any particular rate or at all. On , 1997, the Market Average
Exchange Rate was W to $1.00. Financial information for AICL contained in
this Prospectus has been prepared on an consolidated basis and on the basis of
Korean generally accepted accounting principles ("GAAP"), which differ in
certain significant respects from U.S. GAAP.
Certain technical terms used throughout this Prospectus are defined in the
Glossary appearing immediately prior to the Consolidated Financial Statements at
the end of this Prospectus.
5
<PAGE> 7
RISK FACTORS
Prospective investors should consider carefully the following risk factors,
in addition to the other information contained in this Prospectus concerning the
Company and its business, before purchasing the shares of Common Stock offered
hereby. Certain statements contained in "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," including statements regarding the anticipated
growth in the market for the Company's products, the Company's anticipated
capital expenditures and financing needs, the Company's expected provision of
wafer fabrication services, the Company's expected capacity utilization rates,
the Company's anticipated assumption from AICL of marketing rights in Japan and
Korea, the
belief of the Company as to its future operating performance and other
statements contained in this Prospectus that are not historical facts, are
"forward-looking" statements within the meaning of the U.S. federal securities
laws. Because such statements include risks and uncertainties, actual results
may differ materially from those anticipated in such forward-looking statements
as a result of certain factors, including those set forth in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." These forward-looking statements are made as of the
date of this Prospectus and the Company assumes no obligation to update such
forward-looking statements or to update the reasons why actual results could
differ materially from those anticipated in such forward-looking statements.
FLUCTUATIONS IN OPERATING RESULTS; DECLINES IN AVERAGE SELLING PRICES
A variety of factors could materially and adversely affect the Company's
revenues, gross profit and operating income, or lead to significant variability
of quarterly or annual operating results. These factors include, among others,
the cyclical nature of both the semiconductor industry and the markets addressed
by end-users of semiconductors, the short-term nature of its customers'
commitments, timing and volume of orders relative to the Company's production
capacity, changes in capacity utilization, evolutions in the life cycles of
customers' products, rescheduling and cancellation of large orders, rapid
erosion of packaging selling prices, availability of manufacturing capacity,
allocation of production capacity between the Company's facilities and those of
AICL, fluctuations in package and test service charges paid to AICL, changes in
costs, availability and delivery times of labor, raw materials and components,
effectiveness in managing production processes, fluctuations in manufacturing
yields, changes in product mix, product obsolescence, timing of expenditures in
anticipation of future orders, availability of financing for expansion, changes
in interest expense, the ability to develop and implement new technologies on a
timely basis, competitive factors, changes in effective tax rates, the loss of
key personnel or the shortage of available skilled workers, international
political or economic events, currency and interest rate fluctuations,
environmental events, and intellectual property transactions and disputes.
Unfavorable changes in any of the above factors may adversely affect the
Company's business, financial condition and results of operations. In addition,
the Company increases its level of operating expenses and investment in
manufacturing capacity based on anticipated future growth in revenues. If the
Company's revenues do not grow as anticipated, the Company's business, financial
condition and operating results may be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company expects that average selling prices for its services may
decline in the future, principally due to intense competitive conditions. A
decline in average selling prices of the Company's services, if not offset by
reductions in the cost of producing those services or by a shift to higher
margin products, would decrease the Company's gross margins and could materially
and adversely affect the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
DEPENDENCE ON THE HIGHLY CYCLICAL SEMICONDUCTOR AND PERSONAL COMPUTER INDUSTRIES
The Company's business is substantially affected by market conditions in
the semiconductor industry, which is highly cyclical and, at various times, has
been subject to significant economic
6
<PAGE> 8
downturns and characterized by reduced product demand, rapid erosion of average
selling prices and production overcapacity. In addition, the markets for
semiconductors are characterized by rapid technological change, evolving
industry standards, intense competition and fluctuations in end-user demand.
Because the Company's business will be dependent on the requirements of
semiconductor companies for independent packaging, test and wafer fabrication
services for the foreseeable future, any future downturn in the semiconductor
industry could have a material adverse effect on the Company's business,
financial condition and results of operations. In 1996 and the first six months
of 1997, the Company's operating results were adversely affected by an
unexpected downturn in the semiconductor market. In addition, a significant
portion of the Company's net revenues from packaging and test services depends
on the packaging and testing of semiconductors used in personal computer ("PC")
products. The PC industry is subject to intense competition, is highly volatile
and is subject to significant shifts in demand. As a result, any deterioration
of business conditions in the PC industry could have a material adverse effect
on the Company. See "Business -- Industry Background" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISKS ASSOCIATED WITH LEVERAGE
At June 30, 1997, the Company had outstanding $677.8 million in principal
amount of indebtedness, including non-current amounts due to AUSA, and the
Company intends to incur additional bank debt prior to and following the
Offerings. Following the expected application of the net proceeds to the Company
of the Offerings, the Company will continue to have at least $304.7 million in
principal amount of indebtedness outstanding. At June 30, 1997, the Company has
also guaranteed amounts owed by affiliates of approximately $46 million. At June
30, 1997, the Company had $45.5 million of stockholders' equity and a working
capital deficit of $6.5 million (which amounts were $23.7 million and $18.3
million, respectively, on a pro forma basis, after giving effect to the
termination of AEI's S Corporation status and the distribution of undistributed
net income through June 30, 1997). Following the Offerings, the Company will
continue to be subject to the risks associated with leverage, which risks
include (i) principal and interest repayment obligations which require the
expenditure of substantial amounts of cash, the availability of which will be
dependent on the Company's future performance, (ii) inability to repay principal
or interest when due, which could result in a default on the debt and legal
actions against the Company, (iii) adverse effects of interest expense on the
Company's financial condition and results of operations and (iv) potential
violations of loan covenants which could lead to loans being called by banks. In
addition, a significant portion of the debt is owed to banks located in Korea or
branches of such banks located outside Korea. Recently, banks in Korea and their
overseas branches have been reducing their lending to companies which have
significant amounts of debt relative to their equity. Following the Offerings,
the Company will continue to have a significant amount of debt relative to its
equity, a large portion of which debt the Company plans to renew when it is due.
If the Company's banks do not renew these loans when they become due or do not
extend additional loans on acceptable terms to fund the Company's working
capital or capital expenditure needs, the Company will be forced to find other
sources of financing. There can be no assurance that such financing will be
available on favorable terms or at all. If the Company is not able to obtain
necessary financing, the Company's business and financial condition will be
materially and adversely affected. See "Reorganization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Notes 7, 8, 11 and 16 of Notes to Consolidated Financial Statements.
DEPENDENCE ON RELATIONSHIP WITH AICL; POTENTIAL CONFLICTS OF INTEREST
AICL was founded in 1956 by Mr. Hyang-Soo Kim, who currently serves as the
honorary Chairman and a Representative Director of AICL. AICL is a member of the
Anam group of companies (the "Anam Group"), consisting principally of companies
in Korea in the electronics industries. The management of AICL and the other
companies in the Anam Group are influenced to a significant degree by the family
of Hyang-Soo Kim, which, together with the Company, collectively owned
approximately 21% of the outstanding common stock of AICL as of June 30, 1997.
James Kim, the founder of the Company and currently its Chairman and Chief
Executive Officer, is the eldest son of Hyang-Soo Kim. Since
7
<PAGE> 9
January 1992, in addition to his other responsibilities, James Kim has been
serving as acting Chairman of the Anam Group and a director of AICL. Mr. In-Kil
Hwang, the President and a Representative Director of AICL, is the
brother-in-law of James Kim and a director of AICL. After the Offerings, James
Kim and trusts established on behalf of members of his family (the "Kim Family
Trusts") will own approximately % of the Company's outstanding Common Stock
and James Kim and members of his family will continue to exercise significant
control over the Company. See "-- Benefits of the Offerings to Existing
Stockholders; Continued Control by Existing Stockholders" and "Principal and
Selling Stockholders."
The businesses of the Company and AICL have been interdependent for many
years. In 1996 and the six months ended June 30, 1997, approximately 72% and
68%, respectively, of the Company's revenues were derived from sales of services
performed for the Company by AICL. In addition, substantially all of the
revenues of AICL in 1996 and the six months ended June 30, 1997 were derived
from services marketed by the Company. The Company expects the proportion of its
revenues derived from sales of services performed for the Company by AICL and
the proportion of AICL's revenues from services sold by the Company to increase
as the Company begins selling the wafer fabrication output of AICL's new wafer
foundry and with the Company's scheduled assumption from AICL in late 1997 of
marketing rights for the Korean and Japanese markets. As a result, the Company's
business, financial condition and operating results will continue to be
significantly dependent on the ability of AICL to effectively provide contracted
services on a cost-efficient and timely basis. The termination of the Company's
relationship with AICL for any reason, or any material adverse change in AICL's
business resulting from underutilization of its capacity, the level of its debt,
labor disruptions, fluctuations in foreign exchange rates, changes in
governmental policies, economic or political conditions in Korea or any other
reason, could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company has recently entered into a new supply agreement with AICL (the
"Supply Agreement"). Under the Supply Agreement, AICL has granted to the Company
a first right to the packaging and test services of AICL and the wafer output of
its new wafer foundry. The Company expects to continue to purchase all of AICL's
packaging and test services, and to purchase all of AICL's wafer output, under
the Supply Agreement. Under the Supply Agreement, pricing arrangements relating
to packaging and test services provided by AICL to the Company will be subject
to quarterly review and adjustment, and such arrangements relating to the wafer
output provided by AICL to the Company will be subject to annual review and
adjustment, in each case on the basis of factors such as changes in the
semiconductor market, forecasted demand, product mix and capacity utilization
and fluctuations in exchange rates, as well as the mutual long-term strategic
interests of the Company and AICL. There can be no assurance that any new
pricing arrangements resulting from such review and adjustment will be favorable
to the Company. Pursuant to long-standing arrangements between AICL and the
Company's operating subsidiaries, sales from AICL to the Company will continue
to be made through Anam U.S.A., Inc. ("AUSA"), a wholly-owned financing
subsidiary of AICL. Under the Supply Agreement, the Company will continue to
reimburse AUSA for the financing costs incurred by it in connection with trade
financing provided to the Company. The Supply Agreement also provides that
Amkor-Anam, Inc., a subsidiary of the Company, will continue to provide raw
material procurement and related services to AICL on a fee basis. The Supply
Agreement has a five-year term, and AICL is under no obligation to renew the
agreement upon its expiration. There can be no assurance that AICL will renew
the Supply Agreement upon its expiration or that if it does renew such
agreement, it will be on terms that are favorable to the Company.
AICL's ability to continue to provide services to the Company will depend
on AICL's financial condition and performance. AICL currently has a significant
amount of debt relative to its equity, which debt the Company expects will
continue to increase in the foreseeable future. As of June 30,1997, on the basis
of Korean generally accepted accounting principles, AICL had current liabilities
of approximately W749 billion ($843 million), including approximately W443
billion ($499 million) of short-term borrowings and approximately W67 billion
($75 million) of current maturities of long-term debt, and had long-term
liabilities of approximately W839 billion ($945 million), including
approximately W640 billion
8
<PAGE> 10
($721 million) of long-term debt. As of such date, the total shareholders'
equity of AICL amounted to approximately W288 billion ($324 million). In
addition, during 1996, AICL's cash flow from operations amounted to W191 billion
($215 million). There can be no assurance that AICL will be able to refinance
its existing loans or obtain new loans, particularly in light of recent
initiatives by Korean banks to reduce their exposure to highly leveraged
companies. In addition, there can be no assurance that AICL will be able to
continue to make required interest and principal payments on such loans or
otherwise comply with the terms of its loan agreements. Any inability of AICL to
obtain financing or generate cash flow from operations sufficient to fund its
capital expenditure, debt service and repayment and other working capital and
liquidity requirements could have a material adverse effect on AICL's ability to
continue to provide services and otherwise fulfill its obligations to the
Company. See "-- Risks Associated with Leverage" and "-- Dependence on
International Operations and Sales; Concentration of Operations in the
Philippines and Korea."
As of June 30, 1997, AICL was contingently liable under guarantees in
respect of debt of its subsidiaries and affiliates in the aggregate amount of
approximately W935 billion ($1.1 billion). Such guarantees included those in
respect of all of AUSA's debt, as well as $161 million of the Company's debt to
banks and the Company's obligations under a receivables sales arrangement. The
Company has met a significant portion of its financing needs through financing
arrangements obtained by AUSA based on guarantees provided by AICL for the
benefit of the Company. There can be no assurance that AUSA will be able to
obtain additional guarantees, if necessary, from AICL. Further, a deterioration
in AICL's financial condition could trigger defaults under AICL's guarantees,
causing acceleration of such loans. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." In addition, if any relevant subsidiaries or affiliates of AICL were
to fail to make interest or principal payments or otherwise default under their
debt obligations guaranteed by AICL, AICL could be required under its guarantees
to repay such debt, which event could have a material adverse effect on its
financial condition and results of operations.
Historically, AICL has undertaken capacity expansion programs and other
capital expenditures primarily on the basis of forecasts of the Company and
business plans prepared jointly with the Company. The Supply Agreement provides
for continued capital investment by AICL based on the Company's forecasts and
operational plans prepared jointly by the Company and AICL reflecting such
forecasts. However, there can be no assurance that AICL will be able to fund
future capacity expansions and other capital investments required to supply the
Company with necessary packaging and test services and wafer output on a timely
and cost-efficient basis.
The Company and AICL have historically cooperated on the development of new
package designs and packaging and testing processes and technologies. The Supply
Agreement generally provides for continued cooperation between the Company and
AICL in research and development, as well as the cross-licensing of intellectual
property rights between the Company and AICL. If the Company's relationship with
AICL were terminated for any reason, the Company's research and development
capabilities and intellectual property position could be materially and
adversely affected.
After the Offerings, the Company will continue to be controlled to a
significant degree by James Kim and the Kim Family Trusts, and James Kim and
other members of his family will also continue to exercise significant influence
over the management of AICL and its affiliates. In addition, the Company and
AICL will continue to have certain contractual and other business relationships,
including under the Supply Agreement, and may engage in transactions from time
to time that are material to the Company. Although any such material agreements
and transactions would require approval of the Company's Board of Directors,
conflicts of interest may arise in certain circumstances. There can be no
assurance that such conflicts will not from time to time be resolved against the
interests of the Company. In addition, the Company may agree to certain changes
in its contractual and other business relationships with AICL, including
pricing, manufacturing allocation, capacity utilization and capacity expansion,
among others, which in the judgment of the Company's management will result in
reduced short-term profitability for the Company in favor of potential long-term
benefits to the Company and AICL. There can be no assurance
9
<PAGE> 11
that the Company's business, financial condition or results of operations will
not be adversely affected by any such decision.
CUSTOMER CONCENTRATION; ABSENCE OF BACKLOG
Due to the concentration of market share in the semiconductor industry, the
Company has been largely dependent on a small group of customers for a
substantial portion of its business. In 1995, 1996 and the six months ended June
30, 1997, 34.1%, 39.2%, and 37.3%, respectively, of the Company's net revenues
were derived from sales to the Company's top five customers, with 13.3%, 23.5%,
and 21.2% of the Company's net revenues, respectively, derived from sales to
Intel Corporation ("Intel"). The ability of the Company to maintain close,
satisfactory relationships with such customers is important to the ongoing
success and profitability of its business. The Company expects that it will
continue to be dependent upon a relatively limited number of customers for a
significant portion of its net revenues in future periods. None of the Company's
customers is presently obligated to purchase any amount of packaging or test
services or to provide the Company with binding forecasts of product purchases
for any period. In addition, the Company's new wafer fabrication business will
be significantly dependent upon TI. See "-- Risks Associated with New Wafer
Fabrication Business." The reduction, delay, or cancellation of orders from
Intel or one of the Company's other significant customers could materially and
adversely affect the Company's business, financial condition and results of
operations. There can be no assurance that such customers will not reduce,
cancel or delay orders. See "-- Dependence on the Highly Cyclical Semiconductor
and Personal Computer Industries."
All of the Company's customers operate in the cyclical semiconductor
business and may vary order levels significantly from period to period. In
addition, there can be no assurance that such customers or any other customers
will continue to place orders with the Company in the future at the same levels
as in prior periods. From time to time, semiconductor companies have experienced
reduced prices for some products, as well as delays or cancellations in orders.
There can be no assurance that, should these circumstances occur in the future,
they will not adversely affect the Company's business, financial condition and
results of operations. The loss of one or more of the Company's customers, or
reduced orders by any of its key customers, could adversely affect the Company's
business, financial condition and results of operations. The Company does not
typically operate with any material backlog and, as a result, the Company
expects that in the future, revenues in any quarter will be substantially
dependent upon orders received in that quarter. The Company's expense levels are
based in part on its expectations of future revenues and the Company may be
unable to adjust costs in a timely manner to compensate for any revenue
shortfall. See "Business -- Marketing and Sales."
EXPANSION OF MANUFACTURING CAPACITY; PROFITABILITY AFFECTED BY CAPACITY
UTILIZATION RATES
The Company believes that its competitive position depends substantially on
its ability to expand its manufacturing capacity. Accordingly, although the
Company currently has available manufacturing capacity, the Company is
continuing to make significant investments to expand such capacity, particularly
through the acquisition of capital equipment and the training of new personnel.
There can be no assurance that the Company will be able to utilize such capacity
or to continue to expand its manufacturing capacity in a timely manner, that the
cost of such expansion will not exceed management's current estimates or that
such capacity will not exceed the demand for the Company's services. In
addition, expansion of the Company's manufacturing capacity will continue to
significantly increase its fixed costs, and the Company expects to continue to
incur substantial additional depreciation and other expenses in connection with
the acquisition of new equipment and the construction of new facilities.
Increases or decreases in capacity utilization rates can have a significant
effect on gross margins since the unit cost of packaging and test services
generally decreases as fixed charges are allocated over a larger number of units
produced. Therefore, the Company's ability to maintain or enhance its gross
margins will continue to be dependent, in part, on its ability to maintain high
capacity utilization rates.
Capacity utilization rates may be affected by a number of factors and
circumstances, including overall industry conditions, operating efficiencies,
the level of customer orders, mechanical failure,
10
<PAGE> 12
disruption of operations due to expansion of operations or relocation of
equipment, fire or natural disasters, employee strikes or work stoppages or
other circumstances. Although the Company has been able to maintain a high rate
of capacity utilization in recent years as a result of its close association
with its customers, its knowledge of the semiconductor market conditions, and
its continued improvements in operating efficiencies and equipment maintenance,
there can be no assurance that this high utilization rate will be sustained in
the future. The Company's inability to generate the additional orders necessary
to fully utilize its capacity would have a material adverse effect on the
Company's business, financial condition and results of operations. For example,
in 1996 the Company's capacity utilization rates were negatively affected by an
unexpected downturn in the semiconductor industry. There can be no assurance
that the Company's utilization rates will not be adversely affected by future
declines in the semiconductor industry or for any other reason. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Manufacturing and Facilities."
LIQUIDITY AND FUTURE CAPITAL REQUIREMENTS
The Company plans to continue to incur substantial costs to fund its
equipment and facilities expansion plans and its packaging technology
development. The Company believes that the net proceeds from the sale of the
Common Stock in the Offerings, together with existing cash balances, cash flow
from operations, available equipment lease financing, bank borrowings and
financing provided by AICL through its wholly-owned subsidiary, AUSA, will be
sufficient to meet its projected capital expenditures, working capital and other
cash requirements for at least the next twelve months. There can be no
assurance, however, that lower than expected revenues, increased expenses,
increased costs associated with the purchase or maintenance of capital
equipment, decisions to increase planned capacity or other events will not cause
the Company to seek more capital, or capital sooner than currently expected. The
timing and amount of the Company's actual capital requirements cannot be
precisely determined and will depend on a number of factors, including demand
for the Company's services, availability of capital equipment, fluctuations in
foreign currency exchange rates, changes in semiconductor industry conditions
and competitive factors. There can be no assurance that such additional capital
will be available when needed or, if available, will be available on
satisfactory terms. Failure to obtain any such financing could have a material
adverse effect on the Company. See "-- Risks Associated with Leverage" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DEPENDENCE ON INTERNATIONAL OPERATIONS AND SALES; CONCENTRATION OF OPERATIONS IN
THE PHILIPPINES AND KOREA
All of the production facilities currently used to fill the Company's
orders are located in the Philippines and Korea and many of the Company's
customers' operations are located in countries outside of the United States. A
substantial portion of the Company's revenues are derived from sales to
customers located outside of the United States. In 1996 and the first six months
of 1997, sales to such customers accounted for 27% and 28%, respectively, of the
Company's revenues. The Company expects sales outside of the United States to
continue to represent a significant portion of its future revenues. As a result,
the Company's business will continue to be subject to certain risks generally
associated with doing business abroad, such as foreign governmental regulations,
currency fluctuations, political unrest, disruptions or delays in shipments,
currency controls and fluctuations, changes in local economic conditions, import
and export controls, as well as changes in tax laws, tariffs and freight rates.
The Company has structured its global operations to take advantage of lower tax
rates in certain countries and tax incentives extended to encourage investment.
The Company's tax returns through 1993 in the Philippines and through 1994 in
the U.S. have been examined by the Philippine and U.S. tax authorities,
respectively. The recorded provisions for subsequent open years are subject to
changes upon examination by tax authorities of tax returns for these years.
Changes in the mix of income from the Company's foreign subsidiaries, expiration
of tax holidays and changes in tax laws and regulations could result in
increased effective tax rates for the Company. See Note 10 of Notes to
Consolidated Financial Statements.
11
<PAGE> 13
The Company's results of operations and growth will be influenced by the
political situation in the Philippines and by the general state of the
Philippine economy. Although the political and economic situation in the
Philippines has stabilized in recent years, it has historically been subject to
significant instability. Most recently, the devaluation of the Philippine peso
relative to the U.S. dollar beginning in July 1997 has led to instability in the
Philippine economy. Any future economic or political disruptions or instability
or low economic growth in the Philippines could have a material adverse effect
on the Company's business, financial condition and results of operations.
AICL's operations, which accounted for approximately 72% and 68% of the
Company's revenues in 1996 and the first six months of 1997, respectively, are
subject to certain specific risks. Relations between Korea and the Democratic
People's Republic of Korea ("North Korea") have been tense over most of Korea's
history. Incidents affecting relations between the two Koreas continually occur.
No assurance can be given that the level of tensions with North Korea will not
increase or change abruptly as a result of current or future events, which could
have a material adverse effect on AICL's, and as a result the Company's,
business, financial condition and results of operations.
Financial difficulties of certain large business groups in Korea, some of
which have undergone reorganization, have also raised concerns over Korea's
economic stability and have resulted in banks in Korea reducing their lending to
companies which have significant amounts of debt relative to their equity. There
can be no assurance that such events will not result in a material adverse
effect on AICL's and the Company's, business, financial conditions and results
of operations. See "-- Dependence on Relationship with AICL; Potential Conflicts
of Interest," "Business -- Marketing and Sales" and "-- Facilities and
Manufacturing," and Notes 11 and 14 of Notes to Consolidated Financial
Statements.
RAPID TECHNOLOGICAL CHANGE; PRODUCT DEVELOPMENT
The semiconductor packaging and test industry is characterized by rapid
increases in the diversity and complexity of semiconductor packaging products.
As a result, the Company expects that it will need to offer, on an ongoing
basis, more advanced package designs in order to respond to competitive industry
conditions and customer requirements. The requirement to develop and maintain
advanced packaging capabilities and equipment could require significant research
and development and capital expenditures in future years. In addition, advances
in technology also typically lead to rapid and significant price erosion and
decreased margins for older package types and may lead to products currently
being offered by the Company becoming less competitive or inventories held by
the Company becoming obsolete. The failure by the Company to achieve advances in
package design or to obtain access to advanced package designs developed by
others could have a material adverse effect on the Company's business, results
of operations and financial condition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
The Company's success is also dependent upon the ability of it and AICL to
develop and implement new manufacturing process and package design technologies.
Semiconductor package design and process methodologies have become increasingly
subject to technological change, requiring large expenditures for research and
development. Converting to new package designs or process methodologies could
result in delays in producing new package types which could adversely affect the
Company's ability to meet customer orders.
MANUFACTURING RISKS; PRODUCTION YIELDS
The semiconductor packaging process is complex and involves a number of
precise steps. Defective packaging can result from a number of factors,
including the level of contaminants in the manufacturing environment, human
error, equipment malfunction, use of defective raw materials, defective plating
services and inadequate sample testing. From time to time, the Company expects
to experience lower than anticipated production yields as a result of such
factors, particularly in connection with any expansion of its capacity or change
in its processing steps. In addition, the Company's yield on new products will
be lower during the period necessary for the Company to develop the requisite
expertise and experience in producing such products and using such processes.
The failure of the Company or
12
<PAGE> 14
AICL to maintain high quality production standards or acceptable production
yields, if significant and sustained, could result in loss of customers, delays
in shipments, increased costs, cancellation of orders and product returns for
rework, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Facilities and Manufacturing."
RISKS ASSOCIATED WITH NEW WAFER FABRICATION BUSINESS
The Company is scheduled to begin providing wafer fabrication services with
delivery of the first products from AICL's new foundry expected in the first
half of 1998. Neither the Company nor AICL has experience in providing wafer
fabrication services, and there can be no assurance that the Company will not
experience difficulties in marketing and selling these services or that AICL
will not encounter operational difficulties such as lower than expected yields
or longer than anticipated production ramp-up, unexpected costs and other
problems in providing these services. If the Company or AICL encounters these or
similar difficulties, the Company's and AICL's businesses, financial condition
and results of operations could be materially adversely affected. In addition,
TI has transferred certain of its CMOS processes to AICL and AICL is dependent
upon TI's assistance for developing other state-of-the-art wafer manufacturing
processes. If AICL's relationship with TI is disrupted for any reason, AICL's
ability to produce wafers could be adversely affected, thus negatively impacting
the Company's ability to fulfill its customers' orders for fabrication services,
which could materially and adversely affect the Company's business, financial
condition and results of operations. In addition, AICL's agreement with TI only
covers .25 micron CMOS technology and TI is not under any obligation to transfer
additional technology, particularly .18 micron or smaller CMOS technology. If
AICL is not able to obtain such technology on commercially reasonable terms or
at all, the Company's ability to market AICL's wafer fabrication services could
be materially and adversely affected which could have a material adverse effect
on the Company's and AICL's business, results of operations and financial
condition. The Company's right to the supply of wafers from AICL's foundry is
subject to a preexisting agreement between AICL and TI, pursuant to which TI has
agreed to purchase at least 40% of the capacity of this foundry and under
certain circumstances has the right to purchase up to 70% of this capacity. TI
has agreed to make such purchases through the Company. As a result, the
Company's wafer fabrication business will be significantly dependent upon TI,
which may adversely affect the Company's ability to obtain additional customers.
If the Company is unable as a result to sell substantially all of the output of
AICL's wafer foundry, its business, results of operations and financial
condition could be materially and adversely affected. See "Business --
Competition."
DEPENDENCE ON RAW MATERIALS SUPPLIERS AND SUBCONTRACTORS
The Company obtains the direct materials for the packaging and test
services of its factories and for the packaging and test services provided by
AICL to fill the Company's orders directly from vendors. To maintain competitive
manufacturing operations, the Company must obtain from its vendors, in a timely
manner, sufficient quantities of acceptable materials at expected prices. The
Company sources most of its raw materials, including critical materials such as
lead frames and laminate substrates, from a limited group of suppliers. The
Company purchases all of its materials on a purchase order basis and has no
long-term contracts with any of its suppliers. From time to time, vendors have
extended lead times or limited the supply of required materials to the Company
because of vendor capacity constraints and, consequently, the Company has
experienced difficulty in obtaining acceptable raw materials on a timely basis.
In addition, from time to time, the Company may reject materials that do not
meet its specifications, resulting in declines in output or yield. There can be
no assurance that the Company will be able to obtain sufficient quantities of
raw materials and other supplies of an acceptable quality. The Company's
business, financial condition and results of operations could be materially and
adversely affected if its ability to obtain sufficient quantities of raw
materials and other supplies in a timely manner were substantially diminished or
if there were significant increases in the costs of raw materials that the
Company could not pass on to its customers. See "Business -- Facilities and
Manufacturing."
13
<PAGE> 15
INABILITY TO OBTAIN PACKAGING AND TEST EQUIPMENT IN A TIMELY FASHION
In connection with its future expansion plans, the Company and AICL expect
to purchase a significant amount of new packaging and test equipment. From time
to time, increased demand for some of this equipment causes lead times to extend
beyond those normally met by the equipment vendors. The unavailability of such
equipment or the failure of such equipment, or other equipment acquired by the
Company or AICL, to operate in accordance with the Company's or AICL's
specifications or requirements, or delays in the delivery of such equipment
could delay implementation of the Company's or AICL's expansion plans and impair
the ability of the Company to meet customer orders or otherwise have a material
adverse effect on the Company's business, results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Facilities and Manufacturing."
MANAGEMENT OF GROWTH
The Company has experienced and may continue to experience growth in the
number of its employees and the scope of its operations. For example, the
Company is expanding its scope of operations to include wafer fabrication
services and is hiring new personnel in connection with such expansion. This
growth is expected to continue to strain the Company's managerial, financial,
manufacturing and other resources. In addition, although the Company believes
its current controls are adequate, in order to manage its growth, the Company
must continue to implement additional operating and financial controls and hire
and train additional personnel. Although the Company has been successful in
hiring and properly training sufficient numbers of qualified personnel and in
effectively managing its growth in the past, there can be no assurance that the
Company will be able to do so in the future, and its failure to do so could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, any failure to improve the Company's
operational, financial and management systems could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "-- Risks Associated with New Wafer Fabrication Business," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Employees."
COMPETITION
The independent semiconductor packaging and test industry is very
competitive, being comprised of approximately 50 companies with about 15 of
those companies having sales of $100 million per year or more. The Company faces
substantial competition from established packaging companies primarily located
in Asia, such as Advanced Semiconductor Engineering, Inc. (Taiwan), ASE Test
Limited (Taiwan and Malaysia), ASAT, Ltd. (Hong Kong), Hana Microelectronics
Public Co. Ltd. (Hong Kong and Thailand), Astra International (Indonesia),
Carsem (Malaysia), Hyundai Corporation (Korea), Siliconware Precision Industries
Co., Ltd. (Taiwan), and Shinko Electric Industries Co., Ltd. (Japan). Each of
these companies has significant manufacturing capacity, financial resources,
research and development operations, marketing and other capabilities, and have
been operating for some time. Such companies have also established relationships
with many large semiconductor companies which are current or potential customers
of the Company. The principal elements of competition in the independent
semiconductor packaging market include time to market, breadth of package
offering, technical competence, design services, quality, production yields,
responsiveness and customer service and price. On a larger scale, the Company
also competes with the internal manufacturing capabilities of many of its
largest customers. There can be no assurance that the Company will be able to
compete successfully in the future against existing or potential competitors or
that the Company's operating results will not be adversely affected by increased
price competition.
The independent wafer fabrication business is also highly competitive. The
Company expects its wafer fabrication services to compete primarily with
independent wafer foundries such as Chartered Semiconductor Manufacturing Ltd.,
Taiwan Semiconductor Manufacturing Company Ltd. and United Microelectronics
Corporation, as well as with integrated device manufacturers such as LG Semicon
Co.,
14
<PAGE> 16
Ltd., Hitachi, Ltd., Toshiba Corp. and Winbond Electronics Corporation, who
provide foundry services for other semiconductor companies. Each of these
companies has significant manufacturing capacity, financial resources, research
and development operations, marketing and other capabilities and have been
operating for some time. Many of these companies have also established
relationships with many large semiconductor companies which are current or
potential customers of the Company. The principal elements of competition in the
wafer foundry market include technology, delivery cycle times, price, product
performance, quality, production yield, responsiveness and flexibility,
reliability and the ability to design and incorporate product improvements.
There can be no assurance that the Company will be able to compete successfully
in the future against such companies. See "Business -- Competition."
DEPENDENCE ON KEY PERSONNEL AND AVAILABILITY OF SKILLED WORKFORCE
The Company's success depends to a significant extent upon the continued
service of its key senior management and its technical personnel, each of whom
would be difficult to replace. Competition for qualified employees is intense,
and the loss of the services of any of its existing key personnel without
adequate replacement, or the inability to attract, retain and motivate qualified
new personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, in connection with
its expansion plans, the Company and AICL will be required to increase the
number of qualified engineers and other employees at their respective facilities
in the Philippines and Korea. Competition for such employees in the Philippines
and Korea is intense and the inability to attract new qualified personnel or to
retain such personnel could have a material adverse effect on the Company's
results of operations or financial condition. See "Management."
ENVIRONMENTAL REGULATIONS
The semiconductor packaging process involves a significant amount of
chemicals and gases which are subject to extensive governmental regulations. For
example, liquid waste is produced at the stage at which silicon wafers are diced
into chips with the aid of diamond saws and cooled with running water. In
addition, excess materials on leads and moldings are removed from packaged
semiconductors in the trim and form process. The Company has installed equipment
to collect certain solvents used in connection with its manufacturing process
and has contracted with independent waste disposal companies to remove such
hazardous material.
Federal, state and local regulations in the United States, as well as
environmental regulations in Korea and the Philippines, impose various controls
on the storage, handling, discharge and disposal of chemicals used in the
Company's and AICL's manufacturing process and on the facilities occupied by the
Company and AICL. The Company believes that its activities, as well as those of
AICL, conform to present environmental and land use regulations applicable to
their respective operations and current facilities. Increasing public attention
has, however, been focused on the environmental impact of semiconductor
manufacturing operations and the risk to neighbors of chemical releases from
such operations. There can be no assurance that applicable land use and
environmental regulations will not in the future impose the need for additional
capital equipment or other process requirements upon the Company or AICL or
restrict the Company's or AICL's ability to expand their respective operations.
The adoption of new ordinances or similar measures or any failure by the Company
or AICL to comply with applicable environmental and land use regulations or to
restrict the discharge of hazardous substances could subject the Company or AICL
to future liability or cause their respective manufacturing operations to be
curtailed or suspended.
15
<PAGE> 17
INTELLECTUAL PROPERTY
The Company currently holds 24 United States patents, five of which are
jointly held with AICL, related to various IC packaging technologies, in
addition to other pending patents. These patents will expire at various dates
from 2012 through 2016. With respect to development work undertaken jointly with
AICL, the Company and AICL share intellectual property rights under the terms of
the Supply Agreement between the Company and AICL. Such Supply Agreement also
provides for the cross-licensing of intellectual property rights between the
Company and AICL. In addition, the Company enters into agreements with other
developers of packaging technology to license or otherwise obtain certain
process or package technologies.
The Company expects to continue to file patent applications when
appropriate to protect its proprietary technologies; however, the Company
believes that its continued success depends primarily on factors such as the
technological skills and innovation of its personnel rather than on its patents.
The process of seeking patent protection can be expensive and time consuming.
There can be no assurance that patents will be issued from pending or future
applications or that, if patents are issued, they will not be challenged,
invalidated or circumvented, or that rights granted thereunder will provide
meaningful protection or other commercial advantage to the Company. Moreover,
there can be no assurance that any patent rights will be upheld in the future or
that the Company will be able to preserve any of its other intellectual property
rights.
As is typical in the semiconductor industry, the Company may receive
communications from third parties asserting patents on certain of the Company's
technologies. In the event any third party were to make a valid claim against
the Company or AICL and a license were not available on commercially reasonable
terms, the Company's business, financial condition and results of operations
could be materially and adversely affected. Litigation, which could result in
substantial cost to and diversion of resources of the Company, may also be
necessary to enforce patents or other intellectual property rights of the
Company or to defend the Company against claimed infringement of the rights of
others. The failure to obtain necessary licenses or the occurrence of litigation
relating to patent infringement or other intellectual property matters could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the agreement between AICL and TI
pursuant to which AICL received the technology to produce wafers does not grant
any license to AICL, and explicitly provides that TI reserves the right to bring
a patent infringement suit against AICL if TI is then generally bringing similar
suits against other wafer manufacturers. As a result, the Company could
similarly be subject to patent litigation by TI in connection with its sale of
wafers produced by AICL. Any such litigation could materially and adversely
affect AICL's ability to continue to manufacture wafers and AICL's and the
Company's business, financial condition and results of operations.
NO PRIOR MARKET; LIQUIDITY; STOCK PRICE VOLATILITY; DILUTION
Prior to the Offerings, there has been no public market for the Company's
Common Stock. Consequently, the initial public offering price will be determined
by negotiations among the Company and the representatives of the Underwriters.
There can be no assurance that an active public market for the Common Stock will
develop or be sustained after the Offerings or that the market price of the
Common Stock will not decline below the initial public offering price. The
trading price of the Company's Common Stock could be subject to wide
fluctuations in response to quarter-to-quarter variations in operating results,
announcements of technological innovations or new products by the Company or its
competitors, general conditions in the semiconductor industry, changes in
earnings estimates or recommendations by analysts, or other events or factors.
In addition, the public stock markets have experienced extreme price and trading
volume volatility in recent months. This volatility has significantly affected
the market prices of securities of many high technology companies for reasons
frequently unrelated to the operating performance of the specific companies.
These broad market fluctuations may adversely affect the market price of the
Company's Common Stock. Moreover, investors in the Offerings will incur
immediate, substantial book value dilution. See "Dilution" and "Underwriting."
16
<PAGE> 18
BENEFITS OF THE OFFERINGS TO EXISTING STOCKHOLDERS; CONTINUED CONTROL BY
EXISTING STOCKHOLDERS
Immediately after the closing of the Offerings, based upon shares
outstanding as of , the existing stockholders of the Company will hold
shares of Common Stock, or approximately % of the total number of
shares of Common Stock then outstanding. The Offerings will create a public
market for the resale of shares held by these existing stockholders. In
addition, the Company's officers, directors, 5% stockholders, and their
affiliates will, in the aggregate, beneficially hold shares of Common
Stock, or approximately % of the Company's outstanding shares of Common
Stock after the Offerings. As a result, such stockholders, acting together, will
be able to effectively control substantially all matters requiring approval by
the stockholders of the Company. Such matters could include the election of a
majority of the members of the Board of Directors, proxy contests, mergers
involving the Company, tender offers, open market purchase programs or other
purchases of Common Stock that could give stockholders of the Company the
opportunity to realize a premium over the then prevailing market price for their
shares of Common Stock. In addition, such continued control could also have the
effect of delaying, deferring or preventing a change in control of the Company,
may discourage bids for the Common Stock at a premium over the market price and
may adversely affect the market price of the Common Stock. See "Principal and
Selling Stockholders."
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company's Board of Directors has the authority to issue up to
10,000,000 shares of preferred stock $.001 par value ("Preferred Stock") and to
determine the price, rights, preferences and privileges of those shares without
any further vote or action by the Company's stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. While the Company has no present intention to issue shares of Preferred
Stock, such issuance, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. In addition, the Company is subject to
the anti-takeover provisions of Section 203 of the Delaware General Corporation
Law, which prohibits the Company from engaging in a "business combination" with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 could have the effect of delaying or preventing a change of control
of the Company. The Company's Certificate of Incorporation (the "Certificate of
Incorporation") does not permit cumulative voting. This provision, and other
provisions of the Certificate of Incorporation, the Company's bylaws (the
"Bylaws") and Delaware corporate law, may have the effect of deterring hostile
takeovers or delaying or preventing changes in control or management of the
Company, including transactions in which stockholders might otherwise receive a
premium for their shares over then current market prices.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market after the
Offerings could adversely affect the prevailing market price of the Common
Stock. In addition to the shares of Common Stock offered hereby
(assuming no exercise of the Underwriters' over-allotment options), as of the
date of this Prospectus (the "Effective Date"), there will be approximately
shares of Common Stock outstanding, all of which are "restricted"
shares (the "Restricted Shares") under the Securities Act of 1933, as amended
(the "Securities Act"). Beginning one year after the Reorganization,
approximately Restricted Shares will first become eligible for sale in
the public market pursuant to Rule 144 promulgated under the Securities Act,
subject to certain volume and other resale restrictions pursuant to Rule 144.
See "Shares Eligible for Future Sale."
17
<PAGE> 19
REORGANIZATION
In March, 1970, AEI was incorporated in Pennsylvania to design
semiconductor packages and provide semiconductor packaging services through a
supply relationship with AICL. Since that time, Mr. James Kim, founder of AEI,
and the Kim Family Trusts have acquired a majority interest in a number of other
companies which support or engage in various aspects of the semiconductor
packaging and test business (these companies, together with AEI, are referred to
as the "Amkor Companies"). Included within the Amkor Companies are C.I.L.
Limited, which markets the Company's services to semiconductor companies in
Europe and Asia; T.L. Limited ("TLL"), which provides manufacturing through its
subsidiaries Amkor/Anam Advanced Packaging, Inc. ("AARP") and Amkor/Anam
Pilipinas, Inc. ("AAP") (which is currently owned 60% by TLL and 40% by AICL),
and AAP's wholly-owned subsidiary Automated Microelectronics Inc. ("AMI"); and
AK Industries, Inc. and its wholly-owned subsidiary, Amkor-Anam, Inc., which
provides raw material purchasing and inventory management services. Amkor
Technology, Inc. was formed in September 1997 as a holding company for the Amkor
Companies. Prior to the consummation of the Reorganization, the Company
conducted no business and held no assets or liabilities.
Prior to the Offerings, Mr. James Kim and the Kim Family Trusts will
contribute all of their respective interests in the Amkor Companies to the
Company in exchange for shares of Common Stock. The foregoing contribution will
be made pursuant to the terms of certain contribution agreements among the
Company, Mr. Kim and the Kim Family Trusts. In addition, at approximately the
same time AICL will exchange its interest in AAP for shares of the Company's
Common Stock. Such transactions are referred to collectively as the
"Reorganization." Following consummation of the Reorganization, substantially
all of the issued share capital of the Amkor Companies will be owned by the
Company. Following the Offerings, Mr. James Kim and the Kim Family Trusts will
own shares of Common Stock, representing approximately % of the
outstanding shares of Common Stock. See "Certain Transactions" and "Principal
and Selling Stockholders."
The Offerings are conditioned upon, among other things, the consummation of
the Reorganization.
TERMINATION OF S CORPORATION STATUS AND DISTRIBUTIONS
Prior to the consummation of the Reorganization, AEI had elected to be
treated for U.S. federal and certain state tax purposes as an S Corporation
under the Internal Revenue Code of 1986 and comparable state tax laws. As a
result, AEI did not recognize federal corporate income taxes. Instead, up until
the termination of AEI's S Corporation status (the "Termination Date"), Mr.
James Kim and the Kim Family Trusts have been obligated to pay U.S. federal and
certain state income taxes on their allocable portion of the income of AEI. The
Company, AEI, Mr. Kim and the Kim Family Trusts will enter into tax
indemnification agreements providing that the Company and AEI will be
indemnified by such stockholders, with respect to their proportionate share of
any U.S. federal or state corporate income taxes attributable to the failure of
AEI to qualify as an S Corporation for any period or in any jurisdiction for
which S Corporation status was claimed through the Termination Date. The tax
indemnification agreements will also provide that the Company and AEI will
indemnify Mr. Kim and such stockholders if such stockholders are required to pay
additional taxes or other amounts attributable to taxable years on or before the
Termination Date as to which AEI filed or files tax returns claiming status as
an S Corporation. AEI has made various distributions to Mr. Kim and the Kim
Family Trusts which have enabled them to pay their income taxes on their
allocable portions of the income of AEI. Such distributions totaled
approximately $3.1 million, $19.9 million, $13.0 million and $5.0 million in
1994, 1995, 1996 and the first six months of 1997, respectively. The Company
expects to make additional distributions to such stockholders prior to the
consummation of the Reorganization, which distribution will represent AEI's
cumulative net income in all periods prior to the Termination Date less the
aggregate amount of distributions previously made to such stockholders. These
final distributions are intended to provide such stockholders with the balance
of AEI's net income for which they have already recognized income taxes. Through
June 30, 1997, the amount of such undistributed net earnings was $11.8 million.
See Notes 1 and 10 of Notes to Consolidated Financial Statements.
18
<PAGE> 20
RELATIONSHIP WITH ANAM INDUSTRIAL CO., LTD.
AICL is a Korean company engaged primarily in providing semiconductor
packaging and test services to the Company, which in turn sells such services to
its customers. AICL also currently markets its services directly in Korea and
Japan, although the Company is scheduled to assume marketing rights for such
countries in late 1997. In addition, AICL manufactures and sells electric wiring
devices and watches. AICL operates four semiconductor packaging and test
facilities in Korea, and is undergoing qualification of a new deep submicron
CMOS wafer foundry in Korea which it expects will be capable of producing 25,000
8" wafers per month by the end of 1998. As of June 30, 1997, on the basis of
Korean generally accepted accounting principles, AICL had non-consolidated total
assets of approximately W1,875 billion ($2.11 billion) and non-consolidated
total liabilities of approximately W1,588 billion ($1.79 billion).
AICL was founded in 1956 by Mr. Hyang-Soo Kim, who currently serves as the
honorary Chairman and a Representative Director of AICL. AICL is a member of the
Anam Group, consisting principally of companies in Korea in the electronics
industries. The businesses of AICL and the other companies in the Anam Group are
influenced to a significant degree by the family of Hyang-Soo Kim, which,
together with the Company, collectively owned approximately 21% of the
outstanding common stock of AICL as of June 30, 1997. James Kim, the founder of
the Company and currently its Chairman and Chief Executive Officer, is the
eldest son of Hyang-Soo Kim. Since January 1992, in addition to his other
responsibilities, James Kim has been serving as acting Chairman of the Anam
Group and a director of AICL. Mr. In-Kil Hwang, the President and a
Representative Director of AICL, is the brother-in-law of James Kim. After the
Offerings, James Kim and the Kim Family Trusts will own approximately % of
the outstanding Common Stock of the Company and James Kim and members of his
family will continue to exercise significant control over the Company.
See"Principal and Selling Stockholders" and "Risk Factors -- Benefits of the
Offerings to Existing Stockholders; Continued Control by Existing Stockholders."
The businesses of the Company and AICL have been interdependent for many
years. In 1996 and the six months ended June 30, 1997, approximately 72% and
68%, respectively of the Company's revenues were derived from sales of services
performed for the Company by AICL. In addition, substantially all of the
revenues of AICL in 1996 and the six months ended June 30, 1997 were derived
from services sold by the Company. The Company expects the proportion of its
revenues derived from sales of services performed for the Company by AICL and
the proportion of AICL's revenues from services sold by the Company to increase
as the Company begins selling the wafer fabrication output of AICL's new wafer
foundry and with the Company's scheduled assumption from AICL in late 1997 of
marketing rights for the Korean and Japanese markets. The Company expects that
the businesses of the Company and AICL will continue to remain highly
interdependent by virtue of their supply relationship, family ties between their
respective shareholders and management, financial relationships, coordination of
product and operation plans, joint research and development activities and
shared intellectual property rights. As a result, the Company's business,
financial condition and operating results will continue to be significantly
dependent on the ability of AICL to effectively provide contracted services on a
cost-efficient and timely basis. The termination of the Company's relationship
with AICL for any reason, or any material adverse change in AICL's business
resulting from underutilization of its capacity, the level of its debt, labor
disruptions, fluctuations in foreign exchange rates, changes in governmental
policies, economic or political conditions in Korea or any other reason, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company has recently entered into the Supply Agreement. Under the
Supply Agreement, AICL has granted to the Company a first right to the packaging
and test services of AICL and the wafer output of its new wafer foundry. The
Company expects to continue to purchase all of AICL's packaging and test
services, and to purchase all of AICL's wafer output, under the Supply
Agreement. Under the Supply Agreement, pricing arrangements relating to
packaging and test services provided by AICL to the
19
<PAGE> 21
Company will be subject to quarterly review and adjustment, and such
arrangements relating to the wafer output provided by AICL to the Company will
be subject to annual review and adjustment, in each case on the basis of factors
such as changes in the semiconductor market, forecasted demand, product mix and
capacity utilization and fluctuations in exchange rates, as well as the mutual
long-term strategic interests of the Company and AICL. There can be no assurance
that any new pricing arrangements resulting from such review and adjustment will
be favorable to the Company. Pursuant to long-standing arrangements between AICL
and the Company's operating subsidiaries, sales from AICL to the Company will
continue to be made through AUSA, a wholly owned financing subsidiary of AICL.
Under the Supply Agreement, the Company will continue to reimburse AUSA for the
financing costs incurred by it in connection with trade financing provided to
the Company. The Supply Agreement also provides that Amkor-Anam, Inc., a
subsidiary of the Company, will continue to provide raw material procurement and
related services to AICL on a fee basis. The Supply Agreement has a five-year
term, and AICL is under no obligation to renew the agreement upon its
expiration. There can be no assurance that AICL will renew the Supply Agreement
upon its expiration or that if it does renew such agreement, it will be on terms
that are favorable to the Company.
AICL's ability to continue to provide services to the Company will depend
on AICL's financial condition and performance. AICL currently has a significant
amount of debt relative to its equity, which debt the Company expects will
continue to increase in the foreseeable future. As of June 30,1997, on the basis
of Korean generally accepted accounting principles, AICL had current liabilities
of approximately W749 billion ($843 million), including approximately W443
billion ($499 million) of short-term borrowings and approximately W67 billion
($75 million) of current maturities of long-term debt, and had long-term
liabilities of approximately W839 billion ($945 million), including
approximately W640 billion ($721 million) of long-term debt. As of such date,
the total shareholders' equity of AICL amounted to approximately W288 billion
($324 million). In addition, during 1996, AICL's cash flow from operations
amounted to W191 billion ($215 million). There can be no assurance that AICL
will be able to refinance its existing loans or obtain new loans, particularly
in light of recent initiatives by Korean banks to reduce their exposure to
highly leveraged companies. See "Risk Factors -- Risks Associated With Leverage"
and " -- Dependence On International Operations and Sales; Concentration of
Operations in the Philippines and Korea." In addition, there can be no assurance
that AICL will be able to continue to make required interest and principal
payments on such loans or otherwise comply with the terms of its loan
agreements. Any inability of AICL to obtain financing or generate cash flow from
operations sufficient to fund its capital expenditure, debt service and
repayment and other working capital and liquidity requirements could have a
material adverse effect on AICL's ability to continue to provide services and
otherwise fulfill its obligations to the Company.
As of June 30, 1997, AICL was contingently liable under guarantees in
respect of debt of its subsidiaries and affiliates in the aggregate amount of
approximately W935 billion ($1.1 billion). Such guarantees included those in
respect of all of AUSA's debt, as well as $161 million of the Company's debt to
banks and the Company's obligations under a receivables sale arrangement. The
Company has met a significant portion of its financing needs through financing
arrangements obtained by AUSA for the benefit of the Company, based on
guarantees provided by AICL. There can be no assurance that AUSA will be able to
obtain additional guarantees, if necessary, from AICL. Further, a deterioration
in AICL's financial condition could trigger defaults under AICL's guarantees,
causing acceleration of such loans. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources". In addition, if any relevant subsidiaries or affiliates of AICL were
to fail to make interest or principal payments or otherwise default under their
debt obligations guaranteed by AICL, AICL could be required under its guarantees
to repay such debt, which event could have a material adverse effect on its
financial condition and results of operations.
Historically, AICL has undertaken capacity expansion programs and other
capital expenditures primarily on the basis of forecasts of the Company and
business plans prepared jointly with the Company. The Supply Agreement generally
provides for continued capital investment by AICL based on the
20
<PAGE> 22
Company's forecasts and operational plans prepared jointly by the Company and
AICL reflecting such forecasts. However, there can be no assurance that AICL
will be able to fund future capacity expansions and other capital investments
required to supply the Company with necessary packaging and test services and
wafer output on a timely and cost-efficient basis.
The Company and AICL have historically cooperated on the development of new
package designs and packaging and testing processes and technologies. The Supply
Agreement generally provides for continued cooperation between the Company and
AICL in research and development, as well as the cross-licensing of intellectual
property rights between the Company and AICL. If the Company's relationship with
AICL were terminated for any reason, the Company's research and development
capabilities and intellectual property position could be materially and
adversely affected.
After the Offerings, the Company will continue to be controlled to a
significant degree by the Kim Family Trusts, James Kim and other members of his
family will continue to exercise significant influence over the management of
AICL and its affiliates. In addition, the Company and AICL will continue to have
certain contractual and other business relationships, including under the Supply
Agreement, and may engage in transactions from time to time that are material to
the Company. Although any such material agreements and transactions would
require approval of the Company's Board of Directors, conflicts of interest may
arise in certain circumstances. There can be no assurance that such conflicts
will not from time to time be resolved against the interests of the Company. In
addition, the Company may agree to certain changes in its contractual and other
business relationships with AICL, including pricing, manufacturing allocation,
capacity utilization and capacity expansion, among others, which in the judgment
of the Company's management will result in reduced short-term profitability for
the Company in favor of potential long-term benefits to the Company and AICL.
There can be no assurance that the Company's business, financial condition or
results of operations will not be adversely affected by any such decision.
21
<PAGE> 23
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company hereby are estimated to be approximately
$ (approximately $ if the Underwriters' over-allotment options
are exercised in full), assuming an initial public offering price of $
per share and after deducting the estimated underwriting discount and estimated
offering expenses. The Company will not receive any proceeds from the sale of
the shares of Common Stock offered hereby by the Selling Stockholders.
Approximately $195 million of the net proceeds to the Company from the
Offerings will be used to repay numerous short-term bank loans by one of the
Company's Philippine subsidiaries originally incurred to finance capital
expenditures for the construction and start-up of P3, the Company's newest
factory in the Philippines, and for working capital. All of these loans are due
within 12 months of June 30, 1997 and bear interest at rates ranging from 7% to
12%. An additional $45 million of the net proceeds to the Company from the
Offerings will be used to repay loans under a line of credit incurred by the
Company's materials procurement subsidiary. These loans currently have an
effective interest rate of 8.02%. The balance of the net proceeds will be used
to fund the Company's capital expenditures and for general corporate purposes. A
portion of the net proceeds may also be used for the acquisition of businesses,
products and technologies that are complementary to those of the Company,
although the Company has no current plans, agreements or commitments and is not
currently engaged in any negotiations with respect to any such transactions.
Pending such uses, the net proceeds to the Company of the Offerings will be
invested in investment grade, interest-bearing securities.
DIVIDEND POLICY
The Company currently anticipates that, following the completion of the
Offerings, all future earnings will be retained for use in the Company's
business and that the Company will not pay any cash dividends on its Common
Stock in the foreseeable future. The payment of any future dividends will be at
the discretion of the Company's Board of Directors and will depend upon, among
other things, future earnings, operations, capital requirements, the general
financial condition of the Company and general business conditions. As an S
Corporation, AEI made substantial cash distributions to its stockholders to pay
income taxes on their allocable portions of AEI's net income. The Company plans
to make additional distributions to such stockholders prior to the Termination
Date. See "Reorganization."
22
<PAGE> 24
CAPITALIZATION
The following table sets forth as of June 30, 1997 (i) the actual
capitalization of the Company derived from the Consolidated Financial
Statements, (ii) the pro forma capitalization of the Company reflecting the
termination of AEI's S Corporation status which will occur in connection with
the Reorganization, and (iii) the pro forma capitalization of the Company as
adjusted to reflect the sale by the Company of shares of Common Stock
pursuant to the Offerings at an assumed initial public offering price of
$ per share and the receipt by the Company of the estimated net
proceeds therefrom, after deducting the estimated underwriting discount and
estimated offering expenses. The capitalization information set forth in the
table below is qualified by the more detailed Consolidated Financial Statements
and Notes thereto included elsewhere in this Prospectus and should be read in
conjunction with such Consolidated Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short term borrowings and current
portion of long-term debt.......................... $240,829 $240,829 $
======== ======== ========
Long-term debt....................................... $158,802 $158,802 $
Due to affiliate (non-current)(3).................... 278,120 278,120
-------- -------- --------
Total long-term debt................................. 436,922 436,922
Stockholder's equity:
Preferred stock, $.001 par value; 10,000,000 shares
authorized, no shares issued and outstanding.... -- --
Common Stock, $.001 par value; 500,000,000 shares
authorized, 82,610,000 shares issued and
outstanding, actual; shares issued and
outstanding, as adjusted(4)..................... 46 46
Additional paid-in capital......................... 22,301 34,001
Retained earnings (deficit)........................ 29,615 (3,885)
Unrealized gains (losses) on investments........... (4,258) (4,258)
Cumulative transaction adjustment.................. (2,156) (2,156)
-------- -------- --------
Total stockholders' equity...................... 45,548 23,748
-------- -------- --------
Total capitalization....................... $482,470 $460,670 $
======== ======== ========
</TABLE>
- ---------------
(1) Pro forma balance sheet data reflects (i) the termination of AEI's S
Corporation status which resulted in the recording of a deferred tax
liability of $10.0 million, (ii) a distribution prior to the Offerings by
the Company of undistributed earnings of AEI through June 30, 1997 of $11.8
million to stockholders of AEI prior to the Reorganization and (iii) the
reclassification of the remaining retained earnings of AEI of $11.7 million
to additional paid-in capital. The amount actually distributed by the
Company to such stockholders of AEI will reflect any undistributed net
income earned by AEI following June 30, 1997 and prior to the
Reorganization.
(2) As adjusted to give effect to the application of the estimated net proceeds
to the Company of the Offerings based on an assumed initial public offering
price of $ per share. See "Use of Proceeds." Also reflects the issuance
of 2,390,000 shares to AICL in exchange for its 40% interest in AAP,
resulting in an increase in common stock of $2,000 and an increase in
additional paid-in capital of $ . See "Reorganization" and Note 1
of Notes to Consolidated Financial Statements.
(3) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
(4) Excludes shares of Common Stock issuable upon exercise of options
to be granted prior to the Offerings under the Company's 1997 Stock Plan at
a price of $ per share. Also excludes an aggregate of
additional shares reserved for future issuance under the Company's 1997
Stock Plan and 1997 Director Option Plan. See "Management" and "Description
of Capital Stock" and Notes 1 and 15 of Notes to Consolidated Financial
Statements.
23
<PAGE> 25
DILUTION
The net tangible book value of the Company as of June 30, 1997 was
approximately $43 million or $ per share of Common Stock. Net tangible
book value per share represents the Company's total tangible assets less total
liabilities as reflected in the Consolidated Financial Statements, divided by
the number of outstanding shares of the Company's Common Stock (after giving
effect to the Reorganization). After giving effect to the sale by the Company of
shares of Common Stock offered hereby at an assumed initial public
offering price of $ per share and the receipt by the Company of the
estimated net proceeds therefrom, after deducting the estimated underwriting
discounts and offering expenses payable by the Company, the Company's net
tangible book value at June 30, 1997 would have been $ or $
per share of Common Stock. This represents an immediate increase in net tangible
book value of $ per share to existing stockholders and an immediate
dilution in net tangible book value of $ per share to new investors.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $
Net tangible book value per share before the
Offerings........................................... $
Increase in net tangible book value per share
attributable to new investors.......................
------
Net tangible book value per share after the Offerings....
------
Dilution per share to new public investors...............
======
</TABLE>
The following table summarizes, as of June 30, 1997 (after giving effect to
the Reorganization), the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
the existing stockholders and by new investors purchasing shares in the
Offerings (at an assumed initial public offering price of $ per share
and before deducting underwriting discount and estimated offering expenses
payable by the Company).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).......... % $ % $
New public investors(1)...........
------- ----- ----------- -----
Total................... 100.0% $ 100.0%
======= ===== =========== =====
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders will reduce the number of shares of Common
Stock held by existing stockholders to shares or % of the
total number of shares of Common Stock outstanding after the Offerings
( or % assuming the Underwriters' over-allotment options are
exercised in full), and will increase the number of shares of Common Stock
held by new investors to shares or % of the total number of
shares of Common Stock outstanding after the Offerings ( shares or
% assuming the Underwriters' over-allotment options are exercised in
full). See "Principal and Selling Stockholders."
24
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for, and as of the
end of, each of the years in the five-year period ended December 31, 1996 and as
of and for the six-month periods ended June 30, 1996 and 1997 are derived from
the consolidated financial statements of Amkor. The consolidated financial
statements as of December 31, 1995 and 1996 and for each of the years in the
three-year period ended December 31, 1996, and as of and for the six-month
period ended June 30, 1997 have been audited by Arthur Andersen LLP, independent
public accountants, and their report thereon, together with such consolidated
financial statements, are included elsewhere in this Prospectus. The selected
consolidated financial data presented below as of December 31, 1992, 1993 and
1994 and June 30, 1996 and for the years ended December 31, 1992 and 1993 and
the six months ended June 30, 1996 are derived from unaudited consolidated
financial statements. In the opinion of management, the unaudited consolidated
financial statements have been prepared on the same basis as the audited
consolidated financial statements and contain all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
Company's results of operations for such periods and financial condition at such
dates. The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full year or future
periods. The selected consolidated financial data set forth below is qualified
in its entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------ -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues..................................... $303,654 $442,101 $572,918 $932,382 $1,171,001 $542,590 $663,489
Cost of revenues................................. 274,236 371,323 514,648 783,335 1,022,078 462,346 586,541
--------- --------- --------- --------- ----------- --------- ---------
Gross profit............................... 29,418 70,778 58,270 149,047 148,923 80,244 76,948
Operating expenses:
Selling, general and administrative............ 27,465 42,649 41,337 55,459 66,625 29,700 47,265
Research and development....................... 836 1,755 3,090 8,733 10,930 4,857 3,515
Loss on shut-down of Scotland operations(1).... 15,231 -- -- -- -- -- --
--------- --------- --------- --------- ----------- --------- ---------
Total operating expenses................... 43,532 44,404 44,427 64,192 77,555 34,557 50,780
--------- --------- --------- --------- ----------- --------- ---------
Operating income (loss).......................... (14,114) 26,374 13,843 84,855 71,368 45,687 26,168
Other (income) expense:
Interest expense, net.......................... (6,330) (5,116) 5,752 9,797 22,245 6,509 16,355
Foreign currency translation................... (3,278) (2,809) (4,865) 1,512 2,961 (1,845) 101
Other (income), expense net.................... 468 3,501 (2,639) 6,523 3,150 4,705 1,287
--------- --------- --------- --------- ----------- --------- ---------
Total other (income) expense............... (9,140) (4,424) (1,752) 17,832 28,356 9,369 17,743
--------- --------- --------- --------- ----------- --------- ---------
Income (loss) before income taxes and minority
interest....................................... (23,254) 21,950 15,595 67,023 43,012 36,318 8,425
Provision for income taxes....................... (115) 2,445 2,977 6,384 7,876 6,650 2,689
--------- --------- --------- --------- ----------- --------- ---------
Income (loss) before minority interest........... (23,139) 19,505 12,618 60,639 35,136 29,668 5,736
Minority interest................................ (6,709) 2,269 1,044 1,515 948 35 1,858
--------- --------- --------- --------- ----------- --------- ---------
Net income (loss)................................ $(16,430) $ 17,236 $ 11,574 $ 59,124 $ 34,188 $ 29,633 $ 3,878
========= ========= ========= ========= =========== ========= =========
PRO FORMA DATA (UNAUDITED):
Historical income (loss) before income taxes and
minority interest.............................. $(23,254) $ 21,950 $ 15,595 $ 67,023 $ 43,012 $ 36,318 $ 8,425
Pro forma provision for income taxes(2).......... 685 5,345 3,177 16,784 10,776 9,150 5,389
--------- --------- --------- --------- ----------- --------- ---------
Pro forma income (loss) before minority
interest(2) (23,939) 16,605 12,418 50,239 32,236 27,168 3,036
Historical minority interest..................... (6,709) 2,269 1,044 1,515 948 35 1,858
--------- --------- --------- --------- ----------- --------- ---------
Pro forma net income (loss)(2) $(17,230) $ 14,336 $ 11,374 $ 48,724 $ 31,288 $ 27,133 $ 1,178
========= ========= ========= ========= =========== ========= =========
Pro forma net income (loss) per common
share(2)....................................... $ (.21) $ .17 $ .14 $ .59 $ .38 $ .33 $ .01
========= ========= ========= ========= =========== ========= =========
Shares used in computing pro forma net income per
common share................................... 82,610 82,610 82,610 82,610 82,610 82,610 82,610
========= ========= ========= ========= =========== ========= =========
</TABLE>
- ---------------
(1) During 1992, the Company decided to cease operations at Amkor Anam
EuroServices Ltd. ("AAEL"). AAEL was an IC packaging and testing facility
located in Scotland. In connection with the shut-down of the facility, AAEL
accrued for all of the costs associated with the shut-down, including but
not limited to reserves to record the property, plant and equipment at net
realizable value, severance, and other operating expenses incurred during
the shut-down period.
(2) Prior to the Reorganization, AEI, one of the principal subsidiaries of the
Company, elected to be taxed as an S Corporation under the Internal Revenue
Code of 1986 and comparable state tax laws. Accordingly, AEI did not
recognize any provision for federal income tax expense during the periods
presented. The pro forma provision for income taxes reflects the additional
U.S. federal income taxes which would have been recorded if AEI had not been
an S Corporation during these periods. See "Reorganization" and Note 1 of
Notes to Consolidated Financial Statements.
25
<PAGE> 27
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
----------------------------------------------------- ----------------------------------------
1992 1993 1994 1995 1996 ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- --------- -------- -------- -------- -------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.... $ 5,451 $ 8,929 $114,930 $ 96,151 $ 49,664 $ 60,993 $ 49,143
Working capital (deficit).... 13,896 (13,256) 134,798 111,192 36,785 (6,461) (18,261)
Total assets................. 159,795 191,754 426,522 635,868 797,613 933,657 921,857
Long-term debt and due to
affiliates................. 79,788 48,740 278,908 326,422 402,338 436,922 436,922
Stockholders' equity
(deficit).................. (207) 7,890 7,146 54,778 38,560 45,548 23,748
</TABLE>
- ---------------
(1) Pro forma balance sheet data reflects (i) the termination of AEI's S
Corporation status which resulted in the recording of a deferred tax
liability of $10.0 million (ii) a distribution prior to the Offerings by the
Company of undistributed earnings of AEI through June 30, 1997 of $11.8
million to stockholders of AEI prior to the Reorganization and (iii) the
reclassification of the remaining retained earnings of AEI of $11.7 million
to additional paid-in capital. The amount actually distributed by the
Company to such stockholders of AEI will increase to reflect any
undistributed net income earned by AEI following June 30, 1997 and prior to
the Reorganization.
(2) As adjusted to give effect to the application of the estimated net proceeds
to the Company of the Offerings based on an assumed initial public offering
price of $ per share. See "Use of Proceeds." Also reflects the elimination
of the minority interest liability and recording of goodwill related to the
issuance of 2,390,080 shares to AICL in exchange for its 40% interest in
AAP. See "Reorganization" and Note 1 of Notes to Consolidated Financial
Statements."
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements within the
meaning of the federal securities laws, including statements regarding the
anticipated growth in the market for the Company's products, the Company's
anticipated capital expenditures and financing needs, the Company's expected
provision of wafer fabrication services, the Company's expected capacity
utilization rates, the Company's anticipated assumption from AICL of marketing
rights in Japan and Korea, the belief of the Company as to its future operating
performance and other statements that are not historical facts. Because such
statements include risks and uncertainties, actual results may differ materially
from those anticipated in such forward-looking statements as a result of certain
factors, including those set forth in the following discussion as well as in
"Risk Factors" and "Business." The following discussion provides information and
analysis of the Company's results of operations from 1994 through 1996 and for
the first six months of 1996 and 1997 and its liquidity and capital resources
and should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and the selected consolidated financial data included elsewhere in
this Prospectus. The operating results for interim periods are not necessarily
indicative of results for any subsequent period or for the entire fiscal year.
OVERVIEW
Background. The Company is the world's largest independent provider of
semiconductor packaging and test services. The Company believes that it is also
one of the leading developers of advanced semiconductor packaging and test
technology in the industry. The Company offers a complete and integrated set of
packaging and test services including IC package design, leadframe and substrate
design, IC package assembly, final testing, burn-in, reliability testing, and
thermal and electrical characterization. The Company provides packaging and test
services through its three factories in the Philippines as well as the four
factories of AICL in Korea pursuant to the Supply Agreement between the Company
and AICL. As of June 30, 1997, the Company had in excess of 150 customers,
including many of the largest semiconductor companies in the world.
The Company was formed in September 1997 as a holding company for the Amkor
Companies, including one of the Company's principal operating subsidiaries, AEI,
which was incorporated in 1970. These companies were under common control and
management prior to the Company's formation. As a result of the Reorganization,
the financial statements included in this Prospectus are presented on a
consolidated basis. See "Reorganization" and "Certain Transactions." Prior to
the Reorganization, AEI elected to be taxed as an S Corporation under the
Internal Revenue Code of 1986 and comparable state tax laws. Accordingly, AEI
did not recognize any provision for federal income tax expense during the
periods presented in the Consolidated Financial Statements. The Consolidated
Financial Statements include a pro forma provision for income taxes which
reflects the U.S. federal income taxes which would have been recorded by the
Company if AEI had not been an S Corporation during these periods. See Notes 1
and 10 of Notes to Consolidated Financial Statements.
General. From 1994 to 1996, the Company's revenues increased from
approximately $572.9 million to $1.17 billion. This increase occurred primarily
as a result of increases in unit volumes together with the shift in the
Company's product mix from traditional leadframe products to advanced leadframe
and laminate products. See "Business -- Products." In order to meet customer
demand, the Company has invested significant resources to expand its capacity in
the Philippines. In 1996 and the first six months of 1997, the Company incurred
and expensed $15.5 million and $16.6 million, respectively, of pre-operating and
start-up costs and initial operating losses in connection with its newest
factory, P3, in the Philippines. This facility operated at substantially less
than full capacity during these periods while customers were completing
qualification procedures for BGA packages to be produced at the facility. The
Company expects to significantly increase utilization of P3 by the end of 1997.
See "Risk Factors -- Expansion of Manufacturing Capacity; Profitability Affected
by Capacity Utilization Rates" and "Business -- Facilities and Manufacturing."
27
<PAGE> 29
The Company's results of operations are generally affected by the
capital-intensive nature of its business. In 1994, 1995, 1996 and the first half
of 1997, the Company invested $68.9 million, $123.6 million, $185.1 million and
$114.4 million, respectively, in property, plant and equipment. Increases or
decreases in capacity utilization rates can have a significant effect on gross
margins since the unit cost of packaging and test services generally decrease as
fixed charges, such as depreciation expense for the equipment, are allocated
over a larger number of units produced. In addition, the Company's gross margin
is significantly affected by fluctuations in packaging and test service charges
paid to AICL pursuant to the Supply Agreement with AICL, which are subject to
quarterly review and adjustment on the basis of factors such as changes in the
semiconductor market, forecasted demand, product mix and capacity utilization
and fluctuations in exchange rates. The Company's results of operations are also
affected by declines over time in the average selling prices for particular
products. At times in the past the Company has been able to offset, at least in
part, the effect of such decline on its margins by successfully developing and
marketing new products with higher margins, such as advanced leadframe and
laminate products, and by taking advantage of economies of scale and higher
productivity resulting from volume production. However, there can be no
assurance that the Company will be successful at offsetting any such declines in
the future. See "Risk Factors -- Expansion of Manufacturing Capacity;
Profitability Affected by Capacity Utilization Rates" and "-- Competition."
Due to the concentration of market share in the semiconductor industry, the
Company has been largely dependent upon a small group of customers for a
substantial portion of its business. In 1994, 1995, 1996 and the six months
ended June 30, 1997, 33.5%, 34.1%, 39.2% and 37.3%, respectively, of the
Company's net revenues were derived from sales to the Company's top five
customers, with 10.6%, 13.3%, 23.5% and 21.2%, respectively, derived from sales
to Intel. See "Risk Factors -- Customer Concentration; Absence of Backlog."
Relationship with AICL. In 1996 and the first six months of 1997,
approximately 72% and 68%, respectively, of the Company's revenues were derived
from sales of services performed for the Company by AICL. In addition,
substantially all of the revenues of AICL in 1996 and the six months ended June
30, 1997 were derived from services sold by the Company. Historically, AICL has
directly sold packaging and test services in Japan and Korea. The Company
expects to assume marketing rights for services in Japan and Korea in late 1997.
Also, in the first half of 1998, the Company is scheduled to begin offering
wafer fabrication services through AICL's new deep submicron CMOS foundry. The
Company expects that this foundry will be capable of producing up to 25,000 8"
wafers per month by the end of 1998. See "Risk Factors -- Risks Associated with
New Wafer Fabrication Business." The Company expects the proportion of its net
revenues derived from sales of services performed for the Company by AICL and
the percentage of AICL's revenues from services sold by the Company to increase
as the Company begins selling the wafer fabrication output of AICL's new wafer
foundry and with the Company's anticipated assumption from AICL of the marketing
rights for Korea and Japan. Following the Company's assumption of these
marketing rights, the Company will have a first right to the packaging and test
services and wafer output of AICL's factories.
The Supply Agreement between the Company and AICL provides, among other
things, for periodic price reviews and adjustments and coordination of research
and development efforts regarding package design and packaging and testing
processes and technologies. The Supply Agreement has a five year term. There can
be no assurance that AICL will renew the agreement upon its expiration, or that
if it does enter into a new agreement with the Company, any new agreement would
be on terms favorable to the Company. See "Relationship with Anam Industrial
Co., Ltd."
The Company expects that the businesses of the Company and AICL will
continue to remain highly interdependent by virtue of their supply relationship,
family ties between their respective shareholders and management, financial
relationships, coordination of product and operation plans, joint research and
development activities and shared intellectual property rights. As a result, the
Company's business, financial condition and operating results will continue to
be significantly dependent on AICL, including without limitation AICL's ability
to effectively provide the contracted services on a cost-efficient and timely
basis as well as AICL's financial condition and results of operations. The
Company will continue to be
28
<PAGE> 30
controlled to a significant degree by James Kim and the Kim Family Trusts, and
James Kim and members of his family will also continue to exercise significant
influence over the management of AICL and its affiliates. In addition, the
Company and AICL will continue to have certain contractual and other business
relationships and may engage in transactions from time to time that are material
to the Company. Although any such material agreements and transactions would
require approval of the Company's Board of Directors, conflicts of interest may
arise in certain circumstances. There can be no assurance that such conflicts
will not from time to time be resolved against the interests of the Company. In
addition, the Company may agree to certain changes in its contractual and other
business relationships with AICL, including pricing, manufacturing allocation,
capacity utilization and capacity expansion, among others, which in the judgment
of the Company's management will result in reduced short-term profitability for
the Company in favor of potential long-term benefits to the Company and AICL.
There can be no assurance that the Company's business, financial condition or
results of operations will not be adversely affected by any such decision. See
"-- Liquidity and Capital Resources" and "Risk Factors -- Dependence on
Relationship with AICL; Potential Conflicts of Interest."
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of
net revenues for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues............................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................................... 89.8 84.0 87.3 85.2 88.4
----- ----- ----- ----- -----
Gross profit........................................... 10.2 16.0 12.7 14.8 11.6
Operating expenses:
Selling, general and administrative...................... 7.2 6.0 5.7 5.5 7.1
Research and development................................. 0.6 0.9 0.9 0.9 0.5
----- ----- ----- ----- -----
Total operating expenses............................... 7.8 6.9 6.6 6.4 7.6
----- ----- ----- ----- -----
Operating income........................................... 2.4 9.1 6.1 8.4 4.0
Other (income) expense:
Interest expense, net.................................... 1.0 1.0 1.9 1.2 2.5
Foreign currency translation............................. (0.8) 0.2 0.2 (0.4) 0.0
Other (income) expense, net.............................. (0.5) 0.7 0.3 0.9 0.2
----- ----- ----- ----- -----
Total other (income) expense........................... (0.3) 1.9 2.4 1.7 2.7
----- ----- ----- ----- -----
Income before income taxes and minority interest........... 2.7 7.2 3.7 6.7 1.3
Provision for income taxes................................. 0.5 0.7 0.7 1.2 0.4
----- ----- ----- ----- -----
Income before minority interest............................ 2.2 6.5 3.0 5.5 0.9
Minority interest.......................................... 0.2 0.2 0.1 0.0 0.3
----- ----- ----- ----- -----
Net income................................................. 2.0 6.3 2.9 5.5 0.6
Pro forma provision for income taxes....................... 0.0 1.1 0.2 0.5 0.4
----- ----- ----- ----- -----
Pro forma net income....................................... 2.0% 5.2% 2.7% 5.0% 0.2%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net Revenues. The Company's net revenues consist of fees for the packaging
and testing of ICs which are consigned by customers to the Company's or AICL's
factories. Net revenues for the first six months of 1997 increased 22.3% to
$663.5 million from $542.6 million for the first six months of 1996 primarily
due to an increase in unit volumes of semiconductors packaged and tested by the
Company, offset in part by declines in average selling prices for many of the
Company's leadframe products. In addition, the openings of K4, AICL's newest
factory, and P3 in September 1996 enabled the Company to begin to expand sales
of BGA packages in the first six months of 1997.
29
<PAGE> 31
Gross Profit. Gross profit decreased 4.1% to $76.9 million in the first six
months of 1997 from $80.2 million in the first six months of 1996, representing
a decrease in gross margin to 11.6% from 14.8% during these periods. Cost of
revenues consists principally of packaging and test service charges from AICL,
costs of direct material for both the Philippine factories and AICL and labor
and other costs at the Philippine factories. The decrease in gross margin was
primarily due to $10.0 million of initial operating losses and start-up costs
incurred in connection with P3, an increase in packaging and test service
charges paid to AICL, and the erosion in average selling prices for leadframe
products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 59.1% to $47.3 million, or 7.1% of net
revenues, in the first six months of 1997 from $29.7 million, or 5.5% of net
revenues, in the first six months of 1996 primarily due to increases in
personnel in marketing and support to sustain the Company's growth. The growth
in employees contributed to an overall increase in employee-related expenses and
corporate travel expenses. In addition, during the first six months of 1997, the
Company recognized $5.2 million of selling, general and administrative expenses
associated with the start-up of P3. The Company has also continued to invest in
new information systems in order to enhance operating efficiencies and improve
customer service and support.
Research and Development Expenses. Research and development expenses
decreased 27.6% to $3.5 million, or 0.5% of net revenues, in the first six
months of 1997, from $4.9 million, or 0.9% of net revenues, in the first six
months of 1996. The decrease in research and development costs principally
reflected the termination in late 1996 of the Company's efforts to develop its
own laminate substrate manufacturing capability.
Other Income (Expense). Other income (expense) consists of interest
expense, net, foreign currency translation expenses and other expense (income),
net. Other expense increased 89.4% to $17.7 million in the first six months of
1997 from $9.4 million in the first six months of 1996 primarily as a result of
increased interest expense. Interest expense for the first six months of 1997
increased to $19.3 million from $9.8 million in the first six months of 1996 as
the Company significantly increased its borrowing to finance capacity expansion.
See "-- Liquidity and Capital Resources." Interest expense in each of the
periods was offset in part by interest income of $3.0 million and $3.3 million,
respectively.
Income Taxes. The Company's effective tax rate (after giving effect to the
pro forma adjustment for income taxes) for the first six months of 1997 was 64%
as compared to 25% for the first six months of 1996. The increase in the
Company's effective tax rate in the first six months of 1997 from its effective
tax rate of 25% in 1996 and 1995 was primarily due to a net loss in the first
six months of 1997 for the Company's Philippine subsidiary that owns P3. The
Company could not use this loss to offset income from the Company's other
Philippine subsidiaries and reduce the amount of Philippine income tax payable
by the Company because this subsidiary is not consolidated with the Company's
other Philippine subsidiaries for tax reporting purposes. The Company's
subsidiary that owns P3 operates under a tax holiday from Philippine income
taxes until the end of 2002. The Company expects that if P3 becomes profitable,
the Company's effective tax rate related to its Philippine operations during the
tax holiday will be less than the Philippine statutory rate of 35%. The Company
has structured its global operations to take advantage of lower tax rates in
certain countries and tax incentives extended to encourage investment. The
Company's tax returns through 1993 in the Philippines and through 1994 in the
U.S. have been examined by the Philippine and U.S. tax authorities,
respectively. The recorded provisions for subsequent open years are subject to
changes upon examination of these tax returns by tax authorities. Changes in the
mix of income from the Company's foreign subsidiaries, expiration of tax
holidays and changes in tax laws and regulations could result in increased
effective tax rates for the Company.
Minority Interest. Minority interest represents AICL's ownership interest
in the consolidated net income of two of the Company's Philippine subsidiaries.
In connection with the Reorganization, these subsidiaries became wholly-owned by
the Company.
30
<PAGE> 32
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Revenues. Net revenues in 1996 increased 25.6% to $1.17 billion from
$932.4 million in 1995. The increase was primarily due to an increase in units
sold together with an increase in sales of newer products, such as advanced
leadframe and laminate packages. This increase in sales of newer products offset
declines in average selling prices for many of the Company's other products.
Gross Profit. Gross profit in 1996 and 1995 was approximately $149 million
representing a decrease in gross margin to 12.7% in 1996 from 16.0% in 1995. The
decrease in gross margin was primarily attributable to increases in cost of
revenues due to $15.5 million in pre-operating and start-up costs associated
with P3, as well as increased packaging and test service charges paid to AICL.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 20.1% to $66.6 million, or 5.7% of net
revenues, in 1996 from $55.5 million, or 6.0% of net revenues, in 1995 as a
result of the addition of personnel and infrastructure to service increases in
customer demand. In addition, the Company continued its investments in new
information systems in order to enhance operating efficiencies and improve
customer service and support.
Research and Development Expenses. Research and development expenses
increased 25.2% to $10.9 million, or 0.9% of net revenues, in 1996 from $8.7
million, or 0.9% of net revenues, in 1995 as a result of increased staffing and
funding for the Company's efforts to develop laminate substrate manufacturing
capabilities, prior to termination of such efforts in late 1996.
Other Income (Expense). Other expense increased 59.0% to $28.4 million in
1996 from $17.8 million in 1995 primarily as a result of increases in interest
expense, net, offset in part by a decrease in other expense, net. Interest
expense, net in 1996 increased to $22.2 million from $9.8 million in 1995 as the
Company significantly increased its borrowing to finance capacity expansion. See
"-- Liquidity and Capital Resources." As a result of this increase in debt, the
Company's interest expense increased to $27.7 million in 1996 from $17.3 million
in 1995.
Income Taxes. The Company's effective tax rate (after giving effect to the
pro forma provision for income taxes) for 1996 and 1995 was 25%. These rates
were different from the United States statutory rate primarily due to the impact
of lower tax rates, including tax holidays, in certain of the countries in which
the Company's subsidiaries are located. See Note 10 of Notes to Consolidated
Financial Statements.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Revenues. Net revenues in 1995 increased 62.7% to $932.4 million from
$572.9 million in 1994. This increase was primarily due to an increase in units
sold as well as an increase in average selling prices which resulted from
significantly increased demand for semiconductors in 1995.
Gross Profit. Gross profit in 1995 increased 155.8% to $149.0 million from
$58.3 million in 1994, representing an increase in gross margin to 16.0% in 1995
from 10.2% in 1994. The increase in gross margin was primarily due to a
decrease, as a percentage of sales, in the packaging and test service charges
paid to AICL in 1995, together with an increase in the average selling price for
many of the Company's products and an increase in the percentage of the
Company's revenues from sales of new, higher margin products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 34.2% to $55.5 million, or 6.0% of net
revenues, in 1995 from $41.3 million, or 7.2% of net revenues, in 1994 as a
result of the addition of personnel and infrastructure to service increases in
customer demand. In addition, the Company began making significant investments
in new information systems in 1995 in order to enhance operating efficiencies
and improve customer service and support.
Research and Development Expenses. Research and development expenses
increased 182.6% to $8.7 million, or 0.9% of net revenues, in 1995 from $3.1
million, or 0.6% of net revenues, in 1994 as a
31
<PAGE> 33
result of increased staffing as well as funding for the Company's efforts to
develop laminate substrate manufacturing capabilities.
Other Income (Expense). Other expense increased to $17.8 million in 1995
from income of $1.8 million in 1994 primarily as a result of foreign currency
translation losses of $1.5 million in 1995 as compared to foreign currency
translation gains of $4.9 million in 1994 due to a significant depreciation in
the Philippine peso relative to the U.S. dollar in 1995 as compared to 1994, as
well as increases in interest expense, net to $9.8 million in 1995 from $5.8
million in 1994 as a result of increased borrowing to finance capacity
expansion.
Income Taxes. The Company's effective tax rate (after giving effect to the
pro forma provision for income taxes) increased to 25% in 1995 from 20% in 1994
primarily due to a higher proportion of taxable income generated in countries
with relatively higher tax rates.
QUARTERLY RESULTS
The following table sets forth certain unaudited consolidated financial
information, including as a percentage of net revenues, for the six fiscal
quarters ended June 30, 1997. The Company believes that all necessary
adjustments, consisting only of normal recurring adjustments, have been included
in the amounts stated below to present fairly the selected quarterly information
when read in conjunction with the Consolidated Financial Statements and the
Notes thereto included elsewhere herein. The Company's results of operations
have varied and may continue to vary significantly from quarter to quarter and
are not necessarily indicative of the results of any future period. In addition,
in light of the Company's recent growth, the Company believes that
period-to-period comparisons should not be relied upon as an indication of
future performance.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
SEPT.
MAR. 31, JUNE 30, 30, DEC. 31, MAR. 31, JUNE 30,
1996 1996 1996 1996 1997 1997
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues............................ $270,327 $272,262 $285,784 $342,628 $313,019 $350,471
Cost of revenues........................ 230,387 231,959 250,898 308,834 287,449 299,093
-------- -------- -------- -------- -------- --------
Gross profit.......................... 39,940 40,303 34,886 33,794 25,570 51,378
Operating expenses:
Selling, general and administrative... 13,752 15,948 16,716 20,209 20,608 26,657
Research and development.............. 2,100 2,757 3,071 3,002 1,485 2,030
-------- -------- -------- -------- -------- --------
Total operating expenses....... 15,852 18,705 19,787 23,211 22,093 28,687
-------- -------- -------- -------- -------- --------
Operating income........................ 24,088 21,598 15,099 10,583 3,477 22,691
Other expense (income), net............. 3,317 6,052 9,853 9,135 8,165 9,577
-------- -------- -------- -------- -------- --------
Income before income taxes and minority
interest.............................. 20,771 15,546 5,246 1,448 (4,689) 13,114
Provision for income taxes.............. 3,803 2,847 961 265 (1,497) 4,186
-------- -------- -------- -------- -------- --------
Income before minority interest......... 16,968 12,699 4,285 1,183 (3,192) 8,928
Minority interest....................... 599 (564) 304 609 1,637 221
-------- -------- -------- -------- -------- --------
Net income.............................. $ 16,369 $ 13,263 $ 3,981 $ 574 $ (4,829) $ 8,707
======== ======== ======== ======== ======== ========
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
SEPT.
MAR. 31, JUNE 30, 30, DEC. 31, MAR. 31, JUNE 30,
1996 1996 1996 1996 1997 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................ 85.2 85.2 87.8 90.1 91.8 85.3
-------- -------- -------- -------- -------- --------
Gross profit.......................... 14.8 14.8 12.2 9.9 8.2 14.7
Operating expenses:
Selling, general and administrative... 5.1 5.9 5.8 5.9 6.6 7.6
Research and development.............. 0.8 1.0 1.1 0.9 0.5 0.6
-------- -------- -------- -------- -------- --------
Total operating expenses............ 5.9 6.9 6.9 6.8 7.1 8.2
-------- -------- -------- -------- -------- --------
Operating income........................ 8.9 7.9 5.3 3.1 1.1 6.5
Other expense (income), net............. 1.2 2.2 3.5 2.7 2.6 2.8
-------- -------- -------- -------- -------- --------
Income before income taxes and minority
interest.............................. 7.7 5.7 1.8 0.4 (1.5) 3.7
Provision for income taxes.............. 1.4 1.0 0.3 0.1 (0.5) 1.2
-------- -------- -------- -------- -------- --------
Income before minority interest......... 6.3 4.7 1.5 0.3 (1.0) 2.5
Minority interest....................... 0.2 (0.2) 0.1 0.2 0.5 0.0
-------- -------- -------- -------- -------- --------
Net income.............................. 6.1% 4.9% 1.4% 0.2% (1.5)% 2.5%
======== ======== ======== ======== ======== ========
</TABLE>
The Company's revenues are generally lower in the first quarter of the year
as compared to the fourth quarter of the preceding year primarily due to the
combined effect of holidays in the United States, the Philippines and Korea.
Semiconductor companies in the United States generally reduce their production
during the holidays at the end of December which results in a significant
decrease in orders for packaging and testing services during the first two weeks
of January. In addition, the Company typically closes its factories in the
Philippines for holidays in January, and AICL closes its factories in Korea for
holidays in February. As a result of these factors, the Company's net revenues
are significantly reduced during the months of January and February.
Beginning in the third quarter of 1996, intense competition in the
semiconductor industry worldwide led to a decrease in the average selling prices
of many of the Company's leadframe packages. This decrease was partially offset
by an increase in sales of advanced leadframe and laminate packages, which carry
higher prices and gross margins. In addition, the Company's cost of revenues as
a percentage of revenues increased significantly during the three quarters ended
March 31, 1997 primarily as a result of initial operating losses and start-up
costs associated with P3. Cost of revenues was also affected in the two quarters
ended June 30, 1997, as the Company recognized a $3.7 million write-off for
custom laminate raw materials which were purchased to meet customer orders which
were subsequently cancelled. The Company also increased its staffing at P3 in
the two quarters ended June 30, 1997, which resulted in an increase in selling,
general and administrative expenses as a percentage of revenues in this period.
The combined effect of these factors, however, was to decrease the levels of
profitability in the third and fourth quarters of 1996 and the first quarter of
1997.
The Company's quarterly operating results may vary significantly due to a
variety of factors including, among others, the cyclical nature of both the
semiconductor industry and the markets addressed by end-users of semiconductors,
the short-term nature of its customers' commitments, timing and volume of orders
relative to the Company's production capacity, changes in capacity utilization,
evolutions in the life cycles of customers' products, rescheduling and
cancellation of large orders, rapid erosion of packaging selling prices,
availability of manufacturing capacity, allocation of production capacity
between the Company's facilities and AICL's facilities, fluctuations in
packaging and test service charges paid to AICL, changes in costs, availability
and delivery times of labor, raw materials and components, effectiveness in
managing production processes, fluctuations in manufacturing yields, changes in
product mix, product obsolescence, timing of expenditures in anticipation of
future orders, availability of financing for expansion, changes in interest
expense, the ability to develop and implement new technologies, competitive
factors, changes in effective tax rates, the loss of key personnel or the
shortage of available skilled workers, international political or economic
events, currency and interest rate fluctuations, environmental events, and
intellectual property transactions and disputes. Unfavorable
33
<PAGE> 35
changes in any of the above factors may adversely affect the Company's business,
financial condition and results of operations. In addition, the Company
increases its level of operating expenses and investment in manufacturing
capacity in anticipation of future growth in revenues. To the extent the
Company's revenues do not grow as anticipated, the Company's financial condition
and operating results may be materially adversely affected. See "Risk
Factors -- Fluctuations in Operating Results; Declines in Average Selling
Price."
LIQUIDITY AND CAPITAL RESOURCES
The Company has been investing significant amounts of capital in increasing
its packaging and test services capacity, including for the construction of P3,
the addition of capacity in the Company's other Philippine facilities and the
construction of a new manufacturing facility in the United States, scheduled to
open in 1998. In 1994, 1995, 1996 and the first half of 1997, the Company made
capital expenditures of $68.9 million, $123.6 million, $185.1 million and $114.4
million, respectively. The Company presently anticipates that its capital
expenditures for the second half of 1997 will be approximately $80 million, and
between $200 million and $215 million for 1998.
The Company historically has met a significant portion of its cash
requirements for working capital and capital expenditures from a combination of
cash from operating activities, short-term and long-term bank loans and
financing obtained for the benefit of the Company by AUSA, a wholly-owned
financing subsidiary of AICL. Cash used by operating activities in 1994 was
$26.3 million and cash provided by operating activities in 1995, 1996 and the
first six months of 1997 was $47.6 million, $14.0 million, and $56.9 million,
respectively. Cash provided by financing activities was $205.9 million, $71.2
million, $148.0 million and $82.1 million for 1994, 1995, 1996 and the six
months ended June 30, 1997, respectively.
At June 30, 1997, the Company's debt consisted of $240.8 million of
short-term borrowings, $158.8 million of long-term debt and $278.1 million of
amounts due to AUSA. Following the expected application of the net proceeds to
the Company of the Offerings, the Company will continue to have at least $304.7
million in principal amount of indebtedness outstanding. In addition, at June
30, 1997 the Company had cash and cash equivalents of $60.9 million and a
working capital deficit of $6.5 million ($49.1 and $18.3 million, respectively,
on a pro forma basis, after giving effect to the termination of AEI's S
Corporation status and the distribution of undistributed earnings through June
30, 1997). The Company's working capital deficit results primarily from the
significant amount of its short-term debt, primarily in connection with its
Philippine subsidiaries. At June 30, 1997, the Company had extended guarantees
in respect of bank debt of affiliates in the amount of $35 million and in
respect of vendor obligations of an affiliate in the amount of $11 million,
which amount may vary over time. See Note 11 of Notes to Consolidated Financial
Statements.
At June 30, 1997, the Company had $208 million in borrowing facilities with
a number of domestic and foreign banks, of which $18 million remained unused.
Certain of these agreements require compliance with certain financial covenants
and restrictions, and are collateralized by assets of the Company. These
facilities are typically revolving lines of credit and working capital
facilities for one-year renewable periods and generally bear interest at rates
ranging from 7.5% to 9.75%. The Company has received commitments from the banks
representing $136 million of the facilities indicating that they intend to renew
the facilities when they expire through at least October 1, 1998. Also included
in short-term debt are a $40 million term loan, which was redeemed in August
1997 before maturity at its principal amount, and another $10 million term loan
that was repaid at maturity. In connection with the repayment of these loans,
the Company obtained a three-month $55 million bridge loan from a bank. The
Company is currently negotiating with this bank to secure a short-term loan to
replace such bridge loan. Also outstanding at June 30, 1997 is $210 million in
long-term debt and capital lease obligations with various expiration dates
through April 2004, which accrue interest at rates ranging from 6.6% to 9.1%.
The Company has met a significant portion of its financing needs through
financing arrangements obtained by AUSA, AICL's wholly-owned financing
subsidiary. A majority of the amount due to AUSA
34
<PAGE> 36
represents outstanding amounts under financing obtained by AUSA for the benefit
of the Company, with the balance representing payables to AUSA for packaging and
service charges paid to AICL. Based on guarantees provided by AICL, AUSA obtains
for the benefit of the Company a continuous series of short-term financing
arrangements which generally are less than six months in duration, and typically
are less than two months in duration. Because of the short term nature of these
loans, the flows of cash to and from AUSA under this arrangement are
significant. At June 30, 1987, AUSA had borrowed $273 million of its $285
million of credit facilities. These credit facilities are with U.S. branches of
a number of banks located in Korea and have interest rates ranging from
approximately 7% to prime plus 0.25%. The Company reimburses AUSA for the
interest charges incurred by AUSA under these loans. AUSA has received
commitments from its banks indicating that they intend to renew the facilities
when they expire through at least October 1, 1998. AUSA has extended similar
terms to the Company with respect to amounts due to AUSA by the Company.
Accordingly, amounts due to AUSA are classified as noncurrent liabilities. In
July 1997, the Company's indebtedness to AUSA was reduced by approximately $83
million with funds received from the Company's Receivables Sale (as defined
below). In addition, in August 1997, approximately $50 million of the Company's
indebtedness was assumed by AK Investments, Inc. an affiliate of the Company, in
connection with the sale to AK investments of its investment in Anam S&T Co.,
Ltd. and certain investments in and notes receivable from companies unrelated to
the semiconductor packaging and test business. See Note 15 of Notes to
Consolidated Financial Statements.
At June 30, 1997, all of AUSA's debt, as well as $161 million of the
Company's debt to banks and the Company's obligations under the Receivables Sale
(as defined below), was guaranteed by AICL. AICL currently has a significant
amount of debt relative to its equity and was contingently liable under
guarantees in respect of debt of its subsidiaries and affiliates in the
aggregate amount of approximately W935 billion ($1.1 billion), including the
guarantees of the Company's loans and AUSA's loans. As a result of its
relationship with AICL, the Company's business, financial condition and
operating results are significantly dependent on AICL. There can be no assurance
that AUSA will be able to obtain additional guarantees, if necessary, from AICL.
In addition, a deterioration in AICL's financial condition could trigger
defaults under AICL's guarantees, causing acceleration of such loans. See
"-- Overview -- Relationship with AICL," "Risk Factors -- Dependence on
Relationship with AICL; Potential Conflicts of Interest" and "Relationship with
Anam Industrial Co., Ltd."
In addition, in July 1997, the Company entered into a trade receivables
securitization agreement with a commercial financial institution. Under the
terms of the agreement, the financial institution has committed to purchase,
with limited recourse, all right, title and interest in eligible receivables, as
defined in the agreement, up to $100 million (the "Receivables Sale"). Funds
received pursuant to the agreement are subject to a discount of LIBOR plus
0.375%. The agreement, which has an initial term of one year, can be
automatically renewed for two consecutive one year periods. Pursuant to the
Receivables Sale, the Company has received proceeds of approximately $83.4
million which were applied to reduce the Company's indebtedness to AUSA.
The Company intends to use the net proceeds from the Offerings to repay
approximately $250 million of its outstanding short-term debt to banks.
Following the Offerings, the Company will continue to have a significant amount
of debt, and the Company expects that its average bank borrowings will increase
in 1998 to finance additional working capital requirements from growth of the
Company's operations as well as planned capital expenditures to support
additional revenue growth. The Company believes that the net proceeds from the
Offerings, together with existing funds and cash flow from operations, will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. There can be no assurance,
however, that lower than expected revenues, increased expenses, increased costs
associated with the purchase or maintenance of capital equipment, decisions to
increase planned capacity or other events will not cause the Company to seek
more capital, or capital sooner than currently expected. The timing and amount
of the Company's actual capital requirements cannot be precisely determined and
will depend on a number of factors, including demand for the Company's services,
availability of capital equipment, fluctuations in foreign currency exchange
rates, changes in semiconductor industry conditions and competitive factors.
35
<PAGE> 37
Prior to the consummation of the Reorganization, AEI was treated for U.S.
federal and certain state tax purposes as an S Corporation under the Internal
Revenue Code of 1986 and comparable state tax. As a result, AEI did not
recognize federal corporate income taxes. Instead, up until the the Termination
Date, Mr. James Kim and the Kim Family Trusts have been obligated to pay U.S.
federal and certain state income taxes on their allocable portion of the income
of AEI. The Company, AEI, Mr. Kim and the Kim Family Trusts will enter into tax
indemnification agreements providing that the Company and AEI will be
indemnified by such stockholders, with respect to their proportionate share of
any U.S. federal or state corporate income taxes attributable to the failure of
AEI to qualify as an S Corporation for any period or in any jurisdiction for
which S Corporation status was claimed through the Termination Date. The tax
indemnification agreements will also provide that the Company and AEI will
indemnify Mr. Kim and such stockholders if such stockholders are required to pay
additional taxes or other amounts attributable to taxable years on or before the
Termination Date as to which AEI filed or files tax returns claiming status as
an S Corporation. AEI has made various distributions to Mr. Kim and the Kim
Family Trusts which have enabled them to pay their income taxes on their
allocable portions of the income of AEI. Such distributions totaled
approximately $3.1 million, $19.9 million, $15.1 million and $5.0 million in
1994, 1995, 1996 and the first six months of 1997, respectively. The Company
expects to make additional distributions to such stockholders prior to the
consummation of the Reorganization, which distributions will represent AEI's
cumulative net income in all periods prior to the Termination Date less the
aggregate amount of distributions previously made to such stockholders. These
final distributions are intended to provide such stockholders with the balance
of AEI's net income for which they have already recognized income taxes. Through
June 30, 1997, the amount of such undistributed net earnings was $11.8 million.
See "Reorganization" and Notes 1 and 10 of Notes to Consolidated Financial
Statements.
FOREIGN CURRENCY TRANSLATION GAINS AND LOSSES
The Company's subsidiaries in the Philippines maintain their accounting
records in U.S. dollars. This is due to the fact that all sales, the majority of
all bank debt and all significant material and fixed asset purchases of such
subsidiaries are denominated in U.S. dollars. As a result, the Philippine
subsidiaries' exposure to changes in the Philippine peso/U.S. dollar exchange
rate relates primarily to certain receivables and advances and other assets
offset by payroll, pension and local liabilities. To minimize its foreign
exchange risk, the Company selectively hedges its net foreign currency exposure
through short-term (generally not more than 30 to 60 days) forward exchange
contracts. To date, the Company's hedging activity has been immaterial.
36
<PAGE> 38
BUSINESS
The following discussion contains forward-looking statements within the
meaning of the U.S. federal securities laws, including statements regarding the
anticipated growth in the market for the Company's products, the Company's
anticipated capital expenditures and financing needs, the Company's expected
provision of wafer fabrication services, the Company's expected capacity
utilization rates, the belief of the Company as to its future operating
performance and other statements that are not historical facts. Because such
statements include risks and uncertainties, actual results may differ materially
from those anticipated in such forward-looking statements as a result of certain
factors, including those set forth in "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business."
Amkor is the world's largest independent provider of semiconductor
packaging and test services. The Company believes that it is also one of the
leading developers of advanced semiconductor packaging and test technology in
the industry. The Company offers a complete and integrated set of packaging and
test services including IC package design, leadframe and substrate design, IC
package assembly, final testing, burn-in, reliability testing, and thermal and
electrical characterization. As of June 30, 1997, the Company had in excess of
150 customers, including many of the largest semiconductor companies in the
world. Such customers include, among others, Advanced Micro Devices, Inc.,
International Business Machines Corp., Intel, Lucent Technologies, Inc.,
Motorola, Inc., National Semiconductor Corp., Philips Electronics N.V.,
SGS-THOMSON Microelectronics N.V., Siemens AG and TI.
In the first half of 1998 the Company is scheduled to begin offering wafer
fabrication services through AICL's new deep submicron CMOS foundry. The Company
expects that this foundry will be capable of producing up to 25,000 8" wafers
per month by the end of 1998. Through a strategic relationship with TI, the
Company and AICL are qualifying .25 micron CMOS process technology, and AICL is
negotiating with TI to obtain the technology necessary to migrate to .18 micron
during 1998. This foundry will primarily manufacture digital signal processors
("DSPs"), application specific integrated circuits ("ASICs") and other logic
devices. The Company expects to sell approximately 50% of AICL's wafer output to
TI pursuant to its relationship with TI. By leveraging the Company's leading
position in semiconductor packaging and test services, the new wafer fabrication
services will enable the Company to become one of the first providers of a fully
integrated, turnkey semiconductor fabrication, packaging and test service
solution.
The Company provides packaging and test services through its three
factories in the Philippines as well as the four factories of AICL in Korea
pursuant to a supply agreement between the Company and AICL, under which AICL
provides packaging and test services to the Company. In 1996 and the first six
months of 1997, AICL provided packaging and test services representing
approximately 72% and 68%, respectively, of the Company's net revenues.
INDUSTRY BACKGROUND
Manufacturing Process
The production of a semiconductor is a complex process that requires
increasingly sophisticated engineering and manufacturing expertise. The
production process can be broadly divided into three primary stages: (i) wafer
fabrication, (ii) assembly of die into finished devices (referred to as
"packaging") and (iii) testing of finished devices and other back-end processes.
37
<PAGE> 39
[ORGANIZATIONAL CHART]
The wafer fabrication process begins with the generation of a mask that
defines the circuit patterns for the transistors and interconnect layers that
will be formed on the raw silicon wafer. The transistors and other circuit
elements are formed by repeating a series of process steps wherein a
photosensitive material is first deposited on the wafer, the material is exposed
to light through the mask in a photolithography process, and finally, the
unwanted material is etched away, leaving only the desired circuit pattern on
the wafer. By stacking up the various patterns, the individual elements of the
semiconductor are defined. The final step in the wafer fabrication process is to
electrically test each individual chip in a wafer probe process in order to
identify the good chip for packaging.
The fabricated wafers are then transferred to packaging facilities.
Semiconductor packaging serves to protect the chip, facilitate integration into
electronic systems, and enable the dissipation of heat from the devices. In the
packaging process, the wafer is diced into its individual die which are then
separated from the wafer and attached to a substrate via an epoxy adhesive.
Leads on the substrate are then connected by extremely fine gold wires to the
input/output ("I/O") terminals on the chips through the use of automated
machines known as "wire bonders". Each die is then encapsulated in a plastic
molding compound, thus forming the package, which then goes through several
additional finishing steps to prepare it for testing.
Following packaging, each packaged device is then tested utilizing a
sophisticated test platform and program which tests the many different operating
specifications of the IC, including functionality, voltage, current and timing.
The completed devices are either shipped back to the customer or shipped
directly to their final destination.
Trends Toward Outsourcing
Historically, semiconductor companies manufactured semiconductors primarily
in their own factories. Independent packagers of semiconductors were used solely
to handle the overflow volume requirements of semiconductor companies.
Outsourcing of final testing and wafer fabrication was virtually non-existent
38
<PAGE> 40
in the early days of the industry. Over the past fifteen years, however, the
need for independent semiconductor packaging and test services has grown
dramatically for several reasons.
First, semiconductor companies are facing ever-increasing demands for
miniaturization, higher lead counts and improved thermal and electrical
performance in IC packages. As a result of this trend, semiconductor packaging
is now viewed as an enabling technology requiring sophisticated expertise and
technological innovation. Independent providers of packaging and test services
have developed substantial expertise in packaging and test technology and new
package innovation. Semiconductor companies, having found it difficult to keep
pace using their internal resources, have come to rely increasingly on the
independent packaging and test services providers as a key source for new
technology development and innovation.
Second, semiconductor companies are increasingly seeking to shorten their
time to market for new products. Having the right packaging technology and
capacity in place is a critical factor in reducing time to market. As packaging
solutions are identified for a specific product, semiconductor companies
frequently do not have the equipment or expertise to implement such solutions in
the volumes required, nor sufficient time to develop these capabilities before
introducing a new product into the market. For this reason, semiconductor
companies are increasingly leveraging the resources and capabilities of
independent packaging and test companies to deliver their new products to market
more quickly.
Third, the packaging and testing of ICs has evolved into an increasingly
complex process that requires substantial investment in specialized equipment
and facilities. For example, the investment in facilities and equipment
necessary for a processing line capable of packaging 100 million ball grid array
("BGA") packages per year can be as much as $200 million. As a result of the
substantial cost of this manufacturing equipment, the equipment must be utilized
at a high capacity level for an extended period of time in order to be cost
effective. With semiconductor companies facing increasingly shorter product life
cycles, faster new product introductions and the need to continuously update or
replace packaging equipment to accommodate new products, it has become
increasingly difficult for semiconductor companies to sustain such high levels
of capacity utilization. Independent providers of packaging and test services,
on the other hand, can use existing equipment at high utilization levels over a
longer period of time for a broad range of customers, effectively extending the
life of the equipment.
Fourth, as the cost to build a new wafer fabrication facility has increased
to over $1 billion, semiconductor companies have been forced to concentrate
their capital resources on core wafer manufacturing activities. As a result,
semiconductor companies are increasingly seeking to use independent packaging
and test providers who have the ability to invest the capital to develop new
packaging and test capacity. The Company believes that as the cost to construct
new wafer fabrication facilities continues to increase, semiconductor
manufacturers will increasingly seek to outsource packaging and test services.
Fifth, there has been a recent growth of "fabless" semiconductor companies
whose core competency and focus is entirely on the semiconductor design process.
According to industry estimates, sales by fabless semiconductor companies have
grown from $3.2 billion in 1993 to $6.8 billion in 1996, representing 3.7% and
4.8%, respectively, of the worldwide market for semiconductors. The significant
growth in the number of fabless semiconductor companies has been driven in large
part by the ability of such companies to effectively outsource virtually every
significant step of the semiconductor manufacturing process. This development
has allowed fabless semiconductor companies to introduce new semiconductors very
quickly without committing significant amounts of capital and other resources.
The Company believes that increases in the number of fabless semiconductor
companies will continue to be a significant driver of growth in the independent
semiconductor manufacturing industry.
These trends, combined with the growth in the number of ICs being produced
and sold, are driving increasing demand for independent packaging and test
services. This demand is expected to grow faster than that of the semiconductor
market as a whole. According to industry estimates, independent packaging
revenues are expected to grow at a compound annual rate of 20.3% over the next
five years from an estimated $5.0 billion in 1996 (32% of the world's IC
packaging needs) to $12.5 billion in 2001
39
<PAGE> 41
(45% of the world's IC packaging needs). Today, nearly all of the world's major
semiconductor companies use independent packaging and test service providers for
at least a portion, if not all, of their packaging and test needs.
Many of the same forces that have driven the growth of independent
packaging and test have also been driving increasing demand for independent
wafer fabrication services. Moreover, because the cost of new wafer fabrication
facilities has been rising steadily, many semiconductor companies are seeking to
leverage their capital resources by outsourcing some or all of their wafer
fabrication needs. This is particularly true for newer, smaller geometry
technologies that are necessary for producing the newest, leading edge ICs,
because they cannot be produced in many semiconductor companies' existing wafer
fabrication facilities. As the demand for ICs with smaller geometries increases,
the Company believes semiconductor companies will increasingly utilize
independent wafer manufacturers.
The Need for Turnkey Solutions
The growing demand for independent wafer fabrication, packaging, and test
services has generally been served by separate wafer fabrication, packaging or
test companies. This creates inefficiencies for semiconductor companies which
must manage the delays, complex logistics and uncertainty inherent in utilizing
a different service provider for each step of the semiconductor manufacturing
process. Only a very few, if any, independent service providers have the
capability of providing a combination of wafer fabrication, packaging and test
services.
THE AMKOR SOLUTION
Amkor is the largest independent provider of semiconductor packaging and
test services in the world. With its leading edge process technology and package
design expertise, the Company is able to provide its customers with a broad
range of new packaging solutions that enable faster, smaller and more powerful
ICs. Due to its size and industry-leading position, the Company is capable of
implementing and utilizing the capital equipment necessary for both new and
mature packages, thereby affording its customers an attractive alternative in
their capital allocation decisions. In addition, with AICL's new wafer
fabrication capabilities, the Company will be able to begin offering a fully
integrated, turnkey semiconductor manufacturing solution.
STRATEGY
Principal elements of the Company's strategy include:
Maintain Product Technology Leadership. The Company believes that it is one
of the world's leading designers and developers of new semiconductor packaging
technology. The Company has designed and developed such leading edge leadframe
and laminate products as its PowerQuad, SuperBGA, FlexBGA and ChipArray BGA
packages. The Company is focusing additional design and development efforts on
new generations of the BGA packaging format and on "flip chip" die attach
technologies where the I/O pads on the chip are attached directly to the
package's substrate rather than with wire-bonded connections. The Company
employs a staff of leading semiconductor packaging technologists and undertakes
significant research and development activities in its Chandler, Arizona and
Philippines locations, as well as through joint development activities with
AICL's development staff in Korea. The Company intends to continue to maintain
its leading packaging technology position.
Maintain Advanced Manufacturing Capabilities. The Company believes that its
tradition of manufacturing excellence has been a key factor in its success in
attracting and retaining customers, and it is committed to maintaining that high
level of excellence. Key to this effort is the Company's commitment to
continuous advancement of its process technology. The Company's development
teams work with its customers, suppliers, and others to develop new processing
technologies as well as pursue continuous improvements in the Company's existing
processing capabilities. These efforts have directly resulted in reduced time to
market, increased quality, and lower manufacturing costs. The Company holds
numerous
40
<PAGE> 42
process technology patents, including joint ownership with AICL of a U.S. patent
for the "Gold Gate" molding method, which enables automated mold processing for
BGA packages.
Leverage Scale and Scope of the Company's Packaging and Test
Capabilities. The Company believes that its scale of operations and its breadth
of product offerings provide it with several competitive advantages. First, the
Company believes that its size and position in the industry allow it certain
advantages in procuring key materials and manufacturing equipment. Second, the
Company is able to capitalize on the substantial economies of scale that result
from high utilization rates of its capital equipment, thereby lowering the
Company's per unit manufacturing costs and facilitating cost-effective solutions
for its customers. The Company's scale also allows it to offer an
industry-leading breadth of product offerings and to be a single source for many
of its customers' packaging requirements. The Company offers over 600 different
package formats and sizes with a variety of processing and materials options.
The Company added 175 and 139 new packaging options, respectively, in 1996 and
the first eight months of 1997. The Company is committed to continued expansion
of both its size of operations and its scope of product and service offerings.
Establish Industry Packaging Standards. The Company believes that by
bringing new package designs to market early, its designs are more likely to
become industry standards, which in turn will allow the Company to obtain higher
margins than its competitors for such new designs. The Company also seeks to
capture substantial market share and to spur the industry-wide adoption of its
new packages by investing aggressively in expanding its manufacturing capacity
for these packages. As a result, it is one of the leading providers of advanced
packaging solutions such as thin package formats and BGA packages. The Company
believes these package types will comprise some of the highest growth and more
profitable segments of the packaging market in coming years.
Enhance Customer and Supplier Relationships. As the world's largest
independent provider of semiconductor packaging and test services, the Company
has developed long-standing strategic relationships with leading semiconductor
and electronics companies, its suppliers, and other developers of new
semiconductor technologies. The Company believes that these relationships have
allowed it to stay ahead of the constantly advancing demand curve for
independent packaging services. The Company has repeatedly developed
leading-edge packaging technologies that have met the requirements of newer IC
devices and that have been quickly accepted in the marketplace. The Company's
alliances with certain of its key equipment and material suppliers have enabled
the Company to achieve packaging and manufacturing process innovation and cost
reduction. Developing and maintaining these relationships within the industry
will continue to be an integral part of the Company's overall strategic
direction.
Focus on Customer Service and Support. The Company believes that its focus
on customer service and support has been crucial in attracting and retaining
leading semiconductor companies as its customers. The Company has a firmly
established customer-oriented culture. To provide a dedicated customer support
infrastructure and to stay abreast of customers' expectations, the Company has
strategically established technical and sales teams near major customer
facilities and in acknowledged technology centers. In addition, the Company has
implemented direct electronic links with its customers to enhance communication
and facilitate real-time engineering data and order information flow.
Provide an Integrated, Turnkey Solution. The Company seeks to provide a
complete turnkey solution comprising wafer fabrication, packaging and test
services. In the first half of 1998, the Company is scheduled to begin to
provide wafer fabrication services through AICL's new deep submicron CMOS
foundry. With the addition of wafer fabrication, the Company will be able to
provide all stages of IC production for its customers from the fabrication of
wafers through the shipment of finished ICs. The Company believes this
integration will enable customers to improve the cost and performance of their
ICs and achieve faster time to market for both new product introductions and
production lead times.
41
<PAGE> 43
PRODUCTS
Packaging
The Company offers a broad range of package formats designed to provide
customers with a full array of packaging solutions for both commodity and
advanced products. The Company's products are divided into three product
families: traditional leadframe, advanced leadframe, and laminate products as
<TABLE>
<CAPTION>
shown in the following tables.
- -----------------------------------------------------------------------------------------------
TRADITIONAL LEADFRAME PRODUCTS
- -----------------------------------------------------------------------------------------------
- ---------------------------------------
PACKAGE TYPE NUMBER OF LEADS APPLICATIONS
- ------------------------------------------------------ --------------------------------------
<S> <C> <C>
PDIP (Plastic Dual In-line Packages) 8-48 General purpose plastic IC package for
SPDIP (Shrink DIP) 28-64 consumer electronic products such as
games, telephones, TV, audio equipment
and computer peripherals.
- -----------------------------------------------------------------------------------------------
Hermetic Custom A line of mature, ceramic predominant
packages used especially for high-
reliability applications (military,
space and commercial aviation).
- -----------------------------------------------------------------------------------------------
PLCC (Plastic Leaded Chip Carrier) 20-84 Used for logic, gate arrays, DAC,
processors and chip sets used in
larger form-factor items (copiers,
printers, scanners, desktop PCs,
electronic games and monitors).
- -----------------------------------------------------------------------------------------------
SOIC (Small Outline Integrated Circuit) 8-44 Designed for needs of lower lead
devices. End uses include consumer
audio/video and entertainment
products, pagers, cordless telephones,
fax machines, copiers, printers, PC
peripherals and automotive parts.
- -----------------------------------------------------------------------------------------------
MQFP (Metric Quad Flat Package) 44-304 Adapted to meet the increasing
challenges of advanced
processors/controllers, DSPs, ASICs,
video-DAC, PC chip sets, gate arrays,
logic devices, multimedia and other
technologies for consumer, commercial,
office, automotive, PC and industrial
products.
- -----------------------------------------------------------------------------------------------
PowerQuad(R) 100-304 Higher performance thermally enhanced
QFP package. Used for DSPs,
programmable logic devices,
microprocessors and micro-controllers,
high-speed and field programmable gate
array logic devices, ASIC and other
technologies requiring more thermal
performance than offered by standard
QFP packages.
- -----------------------------------------------------------------------------------------------
PowerSOP(TM) 8-36 Higher performance thermally enhanced
SOIC package. Used for wireless RF
telecom devices, automotive,
industrial, disk drive, pagers, and
other technologies requiring more
thermal performance than offered by
standard SOIC packages.
</TABLE>
================================================================================
42
<PAGE> 44
<TABLE>
<CAPTION>
- --------------------------------------
ADVANCED LEADFRAME PRODUCTS
- ---------------------------------------------------------------------------------------------
- --------------------------------------
PACKAGE TYPE NUMBER OF LEADS APPLICATIONS
- ------------------------------------------------------ -------------------------------------
<S> <C> <C>
TQFP (Thin Quad Flat Package) 32-256 Designed for lightweight, portable
electronics requiring broad
performance characteristics,
including notebook computers, desktop
PCs, audio/video and
telecommunications products,
cordless/RF devices, office
equipment, disk drives and
communication boards (e.g., Ethernet
and ISDN).
- ---------------------------------------------------------------------------------------------
TSOP (Thin Small Outline Package) 32-48 Primary application is for SRAM,
DRAM, FLASH and FSRAM memory devices.
End uses include PC cards, PCMCIA
form-factor products, cameras
(still/video) and notebook computers.
- ---------------------------------------------------------------------------------------------
TSSOP (Thin Shrink Small Outline 8-80 Designed for gate drivers,
Package) controllers, logic, analog, memory
(SRAM, DRAM, EPROM, E2PROM),
comparators and optoelectronics.
- ---------------------------------------------------------------------------------------------
SSOP (Shrink Small Outline Package) 8-64 Designed to enable end-products such
as pagers, portable audio/video
products, disk drives, and wireless
applications to be reduced in size
and weight.
- ---------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 45
<TABLE>
<CAPTION>
- --------------------------------------
LAMINATE PRODUCTS
- ---------------------------------------------------------------------------------------------
- --------------------------------------
PACKAGE TYPE NUMBER OF BALLS APPLICATIONS
- ------------------------------------------------------ -------------------------------------
<S> <C> <C>
PBGA (Plastic Ball Grid Array) 119-544 Semiconductors for end users which
require the enhanced performance
provided by the integrated design of
PBGA, including microprocessors/
controllers, ASICs, gate arrays,
memory, DSPs and PC chip sets.
Designed for applications where
improved portability, form-factor and
high-performance are necessary,
including wireless products,
cellular, GPS, notebook computers,
video cameras and disk drives.
- ---------------------------------------------------------------------------------------------
SuperBGA(R) 64-600 Designed for high-speed, high-power
semiconductors such as ASICs,
microprocessors, gate arrays, and
DSPs. Applications include wireless
products, notebook computers, PDAs,
video GUI and CPU/BUS boards.
- ---------------------------------------------------------------------------------------------
FlexBGA 133-412 Higher performance, lower profile
package than PBGA due to size
reduction made possible by denser
substrate. Ideal for high performance
disk drives, cellular phones, pagers,
wireless communications, DSPs and
micro-controller applications.
- ---------------------------------------------------------------------------------------------
MicroBGA(TM) 8-200 Especially suited for memory devices
such as FLASH, SRAM, DRAM and FSRAM
technologies, microprocessors/
controllers and high value ASICs
requiring a low height, weight and
size packaging. End uses include
cellular and other telecommunications
products, disk drives, notebooks/sub-
notebooks, PDAs, wireless and
consumer systems and memory boards.
- ---------------------------------------------------------------------------------------------
ChipArray(TM) 36-128 Designed for semiconductors such as
memory, analog, ASICs and PLDs
requiring a smaller package than
conventional PBGAs. Applications
include cellular and other
telecommunications, notebooks/sub-
notebooks, PDAs, wireless systems and
GPS.
- ---------------------------------------------------------------------------------------------
FlipChip N/A An enabling interconnect technology
which can be utilized in advanced IC
packages such as PBGA, chip scale and
flex circuit solutions to support
improved electrical requirements and
very high semiconductor density in
very small systems.
</TABLE>
================================================================================
44
<PAGE> 46
Traditional Leadframe Products. Traditional leadframe products are the most
widely recognized package types and are characterized by a chip encapsulated in
a plastic mold compound with metal leads surrounding the perimeter. This package
type has evolved from packages designed to be plugged into the circuit board by
inserting the leads into holes on the circuit board to the more modern surface-
mount design, in which the leads are soldered to the surface of the circuit
board. Specific package customization and evolutionary improvements are
continually being engineered to enable improved electrical performance and
multi-chip capability, as well as smaller printed circuit board footprints. The
Company offers a wide range of lead counts and body sizes within this product
group to satisfy customer die size variations. In addition, the Company offers
power versions of the SOP, PLCC, and MQFP package types which are specially
designed to handle today's high power ICs that need with enhanced heat
dissipation characteristics.
Advanced Leadframe Products. The Company's customers are seeking
increasingly thinner packages, which has led the Company to develop newer, more
advanced leadframe products. The Company's advanced leadframe products are
similar in design to its traditional leadframe products. However, the advanced
leadframe products generally are thinner and smaller, have more leads, and have
advanced thermal and electrical characteristics which are necessary for many of
today's more advanced semiconductor applications. The TSOP, TSSOP and SSOP
packages are significantly smaller than the Company's traditional SOIC products,
while the TQFP package is a smaller version of the MQFP package. The Company
also offers power versions of these package types. The Company plans to continue
to develop increasingly smaller versions of these products to keep pace with
continually shrinking die sizes and increasing demands for miniaturization.
Laminate Products. The laminate product family represents the newest and
fastest growth area for the Company and consists of products employing the BGA
format which utilize a laminate (plastic or tape) substrate rather than a
leadframe substrate. BGA technology was first introduced in the industry as a
solution to problems associated with the increasingly high lead counts required
for advanced semiconductors. As the number of leads surrounding the IC
increased, packagers attempted to maintain the size of the package by increasing
the proximity of the leads to one another. As a result, however, these high lead
count packages experienced significant electrical shorting problems and required
the development of increasingly sophisticated and expensive techniques for
producing circuit boards to accommodate the density of the leads. The BGA
methodology solved this problem by effectively creating leads on the bottom of
the package in the form of small bumps or balls. These balls can be evenly
distributed across the entire bottom surface of the package, allowing greater
distance between the individual leads. The Company's first product in this
family was the plastic BGA. The Company has subsequently designed additional BGA
type packages which include features that enable low cost, high volume
manufacturing methods as well as higher performance packages. These new laminate
products include: SuperBGA(R), which includes a copper heat-sink for heat
dissipation and is designed for very low profile, high power applications;
ChipArray(TM), which allows the package to be as small as 1.5 mm larger than the
chip itself; and MicroBGA(TM), which is designed to be approximately the same
size as the chip and uses a tape substrate rather than a plastic laminate. The
Company is currently designing newer versions of BGA packages to enable further
significant reductions in package size.
Test and Related Services
The Company also provides its customers with semiconductor test services.
The Company has the capability to test digital logic, analog and mixed signal
products. The combination of the Company's test operations together with AICL's
Korean test operations comprises one of the largest independent test operations
in the world. Providing test services requires a high level of communication and
integration between the Company and its customers. In order to enable
semiconductor companies to improve their time to market and to reduce costs,
there has been an increasing trend to put packaging and test operations in the
same location. The Company has capitalized on this trend by supplying its own
testers or by supplementing customer-supplied testers with handlers and other
related equipment.
45
<PAGE> 47
Although test services accounted for only 3.3% of the Company's total 1996
revenue and 13% of the total units shipped, the Company expects test services to
grow significantly during the next several years as customers seek to reduce the
time to market for their products by using contractors with test services at the
packaging site. In addition to final test services, the Company provides a full
range of other related services, such as burn-in test services, "dry pack"
services, "tape and reel" packing, and wafer "probing" or "sorting."
The following table sets forth, for the periods indicated, the amount of
the Company's net revenues and the percentage of total net revenues by product
type:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------------------------------------------- -----------------
1994 1995 1996 JUNE 30, 1997
----------------- ----------------- ----------------- -----------------
REVENUES % REVENUES % REVENUES % REVENUES %
-------- ----- -------- ----- -------- ----- -------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Traditional Leadframe....... $ 487 85.1% $ 699 75.0% $ 792 67.6% $ 394 59.4%
Advanced Leadframe.......... 53 9.2 157 16.8 220 18.8 142 21.4
Laminate.................... 3 0.5 15 1.6 90 7.7 81 12.3
Testing and Other 30 5.2 61 6.6 69 5.9 46 6.9
---- ----- ---- ----- ------ ----- ---- -----
Total................... $ 573 100.0% $ 932 100.0% $ 1,171 100.0% $ 663 100.0%
==== ===== ==== ===== ====== ===== ==== =====
</TABLE>
Wafer Fabrication
The Company is scheduled to begin offering wafer fabrication services
through AICL's new deep submicron CMOS foundry in the first half of 1998. The
Company expects the foundry to produce up to 25,000 8" wafers per month by the
end of 1998. Through a strategic relationship with TI, the Company and AICL are
currently qualifying .25 micron CMOS process technology, and AICL is negotiating
with TI to obtain the technology necessary to migrate to .18 micron CMOS process
technology during 1998. The Company's right to the supply of wafers from the
foundry is subject to a preexisting agreement between AICL and TI. TI has agreed
to purchase at least 40% of the capacity of the foundry and under certain
circumstances has the right to purchase 70% of the capacity of the foundry. See
"Risk Factors -- Risks Associated with New Wafer Fabrication Business" and
" -- Intellectual Property."
This foundry's capability is targeted to meet the needs of customers for
DSPs, ASICs and other logic devices. As technological capability and the needs
for CMOS designs in this area change, the Company anticipates the need to add
embedded memory and special analog functionality to its core CMOS technology.
The Company plans to continue to focus its semiconductor technology development
efforts to serve the needs of the high performance digital logic market.
With the addition of the wafer fabrication capability, the Company will be
able to offer fully integrated turnkey semiconductor manufacturing services to
its customers. This complete turnkey solution will enable the Company to work
with its customers' IC designers to optimize the integration of IC design with
wafer fabrication, package design, and packaging and test processes. The Company
believes this integration will enable customers to improve the cost and
performance of their ICs and achieve faster time to market in terms of both new
product introductions and production lead times.
46
<PAGE> 48
CUSTOMERS
The Company currently has more than 150 customers, including many of the
largest semiconductor companies in the world. Set forth below is a list of the
Company's top 50 customers in 1997:
<TABLE>
<S> <C> <C>
Actel Corporation IC Works Inc. Plessey Semiconductors
Altera Corporation Integrated Circuit Systems, Inc. Philips Electronics N.V.
Adaptec, Inc. Integrated Device Technology, Inc. Rockwell Corp.
Advanced Micro Devices, Inc. Intel Corporation S3 Incorporated
Alcatel Mietec Lattice Semiconductor Corporation SGS-THOMSON
American Megatrends, Inc. Level One Communications, Inc. Microelectronics N.V.
Analog Devices, Inc. LSI Logic Corporation Siemens AG
Atmel Corporation Lucent Technologies Inc. Siliconix Incorporated
Robert Bosch GmbH Macronix International Co., Ltd. SMC Corporation
Chip & Technologies, Inc. Matra Harris Semiconductors Silicon Storage
Cirrus Logic, Inc. Maxim Integrated Circuits Technology, Inc.
Cypress Semiconductor Corp. Microchip Technology Inc. Symbios Logic
Dallas Semiconductor Microlinear TEMIC Semiconductors
Delco Electronics Corporation Motorola, Inc. Texas Instruments
Digital Equipment Corp. National Semiconductor Incorporated
Harris Corporation Corporation VLSI Technology, Inc.
Hewlett-Packard Company NeoMagic Corporation VTC Inc.
International Business Machines Waferscale Integration, Inc.
Corporation Xilinx, Inc.
</TABLE>
The Company's five largest customers collectively accounted for approximately
22.5%, 31.0%, and 28.3% of the Company's total revenues in 1995, 1996, and the
first six months of 1997, respectively. The Company anticipates that this
customer concentration will continue at least for the foreseeable future. See
"Risk Factors -- Customer Concentration; Absence of Backlog."
MARKETING AND SALES
The Company sells to and supports its customers through an international
network of offices located in close proximity to its largest customers and
concentration of customers, including offices in the United States (Santa Clara,
California; Dallas, Texas; Austin, Texas; Chandler, Arizona; West Chester,
Pennsylvania), France, Singapore, Taiwan, and the Philippines. A substantial
majority of the Company's sales have historically been derived from U.S.-based
customers. See Note 14 of Notes to the Consolidated Financial Statements. The
Company assigns each of its customers a sales and customer support team
consisting of an account manager, a technical program manager, and one or more
customer support representatives. The largest multinational customers are
typically supported from multiple offices. The Company's worldwide force of
account managers, customer service representatives and technical product
managers exceeds 200 personnel. In addition, an extended staff of product
management, process and reliability engineering, marketing and advertising,
information systems, and factory personnel supports the direct account teams.
Together, these direct and extended teams deliver an array of services to the
Company's customers including providing information and expert advice on
packaging solutions and trends, managing the start-up of specific packaging and
test programs, providing a continuous flow of information to the customers
regarding products and programs in process, and researching and helping to
resolve technical and logistical issues.
47
<PAGE> 49
FACILITIES AND MANUFACTURING
Facilities
The Company provides packaging and test services through its factories in
the Philippines as well as its test facility in the U.S. A new packaging factory
is currently under construction at the Company's Chandler, Arizona site with
expected start-up in the second half of 1998. In addition, the Company provides
packaging and test services through AICL's four factories in Korea, pursuant to
the Supply Agreement with AICL. In 1996 and the first six months of 1997, AICL
provided packaging and test services which accounted for approximately 72% and
68%, respectively, of the Company's revenues. In addition to providing
world-class manufacturing services, these factories provide purchasing,
engineering, and customer service support. In the first half of 1998, the
Company is scheduled to begin offering wafer fabrication services through AICL's
new state-of-the-art .25 micron wafer foundry in Korea pursuant to the Supply
Agreement. The size, location, and manufacturing services provided by each of
the Company's and AICL's primary facilities is set forth in the table below. See
"Risk Factors -- Dependence on Relationship With AICL; Potential Conflicts of
Interest," "-- Expansion of Manufacturing Capacity; Profitability Affected by
Capacity Utilization Rates," "-- Risks Associated with New Wafer Fabrication
Business" and "-- Inability to Obtain Packaging and Test Equipment in a Timely
Fashion."
<TABLE>
<CAPTION>
APPROXIMATE
PLANT SIZE
FACILITY LOCATION (SQUARE FEET) MANUFACTURING SERVICES
- ------------------ ---------------------------------- ------------- ------------------------------------
<S> <C> <C> <C>
Company Facilities
P1 Muntilupa, Philippines 579,000 Packaging and test services;
packaging and process development
P2 Muntilupa, Philippines 115,000 Packaging services
P3 Province of Laguna, Philippines 249,000 Packaging and test services
AATS Santa Clara, California 3,000 Final testing services; test program
development; central shipping and
logistics
A1 (1998) Chandler, Arizona 106,000 Packaging services for laminate
products; package and process
development
AICL Facilities
K1 Seoul, Korea 646,000 Packaging services, package and
process development
K2 Buchon, Korea 264,000 Packaging services
K3 Bupyung, Korea 404,000 Packaging and test services
K4 Kwangju, Korea 597,000 Packaging services
Wafer Foundry Buchon, Korea 480,000 Wafer fabrication services
</TABLE>
The Company's operational headquarters is located in Chandler, Arizona
while its administrative headquarters is located in West Chester, Pennsylvania.
In addition to an executive staff, the Chandler, Arizona campus houses sales and
customer service for the southwest region, product management, a technical
design center, planning, marketing and research and development. The West
Chester location houses finance and accounting, legal, personnel administration,
information systems, and serves as a satellite sales office for the Company's
eastern sales region.
Raw Materials and Equipment
The Company's packaging operations depend upon obtaining adequate supplies
of raw materials on a timely basis. The principal raw materials used in the
Company's packaging process are leadframes or laminate substrates, along with
gold wire and molding compound. The Company purchases raw materials based on the
stated demand requirements of its customers and its customers are generally
responsible for any unused materials that result from an overstatement of
demand. The Company works closely with
48
<PAGE> 50
its primary raw material suppliers to insure the availability and timeliness of
raw material supplies. In addition, the Company negotiates worldwide pricing
agreements with its major suppliers to take advantage of the scale of its
operations. The Company is not dependent on any one supplier for a substantial
portion of its raw material requirements.
The Company's packaging operations and expansion plans also depend on
obtaining adequate supplies of manufacturing equipment on a timely basis. To
that end, the Company works closely with its major equipment suppliers to insure
that equipment deliveries are on time and the equipment meets the Company's
stringent performance specifications. In addition, an affiliate of AICL
manufactures semiconductor packaging equipment exclusively for the Company and
AICL at locations in close proximity to the Company's and AICL's packaging
facilities in the Philippines and Korea, respectively. See "Risk
Factors -- Dependence on Raw Materials Suppliers and Subcontractors."
Total Quality Management
The Company believes that total quality management is a vital component of
its manufacturing strategy. To that end, the Company has established a
comprehensive Quality Operating System designed to promote continuous
improvement and maximize manufacturing yields at high volume production while
maintaining the highest quality standards. Each of the Company's and AICL's
factories is ISO9002 and QS-9000 certified.
COMPETITION
The independent semiconductor packaging and test industry is very
competitive, being comprised of approximately 50 companies, with about 15 of
those companies having sales of $100 million per year or more. The Company faces
substantial competition from established packaging companies primarily located
in Asia, such as Advanced Semiconductor Engineering, Inc. (Taiwan), ASE Test
Limited (Taiwan and Malaysia), ASAT Ltd. (Hong Kong), Hana Microelectronics
Public Co. Ltd. (Hong Kong and Thailand), Astra International (Indonesia),
Carsem (Malaysia), Hyundai Corporation (Korea), Siliconware Precision Industries
Co., Ltd. (Taiwan), and Shinko Electric Industries Co., Ltd. (Japan). Each of
these companies has significant manufacturing capacity, financial resources,
research and development operations, marketing and other capabilities, and have
been operating for some time. Such companies have also established relationships
with many large semiconductor companies which are current customers of the
Company. The principal elements of competition in the independent semiconductor
packaging market include time to market, breadth of package offering, technical
competence, design services, quality, production yields, customer service, and
price. The Company believes it generally competes favorably with respect to
these factors. On a larger scale, the Company also competes with the internal
manufacturing capabilities of many of its largest customers.
The independent wafer fabrication business is also highly competitive. The
Company expects its wafer fabrication services to compete primarily with
independent wafer foundries such as Chartered Semiconductor Manufacturing, Ltd.,
Taiwan Semiconductor Manufacturing Company, Ltd. and United Microelectic
Corporation, as well as with device manufacturers such as LG Semicon Co., Ltd.,
Hitachi, Ltd., Toshiba Corp. and Winbond Electronics Corporation, who provide
foundry services for other semiconductor companies. Each of these companies has
significant manufacturing capacity, financial resources, research and
development operations, marketing and other capabilities and have been operating
for some time. Many of these companies have also established relationships with
many large semiconductor companies which are current or potential customers of
the Company. The principal elements of competition in the wafer foundry market
include technology, delivery cycle times, price, product performance, quality,
production yield, responsiveness and flexibility, reliability and the ability to
design and incorporate product improvements. See "Risk Factors -- Competition."
49
<PAGE> 51
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on developing
new package designs and process capabilities, and on improving the efficiency
and capabilities of its existing production processes and materials. The Company
believes that technology development is one of the key success factors in the
packaging market and believes that it has a distinct advantage in this area. In
addition to its internal development work, and its co-development work with
AICL, the Company also works closely with its packaging equipment and raw
material suppliers in developing advanced processing capabilities and materials
for use in the Company's production process. Currently, the Company is focusing
on development programs that extend the capability and applicability of the BGA
packaging format. These include high performance BGAs for microprocessors and
other high-end devices, and a chip size package for memory. In addition, the
Company is aggressively developing a flip-chip die attach and connect process
for its laminate packages that has the potential to reduce packaging size and
cost and improve package performance significantly. The flip-chip packaging
process involves attaching the die I/O terminals directly to the lead circuits
on the substrate without the use of gold wires. In addition to providing a
smaller package size, this process is expected to result in significant
improvements in packaging yields by eliminating the delicate wire bonds from the
package.
As of June 30, 1997, the Company employed approximately 138 persons in
research and development activities. In addition, other management and
operational personnel are involved in research and development activities. In
1994, 1995 and 1996 and the first six months of 1997, the Company's research and
development expenses were approximately $3.1 million, $8.7 million, $10.9
million and $3.5 million, respectively. The Company expects to continue to
invest significant resources in research and development.
INTELLECTUAL PROPERTY
The Company currently holds 24 U.S. patents, five of which are jointly held
with AICL, related to various IC packaging technologies, in addition to other
pending patents. These patents will expire at various dates from 2012 through
2016. With respect to development work undertaken jointly with AICL, the Company
and AICL share intellectual property rights under the terms of the Supply
Agreement between the Company and AICL. Such Supply Agreement also provides for
the cross-licensing of intellectual property rights between the Company and
AICL. In addition, the Company enters into agreements with other developers of
packaging technology to license or otherwise obtain certain process or packaging
technologies.
The Company expects to continue to file patent applications when
appropriate to protect its proprietary technologies; however, the Company
believes that its continued success depends primarily on factors such as the
technological skills and innovation of its personnel rather than on its patents.
The process of seeking patent protection can be expensive and time consuming.
There can be no assurance that patents will be issued from pending or future
applications or that, if patents are issued, they will not be challenged,
invalidated or circumvented, or that rights granted thereunder will provide
meaningful protection or other commercial advantage to the Company. Moreover,
there can be no assurance that any patent rights will be upheld in the future or
that the Company will be able to preserve any of its other intellectual property
rights.
As is typical in the semiconductor industry, the Company may receive
communications from third parties asserting patents on certain of the Company's
technologies. In the event any third party were to make a valid claim against
the Company or AICL and a license were not available on commercially reasonable
terms, the Company's business, financial condition and results of operations
could be materially and adversely affected. Litigation, which could result in
substantial cost to and diversion of resources of the Company, may also be
necessary to enforce patents or other intellectual property rights of the
Company or to defend the Company against claimed infringement of the rights of
others. The failure to obtain necessary licenses or the occurrence of litigation
relating to patent infringement or other intellectual property matters could
have a material adverse effect on the Company's business, financial
50
<PAGE> 52
condition and results of operations. In addition, the agreement between AICL and
TI pursuant to which AICL received the technology to produce wafers does not
grant any license to AICL, and explicitly provides that TI reserves the right to
bring a patent infringement suit against AICL if TI is then generally bringing
similar suits against other wafer manufacturers. As a result, the Company could
similarly be subject to patent litigation by TI in connection with its sale of
wafers produced by AICL. Any such litigation could materially and adversely
affect AICL's ability to continue to manufacture wafers and AICL's and the
Company's business, financial condition and results of operations.
ENVIRONMENTAL MATTERS
The semiconductor packaging process involves a significant amount of
chemicals and gases which are subject to extensive governmental regulations. For
example, liquid waste is produced at the stage at which silicon wafers are diced
into chips with the aid of diamond saws and cooled with running water. In
addition, excess materials on leads and moldings are removed from packaged
semiconductors in the trim and form process. The Company has installed equipment
to collect certain solvents used in connection with its manufacturing process
and has contracted with independent waste disposal companies to remove such
hazardous material.
Federal, state and local regulations in the United States, as well as
environmental regulations in Korea and the Phillippines, impose various controls
on the storage, handling, discharge and disposal of chemicals used in the
Company's and AICL's manufacturing processes and on the facilities occupied by
the Company and AICL. The Company believes that its activities, as well as those
of AICL, conform to present environmental and land use regulations applicable to
their respective operations and current facilities. Increasing public attention
has, however, been focused on the environmental impact of semiconductor
manufacturing operations and the risk to neighbors of chemical releases from
such operations. There can be no assurance that applicable land use and
environmental regulations will not in the future impose the need for additional
capital equipment or other process requirements upon the Company or AICL or
restrict the Company's or AICL's ability to expand their respective operations.
The adoption of new ordinances or similar measures or any failure by the Company
or AICL to comply with applicable environment and land use regulations or to
restrict the discharge of hazardous substances could subject the Company or AICL
to future liability or cause their respective manufacturing operations to be
curtailed or suspended.
EMPLOYEES
As of June 30, 1997, the Company had approximately 8,180 full-time
employees, 5,642 of whom were engaged in manufacturing, 2,043 in manufacturing
support, 138 in research and development, 214 in marketing and sales, and 143 in
finance, business management, and administration. The Company's employees are
not represented by any collective bargaining agreement, and the Company has
never experienced a work stoppage. The Company believes that its relations with
its employees are good. See "Risk Factors -- Dependence on Key Personnel and
Availability of Skilled Workforce."
51
<PAGE> 53
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ---------------------------------------------------
<S> <C> <C>
James J. Kim....................... 61 Chief Executive Officer and Chairman
John N. Boruch..................... 55 President and Director
Frank J. Marcucci.................. 62 Chief Financial Officer
Eric R. Larson..................... 42 Vice President
Michael D. O'Brien................. 65 Vice President
Louis J. Siana(1).................. 65 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee.
The Company is currently identifying additional nonemployee directors and
intends to have two additional directors join the Board of Directors prior to
the Offerings.
James J. Kim. James Kim has served as the Company's Chief Executive Officer
since September 1997. Mr. Kim founded AEI in 1968 and has served as its Chairman
since 1970. He has also served as the Chairman of the Anam group of companies
and a director of AICL since 1992. Mr. Kim is a director of CFM Technologies,
Inc. Mr. Kim earned B.S. and M.A. degrees in Economics from the University of
Pennsylvania. Mr. Kim is Chairman and Chief Executive Officer of The Electronics
Boutique, Inc., an electronics retail chain, and Forte Systems, Inc., a computer
software company.
John N. Boruch. John Boruch has served as President and a director of the
Company since September 1997. Mr. Boruch has served as President of AEI since
February 1992. From 1991 to 1992 he served as AEI Corporate Vice President in
charge of Sales. Mr. Boruch earned a B.A. in Economics from Cornell University.
Mr. Boruch joined the Company in 1984.
Frank J. Marcucci. Frank Marcucci has served as the Chief Financial Officer
of the Company since September 1997. Mr. Marcucci has served as the Chief
Financial Officer of AEI since joining AEI in 1980. Mr. Marcucci earned a B.S.
in Business Administration from Duquesne University and an MBA from the
University of Pittsburgh. Mr. Marcucci is a Certified Public Accountant.
Eric R. Larson. Eric Larson has served as Vice President of the Wafer
Fabrication business of the Company since September 1997. Mr. Larson has served
as President of Amkor/Anam Semiconductor, a division of AEI, since December
1996. From 1979 to 1996 he worked for the Hewlett-Packard Company ("HP") in
various management capacities, most recently as Worldwide Marketing Manager for
disk products. In addition, Mr. Larson was the worldwide Sales and Marketing of
the IC Business Division of HP from July 1985 to May 1993. Mr. Larson earned a
B.A. in Political Science from Colorado State University and an MBA from the
University of Denver.
Michael D. O'Brien. Michael O'Brien has served as the Vice President of
Packaging and Testing Operations of the Company since September 1997. Mr.
O'Brien has served as Corporate Vice President of AEI since 1990. Mr. O'Brien
earned a B.S. from Texas A&M University. Mr. O'Brien joined the Company in 1988.
Louis J. Siana. Louis Siana has served as a director of the Company since
September 1997. Mr. Siana is a partner in Siana, Carr & O'Connor, CPA, an
accounting firm. Until June, 1997, Siana, Carr & O'Connor served as the
accountants to AEI.
52
<PAGE> 54
DIRECTOR COMPENSATION
Directors who are also employees or officers of the Company do not receive
compensation for their services as directors. Non-employee directors are
eligible to receive an annual retainer of $15,000 plus per meeting fees of
$1,000 per board meeting and $1,000 per committee meeting attended. Directors
are reimbursed for travel and related expenses incurred by them in attending
board and committee meetings.
1997 Director Option Plan. The Company's 1997 Director Option Plan (the
"Director Plan") was adopted by the Board of Directors in October 1997 and
approved by the Company's stockholders in October 1997. A total of
shares of Common Stock have been reserved for issuance under the
Director Plan. The option grants under the Director Plan are automatic and
non-discretionary, and the exercise price of the options is 100% of the fair
market value of the Common Stock on the grant date. The Director Plan provides
for an initial grant of options to purchase 10,000 shares of Common Stock to
each new nonemployee director of the Company (an "Outside Director") upon the
later of the effective date of the Director Plan or the date which such
individual first becomes an Outside Director. In addition, each Outside Director
will automatically be granted subsequent options to purchase 3,000 shares of
Common Stock on each date on which such Outside Director is re-elected by the
stockholders of the Company, provided that as of such date such Outside Director
has served on the Board of Directors for at least six months. The term of each
option is ten years. Each option granted to an Outside Director vests as to 25%
of the optioned stock one year after the date of grant, and as to an additional
25% of the optioned stock on each anniversary of the date of grant, so that 100%
of the optioned stock shall be exercisable four years after the date of grant.
In the event of the sale of all or substantially all the Company's assets or the
merger of the company with or into another corporation, all outstanding options
under the Director Plan may either be assumed or an equivalent option may be
substituted by the surviving entity. Following such assumption or substitution,
if the director is terminated other than upon a voluntary resignation, such
options will vest and become exercisable in full. If no assumption or
substitution occurs, each such option will vest and become exercisable in full.
The Director Plan will terminate in September 2007 unless sooner terminated by
the Board of Directors.
BOARD COMMITTEES
The Board of Directors will have a Compensation Committee and an Audit
Committee. The Company is currently identifying additional nonemployee directors
and intends to have two additional directors join the Board of Directors prior
to the Offerings. The Compensation Committee will be composed of at least two
nonemployee directors. The functions of the Compensation Committee are to review
and approve annual salaries, bonuses, and grants of stock options pursuant to
the Company's 1997 Stock Plan and to review and approve the terms and conditions
of all employee benefit plans or changes thereto. The Audit Committee will be
composed of at least two nonemployee directors. The functions of the Audit
Committee will be to recommend annually to the Board of Directors the
appointment of the independent auditors of the Company, discuss and review in
advance the scope and the fees of the annual audit and review the results
thereof with the independent auditors, review and approve nonaudit services of
the independent auditors, review compliance with existing auditors, review and
approve non-audit services of the independent auditors, review compliance with
existing major accounting and financial reporting policies of the Company,
review the adequacy of the financial organization of the Company, and review
management's procedures and policies relating to the adequacy of the Company's
internal accounting controls and compliance with applicable laws relating to
accounting practices.
53
<PAGE> 55
EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth compensation earned
during the fiscal year ended December 31, 1996, by the Company's Chief Executive
Officer and the three other most highly compensated executive officers whose
total salary and bonus during such year exceeded $100,000 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION
- ------------------------------------------------------ -------- -------- ------------
<S> <C> <C> <C>
James J. Kim, Chief Executive Officer and
Chairman(1)......................................... $500,000 $ -- $101,716
John N. Boruch, President............................. 400,000 375,000 --
Frank J. Marcucci, Chief Financial Officer............ 216,731 100,000 --
Michael D. O'Brien, Vice President.................... 198,460 100,000 --
</TABLE>
- ---------------
(1) All other compensation for Mr. Kim represents compensation to Mr. Kim in the
form of interest free loans.
STOCK PLANS
1997 Stock Plan. The Company's 1997 Stock Plan (the "1997 Plan") provides
for the grant to employees of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the "Code"), and for the grant
to employees, directors and consultants of nonstatutory stock options and stock
purchase rights. The 1997 Plan was adopted by the Board of Directors in October
1997 and approved by the Company's stockholders in October 1997. Unless
terminated sooner, the 1997 Plan will terminate automatically in October 2007. A
total of shares of Common Stock have been reserved for issuance under
the 1997 Plan. The maximum aggregate number of shares which may be optioned and
sold under the 1997 Plan is , plus an annual increase to be added on each
anniversary date of the adoption of the 1997 Plan equal to the lesser of (i) the
number of shares of Common Stock needed to restore the maximum aggregate number
of shares of Common Stock which may be optioned and sold under the 1997 to
, or (ii) a lesser amount determined by the board of directors.
The 1997 Plan may be administered by a committee appointed by the board of
directors (the "Committee"), which Committee shall, in the case of options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, consist of two or more "outside directors" within
the meaning of Section 162(m) of the Code. The Committee has the power to
determine the terms of options granted, including the exercise price, to reduce
the exercise price of any option to the then current fair market price if the
fair market value of the Common Stock covered by such option shall have declined
since the date the option was granted, number of shares subject to the option,
and the exercisability thereof, the form of consideration payable upon such
exercise. In addition, the board of directors has the authority to amend,
suspend or terminate the 1997 Plan, provided that no such action may affect any
share of Common Stock previously issued and sold or any option previously
granted under the 1997 Plan.
Unless determined otherwise by the administrators, options and stock
purchase rights granted under the 1997 Plan are not transferable by the
optionee, and each option and stock purchase right is generally exercisable
during the lifetime of the optionee only by such optionee. Options granted under
the 1997 Plan must generally be exercised within three months following
termination of an optionee's status as an employee, director or consultant of
the Company, within twelve months after an optionee's termination by disability,
and within twelve months after an optionee's termination by death, but in no
event later than the expiration of the option. In the case of stock purchase
rights, unless the administrator determines otherwise, a restricted stock
purchase agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment with the
Company for any reason (including death or disability). The purchase price for
shares repurchased
54
<PAGE> 56
pursuant to a restricted stock purchase agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate determined
by the administrator. The exercise price of all incentive stock options granted
under the 1997 Plan must be at least equal to the fair market value of the
shares on the date of grant. The exercise price of nonstatutory stock options
granted under the 1997 Plan is determined by the Committee, but with respect to
nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the exercise
price must be at least equal to the fair market value of the Common Stock on the
date of grant. With respect to any employee who owns stock possessing more than
ten percent of the voting power of all classes of the Company's, or any parent
or subsidiary of the Company's outstanding capital stock, the exercise price of
any incentive stock option granted to such person must equal at least 110% of
the fair market value of the Common Stock on the date of grant and the term of
such incentive stock option must not exceed five years. The term of all other
options granted under the 1997 Plan may not exceed ten years.
The 1997 Plan provides that in the event of a merger of the Company with or
into another corporation, or a sale of substantially all of the Company's
assets, each outstanding option and stock purchase right will be assumed or
substituted for by the successor corporation. In the event the successor
corporation refuses to assume or substitute for the option or stock purchase
right, the optionee shall have the right to exercise all of the optioned stock,
including shares as to which it would not otherwise be exercisable.
401(K) PLAN
The Company participates in a tax-qualified employee savings and retirement
plan (the "401(k) Plan") which covers certain of the Company's full-time
employees who are at least 21 years of age. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation by up to 13% of
compensation or the statutorily prescribed annual limit, whichever is lower, and
have the amount of such reduction contributed to the 401(k) Plan. After an
employee completes one year of service and has attained age 21, he or she will
become eligible for the Company matching contributions effective as of the
quarterly entry date after meeting these service and age requirements. The
matching contribution amount is a discretionary amount as determined from time
to time by the Company. The 401(k) Plan is intended to qualify under Section 401
of the Internal Revenue Code of 1986, as amended, so that contributions by
employees or by the Company to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made. The trustee under the 401(k) Plan, at the direction of
each participant, invests the assets of the 401(k) Plan in any of a number of
designated investment options.
PHILIPPINE PENSION PLANS
The Company adopted a retirement plan for its eligible Philippine employees
and those eligible employees of designated affiliated companies and subsidiaries
of the Company, the Amkor/Anam Pilipinas, Incorporated Employees' Retirement
Benefit Plan (the "Plan"), originally effective January 1, 1988, and most
recently amended on January 1, 1997. Eligible employees are employees with
regular and permanent status that have been employed continuously for one (1)
year by a participating company. Currently, the companies participating in the
Plan are AMI, AAAP, and Anam Amkor Precision Machine Company (Phils.),
Incorporated. At normal retirement age (age 60), death, or upon total and
permanent disability, a participant will receive a lump sum benefit payment
based on a percentage of his or her final base monthly salary, as determined by
his or her years of credited service. A participant who retires at age 50 with
at least ten (10) years of service will receive a reduced payment based on the
same formula. Company contributions to the Plan are held in trust. The Plan is
presently underfunded by $5,000,000. See Note 9 of Consolidated Financial
Statements.
55
<PAGE> 57
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Company has adopted provisions in its Certificate of Incorporation that
eliminate to the fullest extent permissible under Delaware law the liability of
its directors to the Company for monetary damages. Such limitation of liability
does not affect the availability of equitable remedies such as injunctive relief
or rescission. The Bylaws provide that the Company shall indemnify its directors
and officers, and may indemnify its other employees and agents, to the fullest
extent permitted by Delaware law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. The Company has
entered into indemnification agreements with its officers and directors
containing provisions which may require the Company, among other things, to
indemnify the officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.
There is no currently pending litigation or proceeding involving a
director, officer, employee or other agent of the Company in which
indemnification would be required or permitted.
CERTAIN TRANSACTIONS
AICL was founded in 1956 by Mr. Hyang-Soo Kim, who currently serves as the
honorary Chairman and a Representative Director of AICL. AICL is a member of the
Anam Group of companies (the "Anam Group"), consisting principally of companies
in Korea in the electronics industries. The management of AICL and the other
companies in the Anam Group are influenced to a significant degree by the family
of Hyang-Soo Kim, which, together with the Company, collectively owned
approximately 21% of the outstanding common stock of AICL as of June 30, 1997.
James Kim, the founder of the Company and currently its Chairman and Chief
Executive Officer, is the eldest son of Hyang-Soo Kim. Since January 1992, in
addition to his other responsibilities, James Kim has been serving as acting
Chairman of the Anam Group and a director of AICL. Mr. In-Kil Hwang, the
President and a Representative Director of AICL, is the brother-in-law of James
Kim and a director of AICL. After the Offerings, James Kim and the Kim Family
Trusts will own approximately % of the Company's outstanding Common Stock
and James Kim and members of his family will continue to exercise significant
control over the Company. The Company and AICL have had a long-standing
relationship. In 1996 and the six months ended June 30, 1997, approximately 72%
and 68%, respectively, of the Company's revenues were derived from sales of
services performed for the Company by AICL. In addition, substantially all of
the revenues of AICL in 1996 and the six months ended June 30, 1997 were derived
from services sold by the Company. The Company expects that the businesses of
the Company and AICL will continue to remain highly interdependent by virtue of
their supply relationship, family ties between their respective shareholders and
management, financial relationships, coordination of product and operation
plans, joint research and development activities and shared intellectual
property rights. See "Relationship with Anam Industrial Co., Ltd."
The Company was formed in September 1997 as a holding company for the Amkor
Companies. In connection with the Reorganization, Mr. James Kim, Chairman and
Chief Executive Officer of the Company, and the Kim Family Trusts will exchange
their interests in each of the Amkor Companies in return for shares of the
Company's Common Stock. Following the Offerings, Mr. Kim and the Kim Family
Trusts are expected to own shares of the Company's Common Stock
representing approximately % of the outstanding shares of Common Stock. See
"Reorganization."
The Company proposes to enter into an indemnification agreement with each
of the directors of the Company pursuant to which the Company will indemnify
such directors for all matters arising out of their membership on the Company's
Board of Directors to the maximum extent permissible under Delaware law.
In connection with the Reorganization, the Company proposes to enter into a
tax indemnification agreement with AEI, Mr. Kim and the Kim Family Trusts
pursuant to which the Company and AEI will be
56
<PAGE> 58
indemnified by such stockholders with respect to their proportionate share of
any U.S. federal or state corporate income taxes attributable to the failure of
AEI to qualify as an S Corporation for any period or in any jurisdiction for
which S Corporation status was claimed through the Termination Date. The
indemnification agreement will also provide that the Company and AEI will
indemnify Mr. Kim and such stockholders if such stockholders are required to pay
additional taxes or other amounts attributable to taxable years on or before the
Termination Date as to which AEI filed or files tax returns claiming status as
an S Corporation. AEI has made various distributions to Mr. Kim and the Kim
Family Trusts which have enabled them to pay their income taxes on their
allocable portions of the income of AEI. Such distributions totaled
approximately $13.0 million and $5.0 million in 1996 and the first six months of
1997, respectively. The Company expects to make additional distributions to such
stockholders prior to the consummation of the Reorganization, which represents
AEI's cumulative net income in all periods prior to the Termination Date less
the aggregate amount of distributions previously made to such stockholders. This
final distribution is intended to provide such stockholders with the balance of
AEI's net income for which they have already recognized income taxes. See
"Reorganization and Notes 1 and 10 of Notes to Consolidated Financial
Statements. Through June 30, 1997, the amount of such undistributed net earnings
was $11.8 million.
Mr. Kim has executed certain guarantees to lenders in connection with
certain debt instruments of the Amkor Companies that remain outstanding. The
total contingent liability under such guarantees equals approximately $88.0
million. See Note 11 of Notes to Consolidated Financial Statements.
AEI and Mr. Kim currently are parties to a loan agreement under which Mr.
Kim may borrow funds from AEI, subject to AEI's consent. Mr. Kim has recognized
compensation in 1996 in the amount of $101,716 of imputed interest for loans
under this agreement. Since the beginning of the 1996 fiscal year, the maximum
amount outstanding under such agreement has been $6.5 million. Mr. Kim intends
to use the proceeds from the sales of shares by him to repay amounts outstanding
under the agreement. See Note 11 of Notes to Consolidated Financial Statements.
In connection with the Reorganization, Mr. Kim sold his interest in Amkor
Anam Test Services, Inc. representing half of its outstanding capital stock to
AEI for $910,350. Amkor Anam Test Services, Inc. has been merged into AEI.
AK Investments, Inc. a company owned by Mr. James Kim and the Kim Family
Trusts, purchased certain securities held by AEI for $49.8 million, which
consideration was paid by assuming from AEI certain non-current payables from
AUSA. See Note 11 of Notes to Consolidated Financial Statements.
In 1996, the Kim Family Trusts borrowed $5.3 million at market interest
rates from AEI to purchase the real estate and develop the facilities that
comprise the Company's Chandler, Arizona plant and offices. In 1997, the Kim
Family Trusts, after making improvements, sold the real estate and facilities
back to AEI for $5.7 million which was used to repay the original loan from AEI.
See Note 11 of Notes to Consolidated Financial Statements.
Members of the Kim family own all the outstanding shares of Forte Systems,
Inc. ("Forte"). AEI and Forte currently are parties to a loan agreement under
which Forte may borrow funds at market interest rates from AEI, subject to AEI's
consent. Since the beginning of the 1996 fiscal year, the maximum amount
outstanding under such agreement has been $3.7 million. See Note 11 of Notes to
Consolidated Financial Statements.
Members of the Kim family own all the outstanding shares of The Electronics
Boutique, Inc. (the "Electronics Boutique"). AEI and the Electronics Boutique
currently are parties to a loan agreement under which the Electronics Boutique
may borrow funds at market rates from AEI, subject to AEI's consent. Since the
beginning of the 1996 fiscal year, the maximum amount outstanding under such
agreement in the ordinary course of business of the Electronics Boutique's
business has been $3 million. In addition, in 1996, the Electronics Boutique
borrowed $50 million from AEI in connection with a
57
<PAGE> 59
contemplated acquisition. However, this acquisition was abandoned by the
Electronics Boutique and the $50 million was repaid to AEI within eleven working
days of the date it was borrowed. Finally, AEI has guaranteed certain vendor
obligations and a line of credit of the Electronics Boutique, which total
approximately $11 million and $15 million, respectively. See Note 11 of Notes to
Consolidated Financial Statements.
The Company leases office space located in West Chester, Pennsylvania from
the Kim Family Trusts. The monthly rent pursuant to such lease is $69,000. The
Company sub-leases a portion of this office space to Forte for which the monthly
rent is $43,000. See Note 11 of Notes to Consolidated Financial Statements.
Louis J. Siana is a partner in the accounting firm of Siana Carr &
O'Connor, LLP which, prior to the appointment of Arthur Andersen LLP, served as
the independent auditors for certain of the Company's subsidiaries. These
subsidiaries collectively paid Siana Carr & O'Connor, LLP $225,000 for such
service in fiscal 1996 and 1997.
58
<PAGE> 60
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1997, and as
adjusted to reflect the sale of the shares of Common Stock offered
hereby, by (i) each person or entity who is known by the Company to own
beneficially 5% or more of the Company's outstanding Common Stock; (ii) each
director of the Company; (iii) each of the Named Executive Officers; and (iv)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
BENEFICIAL OWNERSHIP AFTER
PRIOR TO OFFERING NUMBER OF OFFERING(1)
-------------------- SHARES ----------------
NAME AND ADDRESS NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------------------- ---------- ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
James J. Kim.................................. 29,750,000 35.0%
1345 Enterprise Drive
West Chester, PA 19380
David D. Kim Trust of December 31, 1987(2).... 17,620,000 20.7
1500 E. Lancaster Avenue
Paoli, PA 19301
John T. Kim Trust of December 31, 1987(2)..... 17,620,000 20.7
1500 E. Lancaster Avenue
Paoli, PA 19301
Susan Y. Kim Trust of December 31,
1987(2)(3).................................. 17,620,000 20.7
1500 E. Lancaster Avenue
Paoli, PA 19301
Louis J. Siana................................ -- --
John N. Boruch................................ -- --
Eric R. Larson................................ -- --
Frank J. Marcucci............................. -- --
Michael D. O'Brien............................
All directors and executive officers as a
group (6 persons)........................... 29,750,000 35.0%
</TABLE>
- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment options. The number
and percentage of shares beneficially owned is determined in accordance with
Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rule, beneficial ownership
includes any share as to which the individual or entity has voting power or
investment power. Unless otherwise indicated, each person or entity has sole
voting and investment power with respect to shares shown as beneficially
owned.
(2) David D. Kim, John T. Kim and Susan Y. Kim are children of James J. Kim.
(3) Includes 8,330,000 shares held by two trusts established for the benefit of
Susan Y. Kim's children.
59
<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the closing of the Offerings, the Company will be authorized to issue
500,000,000 shares of Common Stock, $.001 par value, and 10,000,000 shares of
undesignated Preferred Stock, $.001 par value. Immediately after the closing of
the Offerings and assuming no exercise of the Underwriters' over-allotment
options, the Company estimates there will be an aggregate of shares
of Common Stock outstanding, shares of Common Stock will be issuable
upon exercise of outstanding options and no shares of Preferred Stock will be
issued and outstanding.
The following description of the Company's capital stock does not purport
to be complete and is subject to and qualified in its entirety by the
Certificate of Incorporation and the Bylaws, which are included as exhibits to
the Registration Statement of which this Prospectus forms a part, and by the
provisions of applicable Delaware law.
The Certificate of Incorporation and the Bylaws contain certain provisions
that are intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and which may have the effect of delaying,
deferring, or preventing a future takeover or change in control of the Company
unless such takeover or change in control is approved by the Board of Directors.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Holders of Common Stock do not have
cumulative voting rights, and, therefore, holders of a majority of the shares
voting for the election of directors can elect all of the directors. In such
event, the holders of the remaining shares will not be able to elect any
directors. See "Risk Factors -- Benefits of the Offerings to Existing
Stockholders; Continued Control by Existing Stockholders."
Holders of the Common Stock are entitled to receive such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between the Company and its debtholders. The Company has never declared or paid
cash dividends on its capital stock, expects to retain future earnings, if any,
for use in the operation and expansion of its business, and does not anticipate
paying any cash dividends in the foreseeable future. See "Dividend Policy." In
the event of the liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets legally
available for distribution after payment of all debts and other liabilities and
subject to the prior rights of any holders of Preferred Stock then outstanding.
PREFERRED STOCK
The Company's Board of Directors is authorized to issue 10,000,000 shares
of Preferred Stock in one or more series and to fix the price, rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
a series or the designation of such series, without any further vote or action
by the Company's stockholders. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of delaying, deferring or making more
difficult a change in control of the Company and may adversely affect the market
price of, and the voting and other rights of, the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no current plans to issue any shares
of Preferred Stock.
60
<PAGE> 62
EFFECT OF DELAWARE ANTITAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Antitakeover Law"), which regulates corporate acquisitions. The
Antitakeover Law prevents certain Delaware corporations, including those whose
securities are listed for trading on the Nasdaq National Market System, from
engaging, under certain circumstances in a "business combination" with any
"interested stockholder" for three years following the date that such
stockholder became an interested stockholder. For purposes of the Antitakeover
Law, a "business combination" includes, among other things, a merger or
consolidation involving the Company and the interested shareholder and the sale
of more than ten percent (10%) of the Company's assets. In general, the
Antitakeover Law defines an "interested stockholder" as any entity or person
beneficially owning 15% or more the outstanding voting stock of the Company and
any entity or person affiliated with or controlling or controlled by such entity
or person. A Delaware corporation may "opt out" of the Antitakeover Law with an
express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from
amendments approved by the holders of at least a majority of the Company's
outstanding voting shares. The Company has not "opted out" of the provisions of
the Antitakeover Law. See "Risk Factors -- Antitakeover Effects of Delaware
Law."
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is First Chicago
Trust Company of New York Shareholder Services, 525 Washington Boulevard, Jersey
City, NJ 07310; telephone (201) 324-0014.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no market for the Common Stock and
there is no assurance that a significant public market for the Common Stock will
develop or be sustained after the Offerings. Sales of substantial amounts of
Common Stock in the public market could adversely affect the market price of the
Common Stock and could impair the Company's future ability to raise capital
through the sale of its equity securities.
Upon the closing of the Offerings, the Company will have outstanding
shares of Common Stock based upon shares outstanding as of
, 1997. In addition to the shares of Common Stock
offered hereby ( if the Underwriters' over-allotment options are
exercised in full), as of the effective date of the Registration Statement (the
"Effective Date"), there will be shares of Common Stock outstanding
(excluding shares issuable upon the exercise of outstanding
options), all of which are "restricted" shares (the "Restricted Shares") under
the Securities Act of 1933, as amended (the "Securities Act"). Such Restricted
Shares may be sold only if registered under the Securities Act or sold in
accordance with an available exemption from such registration.
Under Rule 144, a person (or persons whose shares are aggregated in
accordance with the Rule) who has beneficially owned his or her shares for at
least one year, including persons who are affiliates of the Company, will be
entitled to sell, within any three month period a number of shares of Common
Stock that does not exceed the greater of (i) one percent of the then
outstanding number of shares of Common Stock (up to shares of Common
Stock immediately after the consummation of the Offerings) or (ii) the average
weekly trading volume of the shares during the four calendar weeks preceding
each such sale. In addition, sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about the Company. After shares are held for two
years, a person who is not an affiliate of the Company is entitled to sell such
shares under Rule 144 without regard to such volume limitations, or manner of
sale, notice or public information requirements under Rule 144. Sales of shares
by affiliates will continue to be subject to such volume limitations, and manner
of sale, notice and public information requirements.
61
<PAGE> 63
The Company has agreed with the Underwriters not to offer, pledge, sell,
contract to sell, or otherwise dispose of (or enter into any transaction which
is designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company), directly or
indirectly, or announce the offering of, any other shares of Common Stock or any
securities or options convertible into, or exchangeable or exercisable for,
shares of Common Stock for a period of 180 days following the date hereof
without the prior written consent of Salomon Brothers Inc., subject to certain
limited exceptions. In addition, each of the Company's officers, directors and
stockholders has agreed with the Underwriters not to offer, sell, contract to
sell, pledge or otherwise dispose of, or file a registration statement with the
Securities and Exchange Commission in respect of, or establish or increase a put
equivalent position or liquidate or decrease a call equivalent position within
the meaning of Section 16 of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act") with respect to, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for shares of Common
Stock, or publicly announce an intention to effect any such transaction, for a
period of 180 days after the date hereof without the prior written consent of
Salomon Brothers Inc, subject to certain limited exceptions. See "Underwriting."
Beginning one year from the date of the Reorganization, approximately
Restricted Shares of Common Stock subject to the lock-up agreements
will become eligible for sale in the public market pursuant to Rule 144.
The Company plans to grant options to purchase shares prior to
the Offerings. See "Management -- 1997 Stock Plan." The Company intends to file,
within days after the date of this Prospectus, a Form S-8
registration statement under the Securities Act to register shares reserved for
issuance under this stock option plan and shares issuable upon exercise of
outstanding options. Shares of Common Stock issued upon exercise of options
after the effective date of the Form S-8 will be available for sale in the
public market, subject to Rule 144 volume limitations applicable to affiliates
and lock-up agreements.
62
<PAGE> 64
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK
GENERAL
The following is a general discussion of certain United States federal
income and estate tax considerations relating to the ownership and disposition
of Common Stock by a holder who is not a United States person (a "Non-U.S.
Holder"), and who acquires and owns such Common Stock as a capital asset within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). For this purpose, the term "Non-U.S. Holder" is defined as any
person other than (i) a citizen or resident (within the meaning of Section
7701(a)(30) of the Code) of the United States, (ii) a corporation, partnership
or other entity created or organized in the United States or under the laws of
the United States or of any state, (iii) an estate whose income is includible in
gross income for United States federal income tax purposes, regardless of its
source, or (iv) in general, a trust subject to the primary supervision of a
court within the United States and the control of a United States person as
described in Section 7701(b) of the Code. This discussion does not consider
specific facts and circumstances that may be relevant to a particular Non-U.S.
Holder's tax position, does not address all aspects of United States federal
income and estate taxes and does not deal with foreign, state, and local
consequences and United States federal gift taxes that may be relevant to such
Non-U.S. Holders in light of their personal circumstances. Further, it does not
discuss the rules applicable to Non-U.S. Holders subject to special tax
treatment under the federal income tax laws (including but not limited to,
banks, insurance companies, dealers in securities, holders of securities held as
part of a "straddle," "hedge," or "conversion transaction," and persons who
undertake a constructive sale of Common Stock. Furthermore, this discussion is
based on current provisions of the Code, existing and proposed regulations
promulgated thereunder and administrative and judicial interpretations thereof,
all of which are subject to change, possibly on a retroactive basis.
Accordingly, each prospective purchaser of Common Stock is advised to consult a
tax advisor with respect to current and possible future tax consequences of
acquiring, holding, and disposing of Common Stock.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder of Common Stock will be
subject to withholding of United States federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business of
the Non-U.S. Holder within the United States ("United States trade or business
income"). If the dividend is United States trade or business income, the
dividend would be subject to United States federal income tax on a net income
basis at applicable graduated individual or corporate rates and would be exempt
from the 30% withholding tax described above. Any such dividends that are United
States trade or business income received by a foreign corporation may, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
Certain certification and disclosure requirements must be complied with in order
to be exempt from withholding under the United States trade or business income
exemption discussed above.
Under current United States Treasury regulations, dividends paid to a
stockholder at an address in a foreign country are presumed to be paid to a
resident of such country for purposes of the withholding discussed above (unless
the payor has knowledge to the contrary) and, under the current interpretation
of United States Treasury regulations, for purposes of determining the
applicability of a tax treaty rate, unless an applicable tax treaty requires
some other method for determining a stockholder's residence.
Under United States Treasury regulations that are proposed to be effective
for distributions after December 31, 1997 (the "Proposed Regulations"), to
obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder would
generally be required to provide an Internal Revenue Service Form W-8 certifying
such Non-U.S. Holder's entitlement to benefits under a treaty. The Proposed
Regulations would also provide special rules to determine whether, for purposes
of determining the applicability of a tax
63
<PAGE> 65
treaty, dividends paid to a Non-U.S. Holder that is an entity should be treated
as paid to the entity or those holding an interest in that entity. It is not
certain whether, or in what form, the Proposed Regulations will be adopted as
final regulations.
A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to a tax treaty or whose dividends have
otherwise been subjected to withholding in an amount which exceeds such holder's
United States federal income tax liability, may obtain a refund or credit of any
excess amounts withheld by filing an appropriate claim for refund with the
United States Internal Revenue Service (the "Service").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business of such holder in the United States, (ii) in the case of a Non-U.S.
Holder who is a nonresident alien individual and holds the Common Stock as a
capital asset, such holder is present in the United States for 183 or more days
in the taxable year of the sale or other disposition and certain other
conditions are met, (iii) the Non-U.S. Holder is subject to tax pursuant to
provisions of United States tax law that apply to certain expatriates, or (iv)
under certain circumstances, if the Company is or has been during certain time
periods a "U.S. real property holding corporation" for United States federal
income tax purposes. The Company is not and does not anticipate becoming a "U.S.
real property holding corporation" for United States federal income tax
purposes.
FEDERAL ESTATE TAXES
Common Stock that is owned, or treated as owned, by a non-resident alien
individual (as specifically determined under residence rules for United States
federal estate tax purposes) at the time of death or that has been the subject
of certain lifetime transfers will be included in such holder's gross estate for
United States federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the Service and to each Non-U.S. Holder
the amount of dividends paid to such holder and any tax withheld with respect to
such dividends. These information reporting requirements apply regardless of
whether withholding is required. Copies of the information returns reporting
such dividends and withholding may also be made available under the provisions
of an applicable treaty or agreement, to the tax authorities in the country in
which such holder resides.
United States backup withholding tax (which generally is a withholding tax
imposed at the rate of thirty-one percent (31%) on certain payments to persons
that fail to furnish certain information under the United States information
reporting requirements) generally will not apply to dividends paid on Common
Stock to a Non-U.S. Holder at an address outside the United States. Except as
provided below, Non-U.S. Holders will not be subject to backup withholding with
respect to the payment of proceeds from the disposition of Common Stock effected
by the foreign office of a broker; except that if the broker is a United States
person or a "U.S. related person," information reporting (but not backup
withholding) is required with respect to the payment, unless the broker has
documentary evidence in its files that the owner is a Non-U.S. Holder (and the
broker has no actual knowledge to the contrary) and certain other requirements
are met or the holder otherwise establishes an exemption. For this purpose, a
"U.S. related person" is (i) a "controlled foreign corporation" for United
States federal income tax purposes, or (ii) a foreign person 50% or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the collection or payment of such proceeds
(or for such part of the period that the broker has been in existence) is
derived from activities that are effectively connected with the conduct of a
United States trade or business. The payment of the proceeds of a sale of shares
of Common Stock to or through a United States office of a broker is subject to
information reporting and possible backup withholding unless the owner certifies
its non-United States status under penalties of
64
<PAGE> 66
perjury or otherwise establishes an exemption. Backup withholding is not an
additional tax. Any amounts withheld under the backup withholding rules from a
payment to a Non-U.S. Holder will be allowed as a refund or a credit against
such Non-U.S. Holder's United States federal income tax liability, provided that
the required information is furnished to the Service.
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions under which a Non-United States Holder would be subject to
backup withholding in the absence of the required certification.
THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT WITH HIS TAX ADVISOR
WITH RESPECT TO THE UNITED STATES FEDERAL INCOME TAX AND FEDERAL ESTATE TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK, INCLUDING THE
APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN, OR OTHER TAXING
JURISDICTION.
65
<PAGE> 67
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "U.S. Underwriting Agreement") among the Company, the Selling Stockholders
and each of the underwriters named below (the "U.S. Underwriters"), for whom
Salomon Brothers Inc, BancAmerica Robertson Stephens and Cowen & Company are
acting as representatives (the "U.S. Representatives"), the Company and the
Selling Stockholders have agreed to sell to each of the U.S. Underwriters and
each of the U.S. Underwriters has severally agreed to purchase from the Company
and the Selling Stockholders the aggregate number of Shares set forth opposite
its name in the table below.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
-------------------------------------------------------- ---------
<S> <C>
Salomon Brothers Inc ...................................
BancAmerica Robertson Stephens..........................
Cowen & Company.........................................
---------
Total.........................................
=========
</TABLE>
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters to purchase the Shares listed above are subject to certain
conditions set forth therein. The U.S. Underwriters are committed to purchase
all of the Shares offered by this Prospectus (other than those covered by the
over-allotment options described below), if any are purchased. In the event of
default by any U.S. Underwriter, the U.S. Underwriting Agreement provides that,
in certain circumstances, the purchase commitments of the non-defaulting U.S.
Underwriters may be increased or the U.S. Underwriting Agreement may be
terminated.
The U.S. Representatives have advised the Company and the Selling
Stockholders that the U.S. Underwriters propose initially to offer such Shares
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and to certain dealers at such price less a discount not in
excess of $ per share. The U.S. Underwriters may allow, and such
dealers may reallow, a discount not in excess of $ per share on sales
to certain other dealers. After the Offerings, the public offering price and
such discounts may be changed.
The Company and the Selling Stockholders also have entered into an
underwriting agreement (the "International Underwriting Agreement") with the
International Underwriters named therein, for whom Salomon Brothers
International Limited, BancAmerica Robertson Stephens and Cowen & Company are
acting as representatives (the "International Representatives" and, together
with the U.S. Representatives, the "Representatives"), providing for the
concurrent offer and sale of of the Shares outside the U.S. and
Canada.
The closing with respect to the sale of the Shares pursuant to the U.S.
Underwriting Agreement is a condition to the closing with respect to the sale of
the Shares pursuant to the International Underwriting Agreement, and the closing
with respect to the sale of Shares pursuant to the International Underwriting
Agreement is a condition to the closing with respect to the sale of the Shares
pursuant to the U.S. Underwriting Agreement. The initial public offering price
and underwriting discounts per share for the U.S. Offering and the International
Offering will be identical.
Each U.S. Underwriter has severally agreed that, as part of the
distribution of the Shares by the U.S. Underwriters, (i) it is not purchasing
any Shares for the account of anyone other than a United States or Canadian
Person, (ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any Shares or distribute any Prospectus relating to the U.S.
Offering to any person outside of the United States or Canada, or to anyone
other than a United States or Canadian Person and (iii) any dealer to whom it
may sell any Shares will represent that it is not purchasing for the account of
anyone other than a United States or Canadian Person and agree that it will not
offer or resell, directly or indirectly, any Shares outside of the United States
or Canada, or to anyone other than a United States or Canadian Person or to any
other dealer who does not so represent and agree.
66
<PAGE> 68
Each International Underwriter has severally agreed that, as part of the
distribution of the Shares by the International Underwriters, (i) it
is not purchasing any Shares for the account of any United States or Canadian
Person, (ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any Shares or distribute any Prospectus to any person in the United
States or Canada, or to any United States or Canadian Person and (iii) any
dealer to whom it may sell any Shares will represent that it is not purchasing
for the account of any United States or Canadian Person and agree that it will
not offer or resell, directly or indirectly, any Shares in the United States or
Canada, or to any United States or Canadian Person or to any other dealer who
does not so represent and agree.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement Between U.S. Underwriters
and International Underwriters. "United States or Canadian Persons" means any
person who is a national or resident of the United States or Canada, any
corporation, partnership or other entity created or organized in or under the
laws of the United States or Canada or of any political subdivision thereof, and
any estate or trust the income of which is subject to United States or Canadian
federal income taxation, regardless of its source (other than a foreign branch
of such entity) and includes any United States or Canadian branch of a person
other than a United States or Canadian Person.
Each U.S. Underwriter that will offer or sell shares of Common Stock in
Canada as part of the distribution has severally agreed that such offers and
sales will be made only pursuant to an exemption from the prospectus
requirements in each jurisdiction in Canada in which such offers and sales are
made.
Pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, sales may be made between the U.S. Underwriters and the
International Underwriters of such number of Shares as may be mutually agreed.
The price of any Shares so sold shall be the initial public offering price set
forth on the cover page of this Prospectus, less an amount not greater than the
concession to securities dealers set forth above. To the extent that there are
sales between the International Underwriters and the U.S. Underwriters pursuant
to the Agreement Between U.S. Underwriters and International Underwriters, the
number of Shares initially available for sale by the U.S. Underwriters or by the
International Underwriters may be more or less than the amount specified on the
cover page of this Prospectus.
Each International Underwriter has severally represented and agreed that
(i) it has not offered or sold and, prior to the expiration of six months from
the closing of the International Offering, will not offer or sell any
International Securities in the United Kingdom other than to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (whether as principal or agent) for the purposes of their businesses
or otherwise in circumstances which have not resulted in and will not result in
an offer to the public within the meaning of the Public Offers of Securities
Regulations 1995; (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act of 1986 with respect to anything done
by it in relation to the International Securities in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the International Securities to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.
The Company has granted to the U.S. Underwriters and the International
Underwriters options to purchase up to an additional and
Shares, respectively, at the price to public less the underwriting discount set
forth on the cover page of this Prospectus, solely to cover over-allotments, if
any. Such options may be exercised at any time up to 30 days after the date of
this Prospectus. To the extent such options are exercised, each of the U.S.
Underwriters and the International Underwriters will become obligated, subject
to certain conditions, to purchase approximately the same percentage of such
additional shares of Common Stock as the percentage it was obligated to purchase
pursuant to the U.S. Underwriting Agreement or the International Underwriting
Agreement, as applicable.
The Company has agreed with the Underwriters not to offer, pledge, sell,
contract to sell, or otherwise dispose of (or enter into any transaction which
is designed to, or could be expected to, result
67
<PAGE> 69
in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any affiliate
of the Company or any person in privity with the Company or any affiliate of the
Company), directly or indirectly, or announce the offering of, any other shares
of Common Stock or any securities or options convertible into, or exchangeable
or exercisable for, shares of Common Stock for a period of 180 days following
the date hereof without the prior written consent of Salomon Brothers Inc,
subject to certain limited exceptions. In addition, each of the Company's
officers, directors and stockholders has agreed with the Underwriters not to
offer, sell, contract to sell, pledge or otherwise dispose of, or file a
registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Exchange Act
with respect to any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock, or publicly announce an
intention to effect any such transaction, for a period of 180 days after the
date hereof without the prior written consent of Salomon Brothers Inc, subject
to certain limited exceptions. Salomon Brothers Inc currently does not intend to
release any securities subject to such lock-up agreements, but may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to such lock-up agreements.
The U.S. Underwriting Agreement and the International Underwriting
Agreement provide that the Company and the Selling Stockholders will indemnify
the several U.S. Underwriters and International Underwriters against certain
liabilities under the Securities Act, or contribute to payments the U.S.
Underwriters and the International Underwriters may be required to make in
respect thereof.
Salomon Brothers Inc, an affiliate thereof, Mr. James Kim and AICL are
among the principal shareholders to a securities and investment banking firm in
Korea. In addition, certain of the Underwriters and their affiliates have been
engaged from time to time, and may in the future be engaged, to perform
investment banking and other advisory-related services to the Company and its
affiliates, including certain of the Selling Stockholders, in the ordinary
course of business. In connection with rendering such services in the past, such
Underwriters and affiliates have received customary compensation, including
reimbursement of related expenses.
In connection with the Offerings, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offerings than
they are committed to purchase from the Company and the Selling Stockholders,
and in such case may purchase Common Stock in the open market following
completion of the Offerings to cover all or a portion of such short position.
The Underwriters may also cover all or a portion of such short position, up to
shares of Common Stock, by exercising the Underwriters' over-allotment
options referred to above. In addition, the Representatives, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements with the
Underwriters whereby it may reclaim from an Underwriter (or dealer participating
in the Offerings), for the account of the other Underwriters, the selling
concession with respect to Common Stock that is distributed in the Offerings but
subsequently purchased for the account of the Underwriters in the open market.
Any of the transactions described in this paragraph may result in the
maintenance of the price of the Common Stock at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are undertaken, they may be discontinued at
any time.
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to the Offerings, there has been no public market for the Common
Stock. Accordingly, the initial public offering price for the Common Stock will
be determined by negotiation among the Company, the Selling Stockholders and the
Representatives. Among the factors considered in determining the initial
68
<PAGE> 70
public offering price will be the Company's record of operations, its current
financial condition, its future prospects, the market for its services, the
experience of management, the economic conditions of the Company's industry in
general, the general condition of the equity securities market and the demand
for similar securities of companies considered comparable to the Company and
other relevant factors. There can be no assurance, however, that the prices at
which the Common Stock will sell in the public market after the Offerings will
not be lower than the price at which the Shares are sold by the Underwriters.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Cleary, Gottlieb, Steen & Hamilton, New York, New York, is
acting as counsel for the Underwriters in connection with certain legal matters
relating to the Shares of Common Stock offered hereby.
EXPERTS
The consolidated financial statements and schedule of the Company as of
December 31, 1995 and 1996 and June 30, 1997, and for each of the years in the
three-year period ended December 31, 1996 and for the six month period ended
June 30, 1997, included in this Registration Statement (as defined below) have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report dated , 1997 with respect thereto, and are
included herein, in reliance upon the authority of said firm as experts in
giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement and the exhibits and schedules filed as a part
thereof. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete. In each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, and each such statement is qualified in
all respects by such reference. The Registration Statement, including exhibits
and schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Seven World
Trade Center, Suite 1300, New York, New York 10048 and Northwestern Atrium
Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates
and through the National Association of Securities Dealers, Inc. located at 1735
K Street, N.W., Washington, D.C. 20006. The Commission maintains a World Wide
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov.
69
<PAGE> 71
GLOSSARY
ASIC....................... Application Specific Integrated Circuit. A
custom-designed integrated circuit that performs
specific functions which would otherwise require a
number of off-the-shelf integrated circuits to
perform. The use of an ASIC in place of a
conventional integrated circuit reduces product
size and cost and also improves reliability.
BGA........................ Ball grid array.
Bus........................ A common pathway, or channel, between multiple
devices.
CMOS....................... Complementary Metal Oxide Silicon. Currently the
most common integrated circuit fabrication process
technology, CMOS is one of the latest fabrication
techniques to use metal oxide semiconductor
transistors.
DAC........................ Digital Analog Converter. A device that converts
digital pulses into analog signals.
Die........................ A piece of a semiconductor wafer containing the
circuitry of a single chip.
DRAM....................... Dynamic Random Access Memory. A type of volatile
memory product that is used in electronic systems
to store data and program instructions. It is the
most common type of RAM and must be refreshed with
electricity thousands of times per second or else
it will fade away.
DSP........................ Digital Signal Processor. A type of integrated
circuit that processes and manipulates digital
information after it has been converted from an
analog source.
EEPROM..................... Electrically Erasable and Programmable Read-Only
Memory. A form of non-volatile memory that can be
erased electronically before being reprogrammed.
EPROM...................... Erasable Programmable Read-Only Memory. A
programmable and reusable chip that holds its
content until erased under ultraviolet light.
Ethernet................... A type of local area network (LAN). Most widely
used LAN access method.
Flash Memory............... A type of non-volatile memory, similar to an EEPROM
in that it is erasable and reprogrammable.
FlipChip................... Package type where silicon die is attached to the
packaging substrate using solder balls instead of
wires. See "Business -- Products."
GPS........................ Global Positioning System. A system for identifying
earth locations.
GUI........................ Graphical User Interface. A graphics-based user
interface that incorporates icons, pull-down menus
and a mouse.
IC......................... Integrated Circuit. A combination of two or more
transistors on a base material, usually silicon.
All semiconductor chips, including memory chips and
logic chips, are just very complicated ICs with
thousands of transistors.
Input/Output............... A connector which interconnects the chip to the
package or one package level to the next level in
the hierarchy. Also referred to as pin out
connections or terminals.
ISDN....................... Integrated Services Digital Network. An
international telecommunications standard for
transmitting voice, video and data over digital
lines running at 64 Kbps.
Logic Device............... A device that contains digital integrated circuits
that process, rather than store, information.
70
<PAGE> 72
Mask....................... A piece of glass on which an IC's circuitry design
is laid out. Integrated circuits may require up to
20 different layers of design, each with its own
mask. In the IC production process, a light shines
through the mask leaving an image of the design on
the wafer. Also known as a reticle.
Mask....................... A piece of glass on which an IC's circuitry design
is laid out. In the IC production process, a light
shines through the mask leaving an image of the
design on the wafer. Also known as a reticle.
MBGA....................... Micro Ball Grid Array. See "Business -- Products."
Micron..................... 1/25,000 of an inch. Circuitry on an IC typically
follows lines that are less than one micron wide.
MOS........................ A device which consists of three layers (metal,
oxide and semiconductors) and operates as a
transistor.
MQFP....................... Metric Quad Flat Package. See
"Business -- Products."
PBGA....................... Plastic Ball Grid Array. See
"Business -- Products."
PC......................... Personal Computer.
PCMCIA..................... Standard for connecting peripherals to computers.
PDA........................ Personal Digital Assistant.
PDIP....................... Plastic Dual In-Line Packages. See
"Business -- Products."
Photolithography........... A lithographic technique used to transfer the
design of the circuit paths and electronic elements
on a chip onto a wafer's surface.
PLCC....................... Plastic Leaded Chip Carrier. See
"Business -- Products."
PLD........................ A logic chip that is programmed at the customer's
site.
PQFP....................... Plastic Quad Flat Packages. See
"Business -- Products."
RF......................... Radio Frequency. The range of electromagnetic
frequencies above the audio range and below visible
light.
SIP........................ Single In-Line Package. See "Business -- Products."
SOIC....................... Small Outline IC Packages. See
"Business -- Products."
SRAM....................... Static Random Access Memory. A type of volatile
memory product that is used in electronic systems
to store data and program instructions. Unlike the
more common DRAM, it does not need to be refreshed.
SSOP....................... Shrink Small Outline Packages. See
"Business -- Products."
Surface Mount Technology... A circuit board packaging technique in which the
leads (pins) on the chips and components are
soldered on top of the board.
TQFP....................... Thin Quad Flat Packages. See
"Business -- Products."
TSOP....................... Thin Small Outline Packages. See
"Business -- Products."
TSSOP...................... Thin Shrink Small Outline Packages. See
"Business -- Products."
Wafer...................... Thin, round, flat piece of silicon that is the base
of most integrated circuits.
Wire Bonding............... The method used to attach very fine wire to
semiconductor components in order to provide
electrical continuity between the semiconductor die
and a terminal.
71
<PAGE> 73
AMKOR TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Statements of Income -- Years ended December 31, 1994, 1995 and 1996 and
Six months ended June 30, 1996 (unaudited) and 1997................................. F-3
Consolidated Balance Sheets -- December 31, 1995 and 1996 and June 30, 1997........... F-4
Consolidated Statements of Stockholders' Equity -- Years ended December 31, 1994, 1995
and 1996 and Six months ended June 30, 1997......................................... F-5
Consolidated Statements of Cash Flows -- Years ended December 31, 1994, 1995 and 1996
and Six months ended June 30, 1996 (unaudited) and 1997............................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 74
After the Exchange transaction discussed in Note 1 and the issuance of
shares of common stock of the Company to Amkor Industrial Co., Ltd. in exchange
for its 40% interest in AAPI as discussed in Note 15 to the Amkor Technology,
Inc. and subsidiaries' consolidated financial statements is effected, we expect
to be in position to render the following audit report.
October 2, 1997 ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amkor Technology, Inc.:
We have audited the accompanying consolidated balance sheets of Amkor
Technology, Inc. and subsidiaries (see Note 1) as of December 31, 1995 and 1996,
and June 30, 1997, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996 and the six months ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amkor
Technology, Inc. and subsidiaries as of December 31, 1995 and 1996, and June 30,
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 and the six months ended June
30, 1997, in conformity with generally accepted accounting principles.
Philadelphia, Pa.,
, 1997
F-2
<PAGE> 75
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------------- ----------------------
1994 1995 1996 1996 1997
-------- -------- ---------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET REVENUES......................... $572,918 $932,382 $1,171,001 $ 542,590 $663,489
COST OF REVENUES..................... 514,648 783,335 1,022,078 462,346 586,541
-------- -------- ---------- -------- --------
Gross profit....................... 58,270 149,047 148,923 80,244 76,948
-------- -------- ---------- -------- --------
OPERATING EXPENSES:
Selling, general and
administrative.................. 41,337 55,459 66,625 29,700 47,265
Research and development........... 3,090 8,733 10,930 4,857 3,515
-------- -------- ---------- -------- --------
Total operating expenses........ 44,427 64,192 77,555 34,557 50,780
-------- -------- ---------- -------- --------
OPERATING INCOME..................... 13,843 84,855 71,368 45,687 26,168
-------- -------- ---------- -------- --------
OTHER (INCOME) EXPENSE:
Interest expense, net.............. 5,752 9,797 22,245 6,509 16,355
Foreign currency translation....... (4,865) 1,512 2,961 (1,845) 101
Other (income) expense, net........ (2,639) 6,523 3,150 4,705 1,287
-------- -------- ---------- -------- --------
Total other (income) expense.... (1,752) 17,832 28,356 9,369 17,743
-------- -------- ---------- -------- --------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST.................. 15,595 67,023 43,012 36,318 8,425
PROVISION FOR INCOME TAXES........... 2,977 6,384 7,876 6,650 2,689
-------- -------- ---------- -------- --------
INCOME BEFORE MINORITY INTEREST...... 12,618 60,639 35,136 29,668 5,736
MINORITY INTEREST.................... 1,044 1,515 948 35 1,858
-------- -------- ---------- -------- --------
NET INCOME........................... $ 11,574 $ 59,124 $ 34,188 $ 29,633 $ 3,878
======== ======== ========== ======== ========
PRO FORMA DATA (UNAUDITED):
Historical income before income
taxes and minority interest..... $ 15,595 $ 67,023 $ 43,012 $ 36,318 $ 8,425
Pro forma provision for income
taxes........................... 3,177 16,784 10,776 9,150 5,389
-------- -------- ---------- -------- --------
Pro forma income before minority
interest........................ 12,418 50,239 32,236 27,168 3,036
Historical minority interest....... 1,044 1,515 948 35 1,858
-------- -------- ---------- -------- --------
Pro forma net income............... $ 11,374 $ 48,724 $ 31,288 $ 27,133 $ 1,178
======== ======== ========== ======== ========
Pro forma net income per common
share........................... $ .14 $ .59 $ .38 $ .33 $ .01
======== ======== ========== ======== ========
Shares used in computing pro forma
net income per common share..... 82,610 82,610 82,610 82,610 82,610
======== ======== ========== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 76
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1997
---------------------- ----------------------
1995 1996 ACTUAL PRO FORMA
-------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................ $ 91,151 $ 49,664 $ 60,943 $ 49,143
Short-term investments................... -- 881 3,794 3,794
Accounts receivable --
Trade, net of allowance for doubtful
accounts of $1,043, $1,179 and
$1,979.............................. 135,174 170,892 190,250 190,250
Due from affiliates................... 13,315 26,886 20,061 20,061
Other................................. 5,464 6,426 8,153 8,153
Inventories.............................. 86,040 101,920 117,096 117,096
Other current assets..................... 10,214 8,618 14,018 14,018
-------- -------- -------- --------
Total current assets................ 341,358 365,287 414,315 402,515
-------- -------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, net......... 200,426 324,895 395,793 395,793
-------- -------- -------- --------
INVESTMENTS................................ 66,613 61,993 72,903 72,903
-------- -------- -------- --------
LONG-TERM NOTES RECEIVABLE................. 1,626 8,711 12,628 12,628
-------- -------- -------- --------
OTHER ASSETS:
Due from affiliates...................... 10,090 14,638 15,566 15,566
Other.................................... 15,755 22,089 22,452 22,452
-------- -------- -------- --------
25,845 36,727 38,018 38,018
-------- -------- -------- --------
Total assets........................ $635,868 $797,613 $933,657 $ 921,857
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion
of long-term debt..................... $ 85,120 $191,813 $240,829 $ 240,829
Trade accounts payable................... 87,113 56,055 116,375 116,375
Due to affiliate......................... 18,028 33,379 17,961 17,961
Bank overdraft........................... 16,251 14,518 13,965 13,965
Accrued expenses......................... 18,250 19,899 18,093 18,093
Accrued income taxes..................... 5,404 12,838 13,553 13,553
-------- -------- -------- --------
Total current liabilities........... 230,166 328,502 420,776 420,776
-------- -------- -------- --------
LONG-TERM DEBT............................. 107,385 167,444 158,802 158,802
-------- -------- -------- --------
DUE TO AFFILIATE........................... 219,037 234,894 278,120 278,120
-------- -------- -------- --------
OTHER NONCURRENT LIABILITIES............... 10,435 9,530 9,911 19,911
-------- -------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 1 and
13)
MINORITY INTEREST.......................... 14,067 18,683 20,500 20,500
-------- -------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock............................. 46 46 46 46
Additional paid-in capital............... 16,494 16,770 22,301 34,001
Retained earnings (deficit).............. 28,338 30,798 29,615 (3,885)
Unrealized gains (losses) on
investments........................... 9,584 (7,959) (4,258) (4,258)
Cumulative translation adjustment........ 316 (1,095) (2,156) (2,156)
-------- -------- -------- --------
Total stockholders' equity.......... 54,778 38,560 45,548 23,748
-------- -------- -------- --------
Total liabilities and stockholders'
equity........................... $635,868 $797,613 $933,657 $ 921,857
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 77
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL CUMULATIVE GAINS
COMMON PAID-IN RETAINED TRANSLATION (LOSSES) ON
STOCK CAPITAL EARNINGS ADJUSTMENT INVESTMENTS TOTAL
------ ---------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994............ $ 46 $ 16,494 $ (7,060) $ (1,410) $ -- $ 8,070
Net income.......................... -- -- 11,574 -- -- 11,574
Distributions....................... -- -- (3,120) -- -- (3,120)
Change in division equity account... -- -- (7,753) -- -- (7,753)
Unrealized loss on investments...... -- -- -- -- (35) (35)
Currency translation adjustments.... -- -- -- 881 -- 881
--- ------- -------- ------- -------- --------
BALANCE AT DECEMBER 31, 1994.......... 46 16,494 (6,359) (529) (35) 9,617
Net income.......................... -- -- 59,124 -- -- 59,124
Distributions....................... -- -- (19,922) -- -- (19,922)
Change in division equity account... -- -- (4,505) -- -- (4,505)
Unrealized gain on investments...... -- -- -- -- 9,619 9,619
Currency translation adjustments.... -- -- -- 845 -- 845
--- ------- -------- ------- -------- --------
BALANCE AT DECEMBER 31, 1995.......... 46 16,494 28,338 316 9,584 54,778
Net income.......................... -- -- 34,188 -- -- 34,188
Distributions....................... -- -- (15,123) -- -- (15,123)
Change in division equity account... -- -- (16,605) -- -- (16,605)
Unrealized loss on investments...... -- -- -- -- (17,543) (17,543)
Currency translation adjustments.... -- -- -- (1,411) -- (1,411)
Acquisition of AATS (Note 2)........ -- 276 -- -- -- 276
--- ------- -------- ------- -------- --------
BALANCE AT DECEMBER 31, 1996.......... 46 16,770 30,798 (1,095) (7,959) 38,560
Net income.......................... -- -- 3,878 -- -- 3,878
Distributions....................... -- -- (5,061) -- -- (5,061)
Change in division equity account... -- 5,531 -- -- -- 5,531
Unrealized gain on investments...... -- -- -- -- 3,701 3,701
Currency translation adjustments.... -- -- -- (1,061) -- (1,061)
--- ------- -------- ------- -------- --------
BALANCE AT JUNE 30, 1997.............. $ 46 $ 22,301 $ 29,615 $ (2,156) $(4,258) $ 45,548
=== ======= ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 78
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------------------- ---------------------
1994 1995 1996 1996 1997
--------- ----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................. $ 11,574 $ 59,124 $ 34,188 $ 29,633 $ 3,878
Adjustments to reconcile net income to net cash
provided by (used in) operating activities --
Depreciation and amortization........................ 14,612 26,614 57,825 25,883 42,766
Provision for accounts receivable.................... 1,037 444 1,271 340 800
Provision for excess and obsolete inventory.......... 500 1,000 500 250 3,700
Deferred income taxes................................ 1,517 (1,147) (324) (286) (1,982)
Equity (gain) loss of investee....................... (2,605) 95 (661) (322) (1,022)
(Gain) loss on sale of investments................... (1,700) 126 (139) -- --
Minority interest.................................... 1,044 1,515 948 35 1,858
Changes in assets and liabilities excluding effects of
acquisitions --
Accounts receivable.................................. (31,565) (53,264) (36,695) (9,342) (20,158)
Other receivables.................................... 1,462 (2,565) (925) (5,086) (1,727)
Inventories.......................................... (18,885) (32,668) (16,380) (11,740) (18,876)
Due to/from affiliates, net.......................... (17,465) (8,375) (2,768) (25,035) (8,105)
Other current assets................................. (3,377) (4,764) 1,694 (999) (3,490)
Other non-current assets............................. (7,426) (724) (6,108) (1,762) (882)
Accounts payable..................................... 27,428 45,574 (31,065) (23,561) 60,319
Accrued expenses..................................... (3,143) 7,130 1,555 (3,332) (1,806)
Accrued taxes........................................ 1,000 404 7,433 11,226 716
Other long-term liabilities.......................... (562) 9,034 (108) (9,117) 903
Other, net............................................. 205 -- 3,750 3,750 --
--------- ----------- ----------- --------- ---------
Net cash provided by (used in) operating
activities.................................... (26,349) 47,553 13,991 (19,463) 56,892
--------- ----------- ----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, including
purchase of AATS..................................... (68,926) (123,645) (185,112) (65,212) (114,439)
Sale of property, plant and equipment.................. 2,429 110 2,228 -- 858
Purchases of investments and issuances of notes
receivable........................................... (15,298) (19,351) (21,068) (19,141) (14,092)
Proceeds from sale of investments...................... 8,284 351 520 -- --
--------- ----------- ----------- --------- ---------
Net cash used in investing activities........... (73,511) (142,535) (203,432) (84,353) (127,673)
--------- ----------- ----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank overdrafts and current debt......... (19,483) 41,308 104,901 (5,889) 48,463
Proceeds from issuance of affiliate debt............... 820,027 1,059,759 1,205,174 610,119 432,644
Payments of affiliate debt............................. (627,056) (1,052,415) (1,189,317) (598,423) (390,834)
Proceeds from issuance of long-term debt............... 82,355 50,080 62,144 71,250 10,056
Payments of long-term debt............................. (39,029) (3,021) (3,138) (1,529) (18,698)
Distributions to stockholders.......................... (3,200) (20,003) (15,205) (103) (5,102)
Change in division equity account...................... (7,753) (4,505) (16,605) (4,136) 5,531
--------- ----------- ----------- --------- ---------
Net cash provided by financing activities....... 205,861 71,203 147,954 71,289 82,060
--------- ----------- ----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 106,001 (23,779) (41,487) (32,527) 11,279
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........... 8,929 114,930 91,151 91,151 49,664
--------- ----------- ----------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................. $ 114,930 $ 91,151 $ 49,664 $ 58,624 $ 60,943
========= =========== =========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for --
Interest............................................. $ 6,641 $ 12,594 $ 24,125 $ 9,033 $ 28,696
Income taxes......................................... 364 495 2,256 2,997 329
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 79
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Amkor Technology, Inc. and
subsidiaries ("Amkor" or the "Company") include the accounts of the following
(these companies are referred to as the "Amkor Companies"):
- Amkor Electronics, Inc. ("AEI"), a U.S. S Corporation;
- AK Industries, Inc. (a U.S. Corporation) and its wholly-owned subsidiary,
Amkor-Anam, Inc. (a U.S. Corporation);
- T.L. Limited (a British Cayman Island Corporation) and its Philippine
subsidiaries, Amkor Anam Advanced Packaging, Inc. ("AAAP") and Amkor/Anam
Pilipinas, Inc. ("AAPI") (which is currently owned 60% by T.L. Limited
and 40% by Anam Industrial Co., Ltd. ("AICL" -- see Notes 11 and 15)) and
its wholly-owned subsidiary Automated Microelectronics, Inc. ("AMI");
- C.I.L., Limited (a British Cayman Island Corporation) and its
wholly-owned subsidiary Amkor/Anam Euroservices S.A.R.L. (a French
Corporation);
- Amkor Anam Test Services, Inc. (a U.S. Corporation) (see Note 2); and
- The semiconductor packaging and test business unit of Chamterry
Enterprises, Ltd.
Each of the Amkor Companies is under common control and management. In
connection with the Offerings (see Note 15), on September 26, 1997 the Company
was formed as a holding company for the Amkor Companies. On , 1997
prior to the effective date of the Offerings, the stockholders of the Amkor
Companies contributed all of their interests in the respective Amkor Companies
to the Company in exchange for 82,610 shares of common stock of the Company (the
"Exchange"). In addition, AICL exchanged its 40% interest in AAPI for 2,390
shares of the Company's common stock.
The financial statements reflect the elimination of all significant
intercompany accounts and transactions.
The investments in and the operating results of 20% to 50% owned companies
are included in the consolidated financial statements using the equity method of
accounting.
NATURE OF OPERATIONS
The Company provides semiconductor packaging and test services to
semiconductor and computer manufacturers located in strategic markets throughout
the world. Such services are provided by the Company and by AICL under a long
standing arrangement. Approximately 80%, 79%, 72% and 68% of the Company's
packaging and test revenues in 1994, 1995, 1996 and the six months ended June
30, 1997, respectively relate to the packaging and test services provided by
AICL.
CONCENTRATIONS OF CREDIT RISK
Financial instruments, for which the Company is subject to credit risk,
consist principally of trade receivables. This risk is mitigated by sales to
well established companies, ongoing credit evaluation and frequent contact with
customers.
F-7
<PAGE> 80
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
At December 31, 1995 and 1996, and June 30, 1997, the Company maintained
$79,354, $34,330 and $28,053 respectively in deposits at one U.S. financial
institution and $3,518, $1,993 and $15,688 respectively in deposits at one U.S.
bank.
Additionally, the Company maintained deposits and certificates of deposits
totaling approximately $8,166, $14,649 and $16,113 at foreign owned banks at
December 31, 1995 and 1996 and June 30, 1997, respectively.
SIGNIFICANT CUSTOMERS
The Company has a number of major customers in North America, Asia and
Europe. The Company's largest customer, Intel Corporation, accounted for 10.6%,
13.3%, 23.5% and 21.2% of net revenues in 1994, 1995 and 1996 and the six months
ended June 30, 1997, respectively. The Company's five largest customers
collectively accounted for 33.5%, 34.1%, 39.2% and 37.3% of net revenues in
1994, 1995, 1996 and for the six months ended June 30, 1997, respectively. The
Company anticipates that significant customer concentration will continue for
the foreseeable future, although the companies which constitute the Company's
largest customers may change.
RISKS AND UNCERTAINTIES
The Company's future results of operations involve a number of risks and
uncertainties. Factors that could affect the Company's future operating results
and cause actual results to vary materially from expectations include, but are
not limited to, dependence on the highly cyclical nature of both the
semiconductor and the personal computer industries, competitive pricing and
declines in average selling prices, risks associated with leverage, dependence
on the Company's relationship with AICL (see Note 11), reliance on a small group
of principal customers, timing and volume of orders relative to the Company's
production capacity, availability of manufacturing capacity and fluctuations in
manufacturing yields, availability of financing, competition, dependence on
international operations and sales, dependence on raw material and equipment
suppliers, exchange rate fluctuations, dependence on key personnel, difficulties
in managing growth, enforcement of intellectual property rights, environmental
regulations and fluctuations in quarterly operating results.
FOREIGN CURRENCY TRANSLATION
All of the Company's foreign subsidiaries use the U.S. dollar as their
functional currency. Accordingly, their monetary assets and liabilities are
translated into U.S. dollars at year-end exchange rates and non-monetary items
are translated at historical rates. Certain expenses are translated at the
average monthly exchange rates during the year, however, revenues, cost of
revenues and depreciation are translated at historical rates. Transaction gains
and losses for transactions denominated in local currency are included in Other
(income) expense, net. The cumulative translation adjustment reflected in
Stockholders' Equity in the consolidated balance sheets relates to investments
in unconsolidated companies which use the local currency as the functional
currency (see Note 6).
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
F-8
<PAGE> 81
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
principally by using a moving average method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is
calculated by the straight-line method over the estimated useful lives of
depreciable assets. Accelerated methods are used for tax purposes. Depreciable
lives follow:
<TABLE>
<S> <C>
Building improvements....................................... 10 to 15 years
Machinery and equipment..................................... 3 to 5 years
Furniture, fixtures, and other equipment.................... 3 to 10 years
</TABLE>
Cost and accumulated depreciation for property retired or disposed of are
removed from the accounts and any resulting gain or loss is included in
earnings. Expenditures for maintenance and repairs are charged to expense as
incurred. Depreciation expense was $15,349, $27,381, $58,497 and $42,620 for
1994, 1995 and 1996 and for the six months ended June 30, 1997, respectively.
OTHER NONCURRENT ASSETS
Other noncurrent assets consist principally of security deposits, deferred
income taxes and the cash surrender value of life insurance.
OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities consist primarily of pension obligations and
noncurrent income taxes payable.
INCOME TAXES
The Company accounts for income taxes following the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which requires the use of the liability method. If it is more likely than not
that some portion or all of a deferred tax asset will not be realized, a
valuation allowance is provided.
The Company reports certain income and expense items for income tax
purposes on a basis different from that reflected in the accompanying
consolidated financial statements. The principal differences relate to the
timing of the recognition of accrued expenses which are not deductible for
federal income tax purposes until paid and the use of accelerated methods of
depreciation for income tax purposes.
AEI elected to be taxed as an S Corporation under the provisions of the
Internal Revenue Code of 1986 and comparable state tax provisions. As a result,
AEI does not recognize U.S. federal corporate income taxes. Instead, the
stockholders of AEI are taxed on their proportionate share of the Company's
taxable income. Accordingly, no provision for U.S. federal income taxes was
recorded for AEI . Given the pending Offerings (see Note 15), for informational
purposes, the accompanying consolidated statements of income include an
unaudited pro forma adjustment to reflect income taxes which would have been
recorded if AEI had not been an S Corporation, based on the tax laws in effect
during the respective periods (see Note 16).
F-9
<PAGE> 82
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
EARNINGS PER SHARE
The pro forma net income per common share was calculated by dividing the
pro forma net income by the weighted average number of shares outstanding for
the respective periods, adjusted for the effect of the Exchange (see Note 15).
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings Per Share", which will be effective for the Company in
1997. Primary and fully diluted earnings per share will be replaced by basic and
diluted earnings per share. Prior period results will be restated. The most
significant difference is that the computation of basic earnings per share no
longer assumes potentially dilutive securities are outstanding.
REVENUE RECOGNITION AND RISK OF LOSS
The Company records revenues upon shipment of packaged semiconductors to
its customers. The Company does not take ownership of customer-supplied
semiconductors. Title and risk of loss remains with the customer for these
materials at all times. Risk of loss for Amkor packaging costs passes upon
completion of the packaging process and shipment to the customer. Accordingly,
the cost of the customer-supplied materials is not included in the statement of
income.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expenses as incurred.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." This
statement was effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. SFAS No. 125
provides accounting and reporting standards based on consistent application of a
financial-components approach that focuses on control. Under that approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, and
derecognizes liabilities when extinguished. The Company entered into a
Receivables Sale Agreement subsequent to June 30, 1997 and accounted for the
transaction as a sale under SFAS No. 125 (see Note 15).
INTERIM FINANCIAL STATEMENTS
The financial statements for the six months ended June 30, 1996 are
unaudited and, in the opinion of management of the Company, include all
adjustments (consisting only of normal recurring adjustments) necessary for the
fair presentation of the results for the interim period. The results of
operations for the six months ended June 30, 1997 are not necessarily indicative
of the results to be expected for the full year.
F-10
<PAGE> 83
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. ACQUISITION OF AMKOR ANAM TEST SERVICES, INC.:
On September 30, 1996, AEI and a principal stockholder each acquired 50% of
the outstanding common stock of Amkor Anam Test Services, Inc. (AATS), formerly
Navell Test Consultants, Inc., a provider of test engineering services for the
semiconductor industry located in San Jose, California, for approximately
$2,860. The acquisition was accounted for using the purchase method of
accounting and the results of AATS' operations are included in the Company's
consolidated statements of income effective October 1, 1996. Accordingly, the
total purchase cost has been allocated to the consolidated assets and
liabilities based upon their estimated respective fair values. This acquisition
resulted in goodwill of approximately $2,356, which is being amortized over 20
years.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Land.................................... $ -- $ -- $ 1,263
Building improvements................... 20,248 81,602 87,208
Machinery and equipment................. 204,750 333,188 403,758
Furniture, fixtures and other
equipment............................. 23,613 31,330 29,952
Construction in progress................ 20,371 5,240 23,480
-------- -------- --------
268,982 451,360 545,661
Less -- Accumulated depreciation and
amortization.......................... 68,556 126,465 149,868
-------- -------- --------
$200,426 $324,895 $395,793
======== ======== ========
</TABLE>
4. COMMON STOCK AND ADDITIONAL PAID IN CAPITAL:
The common stock and additional paid-in-capital of the Company are
reflected at the original cost of the Amkor Companies. In connection with the
Exchange, the Company authorized 500,000 shares of $.001 par value common stock,
of which 82,610 shares will be issued to the stockholders of the Amkor Companies
in exchange for their interest in these Companies.
In addition, the Company authorized 10,000 shares of $.001 par value
preferred stock, none of which are outstanding.
Changes in the division equity account reflected in the consolidated
statement of stockholders' equity represent the net cash flow of the
semiconductor packaging and test business unit of Chamterry Enterprises, Ltd.
(see Note 1).
F-11
<PAGE> 84
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INVENTORIES:
Inventories consist of raw materials and purchased components which are
used in the semiconductor packaging process. The Company's inventories are
located at its facilities in the Philippines or at AICL on a consignment basis.
Components of inventories follow:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- JUNE 30,
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Raw materials......................... $79,495 $ 93,112 $108,367
Work-in-process....................... 6,545 8,808 8,729
------- -------- --------
$86,040 $101,920 $117,096
======= ======== ========
</TABLE>
6. INVESTMENTS:
The Company's investments include investments in affiliated companies which
provide services to the Company (see Note 11) and certain other technology based
companies. Investments are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31 JUNE
------------------- 30,
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Equity Investments (20%-50% owned) --
Anam Semiconductor & Technology Co.,
Ltd.................................... $ 8,737 $10,700 $11,197
Datacom International, Inc................ -- 1,335 1,887
Sunrise Capital Fund...................... 1,500 1,328 3,229
------- ------- -------
10,237 13,363 16,313
------- ------- -------
Available for Sale (cost based
investments) --
Anam Industrial Company, Ltd. (AICL)...... 37,127 23,903 30,125
Other..................................... 19,249 24,727 26,465
------- ------- -------
56,376 48,630 56,590
------- ------- -------
$66,613 $61,993 $72,903
======= ======= =======
</TABLE>
The Company had net unamortized investment costs in excess of the
proportionate share of the investee companies' net assets of approximately $347,
$1,284 and $2,118 at December 31, 1995 and 1996 and the six months ended June
30, 1997, respectively. The Company is amortizing this excess amount over
periods between 10 and 40 years.
Subsequent to June 30, 1997, the Company sold its equity investment in Anam
Semiconductor & Technology Co., Ltd. and certain investments and notes
receivable from companies unrelated to the semiconductor packaging and test
business to AK Investments, Inc., an unconsolidated affiliate owned by James J.
Kim, at cost ($49,740) and AK Investments, Inc. assumed $49,740 of the Company's
long-term borrowings from Anam USA, Inc. Management estimates that the fair
value of these investments and notes receivable exceeded the carrying value by
approximately $25,000 at June 30, 1997.
7. SHORT-TERM CREDIT FACILITIES:
At December 31, 1995 and 1996 and June 30, 1997, short-term borrowings
consisted of various operating lines of credit and working capital facilities
maintained by the Company. These borrowings are secured by receivables,
inventories or property. These facilities, which are typically for one-year
renewable terms, generally bear interest at current market rates (approximately
8% at June 30, 1997).
F-12
<PAGE> 85
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
For the years and six month period ended December 31, 1995 and 1996 and June 30,
1997, the weighted average interest rate on these borrowings was 8.0%, 7.8% and
8.3%, respectively. Included in cash and cash equivalents is $1,200 of
certificates of deposit pledged as collateral for certain of these lines. The
unused portion of lines of credit total $17,764 at June 30, 1997.
8. DEBT:
Following is a summary of the Company's short-term borrowings and long-term
debt:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------- JUNE 30,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Short-term borrowings (see Note 7).................... $ 84,620 $150,513 $189,657
Korean Development Bank (KDB) Loan, interest at LIBOR
plus annual spread (6.74% at June 30, 1997), due
October, 2000....................................... 50,000 50,000 50,000
KDB loan, interest at LIBOR plus annual spread (6.9%
at June 30, 1997), due in installments beginning
March, 1998 through April, 2000..................... -- 71,250 71,250
Floating rate notes, interest at LIBOR plus annual
spread (7.38% at June 30, 1997), due February,
2000................................................ 40,000 40,000 40,000
Bank debt, interest at LIBOR plus annual spread (8.54%
at June 30, 1997), due December, 2001............... -- 20,000 20,000
Bank debt, interest at LIBOR plus annual spread (8.54%
at June 30, 1997), due October, 1997................ -- 5,000 5,000
Bank debt, interest at LIBOR plus annual spread (9.14%
at June 30, 1997), due September, 1999.............. -- 4,000 3,750
Bank debt, interest at LIBOR plus annual spread (8.69%
at June 30, 1997), due in equal installments through
January, 2001....................................... -- 5,926 5,926
Note payable, interest at Prime (8.5% at June 30,
1997), due April, 2004.............................. -- -- 3,464
Note payable, interest at LIBOR plus 0.75% (7.31% at
June 30, 1997), due January, 1998................... 12,800 11,000 --
Note payable interest at LIBOR (6.56% at June 30,
1997), due July, 1998............................... -- -- 4,500
Notes payable, interest at LIBOR (6.56% at June 30,
1997), due December, 1999........................... -- -- 5,500
Other, primarily capital lease obligations and other
debt................................................ $ 5,085 $ 1,568 $ 584
--------- --------- ---------
192,505 359,257 399,631
Less -- Current maturities and short-term
borrowings.......................................... (85,120) (191,813) (240,829)
--------- --------- ---------
$107,385 $167,444 $158,802
========= ========= =========
</TABLE>
The KDB loans were obtained to finance the expansion of the Company's
factories in the Philippines. The Company has the option to prepay all or part
of the loans on any interest payment date.
The issued and outstanding Floating Rate Notes (FRNs) were used to repay
then existing short-term foreign currency denominated loans and to finance the
expansion of the Company's factories in the Philippines. The FRNs, which are due
on February 1, 2000, are listed on the Luxembourg Stock Exchange and were issued
in denominations of $500. Interest on the FRNs is payable semi-annually in
arrears in February and August of each year at six-months LIBOR plus an annual
spread. The loans and notes constitute direct, unconditional and unsecured
obligations of the Company which rank pari passu among
F-13
<PAGE> 86
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
themselves and will rank at least pari passu with all other present and future
unsecured and unsubordinated obligations of the Company except for such as may
be preferred by mandatory provisions of applicable law. The FRNs are classified
as current debt because the holder of the FRNs has announced its intention to
redeem, and the Company will repay the FRNs in August, 1997 at their principal
amount. In August, 1997 the Company entered into a three month bridge loan with
a bank for $55,000. The bridge loan was used to repay the FRNs as well as other
debt that was due. The Company expects to enter into a term loan with this bank
prior to the expiration of the bridge loan, which term loan would be used to pay
off the bridge loan.
The KDB loans and FRNs are unconditionally and irrevocably guaranteed by
AICL.
Other bank debt instruments were obtained at interest based on Singapore
interbank rates and LIBOR plus an annual spread. The loans are secured by the
assets of the Company and assets acquired through proceeds from the loans.
Certain instruments contain, among others, provisions pertaining to the
maintenance of specified debt to equity ratios, restrictions with respect to
corporate reorganization, acquisition of capital stock and disposition of all or
a substantial portion of its assets, except in the ordinary course of business.
Annual principal payments required under long-term debt and short-term
borrowings at June 30, 1997 are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Current.......................................... $240,829
1998............................................. 16,706
1999............................................. 37,475
2000............................................. 87,742
2001............................................. 13,051
2002............................................. 49
Thereafter....................................... 3,779
--------
Total.................................. $399,631
========
</TABLE>
F-14
<PAGE> 87
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
9. EMPLOYEE BENEFIT PLANS:
U.S. PENSION PLANS
AEI has a defined contribution benefit plan covering substantially all U.S.
employees under which AEI matches 75% of the employee's contributions of between
6% and 10% of salary, up to a defined maximum on an annual basis. The pension
expense for this plan was $108, $483, $776 and $455 in 1994, 1995, 1996 and the
six months ended June 30, 1997. The pension plan assets are invested primarily
in equity and fixed income securities.
PHILIPPINE PENSION PLANS
AAAP, AAPI and AMI sponsor several defined benefit plans that cover
substantially all employees who are not covered by statutory plans. For defined
benefit plans, charges to expense are based upon costs computed by independent
actuaries.
The components of net periodic pension cost for the defined benefit plans
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
---------------------------- ENDED JUNE
1994 1995 1996 30, 1997
------ ------ ------ -------------
<S> <C> <C> <C> <C>
Service cost of current period................... $ 948 $ 974 $1,542 $ 967
Interest cost on projected benefit obligation.... 623 811 1,228 726
Actual return on plan assets..................... (500) (609) (677) (412)
Net amortization and deferrals................... 97 100 98 61
------ ------ ------ ------
Total pension expense.................. $1,168 $1,276 $2,191 $ 1,342
====== ====== ====== ======
</TABLE>
It is the Company's policy to make contributions sufficient to meet the
minimum contributions required by law and regulation.
The following table sets forth the funded status and the amounts recognized
in the consolidated balance sheets for the defined benefit pension plans:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE
------------------- 30,
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation......................... $ 1,280 $ 1,696 $ 2,148
======= ======= =======
Accumulated benefit obligation.................... $ 1,977 $ 2,848 $ 3,725
======= ======= =======
Actuarial present value of
Projected benefit obligation...................... $ 8,542 $12,699 $13,721
Plan assets at fair value........................... 5,765 6,077 7,832
------- ------- -------
Plan assets less than projected benefit
obligation........................................ (2,777) (6,622) (5,889)
Prior service cost.................................. 1,226 1,125 1,072
Unrecognized net loss............................... -- 1,800 1,186
------- ------- -------
Accrued pension cost................................ $(1,551) $(3,697) $(3,631)
======= ======= =======
</TABLE>
The weighted average interest rate used in determining the projected
benefit obligation was 12% as of December 31, 1995 and 1996 and for the six
months ended June 30, 1997. The rates of increase in future compensation levels
were 11% as of December 31, 1996 and June 30, 1997 and 10% as of December 31,
1995. The expected long-term rate of return on plan assets was 12% as of
December 31, 1995 and 1996 and for the six months ended June 30, 1997.
F-15
<PAGE> 88
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
10. INCOME TAXES:
The provision for income taxes includes federal, state and foreign taxes
currently payable and those deferred because of temporary differences between
the financial statement and the tax bases of assets and liabilities. The
components of the provision for income taxes follow:
<TABLE>
<CAPTION>
FOR THE
SIX
MONTHS
ENDED
FOR THE YEAR ENDED DECEMBER 31, JUNE
-------------------------------- 30,
1994 1995 1996 1997
------- -------- ------- -------
<S> <C> <C> <C> <C>
Current:
Federal.............................. $ 1,277 $ 6,125 $ 5,880 $ 1,235
State................................ 167 908 60 70
Foreign.............................. 16 498 2,260 3,366
------- -------- ------- -------
1,460 7,531 8,200 4,671
------- -------- ------- -------
Deferred:
Federal.............................. (60) (173) (226) (72)
Foreign.............................. 1,577 (974) (98) (1,910)
------- -------- ------- -------
1,517 (1,147) (324) (1,982)
------- -------- ------- -------
Total provision.............. $ 2,977 $ 6,384 $ 7,876 $ 2,689
======= ======== ======= =======
</TABLE>
The reconciliation between the tax payable based upon the U.S. federal
statutory income tax rate and the recorded provision follows:
<TABLE>
<CAPTION>
FOR THE
SIX
MONTHS
ENDED
JUNE
FOR THE YEAR ENDED DECEMBER 31, 30,
-------------------------------- -------
1994 1995 1996 1997
------- -------- ------- -------
<S> <C> <C> <C> <C>
Federal statutory rate................. $ 5,458 $ 23,458 $15,054 $ 2,949
State taxes, net of federal benefit.... 167 908 60 70
S Corp. status of AEI.................. (200) (10,400) (2,900) (2,700)
Difference in rates on foreign
subsidiaries......................... (2,448) (7,582) (4,338) 2,370
------- -------- ------- -------
Total........................ $ 2,977 $ 6,384 $ 7,876 $ 2,689
======= ======== ======= =======
</TABLE>
The Company has structured its global operations to take advantage of lower
tax rates in certain countries and tax incentives extended to encourage
investment. AAPI had a tax holiday in the Philippines which expired in 1995.
AAAP has a tax holiday in the Philippines which expires at the end of 2002. The
Company's tax returns have been examined through 1993 in the Philippines and
through 1994 in the U.S. The recorded provision for open years is subject to
changes upon final examination of these tax returns. Changes in the mix of
income from the Company's foreign subsidiaries, expiration of tax holidays and
changes in tax laws or regulations could result in increased effective tax rates
for the Company.
F-16
<PAGE> 89
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
JUNE
DECEMBER 31, 30,
------------------ -------
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Deferred tax assets (liabilities):
Retirement benefits................................ $ 206 $ 888 $ 1,832
Receivables........................................ 402 344 721
Inventories........................................ 890 1,057 1,230
Unrealized foreign exchange losses................. 612 398 2,056
Unrealized foreign exchange gains.................. (454) (614) (1,762)
Other.............................................. 321 225 195
------ ------ -------
Net deferred tax asset............................. $1,977 $2,298 $ 4,272
====== ====== =======
</TABLE>
Non-U.S. income (loss) before taxes and minority interest of the Company
was $14,390, $23,800, $20,420 and $(2,168) in 1994, 1995, 1996 and the six
months ended June 30, 1997, respectively.
The Company's net deferred tax assets include amounts which management
believes are realizable through future taxable income.
At June 30, 1997, the financial reporting basis of AEI's net assets
exceeded the tax basis of the net assets by approximately $25,400. In connection
with the Offerings, the Company and the stockholders of AEI will enter into a
Tax Indemnification Agreement providing that the Company and AEI will be
indemnified by such stockholders, with respect to their proportionate share of
any federal or state corporate income taxes attributable to the failure of AEI
to qualify as an S Corporation for any period or in any jurisdiction for which S
Corporation status was claimed through the date AEI terminates its S Corporation
status. The Tax Indemnification Agreement will also provide that the Company and
AEI will indemnify the stockholders if such stockholders are required to include
in income additional amounts attributable to taxable years on or before the date
AEI terminates its S Corporation status as to which AEI filed or files tax
returns claiming status as an S Corporation.
11. RELATED-PARTY TRANSACTIONS:
At June 30, 1997, the Company owned 10.2% of the outstanding stock of AICL
(see Note 6), and AICL owned 40% of AAPI. In connection with the Exchange in
________ , 1997 (see Note 1), AICL exchanged its ownership of AAPI for 2,390
shares of the Company. In 1996 and the six months ended June 30, 1997,
approximately 72% and 68% of the Company's net revenues (see Note 1) were
derived from services performed for the Company by AICL, a Korean public company
in which the Company and certain of the Company's principal stockholders hold a
minority interest. By the terms of a long-standing agreement the Company has
been responsible for marketing and selling AICL's semiconductor packaging and
test services, except to customers in Korea and Japan to whom AICL has
historically sold such services directly. The Company has worked closely with
AICL in developing new technologies and products. The Company has recently
entered into a five year supply agreement with AICL giving the Company the right
to market and sell AICL's packaging and test services and the wafer output of
AICL's new wafer foundry. The Company's business, financial condition and
operating results have been and will continue to be significantly dependent on
the ability of AICL to effectively provide the contracted services on a cost-
efficient and timely basis. The termination of the Company's relationship with
AICL for any reason, or any material adverse change in AICL's business resulting
from underutilization of its capacity, the level of its debt, labor disruptions,
fluctuations in foreign exchange rates, changes in governmental
F-17
<PAGE> 90
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
policies, economic or political conditions in Korea or any other reason could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company has met a significant portion of its financing needs through
financing arrangements provided by Anam USA, Inc. ("Anam USA"), AICL's
wholly-owned financing subsidiary. A majority of the amount due to Anam USA
represents outstanding amounts under financing obtained by Anam USA for the
benefit of the Company with the balance representing payables to Anam USA for
packaging and service charges paid to AICL. Based on guarantees provided by
AICL, Anam USA obtains for the benefit of the Company a continuous series of
short-term financing arrangements which generally are less than six months in
duration, and typically are less than two months in duration. Because of the
short term nature of these loans, the flows of cash to and from Anam USA under
this arrangement are significant. Purchases from AICL through Anam USA were
$254,266, $354,062, $460,282 and $251,344 for 1994, 1995, 1996 and the six
months ended June 30, 1997. Charges from ANAM USA for interest and bank charges
were $3,181, $4,484, $7,074 and $4,583 for 1994, 1995, 1996 and the six months
ended June 30, 1997. Amounts payable to AICL and Anam USA were $232,608,
$252,221, and $289,634 at December 31, 1995, 1996 and June 30, 1997,
respectively.
AICL's ability to continue to provide services to the Company will depend
on AICL's financial condition and performance. AICL currently has a significant
amount of debt relative to its equity, which debt the Company expects will
continue to increase in the foreseeable future. As of June 30, 1997, on the
basis of Korean generally accepted accounting principles (unaudited) and
translated for convenience at the June 30, 1997 exchange rate of Korean Won (W)
888 to 1 U.S. dollar, AICL had current liabilities of approximately W749 billion
($843 million), including approximately W443 billion ($499 million) of current
maturities of long-term debt, and had long-term liabilities of approximately
W839 billion ($945 million). There can be no assurance that AICL will be able to
refinance its existing loans or obtain net loans, particularly in light of
recent initiatives by Korean banks to reduce their exposure to highly leveraged
companies. In addition, there can be no assurance that AICL will be able to
continue to make required interest and principal payments on such loans or
otherwise comply with the terms of its loan agreements. Any inability of AICL to
obtain financing or generate cash flows from operations sufficient to fund its
capital expenditure, debt service and repayment and other working capital and
liquidity requirements could have a material adverse effect on AICL's ability to
continue to provide services and otherwise fulfill its obligations to the
Company.
As of June 30, 1997, AICL was contingently liable under guarantees in
respect of debt of its subsidiaries and affiliates in the aggregate amount of
approximately W935 billion ($1.05 billion). Such guarantees included those in
respect of all of Anam USA's debt, as well as approximately $161 million of the
Company's debt to banks and the Company's obligations under a receivables sale.
The Company has met a significant portion of its financing needs through
financing arrangements obtained by Anam USA for the benefit of the Company,
based on guarantees provided by AICL. As a result of AICL's debt position, there
can be no assurance that Anam USA will be able to obtain additional guarantees,
if necessary, from AICL. Further, a deterioration in AICL's financial condition
could trigger defaults under AICL's guarantees, causing acceleration of such
loans. In addition, if any relevant subsidiaries or affiliates of AICL were to
fail to make interest or principal payments or otherwise default under their
debt obligations guaranteed by AICL, AICL could be required under its guarantees
to repay such debt, which event could have a material adverse effect on its
financial condition and results of operations.
Anam Engineering and Construction, an affiliate of AICL, built the
packaging facility for AAP in the Philippines. Payments to Anam Engineering and
Construction were $6,542, $22,167 and $3,130 in 1995, 1996 and the six months
ended June 30, 1997, respectively. Anam Precision Equipment and Anam Instruments
manufactures certain equipment used by the Philippine operations. Payments to
Anam
F-18
<PAGE> 91
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Precision Equipment and Anam Instruments were $6,652 and $357 in 1996 and the
six months ended June 30, 1997.
During 1996, the Company extended guarantees on behalf of an affiliate to
vendors used by this affiliate. Outstanding guarantees as of December 31, 1996
and June 30, 1997 were $25,079 and $11,236, respectively. Amounts guaranteed
under this agreement fluctuate due to the cyclical nature of the affiliate's
retail business. Balances guaranteed at December 31 are generally the largest.
The Company has executed a surety and guarantee agreement on behalf of an
affiliate. The Company has unconditionally guaranteed the affiliate's obligation
under a $17,000 line of credit and a $13,000 term loan note. As of June 30,
1997, there were no amounts outstanding under the line of credit and $10,500 was
outstanding under the term loan note. The Company has also unconditionally
guaranteed another affiliate's obligation under a $4,000 term loan agreement and
a $1,000 line of credit. As of June 30, 1997, there was $4,000 outstanding under
the term loan and no amounts outstanding under the line of credit.
A principal stockholder of the Company has extended guarantees on behalf of
the Company in the amount of $88,000 at June 30, 1997.
The Company leases office space in West Chester, PA and Chandler, AZ from
certain shareholders of Amkor Electronics. These leases expire in 2006 and 2001
respectively. The Company has the option to extend the West Chester lease for an
additional 10 years through 2016. Amounts paid in 1996 and for the six months
ended June 30, 1997 were $1,343 and $823, respectively (see Note 15).
At December 31, 1995 and 1996 and for the six months ended June 30, 1997,
the Company has long-term notes receivable from affiliates of $626, $6,711 and
$10,128, respectively. Realization of these notes is dependent upon the ability
of the affiliates to repay the notes. In management's opinion, these receivables
are recorded at the net realizable value. In September 1997, $5,710 of these
notes were satisfied as a result of the purchase of the Chandler facility (see
Note 15).
12. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate methodologies;
however, considerable judgment is required in interpreting market data to
develop the estimates for fair value. Accordingly, these estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. Certain of these financial instruments are with major
financial institutions and expose the Company to market and credit risks and may
at times be concentrated with certain counterparties or groups of
counterparties. The creditworthiness of counterparties is continually reviewed,
and full performance is anticipated.
The methods and assumptions used to estimate the fair value of significant
classes of financial instruments is set forth below:
Available for sale investments -- The fair value of these financial
instruments was estimated based on market quotes, recent offerings of
similar securities, current and projected financial performance of the
Company and net asset positions.
Short-term borrowings -- Short-term borrowings have variable rates
that reflect currently available terms and conditions for similar
borrowings. The carrying amount of this debt is a reasonable estimate of
fair value.
Long-term debt and due to affiliates -- Long-term debt and due to
affiliates have variable rates that reflect currently available terms and
conditions for similar debt. The carrying amount of this debt is a
reasonable estimate of fair value.
F-19
<PAGE> 92
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
13. COMMITMENTS AND CONTINGENCIES:
The Company is involved in various claims and litigation incidental to the
conduct of its business. Based on consultation with legal counsel, management
does not believe that any claims or litigation to which the Company is a party
will have a material adverse effect on the Company's financial condition or
results of operations.
Future minimum lease payments under operating leases that have initial or
remaining noncancelable lease terms in excess of one year at June 30, 1997, are:
<TABLE>
<S> <C>
1997(6 months)..................................... $3,162
1998............................................... 5,948
1999............................................... 5,762
2000............................................... 5,532
2001............................................... 5,136
2002............................................... 5,214
</TABLE>
Rent expense amounted to $2,742, $3,692, $5,520 and $3,863 for 1994, 1995,
1996 and the six months ended June 30, 1997, respectively.
The Company has various purchase commitments for materials, supplies and
capital equipment incident to the ordinary conduct of business. As of June 30,
1997 the Company had commitments for capital equipment of approximately $60,000.
In the aggregate, such commitments are not at prices in excess of current
market.
14. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION:
The Company is primarily engaged in one industry segment, namely, the
packaging and testing of integrated circuits. Financial information, summarized
by geographic area, is as follows:
<TABLE>
<CAPTION>
UNITED
STATES EUROPE PHILIPPINES ELIMINATIONS CONSOLIDATED
---------- -------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Six months ended June 30, 1997:
Net revenues from unaffiliated
customers...................... $ 577,640 $ 85,849 $ -- $ -- $ 663,489
Net revenues from affiliates..... -- -- 125,460 (125,460) --
---------- -------- -------- --------- ----------
Total net revenues............... 577,640 88,968 125,460 (125,460) 663,489
Income before income taxes and
minority interest.............. 10,593 11,628 (13,796) -- 8,425
Identifiable assets.............. 451,858 27,400 509,921 (209,942) 779,237
Corporate assets................. 154,420
----------
Total assets..................... $ 933,657
==========
Year ended December 31, 1996:
Net revenues from unaffiliated
customers...................... $1,013,182 $157,819.. $ -- $ -- $1,171,001
Net revenues from affiliates..... -- -- 198,637 (198,637) --
---------- -------- -------- --------- ----------
Total net revenues............... 1,013,182 157,819 198,637 (198,637) 1,171,001
Income before income taxes and
minority interest.............. 22,592 12,473 7,947 -- 43,012
Identifiable assets.............. 350,988 19,806 424,653 (183,255) 612,192
Corporate assets................. 185,421
----------
Total assets..................... $ 797,613
==========
</TABLE>
F-20
<PAGE> 93
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNITED
STATES EUROPE PHILIPPINES ELIMINATIONS CONSOLIDATED
---------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Net revenues from unaffiliated
customers...................... $ 792,285 $140,097.. $ -- $ -- $ 932,382
Net revenues from affiliates..... -- -- 128,164 (128,164) --
---------- -------- -------- --------- ----------
Total net revenues............... 792,285 140,097 128,164 (128,164) 932,382
Income before income taxes and
minority interest.............. 43,223 13,019 10,781 -- 67,023
Identifiable assets.............. 323,886 19,014 270,185 (179,166) 433,919
Corporate assets................. 201,949
----------
Total assets..................... $ 635,868
==========
Year ended December 31, 1994:
Net revenues from unaffiliated
customers...................... $ 488,329 $84,589.. $ -- $ -- $ 572,918
Net revenues from affiliates..... -- -- 76,591 (76,591) --
---------- -------- -------- --------- ----------
Total net revenues............... 488,329 84,589 76,591 (76,591) 572,918
Income before income taxes and
minority interest.............. 1,205 9,118 5,272 -- 15,595
Identifiable assets.............. 267,615 17,436 134,704 (89,081) 330,674
Corporate assets................. 95,848
----------
Total assets..................... $ 426,522
==========
</TABLE>
Sales between affiliates are priced at customer selling price less material
costs provided by the segment, less a sales commission. Net revenues from
unaffiliated customers for the United States include $109,532, $160,507 and
$101,939 of revenues from unaffiliated foreign customers for the years and six
months ended December 31, 1995, 1996 and June 30, 1997, respectively. No other
periods presented had sales to unaffiliated foreign customers from the United
States of 10% or more of total consolidated net revenues. Identifiable assets
are those assets that can be directly associated with a particular geographic
area. Corporate assets are those assets which are not directly associated with a
particular geographic area and consist primarily of cash and cash equivalents,
investments and advances or loans to another geographic segment.
15. SUBSEQUENT EVENTS:
Effective July 7, 1997, the Company entered into a Receivables Sale
Agreement (the "Agreement") with a bank (the "Purchaser"), and under the
Agreement, the Purchaser has committed to purchase, with limited recourse, all
right, title and interest in selected accounts receivable of the Company, up to
a maximum of $100,000. In connection with the Agreement, the Company established
a wholly owned, bankruptcy remote subsidiary, Amkor Receivables Corp., to
purchase accounts receivable at a discount from the Company on a continuous
basis, subject to certain limitations as described in the Agreement. Amkor
Receivables Corp. simultaneously sells the accounts receivable at the same
discount to the Purchasers.
On September 11, 1997, the office being leased in Chandler, Arizona was
purchased from certain stockholders of the Company. The total purchase price of
the building ($5,710) represents the carrying value to the stockholders.
On October , 1997, the stockholders of each of the Amkor Companies
described in Note 1 exchanged all of their shares of these companies for 82,610
newly issued shares of Amkor Technology, Inc. ("ATI") a holding company
established for this purpose. ATI filed a registration statement on October ,
1997 with the Securities and Exchange Commission as part of a proposed plan to
reduce outstanding borrowings and to increase the stockholders' equity. ATI
intends to raise approximately $ (after deducting the underwriting
discount and estimated offering expenses) from the sale of
F-21
<PAGE> 94
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
shares of common stock (the "Offerings"). Approximately $ of
the proceeds will be used to reduce short-term borrowings and long-term debt. In
connection with the Offerings, certain existing stockholders intend to sell
approximately of their shares.
The Company plans on establishing stock option plans in October 1997
pursuant to which 2,600,000 shares of common stock will be reserved for future
issuance upon the exercise of stock options granted to employees, consultants
and directors. The options will be issued at fair value and generally will vest
over five years.
Concurrently with the Exchange, the Company intends to issue 2,390 shares
of common stock to AICL in exchange for its 40% interest in AAPI. The Company
will account for this transaction as a purchase and eliminate the minority
interest liability and recognize goodwill of approximately $ .
16. PRO FORMA ADJUSTMENTS:
STATEMENT OF INCOME
Pro forma adjustments are presented to reflect a provision for income taxes
as if AEI had not been an S Corporation for all of the periods presented. Pro
forma net income per common share is based on the weighted average number of
shares outstanding as if the Reorganization had occurred at the beginning of the
period presented.
BALANCE SHEET
As discussed in Note 1, the Company intends to reorganize prior to the
effective date of the contemplated offering. AEI will terminate its S
Corporation status at which time additional deferred tax liabilities of $10,000
will be recorded for existing temporary differences between the book and tax
bases of assets and liabilities. If the termination of AEI's S Corporation
status would have occurred on June 30, 1997, AEI would have declared a
distribution of $11,800 of previously taxed income. Any amounts remaining in
retained earnings related to AEI will be reclassified to additional paid in
capital. The pro forma balance sheet is presented to reflect these changes as if
they occurred on June 30, 1997.
F-22
<PAGE> 95
APPENDIX - DESCRIPTION OF GRAPHICS
----------------------------------
Inside Front Cover - Photograph of manufacturing facilities; pictures
of products; and diagram of wafer fabrication, packaging and test
operations.
Page 38 - Diagram showing wafer fabrication process, starting with a
raw wafer, packaging and final testing.
<PAGE> 96
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH THE INFORMATION IS GIVEN IN
THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Reorganization......................... 18
Relationship with Anam Industrial Co.,
Ltd.................................. 19
Use of Proceeds........................ 22
Dividend Policy........................ 22
Capitalization......................... 23
Dilution............................... 24
Selected Consolidated Financial Data... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 27
Business............................... 37
Management............................. 52
Certain Transactions................... 56
Principal and Selling Stockholders..... 59
Description of Capital Stock........... 60
Shares Eligible for Future Sale........ 61
Certain United States Federal Tax
Consequences to Non-United States
Holders of Common Stock.............. 63
Underwriting........................... 66
Legal Matters.......................... 69
Experts................................ 69
Additional Information................. 69
Glossary............................... 70
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERINGS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
SHARES
AMKOR
TECHNOLOGY, INC.
COMMON STOCK
($.001 PAR VALUE)
LOGO
SALOMON BROTHERS INC
BANCAMERICA
ROBERTSON STEPHENS
COWEN & COMPANY
PROSPECTUS
DATED , 1997
======================================================
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts, commissions and certain accountable expenses, payable by
the Company in connection with the sale of Common Stock being registered. All
amounts are estimates except the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $121,970
NASD Filing Fee.................................................. 30,500
Nasdaq National Market System Listing Fee........................ 50,000
Printing Fees and Expenses....................................... *
Legal Fees and Expenses.......................................... *
Accounting Fees and Expenses..................................... *
Blue Sky Fees and Expenses....................................... 5,000
Transfer Agent and Registrar Fees................................ *
Miscellaneous.................................................... *
----------
Total.................................................. $ *
==========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
The Registrant's Amended and Restated Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permissible under
Delaware law.
The Registrant's Bylaws provide for the indemnification of officers,
directors and third parties acting on behalf of the Registrant if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to the best interest of the Registrant, and, with respect to any criminal action
or proceeding, the indemnified party had no reason to believe his conduct was
unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
The form of Underwriting Agreement filed as Exhibit 1.1 hereto provides for
the indemnification of the Registrant's directors and officers in certain
circumstances as provided therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In , 1997, shares of the Company's Common Stock were
issued to Mr. James Kim and members of his family in exchange for their
outstanding interests in AEI and certain other Amkor Companies. In addition, in
, 1997 shares of Common Stock were issued to AICL
in exchange for its 40% interest in Amkor/Anam Pilipinas, Inc. Such issuances
were made pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended. See "Reorganization" in Part I hereof. The
recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the share certificates
II-1
<PAGE> 98
issued in such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation.
3.2 Bylaws.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, as to the
legality of the securities being registered.*
10.1 Form of Indemnification Agreement for directors and officers.*
10.2 1997 Stock Plan and form of agreement thereunder.*
10.3 Receivables Purchase Agreement between Amkor Electronics, Inc. and Amkor
Receivables Corp., dated June 20, 1997.
10.4 Tax Indemnification Agreement dated , 1997 between Amkor Technology,
Inc., Amkor Electronics, Inc. and certain stockholders of Amkor Technology, Inc.*
10.5 Bridge Loan Agreement between Amkor/Anam Pilipinas, Inc., Anam Industrial Co.,
Ltd. and the Korea Development Bank for $55,000,000, dated July 1997.
10.6 Loan Agreement between Amkor/Anam Pilipinas, Inc. and the Korea Development Bank
for $71,000,000, dated March 28, 1996.
10.7 Loan Agreement between Amkor/Anam Pilipinas, Inc. and the Korea Development Bank
for $50,000,000, dated September 7, 1995.
10.8 Commercial Office Lease between Chandler Corporate Center Phase II, G.P. and
Amkor Electronics, Inc., dated September 6, 1993.
10.9 Commercial Office Lease between the 12/31/87 Trusts of Susan Y., David D. and
John T. Kim and Amkor Electronics, Inc., dated October 1, 1996.
10.10 Commercial Office Lease between the 12/31/87 Trusts of Susan Y., David D., and
John T. Kim and Amkor Electronics, Inc., dated June 14, 1996.
10.11 Contract of Lease between Corinthian Commercial Corporation and Amkor/Anam
Pilipinas Inc., dated October 1, 1990.
10.12 Contract of Lease between Salcedo Sunvar Realty Corporation and Automated
Microelectronics, Inc., dated May 6, 1994.
10.13 Lease Contract between AAPI Realty Corporation and Amkor/Anam Advanced Packaging,
Inc., dated November 6, 1996.
10.14 Immunity Agreement between Amkor Electronics, Inc. and Motorola, Inc., dated June
30, 1993.*
10.15 Assembly Agreement between Amkor Electronics, Inc. and Intel Corporation, dated
July 17, 1991.*
10.16 1997 Director Stock Option Plan and form of agreement thereunder.*
10.17 Amkor Electronics, Inc. 401(k) Plan.*
21.1 List of Subsidiaries of the Registrant.*
23.1 Consent of Independent Public Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
</TABLE>
II-2
<PAGE> 99
<TABLE>
<C> <S>
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, and will be governed by the final adjudication of such
issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of the registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared
effective, and (2) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of West
Chester, State of Pennsylvania, on the 3rd day of October 1997.
AMKOR TECHNOLOGY, INC.
By: /s/ JAMES J. KIM
------------------------------------
James J. Kim, Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints James J. Kim and Frank J. Marcucci
and each one of them, acting individually and without the other, as his or her
attorney-in-fact, each with full power of substitution, for him and her in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to sign any registration
statement for the same Offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------------- -----------------
<C> <S> <C>
/s/ JAMES J. KIM Chief Executive Officer and October 3,1997
- --------------------------------------------- Chairman
James J. Kim
/s/ FRANK J. MARCUCCI Chief Financial Officer and October 3, 1997
- --------------------------------------------- Secretary
Frank J. Marcucci
/s/ JOHN N. BORUCH President and Director October 3, 1997
- ---------------------------------------------
John N. Boruch
/s/ LOUIS J. SIANA Director October 3, 1997
- ---------------------------------------------
Louis J. Siana
</TABLE>
II-4
<PAGE> 101
INDEX TO FINANCIAL STATEMENT SCHEDULES*
<TABLE>
<CAPTION>
SEQUENTIALLY
SCHEDULE NUMBERED
NUMBER DESCRIPTION OF SCHEDULES PAGE
- -------- ------------------------------------------------------------------- ------------
<C> <S> <C>
Report of Independent Public Accountants........................... S-2
VIII Valuation and Qualifying Accounts.................................. S-3
</TABLE>
- ---------------
* All other schedules are omitted as the required information is inapplicable or
the information is presented in the financial statements or related rates.
S-1
<PAGE> 102
After the Exchange transaction discussed in Note 1 and the issuance of
shares of common stock of the Company to Anam Industrial Co., Ltd. in exchange
for their 40% interest in AAPI as discussed in Note 15 to the Amkor Technology,
Inc. and subsidiaries' consolidated financial statements is effected, we expect
to be in position to render the following audit report.
October 2, 1997
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amkor Technology, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Amkor Technology, Inc. and subsidiaries
included in this prospectus and have issued our report thereon dated ,
1997. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index above is
presented for purpose of complying with the Securities and Exchange Commission
and is not a part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
S-2
<PAGE> 103
SCHEDULE VIII
AMKOR TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END
OF PERIOD EXPENSE WRITE-OFFS OTHER OF PERIOD
---------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1994:
Allowance for doubtful
accounts........... $ 524 $ 500 $ (546) $ 9 $ 487
Year ended December 31,
1995:
Allowance for doubtful
accounts........... $ 487 $ 500 $ -- $ 56 $ 1,043
Year ended December 31,
1996:
Allowance for doubtful
accounts........... $ 1,043 $ 660 $ (564) $ 40 $ 1,179
Six months ended June
30, 1997:
Allowance for doubtful
accounts........... $ 1,179 $ 800 $ -- -- $ 1,979
</TABLE>
S-3
<PAGE> 104
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation.
3.2 Bylaws.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, as to
the legality of the securities being registered.*
10.1 Form of Indemnification Agreement for directors and officers.*
10.2 1997 Stock Plan and form of agreement thereunder.*
10.3 Receivables Purchase Agreement between Amkor Electronics, Inc. and Amkor
Receivables Corp., dated June 20, 1997.
10.4 Tax Indemnification Agreement dated , 1997 between Amkor
Technology, Inc., Amkor Electronics, Inc. and certain stockholders of Amkor
Technology, Inc.*
10.5 Bridge Loan Agreement between Amkor/Anam Pilipinas, Inc., Anam Industrial Co.,
Ltd. and the Korea Development Bank for $55,000,000, dated July 1997.
10.6 Loan Agreement between Amkor/Anam Pilipinas, Inc. and the Korea Development
Bank for $71,000,000, dated March 28, 1996.
10.7 Loan Agreement between Amkor/Anam Pilipinas, Inc. and the Korea Development
Bank for $50,000,000, dated September 7, 1995.
10.8 Commercial Office Lease between Chandler Corporate Center Phase II, G.P. and
Amkor Electronics, Inc., dated September 6, 1993.
10.9 Commercial Office Lease between the 12/31/87 Trusts of Susan Y., David D. and
John T. Kim and Amkor Electronics, Inc., dated October 1, 1996.
10.10 Commercial Office Lease between the 12/31/87 Trusts of Susan Y., David D., and
John T. Kim and Amkor Electronics, Inc., dated June 14, 1996.
10.11 Contract of Lease between Corinthian Commercial Corporation and Amkor/Anam
Pilipinas Inc., dated October 1, 1990.
10.12 Contract of Lease between Salcedo Sunvar Realty Corporation and Automated
Microelectronics, Inc., dated May 6, 1994.
10.13 Lease Contract between AAPI Realty Corporation and Amkor/Anam Advanced
Packaging, Inc., dated November 6, 1996.
10.14 Immunity Agreement between Amkor Electronics, Inc. and Motorola, Inc., dated
June 30, 1993.*
10.15 Assembly Agreement between Amkor Electonics, Inc. and Intel Corporation, dated
July 17, 1991.*
10.16 1997 Director Stock Option Plan and form of agreement thereunder.*
10.17 Amkor Electronics, Inc. 401(k) Plan.*
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AMKOR TECHNOLOGY, INC.
FIRST: The name of the Corporation is Amkor Technology, Inc.
(the "Corporation").
SECOND: The address of the Corporation's registered office
in the State of Delaware is Corporation Trust
Center, 1209 Orange Street, in the city of
Wilmington, County of New Castle zip code 19801. The
name of the registered agent at such address is the
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be
organized under the General Corporation Law of
Delaware.
FOURTH: The Corporation is authorized to issue two
classes of stock to be designated respectively
Common Stock and Preferred Stock. The total number
of shares of all classes of stock which the
Corporation has authority to issue is 510,000,000,
consisting of 500,000,000 shares of Common Stock,
$.001 par value (the "Common Stock"), and
10,000,000 shares of Preferred Stock, $.001 par value
(the "Preferred Stock").
The Preferred Stock may be issued from time to time
in one or more series. The Board of Directors is hereby
authorized subject to limitations prescribed by law, to
fix by resolution or resolutions the designations,
powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of
each such series of Preferred Stock, including
without limitation authority to fix by resolution or
resolutions, the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms
of redemption (including sinking fund provisions),
redemption price or prices, and liquidation
preferences of any wholly unissued series of Preferred
Stock, and the number of shares constituting any such
series and the designation thereof, or any of the
foregoing.
The Board of Directors is further authorized to
increase (but not above the total number of
authorized shares of the class) or decrease (but not
below the number of shares of any such series then
outstanding) the number of shares of any series, the
number of which was fixed by it, subsequent to the
issue of shares of such series then outstanding,
subject to the powers, preferences and rights,
and the qualifications, limitations and restrictions
thereof stated in the resolution of the Board of
Directors originally fixing the number of shares of
such series. If the number of shares of any series
is so decreased, then the shares constituting such
decrease shall resume the status which they had
prior to the adoption of the resolution originally
fixing the number of shares of such series.
FIFTH: The name and mailing address of the incorporator are as
follows:
Weston C. Miller
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
SIXTH: The Corporation is to have perpetual existence.
<PAGE> 2
SEVENTH: The election of directors need not be by written
ballot unless a stockholder demands election by written
ballot at a meeting of stockholders and before voting
begins or unless the Bylaws of the Corporation shall
so provide.
EIGHTH: The number of directors which constitute the
whole Board of Directors of the Corporation shall
be designated in the Bylaws of the Corporation.
NINTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the
Board of Directors is expressly authorized to adopt,
alter, amend or repeal the Bylaws of the
Corporation. The stockholders may adopt, alter,
amend or repeal the Bylaws of the Corporation upon an
affirmative supermajority (2/3) vote.
TENTH: To the fullest extent permitted by the Delaware
General Corporation Law as the same exists or may
hereafter be amended, no director of the
Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.
Neither any amendment nor repeal of this Article, nor
the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in
respect of any matter occurring, or any cause of
action, suit or claim that, but for this Article,
would accrue or arise, prior to such amendment, repeal
or adoption of an inconsistent provision.
ELEVENTH: At the election of directors of the Corporation, each
holder of stock of any class or series shall be
entitled to one vote for each share held. No
stockholder will be permitted to cumulate votes at any
election of directors.
TWELFTH: No action that is required or permitted to be
taken by the stockholders of the corporation at any
annual or special meeting of stockholders may be
effected by written consent of stockholders in lieu of
a meeting of stockholders.
THIRTEENTH: Meetings of stockholders may be held within or without
the State of Delaware, as the Bylaws may provide.
The books of the Corporation may be kept (subject
to any provision contained in the laws of the State
of Delaware) outside of the State of Delaware at
such place or places as may be designated from time to
time by the Board of Directors or in the Bylaws of the
Corporation.
FOURTEENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or
hereafter prescribed by the laws of the State of
Delaware, and all rights conferred herein are granted
subject to this reservation.
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed and that the facts stated
herein are true.
Dated: September 26, 1997
/s/ Weston C. Miller
------------------------------------
Weston C. Miller
Incorporator
2
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AMKOR TECHNOLOGY, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 ANNUAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 NOTICE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 ADVANCE NOTICE OF DIRECTOR NOMINEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 ADJOURNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 VOTING; PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD . . . . . . . . . . . . . . . . . . . . . 3
1.10 LIST OF STOCKHOLDERS ENTITLED TO VOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 NUMBER; QUALIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 TELEPHONIC MEETINGS PERMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 QUORUM; VOTE REQUIRED FOR ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7 ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 INFORMAL ACTION BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 COMMITTEE RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES . . 6
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW CERTIFICATES . . . . . . . . . . . . 7
ARTICLE VI INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.1 THIRD PARTY ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 SUCCESSFUL DEFENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.4 DETERMINATION OF CONDUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 PAYMENT OF EXPENSES IN ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.6 INDEMNITY NOT EXCLUSIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.7 INSURANCE INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.8 THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.9 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.10 INDEMNITY FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.11 INDEMNIFICATION OF OTHER PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.12 SAVINGS CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.13 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES . . . . . . . . . . . . . . 11
7.4 INTERESTED DIRECTORS; QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.5 FORM OF RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.6 AMENDMENT OF BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-ii-
<PAGE> 4
BYLAWS
OF
AMKOR TECHNOLOGY, INC.
ARTICLE I
STOCKHOLDERS
1.1 ANNUAL MEETINGS
An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the state of
Delaware, as may be designated by resolution of the Board of Directors from
time to time. Any other proper business may be transacted at the annual
meeting.
1.2 SPECIAL MEETINGS
Special meetings of stockholders for any purpose or purposes may be
called at any time by the Board of Directors, or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and whose
powers and authority, as expressly provided in a resolution of the Board of
Directors, include the power to call such meetings.
1.3 NOTICE OF MEETINGS
Whenever stockholders are required or permitted to take any action at
a meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Unless otherwise provided
by law, the certificate of incorporation or these by-laws, the written notice
of any meeting shall be given not less than ten nor more than sixty days before
the date of the meeting to each stockholder entitled to vote at such meeting.
If mailed, such notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his address as it appears on
the records of the corporation.
1.4 ADVANCE NOTICE OF DIRECTOR NOMINEES
To be properly brought before an annual meeting or special meeting,
nominations for the election of directors must be specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the board
of directors.
1.5 ADJOURNMENTS
Any meeting of stockholders, annual or special, may adjourn from time
to time to reconvene at the same or some other place, and notice need not be
given of any such adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
<PAGE> 5
1.6 QUORUM
Except as otherwise provided by law, the certificate of incorporation
or these by-laws, at each meeting of stockholders the presence in person or by
proxy of the holders of shares of stock having a majority of the votes which
could be cast by the holders of all outstanding shares of stock entitled to
vote at the meeting shall be necessary and sufficient to constitute a quorum.
In the absence of a quorum, the stockholders so present may, by majority vote,
adjourn the meeting from time to time in the manner provided in Section 1.4 of
these by-laws until a quorum shall attend. Shares of its own stock belonging
to the corporation or to another corporation, if a majority of the shares
entitled to vote in the election of directors of such other corporation is
held, directly or indirectly, by the corporation, shall neither be entitled to
vote nor be counted for quorum purposes; provided, however, that the foregoing
shall not limit the right of the corporation to vote stock, including but not
limited to its own stock, held by it in a fiduciary capacity.
1.7 ORGANIZATION
Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or in his absence by the Vice Chairman of the Board, if any, or
in his absence by the President, or in his absence by a Vice President, or in
the absence of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act as secretary
of the meeting.
1.8 VOTING; PROXIES
Except as otherwise provided by the certificate of incorporation, each
stockholder entitled to vote at any meeting of stockholders shall be entitled to
one vote for each share of stock held by him which has voting power upon the
matter in question. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by proxy,
but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the corporation. Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors of election unless so determined
by the holders of shares of stock having a majority of the votes which could be
cast by the holders of all outstanding shares of stock entitled to vote thereon
which are present in person or by proxy at such meeting.
At a stockholders' meeting at which directors are to be elected, a
stockholder shall not be entitled to cumulate votes (i.e., cast for any
candidate a number of votes greater than the number of votes which such
stockholder normally is entitled to cast). The candidates receiving the highest
number of affirmative votes, up to the number of directors to be elected, shall
be elected; votes against any candidate and votes withheld shall have no legal
effect.
-2-
<PAGE> 6
1.9 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty nor less than ten days before the date of such meeting; and (2) in the
case of any other action, shall not be more than sixty days prior to such other
action. If no record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (2) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
1.10 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present. Upon the willful neglect or refusal of the directors to produce such a
list at any meeting for the election of directors, they shall be ineligible for
election to any office at such meeting. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger,
the list of stockholders or the books of the corporation, or to vote in person
or by proxy at any meeting of stockholders.
1.11 NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
No action which may be taken at any annual or special meeting of
stockholders may be taken without a meeting and without prior notice.
-3-
<PAGE> 7
ARTICLE II
BOARD OF DIRECTORS
2.1 NUMBER; QUALIFICATIONS
The Board of Directors shall consist of one or more members, the
number thereof to be determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES
The Board of Directors shall initially consist of the persons named as
directors in the certificate of incorporation, and each director so elected
shall hold office until the first annual meeting of stockholders or until his
successor is elected and qualified. At the first annual meeting of
stockholders and at each annual meeting thereafter, the stockholders shall
elect directors each of whom shall hold office for a term of one year or until
his successor is elected and qualified. Any director may resign at any time
upon written notice to the corporation. Any newly created directorship or any
vacancy occurring in the Board of Directors for any cause may be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a
meeting of stockholders, and each director so elected shall hold office until
the expiration of the term of office of the director whom he has replaced or
until his successor is elected and qualified.
2.3 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held at such places
within or without the State of Delaware and at such times as the Board of
Directors may from time to time determine, and if so determined notices thereof
need not be given.
2.4 SPECIAL MEETINGS
Special meetings of the Board of Directors may be held at any time or
place within or without the State of Delaware whenever called by the President,
any Vice President, the Secretary, or by any member of the Board of Directors.
Notice of a special meeting of the Board of Directors shall be given by the
person or persons calling the meeting at least twenty-four hours before the
special meeting.
-4-
<PAGE> 8
2.5 TELEPHONIC MEETINGS PERMITTED
Members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting thereof by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this by-law shall constitute presence in person at such meeting.
2.6 QUORUM; VOTE REQUIRED FOR ACTION
At all meetings of the Board of Directors a majority of the whole Board
of Directors shall constitute a quorum for the transaction of business. Except
in cases in which the certificate of incorporation or these by-laws otherwise
provide, the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
2.7 ORGANIZATION
Meetings of the Board of Directors shall be presided over by the
Chairman of the Board, if any, or in his absence by the Vice Chairman of the
Board, if any, or in his absence by the President, or in their absence by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
2.8 INFORMAL ACTION BY DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board of Directors or such committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board of Directors or such committee.
-5-
<PAGE> 9
ARTICLE III
COMMITTEES
3.1 COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of the committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in place of any
such absent or disqualified member. Any such committee, to the extent permitted
by law and to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it.
3.2 COMMITTEE RULES
Unless the Board of Directors otherwise provides, each committee
designated by the Board of Directors may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each committee shall
conduct its business in the same manner as the Board of Directors conducts its
business pursuant to Article III of these by-laws.
ARTICLE IV
OFFICERS
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE;
RESIGNATION; REMOVAL; VACANCIES
The Board of Directors shall elect a President and Secretary, and it
may, if it so determines, choose a Chairman of the Board and a Vice Chairman of
the Board from among its members. The Board of Directors may also choose one or
more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or
more Assistant Treasurers. Each such officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of stockholders next
succeeding his election, and until his successor is elected and qualified or
until his earlier resignation or removal. Any officer may resign at any time
upon written notice to the corporation. The Board of Directors may remove any
officer with or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
corporation. Any number of offices may be held by the same person. Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the Board of
Directors at any regular or special meeting.
-6-
<PAGE> 10
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS
The officers of the corporation shall have such powers and duties in
the management of the corporation as may be prescribed by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices, subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
ARTICLE V
STOCK
5.1 CERTIFICATES
Every holder of stock shall be entitled to have a certificate signed
by or in the name of the corporation by the Chairman or Vice Chairman of the
Board of Directors, if any, or the President or Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary, of the corporation, certifying the number of shares owned by him in
the corporation. Any of or all the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES
The corporation may issued a new certificate of stock in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
-7-
<PAGE> 11
ARTICLE VI
INDEMNIFICATION
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director or officer of the corporation, or that such
director or officer is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise (collectively "Agent"), against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement (if
such settlement is approved in advance by the Company, which approval shall not
be unreasonably withheld) actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was an Agent (as defined in Section 6.1)
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
6.3 SUCCESSFUL DEFENSE
To the extent that an Agent of the corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Sections 6.1 and 6.2, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
-8-
<PAGE> 12
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the Agent is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Sections 6.1 and 6.2. Such determination shall be made (1) by the Board of
Directors or an executive committee by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (2) or
if such quorum is not obtainable or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was an Agent of the corporation, or
is or was serving at the request of the corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors and officers, so that any person who is or
was a director or Agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under and subject to the
provisions of this Article VI (including, without limitation the provisions of
Section 6.4) with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
-9-
<PAGE> 13
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 INDEMNITY FUND
Upon resolution passed by the Board, the corporation may establish a
trust or other designated account, grant a security interest or use other means
(including, without limitation, a letter of credit), to ensure the payment of
certain of its obligations arising under this Article VI and/or agreements
which may be entered into between the corporation and its officers and
directors from time to time.
6.11 INDEMNIFICATION OF OTHER PERSONS
The provisions of this Article VI shall not be deemed to preclude the
indemnification of any person who is not an Agent (as defined in Section 6.1),
but whom the corporation has the power or obligation to indemnify under the
provisions of the General Corporation Law of the State of Delaware or
otherwise. The corporation may, in its sole discretion, indemnify an employee,
trustee or other agent as permitted by the General Corporation Law of the State
of Delaware. The corporation shall indemnify an employee, trustee or other
agent where required by law.
6.12 SAVINGS CLAUSE
If this Article or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each Agent against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit, proceeding or investigation, whether civil, criminal or administrative,
and whether internal or external, including a grand jury proceeding and an
action or suit brought by or in the right of the corporation, to the full
extent permitted by any applicable portion of this Article that shall not have
been invalidated, or by any other applicable law.
-10-
<PAGE> 14
6.13 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VI shall, unless otherwise prided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII
MISCELLANEOUS
7.1 FISCAL YEAR
The fiscal year of the corporation shall be determined by resolution
of the Board of Directors.
7.2 SEAL
The corporate seal shall have the name of the corporation inscribed
thereon and shall be in such form as may be approved from time to time by the
Board of Directors.
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND
COMMITTEES
Any written waiver of notice, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
7.4 INTERESTED DIRECTORS; QUORUM
No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if: (1) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum: or (2) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
-11-
<PAGE> 15
7.5 FORM OF RECORDS
Any records maintained by the corporation in the regular course of its
business, including its stock ledger, books of account, and minute books, may be
kept on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a reasonable
time. The corporation shall so convert any records so kept upon the request of
any person entitled to inspect the same.
7.6 AMENDMENT OF BY-LAWS
These by-laws may be altered or repealed, and new by-laws made, by the
Board of Directors, but the stockholders may make additional by-laws and may
alter and repeal any by-laws whether adopted by them or otherwise. Any amendment
to the by-laws made by the stockholders shall require a supermajority (66.6%)
affirmative vote to become effective.
-12-
<PAGE> 1
EXHIBIT 10.3
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 20, 1997
Between
AMKOR ELECTRONICS, INC.,
as the Originator
and
AMKOR RECEIVABLES CORP.,
as they Buyer
<PAGE> 2
TABLE OF CONTENTS
(CONTINUED)
PAGE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PRELIMINARY STATEMENTS.................................................................................................... PAGE 1
ARTICLE I - AMOUNTS AND TERMS OF THE PURCHASES............................................................................ PAGE 1
Section 1.1. Agreement to Purchase........................................................................... PAGE 1
Section 1.2. Payment for the Purchases....................................................................... PAGE 3
Section 1.3. Purchase Price Credit Adjustments............................................................... PAGE 5
Section 1.4. Payments and Computations, Etc.................................................................. PAGE 5
Section 1.5. Transfer of Records............................................................................. PAGE 5
Section 1.6. Characterization................................................................................ PAGE 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES............................................................................... PAGE 6
Section 2.1. Originator Representations and Warranties....................................................... PAGE 6
ARTICLE III - CONDITIONS OF PURCHASES..................................................................................... PAGE 10
Section 3.1. Conditions Precedent to Initial Purchase........................................................ PAGE 10
Section 3.2. Conditions Precedent to All Purchases........................................................... PAGE 9
ARTICLE IV - COVENANTS.................................................................................................... PAGE 11
Section 4.1. Affirmative Covenants of Originator............................................................. PAGE 11
Section 4.2. Negative Covenants of Originator................................................................ PAGE 15
ARTICLE V - ADMINISTRATION AND COLLECTION................................................................................. PAGE 15
Section 5.1. Designation of Sub-Servicer..................................................................... PAGE 16
Section 5.2. Duties of Sub-Servicer.......................................................................... PAGE 16
Section 5.3. Collection Account Agreements................................................................... PAGE 16
Section 5.4. Responsibilities of theOriginator............................................................... PAGE 17
Section 5.5. Reports......................................................................................... PAGE 18
Section 5.6. Sub-Servicer Fee................................................................................ PAGE 18
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI - EVENTS OF DEFAULT........................................................................................... PAGE 18
Section 6.1. Events of Default.............................................................................. PAGE 18
Section 6.2. Remedies....................................................................................... PAGE 19
ARTICLE VII - INDEMNIFICATION............................................................................................ PAGE 20
Section 7.1. Indemnities by the Originator.................................................................. PAGE 20
Section 7.2. Other Costs and Expenses....................................................................... PAGE 22
ARTICLE VIII - MISCELLANEOUS............................................................................................. PAGE 22
Section 8.1. Waivers, Amendments and Consents.............................................................. PAGE 22
Section 8.2. Notices....................................................................................... PAGE 23
Section 8.3. Protection of Buyer's Interests............................................................... PAGE 23
Section 8.4. Confidentiality............................................................................... PAGE 23
Section 8.5. Bankruptcy Petition........................................................................... PAGE 24
Section 8.6. Limitation of Liability....................................................................... PAGE 24
Section 8.7. Choice of Law................................................................................. PAGE 24
Section 8.8. Consent to Jurisdiction....................................................................... PAGE 24
Section 8.9. Waiver of Jury Trial.......................................................................... PAGE 25
Section 8.10. Binding Effect; Assignability.................................................................. PAGE 25
Section 8.11. Subordination.................................................................................. PAGE 26
Section 8.12. Integration; Survival of Terms................................................................. PAGE 26
Section 8.13. Counterparts; Severability..................................................................... PAGE 26
Section 8.14. Characterization............................................................................... PAGE 26
</TABLE>
-ii-
<PAGE> 4
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement dated as of June 20, 1997 is
among Amkor Electronics, Inc., a Pennsylvania corporation (the "Originator"),
and Amkor Receivables Corp., a Delaware corporation (the "Buyer"). Unless
defined elsewhere herein, capitalized terms used in this Agreement shall have
the meanings assigned to such terms in Exhibit I hereto.
PRELIMINARY STATEMENTS
The Originator now owns, and from time to time hereafter will own,
Receivables and the Originator wishes to sell and assign to the Buyer, and the
Buyer wishes to purchase from the Originator, all right, title and interest of
the Originator in and to the Receivables now and hereafter arising.
The Originator and the Buyer believe that it is in their mutual
interest for the Originator to sell the Receivables to the Buyer and for the
Buyer to purchase the Receivables.
The Originator and the Buyer intend this transaction to be a true
sale of the Receivables from the Originator to the Buyer providing the Buyer
with the full benefits of ownership of the Receivables, and the Originator and
the Buyer do not intend this transaction to be, or for any purpose to be
characterized as, a loan from the Buyer to the Originator.
Upon purchasing the Receivables from the Originator, the Buyer will
sell interests in all or a portion of the Receivables pursuant to that certain
Investor Agreement (as the same may from time to time hereafter be amended,
supplemented, restated or otherwise modified, the "Investor Agreement") dated as
of June 20, 1997 among the Buyer, Falcon Asset Securitization Corporation
("Falcon"), the financial institutions parties thereto as 'Investors" and The
First National Bank of Chicago ('First Chicago"), as Agent (the 'Agent')
thereunder.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
<PAGE> 5
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Agreement to Purchase. (a) Upon the terms and subject
to the conditions hereof, the Buyer hereby buys, and the Originator hereby
sells, all of the Originator's right, title and interest in and to all
Receivables existing as of the closing date and thereafter created or arising at
any time prior to the Termination Date, in each case together with all Related
Security relating thereto and all Collections thereof and all Collection
Accounts (the "Purchase"). All right, title and interest in and to all
Receivables (together with the Related Security with respect thereto and all
Collections thereof) arising on each day prior to the Termination Date shall,
without further action of any type being required on the part of the Buyer or
the Originator, transfer on such day to the Buyer and the Buyer shall thereupon
have the obligation to pay the Purchase Price in respect thereof in the manner,
at the time and otherwise in accordance with the terms specified in this
Agreement. Prior to making any Purchase hereunder, the Buyer may request of the
Originator, and the Originator shall deliver, such approvals, opinions,
information, reports or documents as the Buyer may reasonably request.
(b) It is the intention of the parties hereto that each Purchase of
Receivables made hereunder shall constitute a "sale of accounts", as such term
is used in Article 9 of the UCC, which sales are absolute and irrevocable and
provide the Buyer with the full benefits of ownership of the Receivables. Except
for the Purchase Price Credits owed pursuant to Section 1.3 hereof, each sale of
Receivables hereunder is made without recourse to the Originator; provided,
however, that (i) the Originator shall be liable to the Buyer for all
representations, warranties and covenants made by the Originator pursuant to the
terms of this Agreement, and (ii) such sale does not constitute and is not
intended to result in an assumption by the Buyer or any assignee thereof of any
obligation of the Originator or any other Person arising in connection with the
Receivables, the Related Security, the related Contracts or the Collection
Accounts, or any other obligations of the Originator. In view of the intention
of the parties hereto that the Purchases of Receivables made hereunder shall
constitute sales of such Receivables rather than loans secured by such
Receivables, the Originator agrees on or prior to the date hereof to mark (i)
its master data processing records relating to the Receivables with the
following legend:
ALL A/R OF AMKOR ELECTRONICS INC HAVE BEEN SOLD TO AMKOR
RECEIVABLES CORP & FNBC
and (ii) its other books and records relating to the Receivables with the
following legend:
ALL ACCOUNTS RECEIVABLE OF AMKOR ELECTRONICS, INC. HAVE BEEN
SOLD, AND ALL ACCOUNTS RECEIVABLE OF AMKOR ELECTRONICS, INC.
HEREAFTER EXISTING OR ARISING WILL BE SOLD, TO AMKOR
RECEIVABLES CORP. PURSUANT TO THAT CERTAIN RECEIVABLES
PURCHASE AGREEMENT DATED AS OF
PAGE 2
<PAGE> 6
JUNE 20, 1997 BETWEEN AMKOR ELECTRONICS, INC. AND AMKOR
RECEIVABLES CORP. ("ARC"), AND INTERESTS THEREIN HAVE BEEN
SOLD BY ARC TO THE FIRST NATIONAL BANK OF CHICAGO, AS AGENT
FOR CERTAIN PURCHASERS
or in either case such other legend as may be acceptable to the Buyer,
evidencing that the Buyer has purchased such Receivables as provided in this
Agreement, and to note in its financial statements that its Receivables have
been sold to the Buyer. Upon the request of the Buyer, the Originator will
execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate or as the Buyer may reasonably request. In addition,
the Originator will, upon request, make available to the Buyer or to the
Servicer the original copy of each Contract under which a Receivable has arisen.
Section 1.2. Payment for the Purchases. (a) The Purchase Price for
the initial Purchase of Receivables shall be payable in full by the Buyer to the
Originator, and shall be paid to the Originator in the following manner on the
date of such initial Purchase: (i) by delivery of immediately available funds,
to the extent of funds made available to the Buyer in connection with its
subsequent sale of an interest in such Receivables to the Purchasers under the
Investor Agreement, (ii) by the issuance of equity in the manner contemplated in
the Subscription Agreement and having a value of not less than the greater of
(A) $3,000,000 or (B) three percent (3.00%) of the aggregate Capital outstanding
at such time under the Investor Agreement, and (iii) the balance, with the
proceeds of a Revolving Loan. The Purchase Price for each Purchase after the
initial Purchase shall be payable in full by the Buyer to the Originator or its
designee on the date of such Purchase, except that the Buyer may, with respect
to any such Purchase, offset against such Purchase Price any amounts owed by the
Originator to the Buyer hereunder and which have become due but remain unpaid.
(b) With respect to any Purchase hereunder, at the time of
settlement of the Purchase Price therefor, the Buyer may elect to pay all or
part of, the applicable Purchase Price (to the extent that the obligation to pay
such Purchase Price is not satisfied through the application of funds from
Collections as described in Section 1.2(d)) by borrowing from the Originator a
subordinated revolving loan (each a "Revolving Loan"), and the Originator,
subject to the remaining provisions of this paragraph, irrevocably agrees to
advance such Revolving Loan in the amount so specified by the Buyer (which
amount shall be deemed to be the lesser of (i) the aggregate Purchase Price
which remains owing to the Originator in connection with such settlement after
giving effect to funds received by the Originator which have been applied
thereto and (ii) the maximum Revolving Loan which may be borrowed under the
restrictions set forth in this paragraph). Notwithstanding the foregoing, the
Originator is not committed to make any Revolving Loan (and the Buyer's right to
make the election described hereinabove shall not be effective), if, as a result
of making such loan, either (i) the aggregate outstanding amount of the
Revolving Loans would exceed an amount equal to the aggregate Outstanding
Balance of the
PAGE 3
<PAGE> 7
"Eligible Receivables" under and as defined in the Investor
Agreement at such time minus the aggregate Capital outstanding at such time
under the Investor Agreement or (ii) the Buyer's net worth would be equal to an
amount that is less than the greater of (A) $3,000,000 or (B) three percent
(3.00%) of the aggregate Capital outstanding at such time under the Investor
Agreement. or (iii) the amount of the Revolving Loan then being made would
exceed an amount equal to the Purchase Price payable in connection with the
Purchase being made hereunder on such date minus funds then being made available
under the Investor Agreement or otherwise then available to the Buyer. The
Revolving Loans shall be evidenced by, and shall be payable in accordance with
the terms and provisions of, a promissory note in the form of Exhibit X hereto
(the "Revolving Note") and shall be payable solely from funds which the Buyer is
not required under the Investor Agreement to set aside for the benefit of, or
otherwise pay over to, the Agent and/or the Purchasers.
(c) In the case of any Purchase subsequent to the initial Purchase,
if the Buyer has insufficient funds to pay in full the applicable Purchase Price
(after taking account of the proceeds received from the sale of the Receivable
Interests and the proceeds of Revolving Loans made hereunder), then the
Originator shall be deemed to have contributed to the capital of the Buyer
Receivables having a Purchase Price equal to the otherwise unpaid portion of the
total Purchase Price owed on such day, provided, however, that no such deemed
capital contribution shall be made from and after the date on which the
Originator issues its written notice of the designation of the Termination Date.
(d) Unless the Buyer shall otherwise direct the application of
Collections for any purpose not prohibited by the Transaction Documents in a
written notice to the Originator, on each Business Day during a Monthly Period
after the date of the initial Purchase, all Collections available to the Buyer
(after setting aside amounts required to be set aside for the benefit of, or
otherwise paid over to, the Agent and/or the Purchasers in accordance with the
Investor Agreement) shall be remitted directly to the Originator and, subject to
receipt by the Originator of the fee payable by the Buyer pursuant to Section
5.6 hereof for the Monthly Period in which such Business Day occurs, shall be
applied as payments toward the Purchase Price of Receivables conveyed by the
Originator to the Buyer during such Monthly Period; provided, that to the extent
such Collections exceed such Purchase Price, the excess shall be paid directly
to the Buyer. Although amounts shall be paid directly to the Originator on a
daily basis in accordance with the first sentence of this sub-section,
settlement of the Purchase Price between the Buyer and the Originator shall be
effected on a monthly basis with respect to all Purchases within the same
Monthly Period on the Settlement Date occurring in the succeeding calendar month
and based on the information contained in the Receivables Activity Report in
respect of such Monthly Period. Although settlement shall be effected on a
Settlement Date, increases or decreases in the amount owing under the Revolving
Note made pursuant to subsection (b) above and any contribution of capital by
the Originator to the Buyer made pursuant to subsection (c) above shall be
deemed to have occurred and shall be effective as of the last Business Day of
the Monthly Period to which such settlement relates.
PAGE 4
<PAGE> 8
Section 1.3. Purchase Price Credit Adjustments. (a) If on any day
the Outstanding Balance of a Receivable purportedly conveyed hereunder is
either (x) reduced as a result of any defective or rejected goods or services,
any cash discount or any adjustment by the Originator (whether individually or
in its performance of duties as Sub-Servicer), or (y) reduced or canceled as a
result of a setoff in respect of any claim by any Person (whether such claim
arises out of the same or a related transaction or an unrelated transaction and
whether such claim relates to the Originator or any Affiliate thereof) or (z) is
otherwise reduced as a result of any of the factors set forth in the definition
of Dilutions, then, in such event, the Buyer shall be entitled to a credit (a
"Purchase Price Credit") against the Purchase Price otherwise payable hereunder
equal to the full amount of such reduction or cancellation. If such Purchase
Price Credit exceeds the Purchase Price of the Receivables to be sold hereunder
on any date, then the Originator shall pay the remaining amount of such Purchase
Price Credit in cash on the next succeeding Business Day; provided that, if the
Termination Date has not occurred, the Originator shall be allowed to deduct the
remaining amount of such Purchase Price Credit from any indebtedness owed to it
under the Revolving Note.
(b) If on any day any of the representations or warranties contained
in Article II with respect to any Receivables are not true when made, or deemed
made, the Originator shall be deemed to have received on such day a Collection
of such Receivables in full. If the Originator is deemed to have received
Collections pursuant to this Section 1.3(b), the Originator shall immediately
pay such Collections to the Sub-Servicer for application in accordance with the
terms hereof and, at all times prior to such remittance, such Collections shall
be held in trust by the Originator for the exclusive benefit of the Buyer.
Section 1.4. Payments and Computations, Etc. All amounts to be paid
or deposited by the Buyer hereunder shall be paid or deposited in accordance
with the terms hereof on the day when due in immediately available funds to the
account of the Originator designated from time to time by the Originator or as
otherwise directed by the Originator. In the event that any payment owed by any
Person hereunder becomes due on a day which is not a Business Day, then such
payment shall be made on the next succeeding Business Day. Any amount due
hereunder which is not paid when due hereunder shall bear interest at the Base
Rate as in effect from time to time until paid in full; provided, however, that
such interest rate shall not at any time exceed the maximum rate permitted by
applicable law. All computations of interest payable hereunder shall be made on
the basis of a year of 360 days for the actual number of days (including the
first but excluding the last day) elapsed.
Section 1.5. Transfer of Records. (a) In connection with the
Purchases of Receivables hereunder, the Originator hereby sells, transfers,
assigns and otherwise conveys to the Buyer all of the Originator's right and
title to and interest in the Records relating to all Receivables sold hereunder,
without the need for any further documentation in connection with any Purchase.
In connection with such transfer, the Originator hereby grants to each of the
Buyer and the Servicer an irrevocable, non-exclusive license to use, without
royalty or payment of any kind, all software used by the Originator to account
for the Receivables, to the extent necessary to administer the
PAGE 5
<PAGE> 9
Receivables. whether such software is owned by the Originator or is owned by
others and used by the Originator under license agreements with respect thereto.
As of the date hereof. no consent by any licensor of the Originator to such
grant is required. If after the date hereof the consent by any licensor of the
Originator to such grant shall be required, the Originator represents that such
consent shall promptly be obtained. The license granted hereby shall be
irrevocable, and shall terminate on the date this Agreement shall terminate in
accordance with its terms.
(b) The Originator (i) shall take such action requested by the Buyer
and/or the Agent, from time to time hereafter, that may be necessary or
appropriate to ensure that the Buyer and its assigns under the Investor
Agreement have an enforceable ownership interest in the Records relating to the
Receivables purchased from the Originator hereunder and (ii) shall use its
reasonable efforts to ensure that the Buyer and the Servicer each has an
enforceable right (whether by license or sublicense or otherwise) to use all of
the computer software used to account for the Receivables and/or to recreate
such Records.
Section 1.6. Characterization. If, notwithstanding the intention of
the parties expressed in Section 1.1(b), the conveyance by the Originator to the
Buyer of Receivables hereunder shall be characterized as a secured loan and not
a sale, this Agreement shall constitute a security agreement under applicable
law. For this purpose, the Originator hereby grants to the Buyer a duly
perfected security interest in all of the Originator's right, title and interest
in, to and under the Receivables, the Collections, each Collection Account, all
Related Security, all payments on or with respect to such Receivables, all other
rights relating to and payments made in respect of the Receivables, and all
proceeds of any thereof prior to all other liens on and security interests
therein. After an Event of Default, the Buyer shall have, in addition to the
rights and remedies which it may have under this Agreement, all other rights and
remedies provided to a secured creditor after default under the UCC and other
applicable law, which rights and remedies shall be cumulative. In that regard,
the Buyer is hereby granted a license or other right to use, without charge, the
Originator's copyrights, rights of use of any name, trade names, trademarks,
service marks and advertising matter, or any property of a similar nature, as it
may pertain to Related Security comprising repossessed or returned inventory the
sale or lease of which shall have given rise to a Receivable and in order to
facilitate the disposition by the Buyer of such inventory.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Originator Representations and Warranties. The
Originator hereby represents and warrants, individually and in its capacity as
Sub-Servicer, to the Buyer that:
(a) Corporate Existence and Power. The Originator is a corporation
duly organized validly existing and in good standing under the laws of its state
of incorporation, and has all corporate power and all governmental licenses,
authorizations, consents and approvals required to carry on its business in each
jurisdiction in which its business is conducted.
PAGE 6
<PAGE> 10
(b) No Conflict. The execution, delivery and performance by the
Originator of this Agreement and each other Transaction Document to which the
Originator is a party. and the Originator's use of the proceeds of Purchases
made hereunder, are within its corporate powers, have been duly authorized by
all necessary corporate action, do not contravene or violate (i) its certificate
or articles of incorporation or by-laws, (ii) any law, rule or regulation
applicable to it. (iii) any restrictions under any agreement, contract or
instrument to which it is a party or by which it or any of its property is
bound, or (iv) any order, writ, judgement, award, injunction or decree binding
on or affecting it or its property, and do not result in the creation or
imposition of any Adverse Claim on assets of the Originator or its Subsidiaries
(except as created hereunder); and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law. This Agreement and each other
Transaction Document to which the Originator is a party has been duly
authorized, executed and delivered by the Originator.
(c) Governmental Authorization. Other than the filling of the
financing statements required hereunder, no authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Originator of the Transaction Documents to which the Originator is a party.
(d) Binding Effect. The Transaction Documents to which the
Originator is a party constitute the legal, valid and binding obligations of the
Originator enforceable against the Originator in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
limiting creditors' rights generally.
(e) Accuracy of Information. All information heretofore furnished by
the Originator or any of its Affiliates to the Buyer, the Agent or the
Purchasers for purposes of or in connection with this Agreement, any of the
other Transaction Documents or any transaction contemplated hereby or thereby
is, and all such information hereafter furnished by the Originator or any of its
Affiliates to the Buyer, the Agent or the Purchasers will be, true and accurate
in every material respect, on the date such information is stated or certified
and does not and will not contain any material misstatement of fact or omit to
state a material fact or any fact necessary to make the statements contained
therein not misleading.
(f) Use of Proceeds. No proceeds of any Purchase hereunder will be
used (i) for a purpose which violates, or would be inconsistent with, Regulation
G, T, U or X promulgated by the Board of Governors of the Federal Reserve System
from time to time or (ii) to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(g) Good Title; Perfection. Immediately prior to each Purchase
hereunder, the Originator shall be the legal and beneficial owner of the
Receivables and Related Security with respect thereto, free and clear of any
Adverse Claim, except as created by the Transaction
PAGE 7
<PAGE> 11
Documents. This Agreement is effective to. and shall, upon each Purchase
hereunder, irrevocably transfer to the Buyer legal and equitable title to, with
the legal right to sell and encumber. such Receivable and the Related Security,
free and clear of any Adverse Claim except as otherwise created by the Buyer
under the Transaction Documents. Without limiting the foregoing, there has been
duly filed all financing statements or other similar instruments or documents
necessary under the UCC of all appropriate jurisdictions (or any comparable law)
to perfect the Buyer's ownership interest in such Receivable.
(h) Places of Business. The principal places of business and chief
executive office of the Originator and the offices where the Originator keeps
all its Records are located at the address(es) listed on Exhibit II or such
other locations notified to the Buyer in accordance with Section 4.2(a) in
jurisdictions where all action required by Section 4.2(a) has been taken and
completed. The Originator's Federal Employer Identification Number is correctly
set forth on Exhibit II.
(i) Collection Banks; etc. Except as otherwise notified to the Buyer
in accordance with Section 4.2(b), (i) the Originator has instructed all
Obligors to pay all Collections directly to a LockBox, (ii) all proceeds from
such Lock-Boxes are deposited directly by a Collection Bank into a Collection
Account listed on Exhibit III, (iii) the names and addresses of all Collection
Banks, together with the account numbers of the Collection Accounts of the
Originator at each Collection Bank, are listed on Exhibit III, and (iv) each
Collection Account to which Collections are remitted is subject to a Collection
Account Agreement that is in full force and effect. This Agreement, together
with the Collection Account Agreements, is effective to, and does, transfer to
the Buyer all right, title and interest of the Originator in and to each
Lock-Box and Collection Account. The Originator has not granted any Person,
other than the Buyer as contemplated by this Agreement, dominion and control of
any Lock-Box or Collection Account, or the right to take dominion and control of
any Collection Account at a future time or upon the occurrence of a future event
and each Lock-Box and Collection Account is otherwise free and clear of any
Adverse Claim.
(j) Financial Statements; Material Adverse Effect. The financial
statements of the Originator dated December 31, 1996 furnished by the Originator
to the Buyer are materially complete and correct, and such financial statements
have been prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial condition and results of
operations of the Originator as of such date and for the period ended on such
date. Since December 31, 1996 no event has occurred which would have a Material
Adverse Effect.
(k) Names. In the past five years, the Originator has not used any
corporate names, trade names or assumed names other than those listed on Exhibit
II.
(l) Actions, Suits. There are no actions, suits or proceedings
pending, or to the best of the Originator's knowledge, threatened, against or
affecting the Originator, or any of the properties of the Originator, in or
before any court, arbitrator or other body, which are reasonably
PAGE 8
<PAGE> 12
likely to have a Material Adverse Effect. The Originator is not in default with
respect to any order of any court, arbitrator or governmental body.
(m) Credit and Collection Policies. With respect to each Receivable,
the Originator, individually and in its capacity as Sub-Servicer, has complied
in all material respects with the Credit and Collection Policy.
(n) Payments to Originator. With respect to each Receivable
transferred to the Buyer under this Agreement, the Buyer has given reasonably
equivalent value to the Originator in consideration for such transfer of such
Receivable and the Related Security with respect thereto under this Agreement
and such transfer was not made for or on account of an antecedent debt. No
transfer by the Originator to the Buyer of any Receivable is or may be voidable
under any Section of the Bankruptcy Code.
(o) Ownership of the Buyer. The Originator owns one hundred percent
(100%) of the issued and outstanding capital stock of the Buyer. Such capital
stock is validly issued, fully paid and nonassessable and there are no options,
warrants or other rights to acquire securities of the Buyer.
(p) Not an Investment Company. The Originator is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
from time to time, or any successor statute.
(q) Eligibility of Receivables. Each Receivable, at the time
conveyed hereunder, is an Eligible Receivable unless prior to or at such time
the Originator shall have advised the Buyer in writing as to the ineligibility
thereof.
(r) Purpose. The Originator has determined that, from a business
viewpoint, (i) the organization of the Buyer, (ii) the Buyer's limited purposes
and (iii) the sale of the Receivables to the Buyer contemplated hereby are in
the best interests of the Originator.
(s) ERISA. No fact or circumstance, including but not limited to any
Reportable Event, exists in connection with any Plan which would constitute
grounds for the termination of any Plan by the PBGC or for the appointment by
the appropriate United States District Court of a trustee to administer any such
Plan and which would result in the termination of a Plan and the incurrence of
material liability by the Originator or any ERISA Affiliate to the Plan, the
PBGC, participants, beneficiaries or a trustee. No Plan has an accumulated
funding deficiency as defined in Section 412(a) of the Code or Section 302(a) of
ERISA, and no lien exists with respect to any Plan for failure to make required
contributions as described under 412(n) of the Code or Section 302(f) of ERISA.
For the purposes of this representation and warranty, the Originator shall be
deemed to have knowledge of all facts attributable to the Plan administrator
designated pursuant to ERISA.
PAGE 9
<PAGE> 13
(t) Support Agreement. The Support Agreement remains in full force
and effect and no default has occurred thereunder and is then continuing.
ARTICLE III
CONDITIONS OF PURCHASES
Section 3.1. Conditions Precedent to Initial Purchase. The initial
Purchase under this Agreement is subject to the conditions precedent that (i)
the Buyer shall have received on or before the date of such Purchase those
documents listed on Schedule A hereto and (ii) all conditions precedent to the
initial purchase under the Investor Agreement shall have been satisfied and/or
waived.
Section 3.2. Conditions Precedent to All Purchases. Each Purchase
shall be subject to the further conditions precedent that (a) in the case of
each such Purchase, the Sub-Servicer shall have delivered to the Buyer on or
prior to the date of such Purchase, in form and substance satisfactory to the
Buyer, all Receivables Activity Reports as and when due under Section 5.5; (b)
on the date of each such Purchase, the following statements shall be true both
before and after giving effect to such Purchase and the application of the
proceeds therefrom (and acceptance of the proceeds of such Purchase shall be
deemed a representation and warranty by the Originator that such statements are
then true):
(i) the representations and warranties set forth in
Article II are correct on and as of the date of such Purchase as
though made on and as of such date;
(ii) no event has occurred, or would result from such
Purchase, that will constitute an Event of Default, and no event has
occurred and is continuing, or would result from such Purchase, that
would constitute a Potential Event of Default; and
(iii) the Termination Date shall not have occurred; and
(c) the Buyer shall have received such other approvals, opinions or
documents as it may reasonably request.
Notwithstanding any failure or inability of the Originator to
satisfy any of the foregoing conditions precedent on any date in respect of any
Purchase, title to the Receivables and related assets included in such Purchase
shall vest in the Buyer without any action required on the part of the Buyer
(but without impairment of its obligation to pay the Purchase Price in respect
thereof in accordance with the terms of this Agreement), and the Buyer (as owner
of such Receivables) shall have a claim against the Originator arising in
respect of the representations and warranties made by the Originator in
connection with such Purchase.
PAGE 10
<PAGE> 14
ARTICLE IV
COVENANTS
Section 4.1. Affirmative Covenants of Originator. At all times prior
to the Collection Date, the Originator hereby covenants, individually and in its
capacity as Sub-Servicer, that:
(a) Financial Reporting. The Originator will maintain, for itself
and each of its Subsidiaries, a system of accounting established and
administered in accordance with generally accepted accounting principles, and
furnish to the Buyer:
(i) Annual Reporting. Within 120 days after the close of
each of its fiscal years, financial statements for such fiscal year
certified in a manner acceptable to the Buyer by independent public
accountants acceptable to the Buyer.
(ii) Quarterly Reporting. Within 45 days after the close
of the first three quarterly periods of each of its fiscal years,
balance sheets as at the close of each such period and statements of
income and retained earnings and a statement of cash flows for the
period from the beginning of such fiscal year to the end of such
quarter, all certified by its Executive Vice President or Vice
President-Controller.
(iii) Compliance Certificate. Together with the
financial statements required hereunder, a compliance certificate in
substantially the form of Exhibit IV signed by the Originator's
Executive Vice President or Vice President-Controller and dated the
date of such annual financial statement or such quarterly financial
statement, as the case may be.
(iv) Shareholders Statements and Reports. Promptly upon
the furnishing thereof to the shareholders of the Originator, copies
of all financial statements, reports and proxy statements so
furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof,
copies of all registration statements and annual, quarterly, monthly
or other regular reports which the Originator or any of its
Subsidiaries files with the Securities and Exchange Commission.
(vi) Change in Credit and Collection Policy. At least 30
days prior to the effectiveness of any material change in or amendment
to the Credit and Collection Policy, a copy of the Credit and
Collection Policy then in effect and a notice indicating such change
or amendment.
(vii) Other Information. Such other information
(including non-financial information) as the Buyer, the Agent or any
Purchaser may from time to time reasonably request.
PAGE 11
<PAGE> 15
(b) Notices. The Originator will notify the Buyer in writing of any
of the following immediately upon learning of the occurrence thereof, describing
the same and, if applicable, the steps being taken with respect thereto:
(i) Events of Default or Potential Events of Default.
The occurrence of each Event of Default or each Potential Event of
Default, by a statement of the corporate comptroller or senior
financial officer of the Originator.
(ii) Judgment. The entry of any judgment or decree
against the Originator or any of its Subsidiaries.
(iii) ERISA. The occurrence of any Reportable Event
under Section 4043(c) (5), (6) or (9) of ERISA with respect to any
Plan, any decision to terminate or withdraw from a Plan, any finding
made with respect to a Plan under Section 4041(c) or (e) of ERISA, the
commencement of any proceeding with respect to a Plan under Section
4042 of ERISA, the failure to make any required installment or other
required payment under Section 412 of the Code or Section 302 of ERISA
on or before the date for such installment or payment, or any material
increase in the actuarial present value of unfunded vested benefits
under all Plans over the preceding year
(c) Compliance with Laws. The Originator will comply in all respects
with all applicable laws, rules, regulations, orders writs, judgments,
injunctions, decrees or awards to which it may be subject.
(d) Audits. The Originator will furnish to the Buyer from time to
time such information with respect to it and the Receivables as the Buyer may
reasonably request. The Originator shall, from time to time during regular
business hours as requested by Buyer upon reasonable notice, permit the Buyer,
or its agents or representatives. (i) to examine and make copies of and
abstracts from all Records in the possession or under the control of the
Originator relating to Receivables and the Related Security, including, without
limitation, the related Contracts, and (ii) to visit the offices and properties
of the Originator for the purpose of examining such materials described in
clause (i) above, and to discuss matters relating to the Originator's financial
condition or the Receivables and the Related Security or the Originator's
performance hereunder or the Originator's performance under the Contracts with
any of the officers or employees of the Originator having knowledge of such
matters.
PAGE 12
<PAGE> 16
(e) Keeping and Marking of Records and Books.
(i) The Originator will maintain and implement
administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in
the event of the destruction of the originals thereof), and keep and
maintain all documents, books, records and other information
reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit
the immediate identification of each new Receivable and all
Collections of and adjustments to each existing Receivable). The
Originator will give the Buyer notice of any material change in the
administrative and operating procedures referred to in the previous
sentence.
(ii) The Originator will (a) on or prior to the date
hereof, mark its master data processing records and other books and
records relating to the Receivables with a legend, acceptable to the
Buyer, describing the ownership interests of the Buyer therein and
further describing the Receivable Interests sold by the Buyer to the
Purchasers under the Investor Agreement and (b) upon the request of
the Buyer (x) mark each Contract with a legend describing Buyer's
ownership interest therein and further describing the Receivable
Interests sold by the Buyer to the Purchasers under the Investor
Agreement and (y) deliver to the Buyer, the Agent or their designees
all Contracts (including, without limitation, all multiple originals
of any such Contract) relating to the Receivables.
(iii) The Originator shall at all times keep and
maintain separate books, records, general ledgers, aged trial balances
and other receivables reporting, invoicing systems, data processing
records and other information relating to the credit and collection in
respect of (a) the Chandler Accounts and (b) the Receivables. In the
event any customer of the Originator shall be an obligor in respect of
any Chandler Account and an Obligor in respect of any Receivable, the
Originator shall cause separate invoices to be issued, with
instructions to such customer to remit payment on such Chandler
Account to a location other than a Lock-Box or a Collection Account
and to remit payment on such Receivable to a Lock-Box or a Collection
Account. In the event a customer shall at any time submit a single
payment item in respect of both a Chandler Account and a Receivable,
unless such customer shall have otherwise directed the application
thereof, such payment item shall be applied first to the Receivable
and then, after payment in full of such Receivable, to the Chandler
Account. At no time shall any books or records relating to the
Receivables be maintained at the Originator's facility in Chandler,
Arizona.
(f) Compliance with Contracts and Credit and Collection Policy. The
Originator will timely and fully (i) perform and comply with all provisions,
covenants and other promises required to be observed by it under the Contracts
related to the Receivables, and (ii) comply in all material respects with the
Credit and Collection Policy in regard to each Receivable and the related
Contract. The Originator will pay when due any taxes payable in connection with
the Receivables, excluding taxes on or measured by the income or gross receipts
of the Agent or any Purchaser.
PAGE 13
<PAGE> 17
(g) Ownership Interest. The Originator shall take all necessary
action to establish and maintain a valid and perfected first priority ownership
interest in the Receivables and the Related Security and Collections with
respect thereto, to the full extent contemplated herein, in favor of the Buyer,
including, without limitation, taking such action to perfect, protect or more
fully evidence the interest of the Buyer hereunder as the Buyer may reasonably
request.
(h) Purchasers' Reliance. The Originator acknowledges that the
Purchasers are entering into the transactions contemplated by the Investor
Agreement in reliance upon the Buyer's identity as a separate legal entity from
the Originator. Therefore, from and after the date of execution and delivery of
this Agreement. the Originator shall take all reasonable steps including,
without limitation, all steps that any Purchaser may from time to time
reasonably request, to maintain the Buyer's identity as a separate legal entity
and to make it manifest to third parties that the Buyer is an entity with assets
and liabilities distinct from those of the Originator and any Affiliates thereof
and not just a division of the Originator. Without limiting the generality of
the foregoing and in addition to the other covenants set forth herein, the
Originator (i) shall not hold itself out to third parties as liable for the
debts of the Buyer nor purport to own the Receivables or any of the other assets
acquired by the Buyer hereunder, (ii) shall take all other actions necessary on
its part to ensure that the Buyer is at all times in compliance with the
covenants set forth in Section 5.1 (k) of the Investor Agreement and (iii) shall
cause all tax liabilities arising in connection with the transactions
contemplated herein or otherwise to be allocated between the Originator and the
Buyer on an arm's- length basis.
(i) Collections. The Originator shall instruct all Obligors to pay
all Collections directly to a Lock-Box. Pursuant to Section 5.3 hereof and the
Collection Account Agreements, the Originator has transferred and assigned to
the Buyer all of its right, title and interest in and to, and exclusive
ownership, dominion and control (subject to the terms of this Agreement) to each
such Lock-Box and Collection Account. In the case of any Collections received by
the Originator, the Originator shall remit such Collections to a Collection
Account not later than the Business Day immediately following the date of
receipt of such Collections, and, at all times prior to such remittance, the
Originator shall itself hold such Collections in trust, for the exclusive
benefit of the Buyer. The Originator shall direct each Person that is not an
Obligor on a Receivable to cease remitting any payments to any Lock-Box or to
any other account in which the Originator has transferred its right, title and
interest to the Buyer, and the Originator shall not deposit or otherwise credit,
and shall not permit any other Person to deposit or otherwise credit to such
Lock-Boxes and accounts any cash or payment item other than Collections or other
proceeds of Receivables and Related Security transferred to the Buyer hereunder.
(j) ERISA. The Originator shall make all required installments or
other required payments under Section 412 of the Code or Section 302 of ERISA on
or before the due date for such installment or other payment.
(k) Financial Statements. The Originator will report on its
financial records the transfer of the Receivables hereunder as a sale under
generally accepted accounting principles. To the
PAGE 14
<PAGE> 18
extent the Originator prepares financial statements on a consolidated basis that
includes the Buyer, such financial statements shall be footnoted or shall
otherwise disclose that the Receivables have been sold to the Buyer and that
interests in such Receivables have been sold to the Agent on behalf of the
Purchasers.
Section 4.2. Negative Covenants of Originator. At all times prior to
the Collection Date, the Originator hereby covenants, individually and in its
capacity as Sub-Servicer, that:
(a) Name Change,Offices, Records and Books of Accounts. The
Originator will not change its name, identity or corporate structure (within the
meaning of Section 9-402(7) of any applicable enactment of the UCC) or relocate
its chief executive office or any office where Records are kept unless it shall
have: (i) given the Buyer at least 45 days prior notice thereof and (ii)
delivered to the Buyer all financing statements, instruments and other documents
requested by the Buyer in connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. The Originator will
not add or terminate any bank as a Collection Bank from those listed in Exhibit
III, or make any change in its instructions to Obligors regarding payments to be
made to the Originator or payments to be made to any LockBox, Collection Account
or Collection Bank, unless the Buyer shall have received, at least 10 days
before the proposed effective date therefor, (i) written notice of such
addition, termination or change and (ii) with respect to the addition of a
Collection Account or Collection Bank, an executed account agreement and an
executed Collection Account Agreement from such Collection Bank relating
thereto; provided, however, that the Originator may make changes in instructions
to Obligors regarding payments if such new instructions require such Obligor to
make payments to another existing Collection Account that is subject to a
Collection Account Agreement then in effect.
(c) Modifications to Contracts and Credit and Collection Policy. The
Originator will not make any change to the Credit and Collection Policy which
would be reasonably likely to adversely affect the collectibility of any
material portion of the Receivables or decrease the credit quality of any newly
created Receivables. Except as provided in Section 5.2(c), the Originator,
acting as Sub- Servicer or otherwise, will not extend, amend or otherwise modify
the terms of any Receivable or any Contract related thereto other than in
accordance with the Credit and Collection Policy.
(d) Sales, Liens, Etc., The Originator shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, or create or suffer to exist any Adverse Claim upon (including,
without limitation, the filing of any financing statement) or with respect to,
any Receivable or Related Security or Collections in respect thereof, or upon or
with respect to any Contract under which any Receivable arises, or any Lock-Box
or Collection Account or assign any right to receive income in respect thereof
(other than, in each case, the creation of the interests therein in favor of the
Buyer provided for herein and the Agent and the Purchasers provided for in the
Investor Agreement), and the Originator shall defend the right, title
PAGE 15
<PAGE> 19
and interest of the Buyer in, to and under any of the foregoing property,
against all claims of third parties claiming through or under the Originator.
(e) Accounting for Purchases. The Originator shall not, and shall
not permit any Affiliate to, account for or treat (whether in financial
statements or otherwise) the transactions contemplated hereby in any manner
other than as the sale of the Receivables and Related Security by the Originator
to the Buyer.
ARTICLE V
ADMINISTRATION AND COLLECTION
Section 5.1. Designation of Sub-Servicer. (a) The servicing,
administration and collection of the Receivables shall be conducted by the
Servicer so designated from time to time in accordance with Section 6.1 of the
Investor Agreement. The Originator is hereby designated as, and hereby agrees to
act as sub-servicer (the "Sub-Servicer") for the Buyer in the Buyer's capacity
as Servicer pursuant to the terms of the Investor Agreement and the Originator
agrees in such capacity as Sub- Servicer to perform all of the duties and
obligations of the Servicer set forth herein and in the Investor Agreement with
respect to the Receivables, Related Security related thereto and Collections
thereof. The Buyer may, at any time in its sole discretion, remove the
Originator (or any successor thereto) as Sub-Servicer and appoint a successor
Sub-Servicer.
(b) In its capacity as Sub-Servicer, the Originator agrees that it
shall be directly liable to the Agent and the Purchasers for the full and prompt
performance of all such duties and responsibilities of the Servicer. Without the
prior written consent of the Buyer, the Originator shall not be permitted to
delegate any of its duties or responsibilities as Sub-Servicer to any Person. If
at any time the Agent shall designate as Servicer any Person other than the
Buyer, all duties and responsibilities theretofore delegated by the Buyer to the
Originator may, at the discretion of the Agent, be terminated forthwith on
notice given by the Buyer to the Originator.
Section 5.2. Duties of Sub-Servicer. (a) The Sub-Servicer shall take
or cause to be taken all such actions as may be necessary or advisable to
collect each Receivable from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy.
(b) The Sub-Servicer shall forthwith following its receipt of any
Collections remit all such Collections to the Buyer, or to such Persons or
locations as the Buyer may from time to time direct (less any cash collections
or other cash proceeds received with respect to Indebtedness not constituting
Receivables), and, at all times prior to remittance, the Sub-Servicer shall hold
such Collections in trust, for the exclusive benefit of the Buyer and its
assignees and shall not commingle the Collections with any funds or monies of
the Sub-Servicer, the Originator or any other Person. The Sub-Servicer shall not
deposit or otherwise credit, and shall not permit any other Person to deposit or
otherwise credit, to any Lock-Box or Collection Account any cash or
PAGE 16
<PAGE> 20
payment item other than Collections or other proceeds of Receivables and Related
Security transferred to the Buyer hereunder.
(c) The Sub-Servicer, may, in accordance with the Credit and
Collection Policy, extend the maturity of any Receivable or adjust the
Outstanding Balance of any Receivable as the Sub- Servicer may determine to be
appropriate to maximize Collections thereof; provided, however, that such
extension or adjustment shall not alter the status of such Receivable as a
Delinquent Receivable or Defaulted Receivable or limit the rights of the Agent
or the Purchasers under the Investor Agreement. Notwithstanding anything to the
contrary contained herein, the Buyer shall have the absolute and unlimited right
to direct the Sub-Servicer to commence or settle any legal action with respect
to any Receivable or to foreclose upon or repossess any Related Security.
(d) The Sub-Servicer shall hold in trust for the Buyer all Records
that evidence or relate to the Receivables, the related Contracts and Related
Security or that are otherwise necessary or desirable to collect the Receivables
and shall, as soon as practicable upon demand of the Buyer, deliver or make
available to the Buyer all such Records, at a place selected by the Buyer.
(e) Any payment by an Obligor in respect of any indebtedness owed by
it to the Originator shall, except as otherwise specified by such Obligor or
otherwise required by contract or law and unless otherwise instructed by the
Buyer, be applied as a Collection of any Receivable of such Obligor (starting
with the oldest such Receivable) to the extent of any amounts then due and
payable thereunder before being applied to any other receivable or other
obligation of such Obligor.
Section 5.3. Collection Account Agreements. The Originator hereby
transfers to the Buyer, effective concurrently with the initial Purchase
hereunder, the exclusive ownership and control of the Lock-Boxes and the
Collection Accounts, as evidenced by the Collection Account Agreements, and the
Originator (other than in its capacity as Sub-Servicer) shall claim no further
right, title and/or interest in and to any such Collection Accounts nor any
rights to withdraw funds therefrom. The Originator hereby authorizes the Buyer,
and agrees that the Buyer shall be entitled to (i) endorse the Originator's name
on checks and other instruments representing Collections, (ii) enforce the
Receivables, the related Contracts and the Related Security and (iii) take such
action as shall be necessary or desirable to cause all cash, checks and other
instruments constituting Collections of Receivables to come into the possession
of the Buyer and its designees rather than the Originator.
Section 5.4. Responsibilities of the Originator. Anything herein to
the contrary notwithstanding, the exercise by the Buyer or any of its assignees
of its rights hereunder shall not release the Sub-Servicer or the Originator
from any of their duties or obligations with respect to any Receivables or under
the related Contracts. Neither the Buyer nor any of its assignees (including any
Servicer) shall have any obligation or liability with respect to any Receivables
or related Contracts, nor shall any of them be obligated to perform the
obligations of the Originator.
PAGE 17
<PAGE> 21
Section 5.5. Reports. On the Reporting Date of each month (or, if
such date is not a Business Day, the next following Business Day). and at such
times as the Buyer shall request, the Sub-Servicer shall prepare and forward to
the Buyer a Receivables Activity Report. In addition to such other information
as may be included therein, each Receivables Activity Report shall set forth the
following with respect to the related Monthly Period: (i) the aggregate
Outstanding Balance of Receivables created and conveyed as Purchases during such
Monthly Period, (ii) the aggregate Purchase Price payable to the Originator in
respect of such Purchases, specifying the Discount Factor in effect for such
Monthly Period and the aggregate Purchase Price Credits deducted in calculating
such aggregate Purchase Price, (iii) the aggregate amount of funds received by
the Originator during such Monthly Period which are to be applied toward the
aggregate Purchase Price owing for such Monthly Period pursuant to the first
sentence of Section 1.2(d), (iv) the increase or decrease in the amount
outstanding under the Revolving Note as of the end of such Monthly Period after
giving effect to the application of funds toward the aggregate Purchase Price,
and (v) the amount of any capital contribution made by the Originator to the
Buyer as of the end of such Monthly Period. Promptly following any request
therefor by the Buyer, the Originator shall prepare and provide to the Buyer a
listing by Obligor of all Receivables together with an aging of such
Receivables.
Section 5.6. Sub-Servicer Fee. In consideration of the
Sub-Servicer's agreement to perform the duties and obligations of the Servicer
under the Investor Agreement, the Buyer hereby agrees that, so long as the
Originator shall continue to perform as Sub-Servicer hereunder, the Buyer shall
pay over to the Originator a monthly fee in an amount equal to (i) a per annum
rate agreed to by the Buyer and the Originator from time to time, multiplied by
(ii) the average Outstanding Balance of the Receivables sold under this
Agreement during the preceding calendar month, such fee to be calculated to
provide the Servicer and the Sub-Servicer reasonable compensation for their
respective servicing activities and reimbursement for all out-of-pocket costs
and expenses of the Sub-Servicer incurred in connection with such activities;
provided that such fee shall not be in excess of the Servicer Fee paid to the
Buyer by the Purchasers for such period. Such fee shall be payable on the first
Business Day of each calendar month.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.1. Events of Default. The occurrence of any one or more of
the following events shall constitute an Event of Default:
(a) Sub-Servicer or the Originator shall fail (i) to make any
payment or deposit required hereunder when due, (ii) to comply with the
requirements set forth in Section 4.1(e)(iii) or 4.1(i) at any time, or (iii) to
perform or observe any term, covenant or agreement hereunder (other than as
referred to in clause (i) or (ii) of this paragraph (a)) and such failure shall
remain unremedied for three Business Days.
PAGE 18
<PAGE> 22
(b) Any representation, warranty, certification or statement made by
the Originator or the Sub-Servicer in this Agreement, any other Transaction
Document or in any other document delivered pursuant hereto shall prove to have
been incorrect when made or deemed made.
(c) Failure of the Originator or any of its Subsidiaries to pay any
Indebtedness when due, which Indebtedness is outstanding under one or more
instruments or agreements in an aggregate principal amount in excess of
$250,000; or the default by the Originator or any of its Subsidiaries in the
performance of any term, provision or condition contained in any agreement under
which any such Indebtedness was created or is governed, the effect of which is
to cause, or to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Originator or any of its Subsidiaries shall be declared to
be due and payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the date of maturity thereof.
(d) (i) The Originator or any of its Subsidiaries shall generally
not pay its debts as such debts become due or shall admit in writing its
inability to pay its debts generally or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the
Originator or any of its Subsidiaries seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or any substantial part of its property
or (ii) the Originator or any of its Subsidiaries shall take any corporate
action to authorize any of the actions set forth in clause (i) above in this
subsection (d).
(e) One or more final judgments shall be entered against the
Originator or any of its Subsidiaries for the payment of money in the aggregate
amount of $100,000, or the equivalent thereof in another currency, or more on
claims not covered by insurance or as to which the insurance carrier has denied
its responsibility, and such judgement shall continue unsatisfied and in effect
for thirty (30) consecutive days without a stay of execution.
(f) Any "Servicer Default" shall occur under the Investor Agreement
and be declared by the Agent thereunder.
Section 6.2. Remedies. Upon the occurrence and during the
continuation of an Event of Default, the Buyer may (i) declare the Termination
Date to have occurred, whereupon the Termination Date shall forthwith occur,
without demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Originator; provided, however, that upon the occurrence
of an Event of Default described in subsection 6.1(d) above or of an actual or
deemed entry of an order for relief with respect to the Originator under the
Bankruptcy Code, the Termination Date shall automatically occur, without demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Originator. Upon the occurrence of the Termination Date for any reason
whatsoever, the Buyer shall have, in addition to all other rights
PAGE 19
<PAGE> 23
and remedies under this Agreement or otherwise, all other rights and remedies
provided under the UCC, which rights shall be cumulative.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Indemnities by the Originator. Without limiting any
other rights which the Buyer may have hereunder or under applicable law, the
Originator hereby agrees to indemnify the Buyer and any of its assignees
(including the Agent and each Purchaser) and their respective officers,
directors, agents and employees (each an "Indemnified Party") from and against
any and all damages, losses, claims, taxes, liabilities, costs, expenses and for
all other amounts payable, including reasonable attorneys' fees (which attorneys
may be employees of the Buyer, the Agent or such Purchaser) and disbursements
(all of the foregoing being collectively referred to as "Indemnified Amounts")
awarded against or incurred by any of them arising out of or as a result of this
Agreement or the acquisition, either directly or indirectly, of any interest in
the Receivables, excluding, however:
(i) Indemnified Amounts to the extent final judgment of
a court of competent jurisdiction holds such Indemnified Amounts
resulted from gross negligence or willful misconduct on the part of
the Indemnified Party seeking indemnification;
(ii) Indemnified Amounts to the extent the same includes
losses in respect of Receivables which are uncollectible on account of
the insolvency, bankruptcy or lack of creditworthiness of the related
Obligor (unless the asserted claim arises under Section 2.1(q)); or
(iii) taxes imposed by the jurisdiction in which such
Indemnified Party's principal executive office is located, on or
measured by the overall net income of such Indemnified Party to the
extent that the computation of such taxes is consistent with (a) the
characterization of the Purchases as true sales and (b) the
characterization of the transactions under the Investor Agreement as
creating Indebtedness of the Buyer for purposes of taxation;
provided, however, that nothing contained in this sentence shall limit the
liability of the Originator or the Sub-Servicer for amounts otherwise
specifically provided to be paid by the Originator or the Sub-Servicer under the
terms of this Agreement or any other Transaction Document. Without limiting the
generality of the foregoing indemnification, the Originator shall indemnify the
Indemnified Parties for Indemnified Amounts (including, without limitation,
losses in respect of uncollectible receivables, regardless of whether
reimbursement therefor would constitute recourse to the Originator or the
Sub-Servicer) to the extent the same relate to or result from:
PAGE 20
<PAGE> 24
(i) any representation or warranty made by the
Originator or the Sub-Servicer (or any officers of the Originator or
the Sub-Servicer) under or in connection with this Agreement, any
other Transaction Document, any Receivables Activity Report or any
other information or report delivered by the Originator or the
Sub-Servicer pursuant hereto or thereto, which shall have been false
or incorrect when made or deemed made;
(ii) the failure by the Originator or the Sub-Servicer
to comply with any applicable law, rule or regulation with respect to
any Receivable or Contract related thereto, or the nonconformity of
any Receivable or Contract included therein with any such applicable
law, rule or regulation;
(iii) any failure of the Originator or the Sub-Servicer
to perform its duties or obligations in accordance with the provisions
of this Agreement or any other Transaction Document;
(iv) any products liability or similar claim arising out
of or in connection with merchandise, insurance or services which are
the subject of any Contract;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable (including, without limitation, a defense based on
such Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale
of the merchandise or service related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(vi) the commingling of Collections of Receivables at
any time with other funds;
(vii) any investigation, litigation or proceeding
related to or arising from this Agreement or any other Transaction
Document, the transactions contemplated hereby or thereby, the use of
the proceeds of a Purchase, the ownership of the Receivables or any
other investigation, litigation or proceeding relating to the
Originator in which any Indemnified Party becomes involved as a result
of any of the transactions contemplated hereby or thereby;
(viii) any inability to litigate any claim against any
Obligor in respect of any Receivable as a result of such Obligor being
immune from civil and commercial law and suit on the grounds of
sovereignty or otherwise from any legal action, suit or proceeding;
(ix) any Event of Default described in Section 6.1(d);
(x) the failure to vest and maintain vested in the
Buyer, or to transfer to the Buyer, legal and equitable tide to, and
ownership of, a first priority perfected ownership
PAGE 21
<PAGE> 25
interest in the Receivables, the Related Security and the Collections,
free and clear of any Adverse Claim (other than as created by the Buyer
under the Transaction Documents);
(xi) the Originator's use of the proceeds; or
(xii) any attempt by any Person to void any transfer
purported to have been made hereunder under any statutory provision or
common-law or equitable action, including, without limitation, any
provision of the Bankruptcy Code.
Section 7.2. Other Costs and Expenses. The Originator shall pay to
the Buyer on demand all costs and out-of-pocket expenses in connection with the
preparation, execution, delivery and administration of this Agreement, the
transactions contemplated hereby and the other documents to be delivered
hereunder, including without limitation, the costs payable by the Buyer to the
Agent and the Purchasers under Sections 8.2 and 8.3 of the Investor Agreement.
The Originator shall pay to the Buyer on demand any and all costs and expenses
of the Buyer, if any, including reasonable counsel fees and expenses in
connection with the enforcement of this Agreement and the other documents
delivered hereunder and in connection with any restructuring or workout of this
Agreement or such documents, or the administration of this Agreement following
an Event of Default.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Waivers, Amendments and Consents. (a) No failure or
delay on the part of the Buyer or any of its assignees in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy preclude
any other further exercise thereof or the exercise of any other power, right or
remedy. The rights and remedies herein provided shall be cumulative and
nonexclusive of any rights or remedies provided by law. Any waiver of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which given.
(b) No provision of this Agreement or the Revolving Note may be
amended, supplemented, modified or waived except in writing by the Originator
and the Buyer and, to the extent required under the Investor Agreement, the
Agent, the Investors and/or the Required Investors.
(c) It is expressly understood and acknowledged that during the
period the Investor Agreement shall be in effect, the prior consent of the
Agent, the Purchasers and/or other interested Persons thereunder or in
connection therewith shall be required in accordance with the terms thereof in
order for the Buyer to grant a consent, authorization or approval requested of
the Buyer hereunder, or for the Buyer to agree to any amendment, waiver or other
modification to the terms or conditions of this Agreement.
PAGE 22
<PAGE> 26
Section 8.2. Notices. (a) Except as provided below, all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other party (and its designees) hereto at its (or their)
respective address or telecopy number set forth on the signature pages hereof.
All such communications and notices shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when received through the mails, transmitted by
telecopy, delivered to the telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively.
Section 8.3. Protection of Buyer's Interests. (a) The Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all instruments and documents, and take all actions,. that may be
necessary or desirable, or that the Buyer may request, to perfect, protect or
more fully evidence the Buyer's ownership of the Receivables, or to enable the
Buyer to exercise and enforce its rights and remedies hereunder. The Buyer may,
or the Buyer may direct the Originator to, notify the Obligors of Receivables,
at any time following the replacement of the Originator as Sub-Servicer and at
the Originator's expense, of the Buyer's ownership of the Receivables and may
also direct that payments of all amounts due or that become due under any or all
Receivables be made directly to the Buyer or its designee.
(b) If the Originator or the Sub-Servicer fails to perform any of
its obligations hereunder, the Buyer or any of its assignees may (but shall not
be required to) perform, or cause performance of, such obligation; and the
Buyer's or any of its assignee's costs and expenses incurred in connection
therewith shall be payable by the Originator on demand. The Originator and the
Sub-Servicer each irrevocably authorizes the Buyer at any time and from time to
time in the sole discretion of the Buyer, and appoints the Buyer as its
attorney-in-fact, to act on behalf of the Originator and the Sub-Servicer (i)
to execute on behalf of the Originator as seller/debtor and to file financing
statements necessary or desirable in the Buyer's sole discretion to perfect and
to maintain the perfection and priority of the Buyer's ownership interest in the
Receivables and (ii) to file a carbon, photographic or other reproduction of
this Agreement or any financing statement with respect to the Receivables as a
financing statement in such offices as the Buyer in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the Buyer's ownership interest in the Receivables. This appointment is coupled
with an interest and is irrevocable.
Section 8.4. Confidentiality. (a) The Originator shall maintain and
shall cause each of its employees and officers to maintain the confidentiality
of this Agreement and the Investor Agreement and the other confidential
proprietary information with respect to the Agent and Falcon and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein and therein,
except that the Originator and its officers and employees may disclose such
information to the Originator's external accountants and attorneys and as
required by any applicable law or order of any judicial or administrative
proceeding.
PAGE 23
<PAGE> 27
(b) Anything herein to the contrary notwithstanding. the Originator
hereby consents to the disclosure of any nonpublic information with respect to
it (i) to the Buyer, the Agent. the Investors or Falcon by each other, (ii) by
the Buyer, the Agent or the Purchasers to any prospective or actual assignee or
participant of any of them or (iii) by the Agent to any rating agency,
commercial paper dealer or provider of a surety, guaranty or credit or liquidity
enhancement to Falcon or any entity organized for the purpose of purchasing, or
making loans secured by, financial assets for which First Chicago acts as the
administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, provided each such Person is
informed of the confidential nature of such information. In addition, the Buyer,
the Purchasers and the Agent may disclose any such nonpublic information
pursuant to any law, rule, regulation, direction, request or order of any
judicial, administrative or regulatory authority or proceedings (whether or not
having the force or effect of law).
Section 8.5. Bankruptcy Petition. (a) The Originator hereby
covenants and agrees that, prior to the date which is one year and one day after
the payment in full of all outstanding senior Indebtedness of Falcon, it will
not institute against, or join any other Person in instituting against, Falcon
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States.
(b) The Originator hereby covenants and agrees that, prior to date
following the Termination Date which is one year and one day after the date on
which (i) the Outstanding Balance of all Receivables sold hereunder has been
reduced to zero or written off in accordance with the Credit and Collection
Policy and (ii) the Originator has paid to the Buyer all indemnities,
adjustments and other amounts which may be owed hereunder in connection with the
Purchases, it will not institute against, or join any other Person in
instituting against, the Buyer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States.
Section 8.6. Limitation of Liability. Except with respect to any
claim arising out of the willful misconduct or gross negligence of Falcon, the
Agent or any Investor, no claim may be made by the Originator, the Sub-Servicer
or any other Person against Falcon, the Agent or any Investor or their
respective Affiliates, directors, officers, employees, attorneys or agents for
any special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement or the Investor
Agreement, or any act, omission or event occurring in connection therewith; and
the Originator hereby waives, releases, and agrees not to sue upon any claim for
any such damages, whether or not accrued and whether or not known or suspected
to exist in its favor.
SECTION 8.7. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF
THE STATE OF ILLINOIS.
PAGE 24
<PAGE> 28
SECTION 8.8. CONSENT TO JURISDICTION. THE ORIGINATOR HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE
ORIGINATOR PURSUANT TO THIS AGREEMENT AND THE ORIGINATOR HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE BUYER (OR THE RIGHTS OF THE AGENT OR ANY PURCHASER AS THE
BUYER'S ASSIGNEES) TO BRING PROCEEDINGS AGAINST THE ORIGINATOR IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE ORIGINATOR AGAINST THE
BUYER, THE AGENT OR ANY PURCHASER, ANY AFFILIATE OF THE AGENT OR A PURCHASER, OR
ANY OTHER OF THE BUYER'S ASSIGNEES, INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT
OR ANY DOCUMENT EXECUTED BY THE ORIGINATOR PURSUANT TO THIS AGREEMENT SHALL BE
BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
SECTION 8.9. WAIVER OF JURY TRIAL. EACH OF THE ORIGINATOR AND THE
BUYER HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY
DOCUMENT EXECUTED BY THE ORIGINATOR PURSUANT TO THIS AGREEM[ENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
Section 8.10. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the Originator, the Buyer and their
respective successors and permitted assigns (including any trustee in
bankruptcy). The Originator may not assign any of its rights or delegate any of
its obligations hereunder or transfer any interest herein without the prior
written consent of the Buyer. The Buyer may assign at any time any or all of its
rights and obligations hereunder and interests herein to any other person
without the consent of the Originator. Without limiting the foregoing, the
Originator acknowledges that the Buyer, pursuant to the Investor Agreement,
shall assign to the Agent, for the benefit of the Purchasers, all of its rights,
remedies, powers and privileges hereunder and that the Agent may further assign
such rights, remedies, powers and privileges to the extent permitted in the
Investor Agreement. The Originator agrees that the Agent, as the assignee of the
Buyer, shall, subject to the terms of the Investor Agreement, have the right to
enforce this Agreement and to exercise directly all of the Buyer's rights and
remedies under this Agreement (including, without limitation, the right to give
or withhold any
PAGE 25
<PAGE> 29
consents or approvals of the Buyer to be given or withheld hereunder) and the
Originator and Sub-Servicer agree to cooperate fully with the Agent and the
Servicer in the exercise of such rights and remedies. The Originator further
agrees to give to the Agent copies of all notices it is required to give to the
Buyer hereunder and to permit the Agent and the Purchasers (and their assignees)
the rights of inspection and audit granted to the Buyer hereunder. The
Originator further agrees that to the extent the Buyer is herein permitted to
take any action (whether as Originator or Sub-Servicer) or to provide any
information or report, the Agent and the Purchasers (and their assignees) may
similarly so direct and require (with or without the concurrence of the Buyer)
the Originator to take such action or to provide such information or report.
This Agreement shall create and constitute the continuing obligations of the
parties hereto in accordance with its terms, and shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to-any breach of any representation and warranty made by
the Originator pursuant to Article II and the indemnification and payment
provisions of Article VII and Section 8.5 shall be continuing and shall survive
any termination of this Agreement.
Section 8.11. Subordination. The Originator agrees that any
indebtedness, obligation or claim, it may from time to time hold or otherwise
have (including, without limitation any obligation or claim arising in
connection with the Revolving Loans) against the Buyer or any assets or
properties of the Buyer, whether arising hereunder or otherwise existing, shall
be subordinate in right of payment to the prior payment in full of any
indebtedness or obligation of the Buyer owing to the Agent or any Purchaser
under the Investor Agreement. The subordination provision contained herein is
for the direct benefit of, and may be enforced by, the Agent and the Purchasers
and/or any of their assignees under the Investor Agreement.
Section 8.12. Integration; Survival of Terms. This Agreement, the
Revolving Note, the Subscription Agreement, and the Collection Account
Agreements contain the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof superseding all prior oral or written understandings.
Section 8.13. Counterparts; Severability. This Agreement may be
executed in any number of counterparts and by each party hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are 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.
Section 8.14. Characterization. It is the intention of the parties
hereto that each Purchase hereunder shall constitute an absolute and irrevocable
sale, which purchase shall provide the Buyer with the full benefits of ownership
of the applicable Receivables. Except as specifically provided in this
Agreement, each sale of a Receivable hereunder is made without recourse to the
Originator;
PAGE 26
<PAGE> 30
provided however, that (i) the Originator shall be liable to the Buyer for all
representations, warranties and covenants made by the Originator pursuant to the
terms of this Agreement. and (ii) such sale does not constitute and is not
intended to result in an assumption by the Buyer or any assignee thereof of any
obligation of the Originator or any other Person arising in connection with the
Receivables, the Related Security, or the related Contracts, or any other
obligations of the Originator.
(Remainder of this page intentionally left blank.]
PAGE 27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
hereof.
AMKOR ELECTRONICS, INC.
By: /s/ Frank J. Marcucci
----------------------------------------
Name: Frank J. Marcucci
---------------------------------
Title:Executive Vice President
--------------------------------
Goshen Corporate Park
1345 Enterprise, Drive
West Chester, Pennsylvania 19380
Phone: (610) 431-9600
Fax: (610) 431-3023
AMKOR RECEIVABLES CORP.
By: /s/ Frank J. Marcucci
----------------------------------------
Name: Frank J. Marcucci
---------------------------------
Title: Vice President
--------------------------------
Address for Purpose of Notice:
Goshen Corporate Park
1345 Enterprise Drive
West Chester, Pennsylvania 19380
Phone: (610) 431-9600
FAX: (610) 431-3023
With a copy to the Agent at the following
address at anytime the Investor Agreement
shall be in effect:
The First National Bank Of Chicago
Suite 0596, 21st Floor
One First National Plaza
Chicago, Illinois 60670
Attn: Asset-Backed Finance
Fax: (312) 732-4487
<PAGE> 32
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
EXHIBIT I DEFINITIONS
EXHIBIT II PRINCIPAL PLACE OF BUSINESS OF THE ORIGINATOR:
LOCATION(S) OF RECORDS; FEDERAL EMPLOYER
IDENTIFICATION NUMBERS
EXHIBIT III LOCK-BOXES, CONCENTRATION ACCOUNTS, DEPOSITARY
ACCOUNTS
EXHIBIT IV FORM OF COMPLIANCE CERTIFICATE
EXHIBIT V FORM OF COLLECTION ACCOUNT AGREEMENT
EXHIBIT VI CREDIT AND COLLECTION POLICY
EXHIBIT VI FORM OF CONTRACT(S)
EXHIBIT VIII FORM OF RECEIVABLES ACTIVITY REPORT
EXHIBIT IX FORM OF SUBSCRIPTION AGREEMENT
EXHIBIT X FORM OF REVOLVING NOTE
SCHEDULE A LIST OF DOCUMENTS TO BE DELIVERED TO THE AGENT PRIOR TO
THE INITIAL PURCHASE
</TABLE>
<PAGE> 33
EXHIBIT I
DEFINITIONS
As used in this Agreement, the following term shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, another Person
or any Subsidiary of such other Person. A Person shall be deemed to control
another Person if the controlling Person owns 10% or more of any class of voting
securities of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.
"Agent" means First Chicago in its capacity as "Agent" under the
Investor Agreement, and any successor Agent appointed pursuant to Article IX of
the Investor Agreement.
"Agreement" means this Receivables Purchase Agreement, as it may be
amended or modified and in effect from time to time.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C.SectionSection 101 et seq., as amended.
"Base Rate" means, (i) prior to the occurrence of an Event of
Default, a rate per annum, equal to the corporate base rate, prime rate or base
rate of interest, as applicable, announced by First Chicago (or such other bank
as the Agent may designate as the "Reference Bank" under the Investor Agreement)
from time to time, changing when and as such rate changes, and (ii) at all times
after the occurrence of a Event of Default, such rate plus 2% per annum.
"Business Day" means any day on which banks are not authorized or
required to close in Chicago, Illinois.
"Capital" shall have the meaning set forth in the Investor
Agreement.
"Chandler Account" means any indebtedness or obligation owed to the
Originator, whether constituting an account, chattel paper, instrument or
general intangible, arising in connection with the sale of goods or the
provision of services at or from the Originator's manufacturing facility located
in Chandler, Arizona.
"Charged-Off Receivable" means a Receivable: (i) as to which the
Obligor thereof has taken any action, or suffered any event to occur, of the
type described in Section 6.1(d) (as if references to the Originator therein
refer to such Obligor); (ii) as to which the Obligor thereof,
PAGE I-2
<PAGE> 34
if a natural person, is deceased, (iii) which, consistent with the Credit and
Collection Policy, would be written off the Originator's books as
uncollectible, or (iv) which has been identified by the Originator as
uncollectible.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collection Account" means each concentration account, depositary
account, lock-box account or similar account in which any Collections are
collected or deposited.
"Collection Account Agreement" means, in the case of any actual or
proposed Collection Account, an agreement in substantially the form of Exhibit V
hereto.
"Collection Bank" means, at any time, any of the banks or other
financial institutions holding one or more Collection Accounts.
"Collection Date" means the date that is the latest to occur of (i)
the Termination Date, (ii) the date as of which all Receivables purchased
hereunder shall have been collected in full or written off in accordance with
the Credit and Collection Policy and (iii) the date all indemnities, adjustments
and other amounts due hereunder by the Originator to the Buyer shall have been
paid in full.
"Collection Notice" means a notice, in substantially the form of the
Collection Notice contained in Annex A to Exhibit V hereto, from the Agent to a
Collection Bank.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable, including,
without limitation, all cash proceeds of Related Security with respect to such
Receivable.
"Contingent Obligation" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit.
"Contract" means, with respect to any Receivable, any and all
instruments, agreements, leases, invoices or other writings pursuant to which
such Receivable arises or which evidences such Receivable.
"Credit and Collection Policy" means the Originator's credit and
collection policies and practices relating to Contracts and Receivables existing
on the date hereof and summarized in Exhibit VI hereto, as modified from time to
time in accordance with this Agreement.
I-2
<PAGE> 35
"Defaulted Receivable" means a Receivable as to which any payment,
or part thereof, remains unpaid for 116 days or more from the original invoice
date for such payment or is identified as being disputed on the Originator's
books and records.
"Delinquent Receivable" means a Receivable as to which any payment,
or part thereof, remains unpaid for more than 85 days from the original invoice
date or is identified as being disputed on the Originator's books and records.
"Designated Obligor" means an Obligor indicated to be such by the
Buyer or the Agent to the Originator in writing.
"Dilutions" means, at any time, the aggregate amount of reductions
in the Outstanding Balances of the Receivables as a result of any setoff,
discount, adjustment or otherwise, other than (i) cash Collections on account of
the Receivables and (ii) charge-offs.
"Discount Factor" means a percentage calculated to provide the Buyer
with a reasonable return on its investment in the Receivables after taking
account of (i) the time value of money based upon the anticipated dates of
collection of such Receivables and the cost to the Buyer of financing its
investment in such Receivables during such period, (ii) the risk of nonpayment
by the Obligors, and (iii) the costs of sub-servicing performed by the
Originator. The Originator and the Buyer may agree from time to time to change
the Discount Factor based on changes in one or more of the items affecting the
calculation thereof, provided that any change to the Discount Factor shall take
effect as of the commencement of a Monthly Period, shall apply only
prospectively and shall not affect the Purchase Price payment in respect of
Purchases which occurred during any Monthly Period ending prior to the Monthly
Period during which the Originator and the Buyer agree to make such change.
"Eligible Receivable" means, at any time, a Receivable:
(i) the Obligor of which (a) if a natural person, is a
resident of the United States or, if a corporation or other business
organization, is organized under the laws of the United States or any
political subdivision thereof and has its chief executive office in
the United States; provided that a Receivable on which the Obligor is
a corporation or other business organization organized under the laws
of Canada or any political subdivision thereof may, notwithstanding
this clause (a), constitute an "Eligible Receivable" hereunder if (x)
it otherwise satisfies the requirements of this definition and (y) the
Outstanding Balance thereof, together with the Outstanding Balance of
all other Receivables that constitute Eligible Receivables by reason
of this provision does not at any time exceed an aggregate amount
equal to $1,000,000; (b) is not an Affiliate of any of the parties
hereto; (c) is not a Designated Obligor; and (d) is not a government
or a governmental subdivision or agency,
I-3
<PAGE> 36
(ii) the Obligor of which is not both (a) an Obligor,
together with its Affiliates, on Receivables having an aggregate
Outstanding Balance of $1,000,000 or more and (b) an Obligor in
respect of which 25% or more of the aggregate Outstanding Balance of
its Receivables remain unpaid for 116 days or more after the original
invoice date or are identified as being disputed on the Originator's
books and records,
(iii) which is not a Defaulted Receivable, a Charged-Off
Receivable or a Delinquent Receivable,
(iv) which by its terms is due and payable within 30
days of the original billing date therefor and has not had its payment
terms extended,
(v) which is an account receivable representing all or
part of the sales price of merchandise, insurance and services within
the meaning of Section 3(c)(5) of the Investment Company Act of 1940,
as amended,
(vi) a purchase of which with the proceeds of notes
would constitute a "current transaction" within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended,
(vii) which is an "account" within the meaning of
Section 9-106 of the UCC of all applicable jurisdictions,
(viii) which is denominated and payable only in United
States dollars in the United States,
(ix) which arises under a Contract in substantially the
form of one of the form contracts set forth on Exhibit VII hereto or
otherwise approved by the Buyer in writing, which, together with such
Receivable, is in full force and effect and constitutes the legal,
valid and binding obligation of the related Obligor enforceable
against such Obligor in accordance with its terms subject to no
offset, counterclaim or other defense,
(x) which arises under a Contract which (a) does not
require the Obligor under such Contract to consent to the transfer,
sale or assignment of the rights and duties of the Originator or any
of its assignees under such Contract and (b) does not contain a
confidentiality provision that purports to restrict the ability of the
Buyer to exercise its rights under this Agreement or the ability of
the Agent or any Purchaser to exercise their rights under the Investor
Agreement, including, without limitation, the Buyer's, the Agent's or
any Purchaser's right to review the Contract,
(xi) which arises under a Contract that contains an
obligation to pay a specified sum of money, contingent only upon the
sale of goods or the provision of services by the Originator,
I-4
<PAGE> 37
(xii) which is not subject to any right of rescission,
set-off counterclaim, any other defense (including defenses arising
out of violations of usury laws) of the applicable Obligor or any
other Adverse Claim, and the Obligor thereon holds no right as against
the Originator to cause the Originator to repurchase the goods or
merchandise the sale of which shall have given rise to such
Receivable.
(xiii) as to which the Originator has satisfied and
fully performed all obligations on its part with respect to such
Receivable required to be fulfilled by it, and no further action is
required to be performed by any Person with respect thereto other than
payment thereon by the applicable Obligor,
(xiv) all right, title and interest to and in which has
been, or will be, validly transferred by the Originator directly to
the Buyer under and in accordance with this Agreement, and upon the
Purchase thereof hereunder the Buyer will have good and marketable
title thereto free and clear of any Adverse Claim,
(xv) which, together with the Contract related thereto,
does not contravene any law, rule or regulation applicable thereto
(including, without limitation, any law, rule and regulation relating
to truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and
with respect to which no part of the Contract related thereto is in
violation of any such law, rule or regulation,
(xvi) which satisfies all applicable requirements of the
Credit and Collection Policy,
(xvii) which was generated in the ordinary course of the
Originator's business,
(xviii) which arises solely from the sale of goods or
the provision of services to the related Obligor by the Originator,
and not by any other Person (in whole or in part); except that some or
all of the sale of goods or the provision of services may have been
performed by Anam Industrial Co., Ltd. under subcontracting
arrangements with the Originator, provided that no Person other than
the Originator shall have any interest in the claim for payment
against the applicable Obligor arising from such sale of goods or
provision of services,
(xix) as to which neither the Buyer nor the Agent has
notified the Originator that such Receivable or class of Receivables
is not acceptable as an Eligible Receivable, including, without
limitation, because such Receivable arises under a Contract that is
not acceptable to the Buyer or the Agent, and
(xx) that portion of the Outstanding Balance of which
reconciles to the Originator's general ledger.
I-5
<PAGE> 38
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer with the Originator under
Section 414 of the Code.
"Event of Default" has the meaning assigned to that term in Section
6. 1.
"Falcon" has the meaning set forth in the Preliminary Statement of
this Agreement.
"Finance Charges" means, with respect to a Contract, any finance,
interest, late payment charges or similar charges owing by an Obligor pursuant
to such Contract.
"First Chicago" means The First National Bank of Chicago in its
individual capacity and its successors.
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) capitalized lease obligations, (vi) net liabilities under
interest rate, swap, exchange or cap agreements, (vii) Contingent Obligations
and (viii) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Investor Agreement" has the meaning set forth in the Preliminary
Statement of this Agreement.
"Investors" has the meaning set forth in the Preliminary Statement
of this Agreement.
"Lock-Box" means one of the lock-boxes listed on Exhibit III, or
such other lock-box as shall have been established by the Buyer and in respect
of which a Collection Account Agreement shall then be in effect.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition, business or operations of the Originator and its
Subsidiaries, (ii) the ability of the Originator to perform its obligations
under any Transaction Document, (iii) the legality, validity or enforceability
of this Agreement, any Transaction Document or any Collection Account Agreement
or Collection Notice relating to a Collection Account, (iv) the Originator's,
the Buyer's or any Purchaser's interest in the Receivables generally or in any
significant portion of the Receivables, the Related Security or the Collections
with respect thereto, or (v) the collectibility of the Receivables generally or
of any material portion of the Receivables.
I-6
<PAGE> 39
"Monthly Period" means each calendar month or a portion thereof that
elapses during the term of this Agreement. The first Monthly Period shall
commence on the date of the initial Purchase and the final Monthly Period shall
terminate on the Termination Date.
"Obligor" means a Person obligated to make payments pursuant to a
Contract.
"Original Balance" means, with respect to any Receivable, the
Outstanding Balance of such Receivable on the date it was purchased by the
Buyer.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"PBGC" means the Pension Benefit Guaranty Corporation created under
Section 4002(a) of ERISA or any successor thereto.
"Performance Undertaking" means that certain Performance Undertaking
of even date herewith made by Anam Industrial Co., Ltd., in favor of the Buyer,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Plan" means any defined benefit plan maintained or contributed to
by the Originator or any Subsidiary of the Originator or by any trade or
business (whether or not incorporated) under common control with the Originator
or any Subsidiary of the Originator as defined in Section 4001(b) of ERISA and
insured by the PBGC under Title IV of ERISA.
"Potential Event of Default" means an event which, with the passage
of time or the giving of notice, or both, would constitute a Event of Default.
"Purchase" means (i) with respect to all Receivables, Related
Security, Collections and Collection Accounts generally, as defined in Section
1.1, and (ii) in the case of any Receivable and the Related Security and
Collections with respect thereto, the attachment of the Buyer's interest therein
by upon the creation of such Receivable.
"Purchase Price" means, with respect to any Purchase on any date,
the aggregate price to be paid to the Originator for such Purchase on the date
thereof for the Receivables and Related Security being sold to the Buyer on such
date, which price shall equal (i) the product of (x) the Original Balance of
such Receivables, multiplied by (y) one minus the Discount Factor then in effect
minus (ii) any Purchase Price Credits to be credited against the purchase price
otherwise payable in accordance with Section 1.3 hereof.
I-7
<PAGE> 40
"Purchase Price Credit" has the meaning set forth in Section 1.3.
"Purchaser" has the meaning set forth in the Investor Agreement.
"Receivable" means the indebtedness and other obligations owed to
the Originator (without giving effect to any transfer or conveyance hereunder)
whether constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale of goods or the rendering of
services by the Originator, and includes, without limitation, the obligation to
pay any Finance Charges with respect thereto. Indebtedness and other rights and
obligations arising from any one transaction, including, without limitation,
indebtedness and other rights and obligations represented by an individual
invoice, shall constitute a Receivable separate from a Receivable consisting of
the indebtedness and other rights and obligations arising from any other
transaction. The term "Receivable" shall not include (i) the Revolving Note or
(ii) any Chandler Account.
"Receivable Interest" has the meaning set forth in the Investor
Agreement.
"Receivables Activity Report" means a report, in substantially the
form of Exhibit VIII hereto (appropriately completed), furnished by the
Sub-Servicer to the Buyer pursuant to Section 5.5.
"Records" means, with respect to any Receivable, all Contracts and
other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Receivable, any
Related Security therefor and the related Obligor.
"Related Security" means, with respect to any Receivable:
(i) all of the Originator's interest in the inventory
and goods (including returned or repossessed inventory or goods), if
any, the financing of which by the Originator gave rise to such
Receivable, and all insurance contracts with respect thereto,
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure
payment of such Receivable, whether pursuant to the Contract related
to such Receivable or otherwise, together with all financing
statements and security agreements describing any collateral securing
such Receivable,
(iii) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to the Contract
related to such Receivable or otherwise,
I-8
<PAGE> 41
(iv) all service contracts and other contracts and
agreements associated with such Receivables,
(v) all Records related to such Receivables, and
(vi) all proceeds of any of the foregoing.
"Reportable Event" has the meaning set forth in Section 4043 of
ERISA.
"Reporting Date" means the 18th calendar day of each month or, if
such day is not a Business Day, the next following calendar day that is a
Business Day.
"Required Investors" has the meaning set forth in the Investor
Agreement.
"Revolving Loan" has the meaning set forth in Section 1.2(b).
"Revolving Note" means a promissory note in substantially the form
of Exhibit X hereto as more fully described in Section 1.2, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Servicer" means at any time the Person then authorized pursuant to
Article VI of the Investor Agreement to service, administer and collect
Receivables.
"Servicer Default" has the meaning set forth in the Investor
Agreement.
"Servicer Fee" has the meaning set forth in the Investor Agreement.
"Settlement Date" means (i) the second Business Day following the
Reporting Date in each calendar month and (ii) any additional day designated by
the Buyer.
"Subscription Agreement" means the Stockholder and Subscription
Agreement in substantially the form of Exhibit IX hereto, as the same may be
amended, restated, supplemented or otherwise modified from time to time:
"Sub-Servicer" means the Originator in its capacity as sub-servicer
for the Servicer as described in Section 5.1 hereof
"Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or
by one or
I-9
<PAGE> 42
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, association, joint venture or similar business
oreanization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Originator.
"Support Agreement" means that certain Contract, No. ACSC-9609,
dated as of September 2, 1996 between Anam Industrial Co., Ltd. and the
Originator.
"Termination Date" means, the earlier of (i) the date of the
declaration or automatic occurrence of the Termination Date pursuant to Section
6.2 and (ii) the date designated by either the Originator or the Buyer as the
Termination Date in a written notice delivered to the other party (and if to the
Buyer, then to the Agent as well) not less than (A) thirty days prior to such
designated date, if the Investor Agreement shall then be in effect, or (B) ten
days prior to such designated date, if the Investor Agreement shall not then be
in effect.
"Transaction Documents" means, collectively, this Agreement, the
Revolving Note, the Subscription Agreement, the Performance Undertaking, each
Collection Account Agreement and all other instruments, documents and agreements
executed and delivered by the Originator in connection herewith.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles. All terms
used in Article 9 of the UCC in the State of Illinois, and not specifically
defined herein, are used herein as defined in such Article 9.
I-10
<PAGE> 43
EXHIBIT II
PLACES OF BUSINESS, LOCATION OF RECORDS,
FEDERAL EMPLOYER IDENTIFICATION NUMBER OF ORIGINATOR
1. Principal Place of Business and Chief Executive Office: 1345 Enterprise
Drive, West Chester, Pennsylvania 19380
2. Location of Records: 1345 Enterprise Drive, West Chester, Pennsylvania
19380
3. Federal Employer Identification Number of Originator: 23-1722724
4. Trade Names: None
5. Corporate Name: Amkor Electronics, Inc.
<PAGE> 44
EXHIBIT III
COLLECTION ACCOUNTS:
CONCENTRATION ACCOUNTS; AND DEPOSITARY ACCOUNTS
None, except:
Citibank, N.A.
460 W. 33rd Street
New York, NY 10043
Type: Lock-Box Account
Account # 40568602
ABA # 021-000-089
Post Office Box Addresses:
(a) P.O. Box 7247-8748
Philadelphia, PA 19170-8748
(b) Dept. 4015
Los Angeles, CA 90096-4015
<PAGE> 45
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished pursuant to that certain
Receivables Purchase Agreement dated as of June 20, 1997, between Amkor
Electronics, Inc. (the "Originator"), and Amkor Receivables Corp. (the
"Agreement").
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duty elected _______________ of the Originator;
2. I have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Originator and its Subsidiaries during the
accounting period covered by the attached financial statements; and
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
an Event of Default or Potential Event of Default, as each such term is defined
under the Agreement, during or at the end of the accounting period covered by
the attached financial statements or as of the date of this Certificate, except
as set forth below.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Originator has taken, is taking,
or proposes to iake with respect to each such condition or event:
The foregoing certifications, together with the computations set
forth in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ______ day of
____________, 19___.
------------------------------------
[Name]
<PAGE> 46
SCHEDULE I TO COMPLIANCE REPORT
A. Schedule of Compliance as of ____________, 19___ with Sections ____ of
the Agreement. Unless otherwise defined herein, the terms used in this
Compliance Certificate have the meanings ascribed thereto in the
Agreement.
This schedule relates to the month ended: ____________
<PAGE> 47
EXHIBIT V
FORM OF COLLECTION ACCOUNT AGREEMENT
[On letterhead of Buyer]
____________, 19___
[Lock-Box Bank/Concentration Bank/Depositary Bank]
Re: Amkor Receivables Corp.
Amkor Electronics, Inc.
Ladies and Gentlemen:
You have exclusive control of P.O. Box #__________ in [city, state,
zip code] (the "Lock-Box") for the purpose of receiving mail and processing
payments therefrom pursuant to that certain [name of lock-box agreement] between
you and Amkor Electronics, Inc. dated __________ (the "Agreement"). You hereby
confirm your agreement to perform the services described therein. Among the
services you have agreed to perform therein, is to endorse all checks and other
evidences of payment, and credit such payments to our checking account no.
__________ maintained with you in the name of Amkor Electronics, Inc. (the
"Lock-Box Account").
Amkor Electronics, Inc. hereby transfers and assigns all of its
right, title and interest in and to, and exclusive ownership and control over,
the Lock-Box and the Lock-Box Account to Amkor Receivables Corp. (the "Seller").
We hereby request that the name of the Lock-Box Account be changed to the Amkor
Receivables Corp., as "Collection Agent" for the benefit of The First National
Bank of Chicago ("FNBC"), as agent under that certain Investor Agreement (the
"Investor Agreement") dated as of June 20, 1997 among the Seller, Falcon Asset
Securitization Corporation, certain financial institutions parties thereto and
FNBC.
The Seller hereby irrevocably instructs you, and you hereby agree,
that upon receiving notice from FNBC in the form attached hereto as Annex A: (i)
the name of the Lock-Box Account will be changed to FNBC for itself and as agent
(or any designee of FNBC) and FNBC will have exclusive ownership of and access
to such Lock-Box Account, and neither the Seller nor any of our affiliates will
have any control of such Lock-Box Account or any access thereto, (ii) you will
either continue to send the funds from the Lock-Box to the Lock-Box,Account, or
will redirect the funds as FNBC may otherwise request, (iii) you will transfer
monies on deposit in the Lock-Box Account, at any time, as directed by FNBC,
(iv) all services to be performed by you under the Agreement will be performed
on behalf of FNBC, and (v) all correspondence or other mail which you have
agreed to send us will be sent to FNBC at the following address:
The First National Bank of Chicago
Suite 0596, 21st Floor
<PAGE> 48
One First National Plaza
Chicago, Illinois 60670
Attention: Credit Manager, Asset Backed
Securities Division
Moreover, upon such notice, FNBC for itself and as agent will have
all rights and remedies given to us under the Agreement. We agree, however, to
continue to pay all fees and other assessments due thereunder at any time.
You hereby acknowledge that monies deposited in the Lock-Box Account
or any other account established with you by FNBC for the purpose of receiving
funds from the Lock-Box are subject to the liens of FNBC for itself and as agent
under the Investor Agreement, and will not be subject to deduction, set-off,
banker's lien or any other right you or any other party may have against us.
This letter agreement and the rights and obligations of the parties
hereunder will be governed by and construed and interpreted in accordance with
the laws of the State of Illinois. This letter agreement may be executed in any
number of counterparts and all of such counterparts taken together will be
deemed to constitute one and the same instrument. All references herein to "we"
or "us" refer to Amkor Electronics, Inc. and Amkor Receivables Corp.
This letter agreement contains the entire agreement between the
parties, and may not be altered, modified, terminated or amended in any respect,
nor may any right, power or privilege of any party hereunder be waived or
released or discharged, except upon execution by all parties hereto of a written
instrument so providing. In the event that any provision in this letter
agreement is in conflict with, or inconsistent with, any provision of the
Agreement, this letter agreement will exclusively govern and control. Each party
agrees to take all actions reasonably requested by any other parry to carry out
the purposes of this letter agreement or to preserve and protect the rights of
each party hereunder.
Page V-2
<PAGE> 49
Please indicate your agreement to the terms of this letter
agreement by signing in the space provided below. This letter agreement will
become effective immediately upon execution of a counterpart of this letter
agreement by all parties hereto.
Very truly yours,
AMKOR ELECTRONICS, INC.
By:___________________________
Name:_________________________
Title:________________________
AMKOR RECEIVABLES CORP.
By:___________________________
Name:_________________________
Title:________________________
Acknowledged and agreed to
this _____ day of June, 1997
[COLLECTION BANK]
By:___________________________
Name:_________________________
Title:________________________
Acknowledged and agreed to
this _____ day of June, 1997
THE FIRST NATIONAL BANK OF
CHICAGO (for itself and as Agent)
By:___________________________
Name:_________________________
Title:________________________
V-3
<PAGE> 50
ANNEX A
FORM OF COLLECTION NOTICE
[On letterhead of FNBC]
____________, 19__
[Collection Bank/Depositary Bank/Concentration Bank]
Re: [Amkor Receivables Corp.]
Ladies and Gentlemen:
We hereby notify you that we are exercising our rights pursuant to
that certain letter agreement among Amkor Electronics, Inc., [Amkor Receivables
Corp.], you and us, to have the name of, and to have exclusive ownership and
control of, account number ________________ (the "Lock-Box Account") maintained
with you, transferred to us. [Lock-Box Account will henceforth be a zero-balance
account, and funds deposited in the Lock-Box Account should be sent at the end
of each day to _______________.] You have further agreed to perform all other
services you are performing under that certain agreement dated ____________
between you and [Amkor Receivables Corp.] on our behalf.
We appreciate your cooperation in this matter.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
(for itself and as agent)
By:___________________________
Name:_________________________
Title:________________________
<PAGE> 51
EXHIBIT VI
CREDIT AND COLLECTION POLICY
Attached.
<PAGE> 52
EXHIBIT VII
FORM OF CONTRACT(S)
Attached.
<PAGE> 53
DATE:
TO:
ATTN:
QUOTE#: REV#: CUSTOMER#:
EFFECTIVE DATE:
REVISIONS
SECTION: ITEM: DESC:
Amkor is pleased to offer (customer) the following quotation for Assembly and
Test of its IC packages.
INDEX
- -----
<TABLE>
<S> <C>
1.0 ASSEMBLY PRICING (USD AND EX-WORKS FACTORY INCOTERMS
1990)
2.0 FINAL TEST AND/OR OTHER PROCESS PRICING
3.0 CUSTOMER REQUESTED PROCESS OPTIONS - ADDERS
4.0 CUSTOMER REQUESTED MATERIAL OPTIONS - ADDERS
5.0 PACKAGE MATERIALS PRICING
6.0 AAWW PROCESS SPECIFICATIONS
7.0 MATERIAL
8.0 PRECIOUS METAL ADDERS
9.0 FAST TRACK
10.0 LOT SPECIFIC ADDERS
11.0 TERMS AND CONDITIONS OF SALE
</TABLE>
<PAGE> 54
1.0 ASSEMBLY PRICING - USD AND EX-WORKS FACTORY (INCOTERMS 1990)
1.1 Package: Application: (Commercial/Military)
Factory: (AAP/AICL)
<TABLE>
<CAPTION>
ADDERS
Lead Count Dimension Unit Price(S) Unit Price(E) Unit Price(C) Au Ag
---------- --------- ------------- ------------- ------------- -- --
<S> <C> <C> <C> <C> <C> <C>
$ $ $ $ $
</TABLE>
1.2 Package: Application: (Commercial/Military)
Factory: (AAP/AICL)
<TABLE>
<CAPTION>
ADDERS
Lead Count Dimension Unit Price(S) Unit Price(E) Unit Price(C) Au Ag
---------- --------- ------------- ------------- ------------- -- --
<S> <C> <C> <C> <C> <C> <C>
$ $ $ $ $
</TABLE>
ADDERS
1.3 Package: Application: (Commercial/Military)
Factory: (AAP/AICL)
<TABLE>
<CAPTION>
Cumulative ADDERS
Lead Count Dimension Quantity Unit Price Au Ag
---------- --------- ---------- ---------- -- --
<S> <C> <C> <C> <C> <C>
$ $ $
</TABLE>
1.4 Dummy Units will be supplied at 75% of selling price. Daisy Chain
units will be supplied at 100% of selling price.
1.5 Die Inspect Prices (Plated Die) Application: (Commercial/Military)
Factory: (AAP)
<TABLE>
<CAPTION>
Die Size Unit
(Total Area) Price
------------ -----
<S> <C>
$
</TABLE>
Note: Above pricing does not include waffle packs.
2.0 FINAL TEST AND/OR OTHER PROCESS PRICING:
2.1 Test pricing
Package:
Factory: (AAP/AICL)
<TABLE>
<CAPTION>
Lead Test Unit Comments
Count Dimension Device Code Price (Amkor/Consigned-Tester
----- --------- ------ ---- ----- -----------------------
<S> <C> <C> <C> <C> <C>
TA $
TB
</TABLE>
2.3 Burn-In Pricing
<TABLE>
<CAPTION>
Description Burn-In Code Unit Price
----------- ------------ ----------
<S> <C> <C>
T1 $
T2 $
T3 $
</TABLE>
<PAGE> 55
2.4 Tape & Reel Pricing
<TABLE>
<CAPTION>
Description Tape & Reel Code Unit Price
----------- ---------------- ----------
<S> <C> <C>
TR $
</TABLE>
2.5 Test Reject
<TABLE>
<CAPTION>
Description Test Reject Code Unit Price
----------- ---------------- ----------
<S> <C> <C>
RA
Rl
</TABLE>
2.6 Backgrinding Pricing
Package: Application: (Commercial/Military)
Factory: (AAP/AICL)
<TABLE>
<CAPTION>
Wafer Diameter Final Thickness Price per-Wafer
-------------- --------------- ---------------
<S> <C> <C>
$
$
</TABLE>
3.0 CUSTOMER REQUESTED PROCESS OPTIONS - ADDERS:
<TABLE>
<CAPTION>
Option Code Process Description Unit Price Adder Applicable Packages
----------- ------------------- ---------------- -------------------
<S> <C> <C> <C>
$
</TABLE>
4.0 CUSTOMER REQUESTED MATERIAL OPTIONS - ADDERS:
4.1
<TABLE>
<CAPTION>
Option Code Material Description/Size Unit Price
----------- ------------------------- ----------
<S> <C> <C>
DC Die Coat
JC Jumper Chip $
</TABLE>
4.2
<TABLE>
<CAPTION>
Option Code Material Description Size Unit Price Gold Adder
----------- -------------------- ---- ---------- ----------
<S> <C> <C> <C> <C>
PF Perform $ $
$ $
</TABLE>
4.3
<TABLE>
<CAPTION>
Die Size
Option Code Material Description Total Area Unit Price Gold Adder
----------- -------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
EP Silver Glass $ $
$ $
</TABLE>
5.0 PACKAGE MATERIALS PRICING:
5.1
<TABLE>
<CAPTION>
Description Unit Price
----------- ----------
<S> <C>
$
</TABLE>
6.0 AAWW PROCESS SPECIFICATIONS:
<PAGE> 56
<TABLE>
<CAPTION>
Package Type Spec #
------------ ------
<S> <C>
6.1 QFP/TQFP/GQFP
6.2 PDIP
6.3 SOIC/TSOP/TSSOP
6.4 PLCC
6.5 POWER PACKAGES
6.6 CERDIP/CERQUAD
6.7 LCC SIDEBRAZE, CPGA
6.8 CERPACK
</TABLE>
7.0 MATERIAL:
7.1 Customer shall supply die in inked wafer form for all Plastic or
Hermetic products. Customer shall also supply piece parts where
applicable.
7.2 Factory shall supply the following for ___________________:
Leadframe:
Mold Compound:
Epoxy:
Wire:
7.3 Factory shall supply the following for ___________________:
Leadframe:
Mold Compound:
Epoxy:
Wire:
8.0 PRECIOUS METAL ADDERS:
Prices are quoted at the base price of $300 per Troy ounce for gold
and $5 per Troy ounce for silver. Prices are based on the Engelhard
fabricated product price on the day of shipment from the factory.
Adders are calculated per 1,000 units by multiplying the quoted
adder by the dollar increase above the base price. The calculated
price adder per unit is shown as a separate item on the invoice.
<PAGE> 57
9.0 FAST TRACK:
A Fast Track lot is one that will be assembled in one of our
factories and shipped within a specified guaranteed cycle time. The
standard Fast Track airport to airport cycle time is 7 working days
although other expedited times may be available. The cost to process
a standard Fast Track lot is the total of the lot charge plus the
premium as shown below. Two and three day Fast Track requests
require special handling and therefore cost more to process.
A special 9 day Fast Track service is offered for new devices in
previously qualified packages. This is a 7 day Fast Track with 2
days added for the initial document processing for new devices.
Contact your Account Manager or Customer Service Representative for
more details.
FAST TRACK PROGRAM
<TABLE>
<CAPTION>
A to A Fast Track Billing Lot
Cycle Time Premium Code Charge
---------- ------- ---- ------
<S> <C> <C> <C>
*2 Day 500% F2 $1,000
3 Day 300% F3 $ 500
4 Day 200% F4 $ 200
5 Day 150% F5 $ 200
6 Day 125% F6 $ 200
7 Day 100% F7 $ 200
9 Day 100% F9 $ 200
</TABLE>
- All Fast Track requests are to be booked through Amkor sales
office.
- Available capacity is subject to change based on factory
conditions.
- All cycle times will be measured airport in, to airport out
(Sundays and holidays excluded). Exception to this is material in
die bank.
- Two day must be hand carried to and from Factories.
<PAGE> 58
10.0 LOT SPECIFIC ADDERS:
<TABLE>
<CAPTION>
Charge/Lot
----------
<S> <C> <C>
10.1.1 Qual Lot charges $500 / Unit Price
10.1.2 Engineering Lot charges $200 / Unit Price
10.1.3 Minimum Lot charge $1,000 For All BGA Products
$500 For All Other Products
10.1.4 I.Q.A. - (Customer Supplied Material
- Visual & Mechanical $50/lot
- Functional $50/lot
- Administration Charges $150/lot
- 100% Screening Charge $10/Inspector Hour
10.2 Custom Brokers charge $65 Per Shipment
This applies to either AICL and AAP incoming shipments.
This charge covers the following fees:
- Customs Stamps
- Brokerage Fees
- Documentation Preparation
- Airport Storage Charges
</TABLE>
11.0 TERMS AND CONDITIONS OF SALE:
PRICE: Pricing is established in this Amkor Electronics, Inc. ("AMKOR")
quotation. Prices do not include freight forwarding fees or import duties.
PAYMENT AND COLLECTION: All payments are due within 25 days from the
invoice date. Payments shall be in U.S. dollars. Buyer shall advise the
Amkor Billing Department immediately of any discrepancies in regard to any
invoice. Buyer agrees that all line items not in question or dispute shall
be paid within the prescribed payment term. Amkor reserves the right to
assess appropriate finance charges for delinquent payments.
ACCEPTANCE/REJECTION: Claims for defects must be made in writing, within
thirty (30) days of the receipt of the goods by Buyer. AMKOR authorization
is required prior to Buyer return of goods to AMKOR for rework or credit.
DELIVERY: AMKOR delivery of goods to carrier will constitute delivery of
goods to the customer.
RISK OF LOSS/INSURANCE. Buyer shall bear all risk of loss relating to all
piece parts and other material provided to AMKOR by Buyer. Buyer shall
provide insurance coverage door-to-door on all materials and equipment
provided to AMKOR.
ETCHED TO STAMPED LEADFRAME CONVERSIONS: AMKOR may elect to convert a lead
frame from etched to stamped based on combined die support from many
customers. In this case the tooling will be built by AMKOR and available to
all customers. The cost of this tooling will often be offset by AMKOR
charging a price for the stamped frames that includes an amortization cost
for the tooling. When AMKOR elects to invest in an open stamped tool, the
stamped pricing will become effective after all etched inventory is
depleted and after the tooling cost has been amortized.
DELAYS/FORCE MAJEURE: AMKOR shall not be liable for delays in delivery of
goods caused by inability to obtain transportation, equipment, or material.
insurrection, fires, floods, storms, embargoes, action of any military or
civil authorities, strikes, labor difficulties, lockouts, acts of God, or
other similar or different circumstances beyond the control of AMKOR.
<PAGE> 59
DISCLAIMER OF WARRANTIES: AMKOR's warranties as included in this quote, are
in lieu of all other warranties of any kind.
REMEDIES: AMKOR's sole obligation for damages for any cause whatsoever,
shall be limited to the total price paid AMKOR ("Value Added") for the
services and/or goods which are the subject of the dispute.
DAMAGES: AMKOR shall not be liable or responsible for damages arising
directly or indirectly from the sale, use or failure of any semiconductor
devices assembled or tested by AMKOR under this quote.
FREIGHT; EXPORT/IMPORT: Buyer shall be responsible for all costs incurred
(including freight, duty and brokers' out-of-pocket and service charges) to
transport buyer's die and/or material to factory and for assembled devices
from factory to designated "ship-to" locations. Buyer will be "Importer of
Record" for goods returned U.S. Customs. A 15% handling charge applies to
all freight collect charges for shipments received from the customer or on
the customer's behalf.
PATENTS: AMKOR assumes no obligation or liability of any kind with respect
to claims of infringement of United States or foreign patents, copyrights,
trademarks or other proprietary rights arising out of or relating to the
Buyer's purchase, importation, use, possession, sale, or delivery of any
product or services sold to Buyer by AMKOR, and the Buyer shall indemnify,
defend and hold AMKOR harmless from any and all such claims and
liabilities, damages and expenses.
TERMINATION: In the event of termination, Buyer shall purchase all finished
goods and work-in-progress at the established quoted prices, and shall
further purchase at Contractor's cost plus 5% any raw materials in stock,
in transit and/or on order which were purchased or ordered by Contractor to
fill Buyer's forecasted requirements.
ENTIRE TERMS AND CONDITIONS: The terms and conditions of this quote
supersede any and all other terms and conditions unless agreed to in
writing by AMKOR.
This quotation is offered for your immediate acceptance and shall remain valid
for 60 days. Upon acceptance of this quotation, customer shall supply Amkor with
an assembly forecast.
Should you require any further information or have any questions relating to
this quotation, please do not hesitate to contact us.
Best Regards,
AMKOR ELECTRONICS, INC.
(Name)
(Title)
(admin)
<PAGE> 60
ASSEMBLY AND TEST SERVICES AGREEMENT
This Agreement is made and entered into this _____ day of __________, 19__
("Effective Date"), by and between Amkor Electronics, Inc., a Pennsylvania
corporation, with offices at 1345 Enterprise Drive, West Chester, Pennsylvania,
19380, USA ("Contractor"), and ____________, a __________ corporation, with
offices at ________________________________ ("Buyer"). Buyer and Contractor are
collectively referred to at times herein as the "Parties."
WHEREAS, Contractor is in the business of marketing and subcontracting various
assembly, testing, and/or other services to companies engaged in the manufacture
of semiconductors; and,
WHEREAS, Buyer desires Contractor to perform such services from time to time
pursuant to the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises contained
herein, the Parties agree as follows:
1. PURPOSE OF AGREEMENT.
The purpose of this Agreement is to define the term and conditions under
which Buyer will purchase and Contractor will perform or have performed
the services contracted for herein.
2. SCOPE OF WORK.
Contractor shall arrange for the assembly/test of Buyer's Products listed
in Appendix 1, attached hereto, in accordance with Contractor's Quotation,
Buyer's Product requirements, assembly specifications mutually agreed to by
the Parties, and the terms and conditions contained herein.
3. TERM OF AGREEMENT.
This Agreement shall be for a period of _____ years beginning on the
Effective Date. The Agreement may be extended at any time in a writing
executed by both Parties. Either party may request such an extension upon
at least ninety (90) written notice to the other party.
4. PRICING
4.1 Initial Product pricing will be mutually agreed to between the
Parties prior to the Effective Date of this Agreement. In the event
of any contract extensions, pricing will be reviewed and mutually
determined on an annual basis or as otherwise agreed to by the
Parties. Prices are included as part of Appendix 1 hereto which
<PAGE> 61
Appendix may be modified in writing by the Parties from time to time
to reflect new products and prices.
5. DELIVERY, FREIGHT, EXPORT AND IMPORT
5.1 Delivery of products shall be in accordance with the cycle times
mutually agreed to by the Parties.
5.2 Responsibility for all freight, transportation and duties to and from
the place of assembly/test shall be that of the Buyer.
5.3 Buyer will export all die and any other of its materials on its own
export license to the assembly facility (designated in Appendix 1) and
will be the importer of record upon the return shipment of Products
through applicable ports of entry. Contractor shall provide all
reasonable assistance to clear Products through export Customs.
6. PAYMENT TERMS.
All payments are due in full in US dollars within twenty five (25) days
from the invoice date.
7. BUYER'S REQUIREMENTS
7.1 Buyer hereby agrees to provide Contractor with a __________ month rolling
forecast of all Products to be assembled and/or tested by Contractor under
this Agreement. This forecast will adhere to the format specified by
Contractor and will be provided monthly beginning __________. Forecasts for
the first through __________ week shall be Contractor's authorization to
purchase non-standard materials necessary to satisfy Buyer's requirements.
7.2 Buyer shall provide firm orders for Products in the form of a
Purchase Order ("Order") which will contain, unless otherwise agreed, the
Product part number, quantities ordered, requested delivery dates, and
price. Any other terms or conditions of the Order which conflict with or
are a material addition to this Agreement shall not be applicable to the
Parties' transactions hereunder.
7.3 Buyer shall consign to Contractor on a no-charge basis, in time
sufficient to satisfy Contractor's assembly schedule and Buyer's finished
goods requirements, all die and such other material (as may be agreed to by
the parties) in good and merchantable quality and suitable for Contractor
to use for the purpose of performing the services contemplated under this
Agreement. Title and risk of loss for such materials shall remain with the
Buyer at all times.
2
<PAGE> 62
8. ACCEPTANCE; REJECTION.
Within fifteen (15) days of receipt of Product, Buyer must specify in
writing to Contractor any claims for defects or nonconformities. After this
time, Product will be deemed accepted by Buyer. In the event of rejected
Product, Buyer shall follow Contractor's instructions for disposition of
such Product. Based on the nature of the Product defect, it shall be
mutually determined whether to rework the Product, issue credit to Buyer or
select another appropriate remedy. In no event shall Contractor be
responsible for defects caused by materials provided by Buyer or for any
liability in excess of the value of the assembly services related to
rejected Product.
9. WARRANTY
9.1 Contractor warrants for a period of ninety (90) days following
acceptance of Product by Buyer that all Products shall be in
conformance with Buyer specifications and will be free from material
defects in workmanship and materials.
9.2 Buyer's exclusive remedy for breach of this warranty by mutual
agreement shall be either rework of any nonconforming Product or
issuance of credit at the option of the Contractor. In no event shall
Buyer return any Product without the express written authorization of
the Contractor. Contractor's entire liability hereunder, whether in
contract or in tort, shall be limited to an amount not to exceed the
price paid by Buyer to Contractor (value added) for the Products which
are the subject of the dispute.
9.3 Notwithstanding the above, the Parties recognize that certain
components will be supplied by Buyer for use in the assembly process.
Contractor makes no warranty to Buyer with respect to these
components.
9.4 THE EXPRESS WARRANTIES SET FORTH IN THIS AGREEMENT ARE IN LIEU OF ALL
OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WARRANTIES
AS TO CONDITIONS, DESCRIPTION, FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, OR ANY OTHER MATTER.
10. INSPECTION AND AUDIT.
Upon prior mutual agreement between the Parties, Buyer shall have the
right, during normal business hours, to inspect the assembly facility,
equipment, and materials used in the processing of Buyer's Products and to
inspect any of Buyer's consigned materials.
11. CONFIDENTIALITY.
During the term of this Agreement, each Party may disclose certain
information to the other Party which it considers confidential or
proprietary in nature which may include, but
3
<PAGE> 63
is not limited to, designs, drawings, components, techniques, processes,
test data, reports, plans, forecasts, and other similar documents or
records. With respect to such information, the Parties agree as follows:
a. Confidential Information may be furnished either verbally or in
tangible form. Any Confidential Information disclosed in tangible form
shall be conspicuously marked as such, and any Confidential
Information disclosed verbally will be confirmed in writing by the
disclosing party within thirty (30) days of disclosure with a copy of
such writing furnished to the Party receiving such information.
b. The Parties shall not disclose or divulge to any person, or to anyone
except those of its employees who have a need to know, any
Confidential Information which is disclosed.
c. The receiving Party shall advise the disclosing Party in writing in
the event the receiving party becomes aware of any misappropriation or
misuse of Confidential Information by any person and provide
assistance to disclosing Party in any proceeding or lawsuits related
thereto.
d. Neither Party shall be obligated with respect to any information
which:
(1) is already known to the receiving Party;
(2) is or becomes publicly known through no wrongful act of the
receiving Party;
(3) is rightfully received from a third Party without similar
restriction;
(4) is independently developed by receiving Party;
(5) is approved for release by written authorization of the
disclosing Party; or,
(6) is disclosed more than five (5) years after the date of
disclosure.
e. The Parties hereby acknowledge that any violation or threatened
violation of this Provision by one Party shall constitute an
irreparable injury to the other Party for which monetary damages
provide an inadequate remedy and agree that, in addition to all other
rights provided by law to which a party shall be entitled, a Party
shall have the right to seek injunctive and other appropriate
equitable relief. The prevailing party in any such proceeding shall be
entitled to reimbursement of costs of suit including reasonable
attorneys' fees.
f. Upon termination of the Agreement, each Party shall per written
request of the other Party promptly return to the disclosing Party all
Confidential Information received under this Agreement and shall not
retain any copies of such Information expect as otherwise expressly
permitted by the disclosing Party.
4
<PAGE> 64
12. INTELLECTUAL PROPERTY.
The Parties assume no obligation or liability with respect to claims of
infringement of United States or foreign patents, copyrights, trademarks,
or other proprietary rights arising out of or related to products assembled
hereunder pursuant to standard processing or Buyer provided specifications
and the Parties further release one another from any such obligation or
liability.
13. FORCE MAJEURE.
Neither Party shall be liable for delay in performance or failure to
perform, in whole or in part, due to labor dispute, strike, war or act of
war, insurrection, riot, civil unrest, act of public enemy, fire, flood, or
other acts of God, or the acts of any governmental authority, or other
causes beyond the control of such Party. The Party, experiencing such cause
or delay shall immediately notify the other Party of the circumstances
which may prevent or significantly delay its performance hereunder, and
shall use its best efforts to alleviate the effects of such cause or delay.
14. TERMINATION.
Either Party may at its option terminate this Agreement upon the occurrence
of one of the following:
a. In the event the other Party is in default of its obligations under
the Agreement and, after notice of said default is given, fails to
cure same within a period of sixty (60) days, the nondefaulting
Party may terminate this Agreement at the end of said period upon
written notice to the other Party.
b. In the event either Party becomes or is adjudicated insolvent or
bankrupt, or if a receiver or a trustee is appointed for a Party or
its property, or if a Party petitions for reorganization or
arrangement under any bankruptcy or insolvency law, or if any
assignment is made for the benefit of any Party's creditors then, in
addition to such other remedies as may be available at law or in
equity, the other Party hereto shall have the right to terminate this
Agreement on five (5) days prior written notice.
c. Upon either termination of this Agreement or canceflation of any Order
or other Product requirement hereunder, Buyer shall purchase at the
established contract prices all finished Products in inventory, and
shall also purchase at Contractor's cost plus 5% handling and storage
fee all Work-in-Progress and any raw materials in stock and on order
which were purchased specifically to fill Buyer's forecast
requirements.
d. The termination or expiration of this Agreement shall not affect or
impair the rights and obligations of either Party or Orders in
existence prior to such termination or
5
<PAGE> 65
expiration, nor relieve either party of any obligation or liability
accrued hereunder prior to such termination or expiration. Contractor
shall retain a security interest in Buyer's products until payment in
full has been made.
15. CONTROLLING LAW: DISPUTE RESOLUTION.
This Agreement and all questions relating to its validity, interpretation,
and enforcement shall be governed by and construed, interpreted, and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
The Parties agree that, in the event of any claim or controversy arising
out of this Agreement, they shall first attempt in good faith to settle any
such dispute through consultation and negotiation. If after good faith
consultation and negotiation, the Parties are unable to achieve a
resolution, then the dispute shall be submitted to a mutually acceptable
advisor for fact finding and mediation, the cost of which shall be divided
equally between the parties.
(EITHER ONE OF THE FOLLOWING OPTIONS WILL BE INSERTED AT THIS POINT
DEPENDING ON WHETHER IT IS A DOMESTIC OR FOREIGN ACCOUNT.)
a. DOMESTIC ALTERNATIVE: IN THE EVENT THE DISPUTE CANNOT BE RESOLVED
THROUGH MEDIATION, THE DISPUTE SHALL THEN BE SUBMITTED TO ARBITRATION
UNDER THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION AND HELD IN
PHILADELPHIA, PA. THE PARTIES SHALL DESIGNATE ONE OR MORE ARBITRATORS
PURSUANT TO SAID RULES WHOSE DECISION SHALL BE FINAL AND BINDING ON
THEM AND WHICH SHALL BE ENFORCEABLE IN ANY COURT HAVING JURISDICTION.
b. INTERNATIONAL ALTERNATIVE: IN THE EVENT THE DISPUTE CANNOT BE
RESOLVED THROUGH MEDIATION, THE DISPUTE SHALL THEN BE SUBMITTED TO
ARBITRATION UNDER THE RULES OF CONCILIATION AND ARBITRATION OF THE
INTERNATIONAL CHAMBER OF COMMERCE (ICC) BY ONE OR MORE ARBITRATORS
APPOINTED IN ACCORDANCE WITH SAID RULES. THE PLACE OF ARBITRATION
SHALL BE MUTUALLY DETERMINED BY THE PARTIES. IN THE EVENT THE PARTIES
CANNOT SO AGREE, THE ICC COURT OF ARBITRATION SHALL SELECT THE VENUE.
16. MISCELLANEOUS PROVISIONS
16.1 Compliance with Laws.
Both Parties shall comply with all applicable laws, regulations, and
rules of all governmental authorities relating to the performance of
their obligations hereunder and will obtain all necessary permits,
licenses, and consents required for such performance.
16.2 Limitation of Liability.
6
<PAGE> 66
The Parties hereto acknowledge and agree that, except as otherwise
expressly set forth herein, neither Party shall be liable either in
contract or in tort for any special, incidental, consequential, or
punitive damages arising out of or related to the Products assembled
and/or tested hereunder or other services performed pursuant to this
Agreement. In no event shall the Parties' obligation for any claims
whatsoever arising under this Agreement exceed the price paid by Buyer
to Contractor for the services or Products which are directly related
to any dispute.
16.3 Amendment.
This Agreement may be amended only by express written agreement
and signed by authorized representatives of both Parties.
16.4 Entire Agreement.
This Agreement supersedes all prior and contemporaneous
agreements and representations made with respect to the same
subject matter and contains the entire agreement between the
Parties with respect to the subject matter hereof and shall not
be modified except by an instrument in writing signed by duly
authorized representatives of each Party.
16.5 Waiver.
The failure by either Party to demand performance by the other
Party of any obligation under this Agreement shall not
constitute, nor be construed as, a waiver. Any waiver by either
Party or any breach of this Agreement shall not be considered a
waiver of any other breach of this Agreement.
16.6 Notices.
All notices required or permitted to be given under this
Agreement shall be in writing and shall be personally delivered
or sent by certified or registered United States mail, return
receipt requested with postage prepaid, to the following Parties
or to such other persons as may be designated from time to time:
If to Contractor: Name _______________________
Address _______________________
_______________________
If to Buyer: Name _______________________
Address _______________________
_______________________
7
<PAGE> 67
16.7 Severability.
If any Provision or Provisions of the Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining Provisions shall in no way be affected
or impaired thereby.
16.8 Headings.
The headings of the several Provisions herein are inserted for
convenience of reference only and are not intended to be a part of or
affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed and
accepted by their duly authorized representatives as of the day and year first
above written.
BUYER Amkor Electronics, Inc.
By:______________________________ Name:_______________________________
Title:___________________________ Title:______________________________
<PAGE> 68
EXHIBIT VIII
FORM OF RECEIVABLES ACTIVITY REPORT
Attached
<PAGE> 69
AMKOR ELECTRONICS, INC.
RECEIVABLES ACTIVITY REPORT FROM SUB-SERVICER TO ARC
MONTH ENDED [DATE]
- -------------------------------------------------------------
PURSUANT TO SECTION 5.5 OF THE RECEIVABLES PURCHASE AGREEMENT
<TABLE>
<CAPTION>
<S> <C> <C>
(i) Outstanding Balance of Receivables Sold (Sales) -
(ii) Purchase Price
Discount Factor 0.00%
Purchase Price Credits -
Purchase Price -
(iii) Cash Collections to apply to Purchase Price -
(iv) Increase/decrease to Revolving Note -
(v) Amount of additional capital contribution 0
</TABLE>
<PAGE> 70
EXHIBIT IX
FORM OF STOCKHOLDER AND SUBSCRIPTION AGREEMENT
THIS STOCKHOLDER AND SUBSCRIPTION AGREEMENT (this "Agreement")
dated as of June 20, 1997 is entered into by and between AMKOR RECEIVABLES
CORP., a Delaware corporation ("ARC"), and AMKOR ELECTRONICS, INC., a
Pennsylvania corporation ("Amkor"). Except as otherwise specifically provided
herein, capitalized terms used in this Agreement have the meanings ascribed
thereto in the Receivables Purchase Agreement dated as of even date herewith
between ARC and Amkor (as the same may from time to time hereafter be amended,
restated, supplemented or otherwise modified, the "Purchase Agreement").
RECITALS
A. ARC has been organized under the laws of the State of Delaware
for the purpose of, among other things, purchasing, receiving and transferring
accounts receivable and related assets originated by Amkor.
B. Contemporaneously with the execution and delivery of this
Agreement, (i) Amkor and ARC have entered into the Purchase Agreement pursuant
to which Amkor has agreed, from and after the initial purchase date thereunder,
to sell all of its Receivables and Related Security to ARC and (ii) ARC, Falcon
Asset Securitization Corporation ("Falcon"), certain financial institutions
party thereto ("Investors") (Falcon and Investors referred to, collectively, as
the "Purchasers"), and The First National Bank of Chicago, as agent (the
"Agent") for the Purchasers, have entered into an Investor Agreement (as the
same may from time to time hereafter be amended, restated, supplemented or
otherwise modified, the "Investor Agreement") pursuant to which ARC will sell
"Receivable Interests" to the Purchasers.
C. ARC desires to sell shares of its capital stock to Amkor, and
Amkor desires to purchase such shares, on the terms set forth in this Agreement.
NOW, THEREFORE, ARC and Amkor agree as follows:
1. Purchase and Sale of Capital Stock.
Amkor hereby purchases from ARC, and ARC hereby sells to Amkor, 1,000 shares of
common stock, par value $1.00 per share, of ARC (the "Common Stock") for the
purchase price set forth in Section 2.1. The shares of Common Stock being
purchased under this Agreement are referred to herein as the "Shares".
Within three (3) Business Days from the date hereof, ARC shall
deliver to Amkor a certificate registered in Amkor's name representing the
Shares.
<PAGE> 71
2. Consideration for Shares and Capital Contributions
2.1 Consideration for Shares.
To induce ARC to enter into the Purchase Agreement and to enable ARC
to fund its obligations thereunder by consummating the transactions contemplated
by the Investor Agreement, and in reliance upon the representations and
warranties set forth herein, Amkor hereby pays to ARC on the date hereof
$3,000,000 (the "Stock Purchase Price") in consideration of the purchase of the
Shares. The Stock Purchase Price shall take the form of a transfer of cash,
except that ARC shall, in lieu of cash payment of the Stock Purchase Price,
deduct the amount of the Stock Purchase Price from the Purchase Price otherwise
payable by ARC to Amkor on the initial purchase date pursuant to the Purchase
Agreement.
2.2 Contributions After Initial Closing Date.
From time to time Amkor may make additional capital contributions to
ARC. All such contributions shall take the form of a cash transfer, except that
ARC agrees to, in lieu of cash payment thereof, deduct the amount of such
contributions from the Purchase Price for Receivables otherwise payable by ARC
to Amkor on the date of such capital contributions. All of the Receivables so
paid for through such deductions shall constitute purchased Receivables within
the meaning of the Purchase Agreement and shall be subject to all of the
representations, warranties and indemnities otherwise made hereunder. It is
expressly understood and agreed that Amkor has no obligations under this
Agreement to make any capital contributions from and after payment of the Stock
Purchase Price.
3. Representations and Warranties of ARC.
ARC represents and warrants to Amkor as follows:
(a) ARC is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and has all
requisite corporate power and authority to carry on its business as
proposed to be conducted on the date hereof.
(b) ARC has all requisite legal and corporate power to enter into
this Agreement, to issue the Shares and to perform its other obligations
under this Agreement.
(c) Upon receipt by ARC of the Stock Purchase Price and the issuance
of the Shares to Amkor, the Shares will be duly authorized, validly
issued, fully paid and nonassessable.
(d) ARC has taken all corporate action necessary for its
authorization, execution and delivery of, and, its performance under,
this Agreement.
(e) This Agreement constitutes a valid and binding obligation of
ARC, enforceable against ARC in accordance with its terms, except that
enforceability may be
IX-2
<PAGE> 72
limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(f) ARC has filed the Certificate of Incorporation in the form
attached hereto as Exhibit A with the Secretary of State of Delaware and
(ii) adopted the By-laws in the form attached hereto as Exhibit B.
(g) The issuance of the Shares by ARC hereunder is legally permitted
by all laws and regulations to which ARC is subject.
4. Representations and Warranties of Amkor.
Amkor represents and warrants to ARC as follows:
(a) Amkor is a corporation duly incorporated, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania, and
has all requisite corporate power and authority to carry on its business
as conducted on the date hereof.
(b) Amkor has all requisite legal and corporate power to enter into
this Agreement, to purchase the Shares and to perform its other
obligations under this Agreement.
(c) Amkor has taken all corporate action necessary for its
authorization, execution and delivery of, and its performance under, this
Agreement.
(d) This Agreement constitutes a valid and binding obligation of
Amkor, enforceable against Amkor in accordance with its terms, except
that enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding
in equity or at law.
(e) Amkor is purchasing the Shares for investment for its own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and Amkor has no current intention of
selling, granting a participation in, or otherwise distributing, the
same.
(f) Amkor understands that the Shares have not been registered under
the Securities Act of 1933, as amended, or under any other federal or
state law, and that ARC does not contemplate such a registration.
(g) Amkor has such knowledge, sophistication and experience in
financial and business matters that it is capable of evaluating the
merits and risks of the transactions contemplated by this Agreement, and
has made such investigations in connection herewith as have been deemed
necessary or desirable to make such evaluation.
IX-3
<PAGE> 73
(h) The purchase of the Shares by Amkor is legally permitted by all
laws and regulations to which Amkor is subject.
5. Restrictions on Transfer Imposed by the Act: Legend
5.1 Legend. Each certificate representing any Shares shall be
endorsed with the following legend:
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND
ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, OR (B) WHERE
AMKOR RECEIVABLES CORP. HAS BEEN FURNISHED WITH AN OPINION OF
COUNSEL FOR THE HOLDER, WHICH OPINION (IN FORM AND SUBSTANCE), AND
WHICH COUNSEL, SHALL BE REASONABLY SATISFACTORY TO AMKOR RECEIVABLES
CORP. TO THE EFFECT THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
THE ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE,
AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THE STOCKHOLDER AND
SUBSCRIPTION AGREEMENT DATED AS OF JUNE __, 1997, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE OFFICE
OF AMKOR RECEIVABLES CORP.
5.2 Registration of Transfers. ARC need not register a transfer of
any Shares unless the conditions specified in the legend set forth in Section
5.1 hereof are satisfied. ARC may also instruct its transfer agent not to
register the transfer of any Shares unless the conditions specified in the
legend set forth in Section 5.1 hereof are satisfied.
6. Agreement to Vote
(a) Amkor hereby agrees and covenants to vote all of the shares of
Common Stock now or hereafter owned by it, whether beneficially or
otherwise, as is necessary at a meeting of stockholders of ARC, or by
written consent in lieu of any such meeting, to cause to be elected to,
and maintained on, ARC's board of directors at least one person (the
"Independent Director") meeting the qualifications and selected in
accordance with the provisions of the Certificate of Incorporation and
By-laws of ARC.
(b) The obligations provided for in this Section 6 shall terminate
on the Collection Date.
IX-4
<PAGE> 74
7. Successors and Assigns.
Each party agrees that it will not assign, sell, transfer, delegate,
or otherwise dispose of, whether voluntarily or involuntarily, or by operation
of law, any right or obligation under this Agreement except in connection with a
transfer of Shares in compliance with the terms and conditions hereof or
otherwise in accordance with the terms hereof. Any purported assignment,
transfer or delegation in violation of this Section 7 shall be null and void ab
initio. Subject to the foregoing limits on assignment and delegation and except
as otherwise provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto, their respective heirs, legatees, executors,
administrators, assignees and legal successors.
8. Amendments and Waivers.
Any term hereof may be amended and the observance of any term hereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of ARC and Amkor.
Any amendment or waiver so effected shall be binding upon ARC and Amkor.
9. Further Acts.
Each party agrees to perform any further acts and execute and
deliver any document which may be reasonably necessary to carry out the
provisions of this Agreement.
10. Counterparts.
This Agreement may be executed in any number of counterparts, and
all of such counterparts together will be deemed one instrument.
11. Notices.
Any and all notices, acceptances, statements and other
communications to Amkor in connection herewith shall be in writing, delivered
personally, by facsimile or certified mail, return receipt requested, and shall
be addressed to the address of Amkor indicated on the stock transfer register of
ARC or, if no address is so indicated, to the address provided to ARC pursuant
to the Purchase Agreement unless changed by written notice to ARC or its
successor.
12. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAWS OF THE STATE OF DELAWARE.
IX-5
<PAGE> 75
13. Entire Agreement.
This Agreement, together with the Purchase Agreement and the other
documents expressly to be delivered in connection therewith, constitute the full
and entire understanding and agreement between the parties hereto with regard to
the subject matter hereof and thereof.
14. Severability of this Agreement.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused their respective
officers thereunto duly authorized to execute this Agreement as of the date
first written above.
AMKOR RECEIVABLES CORP.
By:________________________________
Name:______________________________
Title:_____________________________
AMKOR ELECTRONICS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
IX-6
<PAGE> 76
EXHIBIT A
TO
STOCKHOLDER AND SUBSCRIPTION AGREEMENT
Form of Certificate of Incorporation
(Attached)
IX-7
<PAGE> 77
EXHIBIT B
TO
STOCKHOLDER AND SUBSCRIPTION AGREEMENT
Form of By-laws
(Attached)
IX-8
<PAGE> 78
EXHIBIT X
FORM OF REVOLVING NOTE
June 20, 1997
1. Note. FOR VALUE RECEIVED, the undersigned, AMKOR RECEIVABLES
CORP., a Delaware corporation (the "Borrower"), hereby unconditionally promises
to pay to the order of Amkor Electronics, Inc., a Pennsylvania corporation (the
"Lender"), in lawful money of the United States of America and in immediately
available funds, on the "Collection Date" (as defined in the "Purchase
Agreement" referred to below) the aggregate unpaid principal sum outstanding of
all "Revolving Loans" made from time to time by the Lender to the Borrower
pursuant to and in accordance with the terms of that certain Receivables
Purchase Agreement dated as of June 20, 1997 between the Lender and the Borrower
(as amended, restated, supplemented or otherwise modified from time to time, the
"Purchase Agreement"). Reference to Section 1.2 of the Purchase Agreement is
hereby made for a statement of the terms and conditions under which the loans
evidenced hereby have been and will be made. All terms which are capitalized and
used herein and which are not otherwise specifically defined herein shall have
the meanings ascribed to such terms in the Purchase Agreement.
2. Interest. The Borrower further promises to pay interest on the
outstanding unpaid principal amount of any Revolving Loans from the date hereof
until payment in full hereof at a rate equal to prime plus 0.25% (as reported in
The Wall Street Journal) (the "Interest Rate"); provided, however, that if the
Borrower shall default in the payment of any principal hereof, the Borrower
promises to, on demand, pay interest at the rate of the Interest Rate plus 1.0%
on any such unpaid amounts, from the date such payment is due to the date of
actual payment. Interest shall be payable on the 25th calendar day of each month
(or, if such day is not a Business Day, the next following Business Day) in
arrears; provided, however, that the Borrower may elect, on the date any
interest payment is due hereunder, to defer such payment and upon such election
the amount of interest due but unpaid on such date shall constitute principal
under this Subordinated Revolving Note. The outstanding principal of any loan
made under this Subordinated Revolving Note shall be due and payable on the
Collection Date and may be repaid or prepaid at any time without premium or
penalty.
3. Principal Payments. The Lender is authorized and directed by the
Borrower to enter on the grid attached hereto, or, at its option, in its books
and records, the date and amount of each loan made by it which is evidenced by
this Subordinated Revolving Note and the amount of each payment of principal
made by the Borrower, and absent manifest error, such entries shall constitute
prima facie evidence of the accuracy of the information so entered; provided
that neither the failure of the Lender to make any such entry or any error
therein shall expand, limit or affect the obligations of the Borrower hereunder.
4. Subordination. The indebtedness evidenced by this Subordinated
Revolving Note is subordinated to the prior payment in full of all of the
Borrower's recourse obligations under that certain Investor Agreement dated as
of June 20, 1997 by and among the Borrower, Falcon Asset Securitization
Corporation ("Falcon"), certain financial institutions party thereto
("Investors") (Falcon and Investors referred to, collectively, as the
"Purchasers"), and The First National Bank of Chicago,
<PAGE> 79
as agent (the "Agent") for the Purchasers (as amended, restated, supplemented or
otherwise modified from time to time, the "Investor Agreement"). The
subordination provisions contained herein are for the direct benefit of, and may
be enforced by, the Agent and the Purchasers and/or any of their assignees
(collectively, the "Senior Claimants") under the Investor Agreement. Until the
date (the "Expiry Date") on which the Investor Agreement has been terminated in
accordance with its terms and all "Aggregate Unpaids" outstanding under the
Investor Agreement have been repaid in full and all other obligations of the
Borrower and/or the Servicer thereunder (all such obligations, collectively, the
"Senior Claim") have been indefeasibly satisfied in full, the Lender shall not
demand, accelerate, sue for, take, receive or accept from the Borrower, directly
or indirectly, in cash or other property or by set-off or any other manner
(including, without limitation, from or by way of collateral) any payment or
security of all or any of the indebtedness under this Subordinated Revolving
Note or exercise any remedies or take any action or proceeding to enforce the
same; provided, however, that (i) the Lender hereby agrees that it will not
institute against the Borrower any proceeding of the type described in Section
6.1(d)(i) of the Purchase Agreement unless and until the date that is one year
and one day after the Expiry Date has occurred and (ii) nothing in this
paragraph shall restrict the Borrower from paying, or the Lender from
requesting, any payments under this Subordinated Revolving Note so long as (x)
the Borrower is not required under the Investor Agreement to set aside the funds
proposed to be used for such payments for the benefit of, or otherwise pay over
such funds to, any of the Senior Claimants, (y) no Event of Default or Potential
Event of Default shall have occurred and then be continuing under the Purchase
Agreement and no "Servicer Default" or "Potential Servicer Default" shall have
occurred and then be continuing under the Investor Agreement and (z) the making
of such payment would not otherwise violate the terms and provisions of either
the Purchase Agreement or the Investor Agreement. Should any payment,
distribution or security or proceeds thereof be received by the Lender in
violation of the immediately preceding sentence, the Lender agrees that such
payment shall be segregated, received and held in trust for the benefit of, and
deemed to be the property of, and shall be immediately paid over and delivered
to the Agent for the benefit of the Senior Claimants.
5. Bankruptcy; Insolvency. Upon the occurrence of any Servicer
Default described in Section 7.1(d)(i) of the Investor Agreement involving the
Borrower as debtor, then and in any such event the Senior Claimants shall
receive payment in full of all amounts due or to become due on or in respect of
the Senior Claim (including "Discount" accruing under the Investor Agreement
after the commencement of any such proceeding, whether or not any or all of such
Discount is an allowable claim in any such proceeding) before the Lender shall
be entitled to receive any payment on account of this Subordinated Revolving
Note, and to that end, any payment or distribution of assets of the Borrower of
any kind or character, whether in cash: securities or other property, in any
applicable insolvency proceeding, which would otherwise be payable to or
deliverable upon or with respect to any or all indebtedness under this
Subordinated Revolving Note, is hereby assigned to and shall be paid or
delivered by the Person making such payment or delivery (whether a trustee in
bankruptcy, a receiver, custodian or liquidating trustee or otherwise) directly
to the Agent for application to, or as collateral for the payment of, the Senior
Claim until such Senior Claim shall have been paid in full and satisfied.
6. Amendments. This Subordinated Revolving Note shall not be
amended, modified or terminated except in accordance with Section 8.1 of the
Purchase Agreement.
X-2
<PAGE> 80
7. Governing Law. This Subordinated Revolving Note has been
delivered at and shall be deemed to have been made at Chicago, Illinois and
shall be interpreted and the rights and liabilities of the parties hereto
determined in accordance with the laws and decisions of the State of Illinois.
Wherever possible each provision of this Subordinated Revolving Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Subordinated Revolving Note shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Subordinated Revolving Note.
8. Waivers. All parties hereto, whether as makers, endorsers, or
otherwise, severally waive presentment for payment, demand, protest and notice
of dishonor. The Lender additionally expressly waives all notice of the
acceptance by any Senior Claimant of the subordination and other provisions of
this Subordinated Revolving Note and expressly waives reliance by any Senior
Claimant upon the subordination and other provisions herein provided.
9. Assignment. This Subordinated Revolving Note may not be assigned,
pledged or otherwise transferred to any party other than the Lender without the
prior written consent of the Agent, and any such attempted transfer shall be
void.
AMKOR RECEIVABLES CORP.
By:________________________________
Name:
Title:
X-3
<PAGE> 81
SCHEDULE TO
SUBORDINATED REVOLVING NOTE
REVOLVING LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Amount Unpaid
Revolving of Principal Notation
Date Loan Principal Paid Balance Made By
---- ---- -------------- ------- -------
<S> <C> <C> <C> <C>
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
--------- ----------- -------------- --------------- -----------
</TABLE>
X-4
<PAGE> 1
EXHIBIT 10.5
================================================================================
July 1997
AMKOR/ANAM PILIPINAS, INC.
as Borrower
and
ANAM INDUSTRIAL CO. LTD.
as Guarantor
and
THE KOREA DEVELOPMENT BANK
as Lender
---------------------------
US$55,000,000 BRIDGE LOAN
AGREEMENT
---------------------------
FRESHFIELDS
12th Floor
Two Exchange Square
Hong Kong
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. INTERPRETATION...................................................................1
2. THE FACILITY.....................................................................5
3. CONDITIONS PRECEDENT.............................................................5
4. DRAWDOWN ........................................................................5
5. REPAYMENT ON MATURITY OR DEMAND..................................................6
6. PREPAYMENT.......................................................................6
7. INTEREST ........................................................................6
8. FEES ........................................................................7
9. TAXES ........................................................................7
10. CHANGE IN CIRCUMSTANCES..........................................................8
11. PAYMENTS .......................................................................10
12. REPRESENTATIONS AND WARRANTIES..................................................10
13. UNDERTAKINGS....................................................................12
14. GUARANTEE.......................................................................15
15. DEFAULT .......................................................................17
16. SET-OFF .......................................................................21
17. EXPENSES AND STAMP DUTY.........................................................21
18. CALCULATIONS AND EVIDENCE.......................................................22
19. ASSIGNMENT......................................................................22
20. REMEDIES, WAIVERS, AMENDMENTS AND CONSENTS......................................23
21. COMMUNICATIONS..................................................................23
22. PARTIAL INVALIDITY..............................................................24
23. COUNTERPARTS....................................................................24
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
24. GOVERNING LAW AND JURISDICTION..................................................24
SCHEDULE 1...........................................................................27
Notice of Drawdown..........................................................27
SCHEDULE 2...........................................................................28
Conditions Precedents.......................................................28
SCHEDULE 3...........................................................................29
Form of Certificate of Borrower.............................................29
SCHEDULE 4...........................................................................30
Form of Certificate of the Guarantor........................................30
SCHEDULE 5...........................................................................31
Freshfields' Legal Opinion..................................................31
SCHEDULE 6...........................................................................35
List of encumbrances/security interests outstanding of
Borrower and the Borrower's Affiliates......................................35
SCHEDULE 7...........................................................................36
List of indebtedness of the Borrower, the Guarantor
and the Borrower's Affiliates...............................................36
</TABLE>
<PAGE> 4
THIS BRIDGE LOAN AGREEMENT is made as of __ July, 1997.
BETWEEN
AMKOR/ANAM PILIPINAS, INC. of KM 22 East Service Road, South Superhighway,
Muntinlupa, Metro Manila, Republic of the Philippines (the BORROWER);
ANAM INDUSTRIAL CO., LTD of 280-8, 2-ka Sungsu-dong, Sungdong-ku, Seoul,
Republic of Korea (the GUARANTOR); and
THE KOREA DEVELOPMENT BANK, of 10-2, Kwanchol-dong, Chongno-ku (C.P.0. Box 28),
Seoul, Republic of Korea (together with its permitted successors and assigns,
the LENDER).
WHEREAS the Borrower desires to borrow funds in an amount not exceeding
US$55,000,000 as a short-term bridge facility to refinance certain of its
existing short and medium-term loans, and the Lender agrees to lend such amount,
all upon and subject to the terms and conditions hereinafter set forth.
Accordingly, the Borrower, Guarantor and the Lender agree as follows:
INTERPRETATION
1.1 DEFINITIONS: In this Agreement, except to the extent that the context
otherwise requires:
ADVANCES means the advances of an amount in the aggregate not exceeding
US$55,000,000 made or to be made by the Lender under this Agreement or, as the
case may be, the outstanding principal amount of such advances from time to time
and ADVANCE means any of such Advances;
AFFILIATE means, with respect to any person, any other person that directly or
indirectly controls, is under common control with or is controlled by, such
person and, for purposes hereof, CONTROL means possession, direct or indirect,
of the power to direct or cause the direction of management or policies through
any legal, contractual or other modus provided that, in any event, any person
that owns directly or indirectly securities having 5% or more of the voting
power for the election of directors or other governing body of a corporation or
5% or more of the partnership or other ownership interests of any other person
(other than as a limited partner of such other person) will be deemed to control
such corporation or other person;
APPLICABLE RATE means, in respect of any Interest Period in respect of any
Advance, LIBOR plus the Margin;
BUSINESS DAY means a day (other than a Saturday, Sunday or public holiday) on
which (1) deposits in Dollars may be offered in the London inter-bank market
<PAGE> 5
and (2) commercial banks are open in (a) Seoul, (b) Makati, Manila and (c) New
York City;
COMMITMENT TERMINATION DATE means the date falling one month after the date of
this Agreement;
DOLLAR(S), US$ AND $ mean the lawful currency of the United States of America;
EVENT OF DEFAULT means any of the events mentioned in Clause 15. 1 or any event
or circumstance which, with the giving of any notice and/or the lapse of any
period of time and/or the fulfilment of any other requirement, would become one
of the events mentioned in that Clause;
FACILITY means an amount not exceeding US$55,000,000;
FINAL REPAYMENT DATE means, subject to Clause 15.2(b), the date falling 3 months
after the date hereof;
INTEREST PAYMENT DATE means the last day of each Interest Period;
INTEREST PERIOD means a period by reference to which interest is calculated and
payable on each Advance pursuant to Clause 7.1 or any overdue sum pursuant to
Clause 15.3;
KOREA means the Republic of Korea;
LIBOR means, in respect of any Interest Period in respect of each Advance or any
overdue sum hereunder, the arithmetic mean (rounded up, if necessary, to the
next 1/16 per cent) of the offered quotations in effect at or about 11:00 a.m.
(local time in London) on the second Business Day before the first day of each
Interest Period for Dollar deposits for such Interest Period as displayed on the
"LIBO" page of the Reuters Monitor Money Rate Service (hereafter the REUTERS
SCREEN) (or any such successor page as determined by the Lender if the Reuters
Screen is unavailable) for delivery on the first day of such Interest Period
and, if no such successor page is available, the rate (rounded up, if necessary,
to the next 1/16 per cent) at which the London office of Bank of America
National Trust and Savings Association is offering Dollar deposits for that
Interest Period is an amount comparable to such Advance or overdue sum, as the
case may be, to prime banks in the London inter-bank marker at or about 11:00
a.m. (local time in London) on the second Business Day before the first day of
that Interest Period for delivery on the first day of such Interest Period;
MARGIN means 1.35 per cent, per annum;
NOTICE OF DRAWDOWN means a notice substantially in the form of Schedule 1;
OBLIGORS means each of the Borrowers and the Guarantor;
Page 2
<PAGE> 6
PAYMENT ACCOUNT means account number 544-7-71671 (CHIPSUID 069628) maintained by
the Lender with head office of Chemical Bank, New York, New York and;
PHILIPPINES means the Republic of Philippines.
1.2 CONSTRUCTION OF CERTAIN REFERENCES: Except to the extent that the context
requires otherwise, any reference in this Agreement to:
an AGENCY of a state includes at any particular time, any agency, authority,
central bank, department, government, legislature, minister, ministry, official,
or public or statutory person (whether autonomous or not) of, or of the
government of, that state or any political sub-division in or of that state;
this AGREEMENT includes this Agreement as from time to time amended,
supplemented or novated, and any document which amends, supplements or novates
this Agreement;
the ASSETS of a person shall be construed as a reference to the whole or any
part of its business, undertaking, property, assets and revenues (including any
right to receive revenues);
BORROWED MONEY includes any indebtedness for or in respect of money borrowed or
raised (whether or not for a cash consideration), by whatever means, or for the
deferred purchase price of assets or services;
a CONSENT includes an approval, authorization, exemption, filing, license,
order, permission, recording or registration (and references to obtaining
consents shall be construed accordingly);
a DIRECTIVE includes any present or future directive, regulation, requirement or
credit restraint programme to be acted upon under direction from an agency of a
state (in each case, whether or not having the force of law but, if not having
the force of law, compliance with which is customary);
DISPOSAL includes any sale, assignment, exchange, transfer, concession, lease,
surrender of lease, license, reservation, waiver, compromise, release, creation
of security, dealing with or the granting of any option or right or interest
whatsoever or any agreement for any of the same and dispose shall be construed
accordingly;
an ENCUMBRANCE shall be construed as a reference to a mortgage, charge, pledge,
lien, hypothecation, security interest, encumbrance or other security
arrangement or interest or third party rights of any kind;
a GUARANTEE also includes any obligations (whatever called) of any person to
pay, purchase, provide funds (whether by the advance of money, the purchase of
or subscription for shares or other securities, the purchase of assets or
services, or
Page 3
<PAGE> 7
otherwise) for the payment of, indemnity against the consequences of default in
the payment of, or otherwise be responsible for, any indebtedness of any other
person;
a HOLDING COMPANY of a person means, at any particular time, any person of which
the first-mentioned person is a subsidiary;
any INDEBTEDNESS includes any obligation (whether present or future, actual or
contingent, as principal or surety or otherwise) for the payment or repayment of
money;
a LAW includes common or customary law and any constitution, decree, judgment,
legislation, order, ordinance, directive, regulation, statute, treaty or other
legislative measure, in each case of any jurisdiction whatever (and LAWFUL and
UNLAWFUL shall be construed accordingly);
something having a MATERIAL ADVERSE EFFECT on a person is a reference to it
having a material adverse effect (1) on the person's financial condition,
business or operations or (2) on the ability of the person to perform and comply
with its material obligations under any material agreements to which it is a
party;
any OBLIGATION of any party under this Agreement or any other agreement shall be
construed as a reference to an obligation expressed to be assumed by or imposed
on it under this Agreement or that agreement, as the case may be (and due,
owing, payable and receivable shall be similarly construed);
a PERSON includes any individual, company, corporation, firm, partnership, joint
venture, association, organization, trust, state or agency of a state (in each
case, whether or not having separate legal personality);
SECURITY means any mortgage, pledge, lien, hypothecation, security charge
(whether fixed or floating, legal or equitable) or encumbrance other than those
arising by operation of law;
SOURCE OF FUNDS means any bank, financial institution, market, participant or
other person providing funds to the Lender for purposes of allowing the Lender
to make the Advances available hereunder;
SUBSIDIARY in relation to any company means any other company or other entity
directly or indirectly controlled by the first-mentioned company; for this
purpose CONTROL means direct or indirect ownership of more than fifty percent
(50%) of the voting share capital or equivalent right of ownership of such
company or entity, or power to direct its policies and management whether by
contract or otherwise;
TAX(ES) includes any present or future tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature and whatever called, by any
Page 4
<PAGE> 8
governmental or other fiscal authority, on whomsoever and wherever imposed,
levied, collected, withheld or assessed;
TAX ON OVERALL NET INCOME of a party to this Agreement shall be construed as a
reference to tax imposed by the jurisdiction in which its principal office is
located on all or part of the net income, profits or gains before taxes of that
party (whether worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction);
the WINDING-UP of a person also includes the dissolution and liquidation of that
person, and any equivalent or analogous procedure under the law of any
jurisdiction in which that person is incorporated, domiciled or resident or
carries on business or has assets; and
a DAY, MONTH OR YEAR shall be construed by reference to the Gregorian calendar.
1.3 PRINCIPLES OF CONSTRUCTION. The headings in this Agreement are inserted for
convenience only and shall be ignored in construing this Agreement. References
to Clauses or Schedules shall, unless the contrary is indicated, be deemed to be
references to Clauses in or Schedules to this Agreement. Any reference to a
sub-clause or a paragraph is to a sub-clause or paragraph of the Clause or, as
the case may be, sub-clause in which such reference appears. Save where the
context otherwise requires, words importing the singular number include the
plural and vice versa.
THE FACILITY
2.1 LENDER TO MAKE ADVANCES: The Lender agrees to make Advances from time to
time to the Borrower upon the terms and conditions of this Agreement.
2.2 BORROWER TO BORROW ADVANCES: The Borrower agrees to borrow up to the full
amount of the Facility upon the terms and conditions of this Agreement.
Accordingly the Borrower will cause the conditions referred to in Clause 3 to be
satisfied and deliver to the Lender a notice requesting each Advance in the form
required by Clause 4 on a date not later than the fifth Business Day before the
Commitment Termination Date.
2.3 CANCELLATION: The Borrower may not cancel all or any part of the Facility.
Any undrawn portion of the Facility shall be automatically canceled after the
Commitment Termination Date.
2.4 PURPOSE: The Borrower will apply the proceeds of the Advances to refinance
certain of its existing short and medium-term loans, but the Lender shall not be
responsible for checking or confirming that the Borrower has done so.
Page 5
<PAGE> 9
CONDITIONS PRECEDENT
3.1 ADVANCES: The Lender shall not be obligated to make any Advance until the
Lender has received each of the items listed in Schedule 2 and has found each of
them satisfactory in form and substance.
3.2 NOTIFICATION: The Lender shall notify the Borrower after it has received all
such items required under Clause 3.1.
DRAWDOWN
4. Each Advance shall be drawndown by the Borrower in a minimum amount of
US$5,000,000 and thereabove in increments of US$5,000,000. Each Advance will be
made by the Lender to the Borrower at its request if the following additional
conditions are fulfilled:-
(a) DRAWDOWN REQUEST: not later than 11:00 a.m. (Seoul time) on the fifth
Business Day before the proposed date of the Advance, the Lender has
received from the Borrower a Notice of Drawdown signed by the Borrower
specifying (i) the proposed date (which must be a Business Day on or before
the Commitment Termination Date) of the Advance and (ii) details of the
bank(s) and the account(s) (which must be in New York City) to which the
Borrower wishes the proceeds of the Advance to be made available by the
Lender;
(b) REPRESENTATIONS ETC. CORRECT: all the representations and warranties in
Clause 12.1 have been complied with and would be correct in all respects if
repeated on the proposed date of the Advance by reference to the
circumstances then existing;
(c) NO EVENT OF DEFAULT ETC.: no Event of Default has occurred on or before the
proposed date of the Advance or will occur as a result of making the
Advance; and
(d) ADDITIONAL REQUIREMENTS: not later than 11:00 a.m. (Seoul time) on the
third Business Day before the proposed date of the Advance, the Lender has
received and found satisfactory such additional information, legal opinions
and/or other documents as it or counsel to the Lender may reasonably
request as a result of circumstances that have arisen since the signing of
this Agreement.
REPAYMENT ON MATURITY OR DEMAND
5. Each Advance shall be repaid by the Borrower in one lump sum on the Final
Repayment Date or on such earlier date as the Lender may demand upon seven days
written notice to the Borrower. Any repayment by the Borrower made upon demand
of the Lender shall be accompanied by all interest accrued
Page 6
<PAGE> 10
thereon to the date of repayment and all other amounts payable by the Borrower
to the Lender hereunder.
PREPAYMENT
6.1 OF LENDER: The Borrower may prepay the Advance in whole or in part on any
Interest Payment Date in minimum amounts of US$5,000,000 and thereabove in
integral multiples of US$5,000,000 upon one month's prior written notice to the
Lender without premium or penalty.
6.2 MISCELLANEOUS. Any notice of prepayment given by the Borrower under this
Agreement shall be irrevocable and shall oblige the Borrower to prepay in
accordance with that notice. The Borrower may not prepay all or any part of the
Advance except as expressly provided in this Agreement and may not reborrow any
amount repaid or prepaid.
INTEREST
7.1 INTEREST PERIODS: Interest shall be calculated and payable on each Advance
by reference to successive Interest Periods. If the Borrower avails itself of
the Facility by way of a single lump-sum Advance on the date of this Agreement
there shall be a single Interest Period commencing on the date of this Agreement
and ending on the Final Repayment Date; otherwise, the first Interest Period
relating to each Advance shall begin on the date of such Advance and end on the
Commitment Termination Date and each subsequent Interest Period shall begin on
the last day of the preceding Interest Period and shall be of one month's
duration, provided that the final Interest Period shall end on the Final
Repayment Date.
7.2 NORMAL INTEREST RATE: Subject to Clause 10, the rate of interest applicable
to each Advance for a particular Interest Period shall be the Applicable Rate.
7.3 PAYMENT OF INTEREST: On the last day of each Interest Period, the Borrower
shall pay to the Lender the interest accrued during that Interest Period on each
Advance, calculated in accordance with Clause 18.1.
FEES
8.1 COMMITMENT FEE: The Borrower shall pay on the Commitment Termination Date a
commitment fee of 0.375% per annum upon the daily undrawn portion of the
Facility calculated on the basis of actual days elapsed from the date of this
Agreement and a 360 day year.
8.2 OTHER FEES: The Borrower shall pay to the Lender such other fees as may be
agreed between the Borrower and the Lender.
Page 7
<PAGE> 11
8.3 VAT/SALE GOODS AND SERVICES TAX: Any referred to in this Clause 8 is
exclusive of any value added tax, sale of goods and services tax or any other
tax which might be chargeable in connection with that fee. If any value added
tax, sale of goods and services tax or other tax is so chargeable it shall be
paid by the Borrower at the same time as it pays the relevant fee.
TAXES
9.1 PAYMENTS TO BE FREE AND CLEAR
(a) GROSS-UP: All payments to be made by the Obligors under this Agreement
shall be made free and clear of and without deduction for or on account of
tax unless such Obligor is required to make such a payment subject to the
deduction or withholding of tax, in which case the sum payable by such
Obligor in respect of which such deduction or withholding is required to be
made shall be increased to the extent necessary to ensure that, after the
making of such deduction or withholding, the person entitled to payment
receives and retains (free from any liability in respect of such deduction
or withholding) a net sum equal to the sum which it would have received and
so retained had no such deduction or withholding been made or required to
be made.
(b) FURTHER GROSS-UP: Without prejudice to the provisions of Sub-clause 9.1(a),
if the Lender or any Affiliate of the Lender is required to make any
payment on account of tax with respect to any amount payable under this
Agreement (not being a tax imposed on the net income of such person by the
jurisdiction in which it is incorporated, unless and except to the extent
that such tax is imposed on an amount deemed to be, but not actually,
received by such person (including without limitation, any sum received or
receivable under this Clause 9)) or any liability in respect of any such
payment is asserted, imposed, levied or assessed against such person, the
Borrower shall, upon demand of the Lender, promptly indemnify such person
against such payment or liability, together with any taxes, interest,
penalties and expense payable or incurred in connection therewith.
(c) CLAIMS: If the Lender intends to make a claim pursuant to Sub-Clause 9.1(b)
it shall notify the relevant Obligor of the event by reason of which it is
entitled to do so, provided that nothing herein shall require the Lender or
any Affiliate of the Lender to disclose any confidential information
relating to the organization of its tax affairs.
9.2 TAX RECEIPTS:
(a) NOTIFICATIONS: If at any time, the Borrower is required by law to make any
deduction or withholding from any sum payable by it under this Agreement
(or if thereafter there is any change in the rates at which or
Page 8
<PAGE> 12
the manner in which such deductions or withholdings are calculated), the
Borrower shall promptly notify the Lender;
(b) RECEIPT: If the Borrower makes any payment under this Agreement in respect
of which it is required to make any deduction or withholding, it shall pay
the full amount to be deducted or withheld to the relevant taxation or
other authority within the time allowed for such payment under applicable
law and shall deliver to the Lender, within thirty days after receipt
thereof from the applicable authority, an original receipt (or a certified
copy thereof) issued by such authority evidencing the payment to such
authority of all amounts so required to be deducted or withheld.
9.3 CONTINUING OBLIGATIONS: The obligations of the Borrower in Clause 9 shall
survive the payments in full of the Advances.
CHANGE IN CIRCUMSTANCES
10.1 INCREASED COSTS: If, by reason of (i) any change in law or in its
interpretation or administration and/or (ii) compliance with any request from or
requirement of any central bank or other fiscal, monetary or other authority
(including, without limitation, a request or requirement which affects the
manner in which the Lender, any Affiliate of the Lender or its source of funds
allocates capital resources to or for the Lender's obligations hereunder):
(a) the Lender or any Affiliate of the Lender incurs a cost as a result of the
Lender having entered into and/or performing its obligations under this
Agreement and/or assuming or maintaining the Advances under this Agreement;
(b) the Lender, any Affiliate of the Lender and/or its source of funds is
unable to obtain the rate of return on its overall capital which it would
have been able to obtain but for the Lender having entered into this
Agreement and/or performing its obligations hereunder and/or assuming or
maintaining the Advances;
(c) there is any increase in the cost to the Lender, any Affiliate of the
Lender and/or its source of funds of funding or maintaining any Advance
hereunder; or
(d) the Lender, any Affiliate of the Lender and/or its source of funds becomes
liable to make any payment on account of tax (not being a tax imposed on
the net income of such person by the jurisdiction in which it is
incorporated or in which its lending office is located for purposes of this
Agreement)
then the Borrower shall, from time to time on demand by the Lender, promptly pay
to the Lender amounts sufficient to indemnify the Lender, any Affiliate of
Page 9
<PAGE> 13
the Lender or its source of funds, as the case may be, for, such cost, foregone
return or tax.
10.2 MARKET DISRUPTION:
(a) If the Lender (individually or after having received notice to such effect
from its source of funds) determines that adequate and fair means do not
exist for ascertaining LIBOR, it shall promptly notify the Borrower of the
fact and that this Sub-Clause 10.2 is in operation.
(b) If a notification under this Sub-Clause applies to an Advance which has not
been made, that Advance shall not be made. However, within 5 Business Days
of receipt of the notification, the Borrower and the Lender shall enter
into negotiations for a period of not more than 30 days with a view to
agreeing an alternative basis for the borrowing of any future Advance.
(c) If a notification under this Sub-Clause applies to an Advance which is
outstanding then, notwithstanding any other provision of this Agreement:-
(i) within 5 Business Days of receipt of the notification, the Borrower
and the Lender shall enter into negotiations for a period of not more
than 30 days with a view to agreeing an alternative basis for
determining the rate of interest and/or funding applicable to that
Advance;
(ii) if no alternative basis is agreed, the Lender shall certify on or
before the last day of the Interest Period to which the notification
relates an alternative basis for maintaining that Advance, which
shall be binding on the Borrower; and
(iii) any such alternative basis may include an alternative method of
fixing the interest rate, alternative Interest Periods or alternative
currencies but it must reflect the cost to the Lender (directly or
indirectly through its source of funds) of funding that Advance from
whatever sources it may select plus the applicable Margin.
10.3 ILLEGALITY: If it is or becomes unlawful in any jurisdiction for the Lender
to give effect to any of its obligations as contemplated by this Agreement or
for the Lender or its source of funds to fund or maintain any Advance, then:
(a) the Lender may notify the Borrower accordingly; and
(b) (i) the Bank shall not be obliged to make any further Advances;
(ii) the Borrower shall forthwith prepay all the Advances; and
Page 10
<PAGE> 14
(iii) the undrawn portion of the Facility shall forthwith be canceled.
Any such prepayment must be accompanied by accrued interest at the Applicable
Rate on the amount prepaid calculated up to the date of prepayment and any other
sum then due to the Lender under this Agreement, including any amount due
pursuant to Clause 15.4(c).
PAYMENTS
11.1 BY THE LENDER: The Lender shall, subject to the terms and conditions of
this Agreement, make such amount of the Facility available to the Borrower as
the Borrower shall have specified in any Notice of Drawdown.
11.2 BY OBLIGORS:
(a) On each date on which any sum is due from either Obligor hereunder, it
shall make that sum available to the Payment Account in immediately
available funds before 10:00 a.m. (New York City time). Any payments by
either Obligor to the Lender shall be made in Dollars (which shall be of
the essence).
(b) If the amount received by the Lender from either Obligor on any date is
less than the total sum remaining or becoming due under this Agreement on
that date, then the Lender shall apply that amount as the Lender deems fit.
11.3 NON-BUSINESS DAYS:
(a) If any Interest Payment Date would otherwise fall on a non-Business Day, it
shall instead fall on the next Business Day in the same calendar month (if
there is one) or the preceding Business Day (if there is not). If the Final
Repayment Date would otherwise fall on a non- Business Day, it shall
instead fall on the preceding Business Day.
(b) Any payment to be made by an Obligor on a day which is not an Interest
Payment Date or the Final Repayment Date and which would otherwise be due
on a non-Business Day shall instead be due on the next Business Day.
REPRESENTATIONS AND WARRANTIES
12.1 BY THE OBLIGORS: The Obligors represent and warrant jointly and severally
to and for the benefit of the Lender by reference to facts and circumstances as
at the date of this Agreement that: -
(a) STATUS: the Borrower is a company duly organized and validly existing under
the laws of the Philippines, the Guarantor is a company duly organized and
validly existing under the laws of Korea, and each of the
Page 11
<PAGE> 15
Borrower and the Guarantor is a separate legal entity capable of suing and
being sued and has the power and authority to own its assets and to conduct
the operations which it conducts;
(b) POWERS: it has the power to enter into, exercise its rights and perform and
comply with its obligations under this Agreement;
(c) AUTHORIZATION AND CONSENTS: all action, conditions and things required
by the laws of the Philippines and Korea to be taken, fulfilled and done
(including the obtaining of any necessary consents) in order (i) to enable
it lawfully to enter into, exercise its rights and perform and comply with
its obligations under this Agreement, (ii) to ensure that those obligations
are legally binding and enforceable and (iii) to make this Agreement
admissible in evidence in the courts of England have been taken, fulfilled
and done;
(d) NON-VIOLATION OF LAWS ETC: its entry into, exercise of its rights and/or
performance of or compliance with its obligations under this Agreement do
not and will not violate (i) any law to which it is subject or (ii) any of
the documents constituting it or (iii) any agreement which is binding on it
or its assets, and do not and will not result in the existence of, or
oblige it to create, any security over those assets;
(e) REGISTRATION AND FILINGS: subject to those matters described in the legal
opinions of Philippine, Korean and English counsel referred to in Paragraph
7 of Schedule 2, it is not necessary in order to ensure the legality,
validity, enforceability and admissibility in evidence in proceedings in
the Philippines, Korea or England of this Agreement that it or any other
document be filed or registered with any court or authority in the
Philippines, Korea or England;
(f) OBLIGATIONS BINDING: its obligations under this Agreement are legal, valid,
binding and enforceable in accordance with their terms;
(g) EXISTING SECURITY: as at the date of this Agreement, no security exists on
or over its assets except as permitted by Clause 13.2;
(h) ACCOUNTS: its most recent audited financial statements for the time being
(including the audited profit and loss account and balance sheet) were
prepared in accordance with applicable laws and regulations, in the case of
the Borrower, of the Philippines and, in the case of the Guarantor, of
Korea and generally accepted accounting principles and policies
consistently applied applicable to the relevant company and show a true and
fair view of its financial position as at the end of, and the results of
its operations for, the financial period to which it relates, and there has
been no material adverse change in its business or financial condition of
since the date of such financial statements;
Page 12
<PAGE> 16
(i) LITIGATION: no litigation, arbitration or administrative proceeding is
current or pending or, so far as it is aware, threatened (i) to restrain
the entry into, exercise of its rights under and/or performance or
enforcement of or compliance with its obligations under this Agreement or
(ii) which has or would have a material adverse effect on it;
(j) WINDING-UP: no meeting has been convened for its winding-up, no such step
is intended by it and, so far as it is aware, no petition, application or
the like is outstanding for its winding up;
(k) NO DEFAULT: no Event of Default has occurred or will occur as a result of
making an Advance; neither it nor any of its subsidiaries is in breach of
or default under any agreement to an extent or in a manner which has or
could have a material adverse effect on it;
(l) NO IMMUNITY: neither it nor any of its assets is entitled to immunity from
suit, execution, attachment, set-off or other legal process; its entry into
this Agreement constitutes, and the exercise of its rights and performance
of and compliance with its obligations under this Agreement will
constitute, private and commercial acts done and performed for private and
commercial purposes;
(m) APPROVALS: subject to those matters described in the legal opinions of
Philippine, Korean and English counsel referred to in Paragraph 7 of
Schedule 2, no approval, consent registration or recordation is required,
.either before or after execution of this Agreement, from or with any
governmental entity of the Philippines, Korea and England in respect of its
entry into, performance and enforcement of this Agreement; and
(n) WITHHOLDING TAX: so long as the Lender is a financing institution owned and
established by Korea, neither the Lender nor the Borrower shall be obliged
to pay any withholding tax in respect of any payment payable or receivable
under this Agreement.
12.2 REPETITION: each of the above representations and warranties in Clause 12.1
shall be deemed repeated on the drawdown date of each Advance and on each
Interest Payment Date, by reference to the then existing circumstances.
12.3 SURVIVAL: The representations and warranties made in this Clause shall
survive the execution of this Agreement and the making of any Advance.
UNDERTAKINGS
13. Each Obligor undertakes that, so long as any sum remains payable under this
Agreement:
13.1 RANKING OF OBLIGATIONS: its obligations under this Agreement rank and will
at all times rank at least equally and rateably in all respects with all its
Page 13
<PAGE> 17
other unsecured indebtedness except for such indebtedness as would, by virtue
only of the law in force in the Philippines (in the case of the Borrower) or
Korea (in the case of the Guarantor) from time to time, be preferred in the
event of its winding up.
13.2 NEGATIVE PLEDGE: neither it nor any of its Affiliates will create or have
outstanding any security on or over any of its assets as security for or in
respect of any indebtedness of it except for:-
(a) encumbrances existing as of the date, which are, in the case of the
Borrower and its Affiliates, listed in Schedule 6;
(b) encumbrances arising solely by operation of law and in the ordinary course
of their respective operations;
(c) any security existing on or over the assets of any company which becomes an
Affiliate after the date of this Agreement and not created in contemplation
of or in connection with such company becoming an Affiliate, to secure
obligations of that subsidiary existing at the date on which it becomes a
subsidiary (but not any increase in principal, capital or nominal amount or
extension of maturity or renewal of such obligations); and
(d) any security created or outstanding with the prior written consent of the
Lender.
13.3 DISPOSALS; CHANGE OF OWNERSHIP: it will not (a) merge or consolidate with
any other entity or take any step with a view to dissolution, liquidation or
winding-up; (b) purchase or redeem any of its issued common shares or reduce its
common share capital or make a distribution of assets or other capital
distribution to its shareholders otherwise than with the Lender's prior written
consent; (c) declare or pay any dividend or make any other income distribution
to its shareholders if an Event of Default has occurred and has not been
remedied to the satisfaction of the Lender; (d) sell, transfer or otherwise
assign, deal with or dispose of all or any part of its business or (except for
good consideration in the ordinary course of its business and on an arm's length
basis) its assets or revenues which might materially and adversely affect its
business or financial condition, whether by a single transaction or by a number
of transactions whether related or not; (e) make or grant any loan or advance or
guarantee or in any other manner be or become directly or indirectly or
contingently liable for any indebtedness or other obligation of any other
person, except (i) as may be necessary in the ordinary course of its business,
(ii) in the case of the Guarantor, the guarantee provided by it in Clause 14 of
this Agreement, (iii) the indebtedness listed in Schedule 7 or (iv) indebtedness
entered into with the Lender's consent; (f) enter into any agreement, obligation
which might materially and adversely affect its financial condition; (g) change
or permit a change in its principal business activities or current business
lines; or (h)
Page 14
<PAGE> 18
acquire any business or assets from, or capital stock of, or be a party to any
acquisition of, any person except for purchases of inventory and other assets to
be sold or used in the ordinary course of business or for any acquisition made
or entered into with the Lender's consent;
13.4 EVENTS OF DEFAULT: it will notify the Lender of the occurrence of any Event
of Default immediately upon becoming aware of it;;
13.5 PREPARATION OF ACCOUNTS: it will keep its books of account in order to
ensure that all accounts of each company to be delivered by it under this
Agreement will be prepared in accordance with the applicable laws and
regulations and generally accepted accounting principles and policies
consistently applied applicable to the relevant company and show a true and fair
view of such company's financial position as at the end of, and the results of
its operations for, the financial period to which it relates;
13.6 ACCOUNTS: it shall deliver to the Lender:
(a) as soon as possible but in any event within 180 days of the end of each
relevant fiscal period, its annual audited consolidated financial
statements and those of all of their respective guaranteed subsidiaries and
Affiliates (including, but not limited to, Amkor Electronics, Amkor/Anam
USA, TL Limited, Amkor/Anam Advanced Packaging Inc. and Automated
Microelectronics Inc.); and
(b) as soon as possible but in any event within 60 days of the end of each
relevant fiscal period, its semi-annual unaudited financial statements and
those of all of their respective guaranteed subsidiaries and Affiliates
(including, but not limited to, Amkor Electronics, Amkor/Anam USA, TL
Limited, Amkor/Anam Advanced Packaging Inc. and Automated Microelectronics
Inc.);
13.7 OTHER INFORMATION: it will promptly deliver to the Lender:
(a) details of any litigation, arbitration or administrative proceeding during
the effectiveness of this Agreement which, if it had been current or
pending or, to its knowledge, threatened at the date of this Agreement,
would have rendered the warranty in Clause 12.1(i) incorrect; and
(b) such other information relating to the financial condition or operations of
it or any of its Affiliates, as the Lender may from time to time reasonably
request;
13.8 CONTROL: in the case of the Guarantor only, the Guarantor shall maintain
management control over, and own collectively, beneficially and of record, at
least 40% of the subscribed and issued common shares of, the Borrower;
Page 15
<PAGE> 19
13.9 NO AMENDMENT: it shall procure that no amendment or supplement is made to
its articles of association or other constitutive documents which (in the
opinion of the Lender) might materially and adversely affect such Obligor's
ability to perform its obligations under this Agreement;
13.10 INFORMATION TO BE TRUE: it shall ensure that all factual information
supplied hereafter by it hereunder to the Lender for any purpose of or connected
with this Agreement will at the time of supply be true, complete and accurate in
all material respects and that all projections and forecasts made by it and
supplied as aforesaid will be made with all due care after diligent
consideration;
13.1 COMPLIANCE: it shall obtain, comply with the terms of and do all that is
necessary to maintain in full force and effect all authorizations, approvals,
licences and consents required in or by the laws and regulations of the
Philippines and Korea to enable it lawfully to enter into and perform its
obligations under this Agreement or to ensure the legality, validity,
enforceability or admissibility in evidence in the Philippines, Korea and
England of this Agreement;
13.12 INSURANCE: it shall maintain insurances on and in relation to its business
and assets with reputable underwriters or insurance companies against such risks
and to such extent as is usual for companies carrying on a business such as that
carried on by it whose practice is not to self insure; and
13.13 TRANSACTIONS WITH AFFILIATES: except as expressly permitted by this
Agreement, it will not directly or indirectly: (a) transfer, sell, lease, assign
or otherwise dispose of any assets to one of its Affiliates; (b) merge into or
consolidate with or purchase or acquire assets from one of its Affiliates; or
(c) enter into any other transaction directly or indirectly with or for the
benefit of one of its Affiliates (including guarantees and assumptions of
obligations of an Affiliate); provided that (x) any such Affiliate who is an
individual may serve as a director, officer or employee of an Obligor and
receive reasonable compensation for his or her services in such capacity and (y)
an Obligor may enter into transactions (other than extensions of credit by such
Obligor to one of its Affiliates) providing for the leasing of assets, the
rendering or receipt of services or the purchase or sale of inventory and other
assets in the ordinary course of business if the monetary or business
consideration arising therefrom would be substantially as advantageous to such
Obligor as the monetary or business consideration which would apply in a
comparable transaction with a person who is not an Affiliate of such Obligor.
GUARANTEE
14.1 GUARANTEE: The Guarantor as principal debtor and not merely as surety
unconditionally and irrevocably guarantees to the Lender punctual payment by the
Borrower of the Guaranteed Amounts in accordance with this Agreement
Page 16
<PAGE> 20
and unconditionally and irrevocably undertakes to the Lender that if and each
time the Borrower does not make payment of any of the Guaranteed Amounts in
accordance with this Agreement, the Guarantor shall pay the amounts not so paid
upon first written demand by the Lender.
In this clause GUARANTEED AMOUNTS means any and all amounts whatsoever which
this Agreement provides are to be paid by the Borrower under this Agreement and
references to the Guaranteed Amounts include references to any part of them.
14.2 INDEMNITY: As a separate, additional, continuing and primary obligation,
the Guarantor unconditionally and irrevocably undertakes with the Lender that,
should the Guaranteed Amounts not be recoverable from the Guarantor under clause
14.1 for any reason whatsoever (including, but without prejudice to the
generality of the foregoing, by reason of any other provision of this Agreement
being or becoming void, unenforceable or otherwise invalid under any applicable
law) then, notwithstanding that it may have been known to the Lender, the
Guarantor shall upon first written demand by the Lender under clause 14.1, make
payment of the Guaranteed Amounts by way of a full indemnity in such manner as
is provided for in this Agreement and shall indemnify the Lender against all
losses, claims, costs, charges and expenses to which it may be subject or which
it may incur under or in connection with this Agreement.
14.3 CONTINUING GUARANTEE: The above guarantee shall be continuing and shall
extend to the ultimate balance of the Guaranteed Amounts, regardless of any
intermediate payment or discharge in whole or in part. If the guarantee ceases
to continue in force, the Lender may open a new account with or continue any
existing account with the Borrower and the liability of the Guarantor in respect
of the Guaranteed Amounts at the date of the cessation shall remain regardless
of any payments in or out of any such account.
14.4 DISCHARGE AND RELEASE: The Guarantor may not terminate its guarantee by
notice to the Lender or otherwise. Subject to clause 14.5, and provided the
Guaranteed Amounts have been paid in full, the Lender may discharge or release
the Guarantor by written instrument signed by the Lender.
14.5 CLAWBACK: Any discharge or release referred to in clause 14.4, and any
composition or arrangement which the Guarantor may effect with the Lender, shall
be deemed to be made subject to the condition that it will be void, if any
payment or security which the Lender may previously have received or may
thereafter receive from any person in respect of the Guaranteed Amounts, is set
aside, refunded or reduced, in whole or in part under any applicable law or
proves to have been for any reason invalid. If such condition is satisfied, the
Lender shall be entitled to recover from the Guarantor on demand the value of
such security or the amount of any such payment as if such discharge, release,
compromise or arrangement had not occurred.
Page 17
<PAGE> 21
14.6 WAIVER OF FENCES: The liabilities and obligations of the Guarantor under
this Agreement shall remain in force notwithstanding any act, omission, neglect,
event or matter whatsoever, except the proper and valid payment of all the
Guaranteed Amounts and without prejudice to its generality, the foregoing shall
apply in relation to anything which would have discharged the Guarantor (wholly
or in part) or which would have afforded the Guarantor any legal or equitable
defense, and in relation to any winding up, reconstruction, reorganization or
dissolution of, or any change in constitution or corporate identity or loss of
corporate identity by, the Borrower or any other person and any incapacity or
lack of corporate power or authority of any person. Without prejudice to the
generality of the foregoing none of the liabilities or obligations of the
Guarantor under this Agreement shall be impaired by the Lender:
(a) releasing or granting any time or any indulgence whatsoever to the Borrower
and, in particular, waiving any of the pre-conditions for Advances under
this Agreement or any contravention by the Borrower of this Agreement or
entering into any transaction or arrangements whatsoever with or in
relation to the Borrower and/or any third party;
(b) taking, accepting, varying, dealing with, enforcing, abstaining from
enforcing, surrendering or releasing any security for the Guaranteed
Amounts in such manner as it or they think fit; or
(c) claiming, proving for, accepting or transferring any payment in respect of
the Guaranteed Amounts in any composition by, or winding up of, the
Borrower and/or any third party or abstaining from so claiming, proving,
accepting or transferring.
14.7 DEMANDS: Demands under this clause may be made from time to time, and the
liabilities and obligations of the Guarantor under this Agreement may be
enforced, irrespective of:
(a) whether any demands , steps or proceedings are being or have been made or
taken against the Borrower and/or any third party; or
(b) whether or in what order any security to which the Lender may be entitled
in respect of the Guaranteed Amounts is enforced.
The Guarantor waives diligence, presentment, protest, demand for repayment and
notice of default to or upon the Borrower.
14.8 SUSPENSE ACCOUNT: Until all amounts which may be or become payable by the
Borrower hereunder or in connection herewith have been irrevocably paid and
discharged in full, the Lender may:
(a) refrain from applying or enforcing any other security, moneys or rights
held or received by the Lender in respect of such amounts or apply and
enforce the same in such manner and order as the Lender sees fit
Page 18
<PAGE> 22
(whether against such amounts or otherwise) and the Guarantor shall not be
entitled to the benefit of the same; and
(b) hold in suspense account (subject to the accrual of interest thereon at
market rates for the account of the Guarantor) any moneys received from the
Guarantor or on account of the Guarantor's liability hereunder.
14.9 SUBORDINATION: So long as the Guarantor has any liability under this
Agreement:
(a) the Guarantor shall not take or accept any encumbrance from the Borrower
or, in relation to the Guaranteed Amounts, from any third party, without
first obtaining the Lender's written consent;
(b) after the occurrence of an Event of Default, the Guarantor shall not,
without first obtaining the Lender's written consent, seek to recover,
whether directly or by set-off, lien, counterclaim or otherwise, nor accept
any moneys or other property, nor exercise any rights, in respect of any
sum which may be or become due to the Guarantor on any account by the
Borrower or, in relation to the Guaranteed Amounts, from any third party,
nor claim, prove for or accept any payment in any composition by, or any
winding up of, the Borrower or, in relation to the Guaranteed Amounts, any
third party; and
(c) if, notwithstanding the foregoing, the Guarantor holds or receives any such
security, moneys or property, it shall forthwith pay or transfer the same
to the Lender.
DEFAULT
15.1 EVENTS OF DEFAULT: Each of the following events shall constitute Events of
Default:
(a) NON-PAYMENT: either Obligor does not pay in the manner provided in this
Agreement any sum payable under it when due; or
(b) BREACH OF WARRANTY: any representation, warranty or statement made by
either Obligor in this Agreement or in any document delivered under this
Agreement is not complied with or is or proves to have been incorrect in
any material respect when made or deemed to be made and such
non-compliance, or incorrect statement, if capable of remedy, is not
remedied or rectified within 30 days; or
(c) BREACH OF OTHER OBLIGATION: either Obligor does not perform or comply with
any one or more of its obligations under this Agreement, as the case may
be, and, if that default is capable of remedy, it is not in the reasonable
opinion of the Lender remedied within 30 days after notice of that default
has been given to it by the Lender; or
Page 19
<PAGE> 23
(d) CROSS DEFAULT: Any other indebtedness in respect of borrowed money of the
Borrower in the aggregate equal to or exceeding US$200,000 or of the
Guarantor in the aggregate equal exceeding US$1,000,000 (i) is not paid
when due or within any applicable grace period in any agreement relating to
the indebtedness or (ii) becomes due and payable, or capable of being
declared due and payable before its normal maturity by reason of a default
or event of default or event which could constitute an event of default
upon any declaration or expiry of any grace period, however described, save
in any such case where such Obligor is contesting in good faith by the
expeditious institution of formal legal proceedings the entitlement to such
early repayment; or
(e) LITIGATION: any litigation, arbitration or administrative proceeding
becomes current, pending or threatened against either Obligor or any of
their Affiliates which, in the reasonable opinion of the Lender, (i)
restrains its entry into, exercise of its rights under and/or performance
or enforcement of or compliance with either Obligor's obligations under
this Agreement or (ii) has or would have a material adverse effect on such
Obligor; or
(f) INSOLVENCY: either Obligor or any of their Affiliates becomes insolvent, is
unable to pay its debts as they fall due, stops, suspends or threatens to
stop or suspend payment of all or a material part of its debts, begins
negotiations or takes any proceeding or other step with a view to
readjustment, rescheduling or deferral of all of its indebtedness (or of
any part of its indebtedness which it will or might otherwise be unable to
pay when due) or proposes or makes a general assignment or an arrangement
or composition with or for the benefit of its creditors or a moratorium is
agreed or declared in respect of or affecting all or a material part of the
indebtedness of such Obligor or any of their respective Affiliates; or
(g) ENFORCEMENT PROCEEDINGS: a distress, attachment, execution or other legal
process is levied, enforced, or sued out on or against the assets of either
the Obligor or any of their respective Affiliates and is not discharged or
stayed within 30 days; or
(h) SECURITY ENFORCEABLE: any present or future security on or over the assets
of either Obligor or any of their respective Affiliates becomes enforceable
and any step (including the taking of possession or the appointment of a
receiver, manager or similar officer) is taken to enforce that security; or
(i) WINDING-UP: any step is taken by any person for the winding-up of either
Obligor or any of their respective Affiliates (except a voluntary winding
up or otherwise for the purpose of and followed by a reconstruction,
amalgamation or reorganization on terms approved by the Lender before that
step is taken); or
Page 20
<PAGE> 24
(j) AUTHORIZATION AND CONSENTS: any material action, condition or thing
(including the obtaining of any necessary consent or approval) at any time
required to be taken, fulfilled or done for any of the purposes stated in
Clause 12.1(c), (e) or (m) of this Agreement is not taken, fulfilled or
done or any such consent ceases to be in full force and effect without
modification or any condition in or relating to any such consent is not
complied with; or
(k) ILLEGALITY: it is or becomes unlawful for either Obligor to perform or
comply with any one or more of its material obligations under this
Agreement; or
(l) ANALOGOUS EVENTS: any event occurs which, under the law of any relevant
jurisdiction, has an analogous or equivalent effect to any of the events
mentioned in the immediately preceding sub-clauses (f), (g) or (i); or
(m) MATERIAL ADVERSE CHANGE: any event occurs or circumstances arise which the
Lender reasonably determines to give grounds for believing that either
Obligor will or may not (or will or may be unable to) perform or comply
with any one or more of its obligations under this Agreement; or
(n) SUBSIDIARY: the Borrower ceases to be managed by the Guarantor or the
Guarantor shall cease to own collectively, beneficially and of record at
least 40% of the subscribed and issued common shares of the Borrower.
15.2 CANCELLATION/ACCELERATION: At any time after the occurrence of an Event of
Default and for so long as it is continuing the Lender may, by notice to the
Borrower, declare:
(a) the Facility (to the extent it is not yet advanced) to be cancelled,
whereupon it shall be cancelled; and/or
(b) each Advance, accrued interest thereon and any other sum then payable under
this Agreement to be immediately due and payable, whereupon they shall
become so due and payable.
15.3 DEFAULT INTEREST: If the Borrower does not pay any sum payable under this
Agreement when due, it shall pay interest on the amount from time to time
outstanding in respect of that overdue sum for the period beginning on its due
date and ending on the date of its receipt by the Lender (both before and after
judgment) in accordance with this sub-clause. Such interest shall be calculated
and payable by reference to successive Interest Periods, each of which (other
than the first, which shall begin on the due date) shall begin on the last day
of the previous one. Each such Interest Period shall be of one month or such
shorter period as the Lender may in its sole discretion from time to time select
Page 21
<PAGE> 25
and the rate of interest applicable for a particular Interest Period shall be
the rate per annum equal to the sum of LIBOR plus the Margin plus 2 percent. Any
interest payable under this sub-clause which is not paid when due in accordance
with Clause 7.3 shall be added to the overdue sum and itself bear interest
accordingly.
15.4 MISCELLANEOUS INDEMNITIES: The Borrower shall on demand indemnify the
Lender against any reasonable cost, or expense sustained or incurred by the
Lender (including the liquidating or unwinding of any deposits or funding or
financing arrangement with any of the Lender's source of funds) as a result of:
(a) the acceleration of repayment of any Advance under Clause 15.2;
(b) the receipt or recovery by the Lender of any part of any Advance or an
overdue sum otherwise than on the last day of an Interest Period relating
to that part of the Advance or that overdue sum for whatever reason;
(c) the prepayment of any part of Advance pursuant to Clause 6.1 or 10.3;
(d) the repayment of any part of any Advance prior to the Final Repayment Date
except in accordance with the terms of this Agreement;
(e) the Lender's source of funds being affected by any of the circumstances
described in Clauses 10.1, 10.2 or 10.3; or
(f) the occurrence or continuance of any Event of Default.
15.5 CURRENCY INDEMNITY:
(a) The Dollar is the sole currency of account and payment for each sum payable
by either Obligor under or in connection with this Agreement, including
damages and any other amounts relating thereto.
(b) Any amount received or recovered in a currency other than Dollars in
accordance with the immediately preceding Clause 15.5(a) (whether as a
result of, or of the enforcement of, a judgment or order of a court of any
jurisdiction, in the winding-up of such Obligor, or otherwise) by the
Lender in respect of any sum expressed to be due to it from such Obligor
under this Agreement shall only constitute a discharge to such Obligor to
the extent of the amount which the Lender is able, in accordance with its
usual practice, to purchase in a recognised foreign exchange market with
the amount so received or recovered in that other currency on the date of
that receipt or recovery (or, if it is not practicable to make that
purchase on that date, on the first date on which it is practicable to do
so) equals the amount in Dollars to be recovered or received by the Lender
under such circumstances.
Page 22
<PAGE> 26
(c) If that amount in dollars is less than the amount expressed to be due to
the Lender under this Agreement, the relevant Obligor shall indemnify the
Lender in Dollars against any loss sustained by it as a result. If that
amount in Dollars is greater than the amount expressed to be due to the
Lender under this Agreement, the Lender shall promptly pay such surplus to
relevant Obligor. In any event, the relevant Obligor shall indemnify the
Lender against the cost of making any such purchase. For the purpose of
this Clause, it will be sufficient for the Lender to demonstrate that it
would have suffered a loss had an actual exchange or purchase been made.
(d) These indemnities constitute a separate and independent obligation from the
other obligations in this Agreement, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence
granted by the Lender, shall continue in full force and effect despite any
judgment, order, claim or proof for a liquidated amount in respect of any
sum due under this Agreement or any judgment and shall survive the
termination of this Agreement.
15.6 GENERAL INDEMNIFICATION: The Borrower and the Guarantor jointly and
severally agree to pay and indemnify the Lender, the Lender's Affiliates and the
Lender's sources of funds, and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each an INDEMNIFIED PERSON)
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses, or disbursements
(including attorneys' fees and disbursements and the allocated costs of internal
counsel) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance, and administration of this Agreement, or the
transactions contemplated hereby, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any violation of any
environmental law by the Borrower or the Guarantor or any of their respective
subsidiaries, or the Advances and other extensions of credit hereunder or the
use of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the INDEMNIFIED LIABILITIES); provided
that neither Borrower nor the Guarantor shall have any obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person. The
agreements in this subclause shall survive payment of all other obligations of
the Borrower and the Guarantor hereunder.
SET-OFF
16. Each Obligor authorizes the Lender to apply after the occurrence of any
Event of Default any credit balance to which it is at any time beneficially
entitled on any account at any office of the Lender in or towards satisfaction
of any sum then due from it to the Lender under this Agreement and unpaid. For
that purpose, the Lender is authorized to use all or any part of any such credit
Page 23
<PAGE> 27
balance to buy such other currencies as may be necessary to effect such
application. The Lender shall as soon as practicable after the exercise of its
rights under this clause notify the relevant Obligor. The Lender shall not be
obliged to exercise any of its rights under this clause, which shall be without
prejudice and in addition to any right of set-off, combination of accounts, lien
or other right to which it is at any time otherwise entitled (whether by
operation of law, contract or otherwise).
EXPENSES AND STAMP DUTY
17. Whether or not any Advance is made under this Agreement, the Borrower shall
pay:
(a) INITIAL EXPENSES: on demand, all reasonable costs and expenses incurred by
the Lender in connection with the preparation, negotiation and execution of
this Agreement;
(b) ENFORCEMENT EXPENSES: on demand, all costs and expenses (including legal
fees of internal and external counsel of the Lender or any other person
pursuing a claim on the Lender's behalf) incurred by any person in
protecting or enforcing the Lender's rights under this Agreement or any
amendment of or waiver in respect thereof; and
(c) STAMP DUTY: promptly, and in any event before any penalty becomes payable,
any stamp, documentary, registration or similar tax payable in connection
with the entry into, performance, enforcement or admissibility in evidence
of this Agreement and/or any such amendment or waiver, and shall indemnify
the Lender against any liability with respect to or resulting from any
delay in paying or omission to pay any such tax.
CALCULATIONS AND EVIDENCE
18.1 BASIS OF CALCULATION: All interest shall accrue from day to day and shall
be calculated on the basis of a year of 360 days and the actual number of days
elapsed.
18.2 LOAN ACCOUNTS: The entries made in the accounts maintained by the Lender in
accordance with its usual practice shall be, save for manifest error, prima
facie evidence of the existence and amounts of the obligations of the Borrower
recorded in them.
18.3 CERTIFICATES CONCLUSIVE: A certificate by the Lender as to any sum payable
to it under this Agreement and any other certificate, determination,
notification or opinion of the Lender provided for in this Agreement, shall be
conclusive save for manifest error.
Page 24
<PAGE> 28
ASSIGNMENT
19.1 BENEFIT AND BURDEN OF THIS AGREEMENT: This Agreement shall benefit and be
binding on the parties, their respective successors and any permitted assignee
or transferee of some or all of a party's rights or obligations under this
Agreement. Any reference in this Agreement to any party shall be construed
accordingly.
19.2 OBLIGORS: Neither Obligor may assign or transfer all or any part of its
rights or obligations under this Agreement.
19.3 LENDER:
(a) The Lender may transfer or sell a participation in all or part of its
rights and obligations under this Agreement (a) to any holding company or
subsidiary of the Lender or any other subsidiary of any such holding
company or (b) to any other bank or financial institution (with the consent
of the Borrower and the Guarantor in the case of a transfer but not a
participation, which consent shall not be unreasonably withheld) (a
TRANSFEREE). If either the Borrower or the Guarantor does not notify the
Lender of its decision within 30 days of receiving a request for a consent
to transfer, such consent will be deemed to have been granted.
(b) Any permitted transferee hereunder shall be treated as the Lender for all
purposes of this Agreement and shall be entitled to the full benefit of
this Agreement to the same extent as if it were an original party in
respect of the rights or obligations transferred to it. Any other
Transferee hereunder shall be entitled to the benefits of Clauses 9, 10,
15.4, 15.5, 15.6, 16 and 17(b) hereof.
19.4 DISCLOSURE OF INFORMATION: The Lender may, subject to the prior consent of
the Borrower and the Guarantor, such consent not to be unreasonably withheld,
disclose to a potential assignee or participant or any other person proposing to
enter into contractual arrangements with it in relation to this Agreement such
confidential information about the Borrower and the Guarantor and their
respective subsidiaries as it may think fit. Further, the Lender can disclose
any confidential information about the Guarantor and the Borrower which the
Lender is required or requested to disclose by any applicable law or at the
direction of any agency of state or regulatory body having the power to oversee
any aspect of the business of the Lender or its source of funds.
REMEDIES, WAIVERS, AMENDMENTS AND CONSENTS
20.1 NO IMPLIED WAIVERS, REMEDIES CUMULATIVE: No failure on the part of the
Lender to exercise, and no delay on its part in exercising, any right or remedy
under this Agreement will operate as a waiver thereof, nor will any
Page 25
<PAGE> 29
single or partial exercise of any right or remedy preclude any other or further
exercise thereof or the exercise of any other right or remedy. The rights and
remedies provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.
20.2 AMENDMENTS, WAIVERS AND CONSENTS: Any provision of this Agreement may be
amended only if the Borrower, the Guarantor and the lender so agree in writing
and any Event of Default, provision or breach of any provision of this Agreement
may be waived before or after it occurs only if the Lender so agrees in writing.
COMMUNICATIONS
21.1 ADDRESSES: Each communication under or for the purpose of this Agreement
shall be made by fax, by registered mail or by hand delivery in writing. Each
communication or document to be delivered to the Borrower, the Guarantor or the
Lender under or for the purpose of this Agreement shall be sent to that party at
the fax number or address, and marked for the attention of the person (if any)
designated by that party on the signature page of this Agreement or otherwise
from time to time notified by such party to the other parties hereto.
21.2 DEEMED DELIVERY: Any communication to any person under this Agreement shall
be deemed to be received by that person (if sent by fax) when despatched with
confirmed answer back or (in any other case) when left at the address required
by Clause 21.1 or 7 days after being put in the post (by registered mail if to
another country) postage prepaid and addressed to it at that address.
21.3 LANGUAGE: All communications and documents shall either be in English or
accompanied by a translation into English. If there is a conflict, the English
translation shall prevail over the original language version.
PARTIAL INVALIDITY
22. The illegality, invalidity or unenforceability of any provision of this
Agreement under the law of any jurisdiction shall not affect its legality,
validity or enforceability under the law of any other jurisdiction nor the
legality, validity or enforceability of any other provision.
COUNTERPARTS
23. This Agreement may be signed in any number of counterparts, all of which
taken together shall constitute one and the same instrument.
Page 26
<PAGE> 30
GOVERNING LAW AND JURISDICTION
24.1 GOVERNING LAW: This Agreement shall be governed by and construed with the
laws of England, without prejudice to any other rights or remedies available to
the Lender under the laws of any jurisdiction where either Obligor or their
respective assets may be found.
24.2 JURISDICTION: Each of the parties agrees that the courts of England shall
have non-exclusive jurisdiction to hear and determine any suit, action or
proceeding, and to settle any disputes, which may arise out of or in connection
with this Agreement (Proceedings) and for such purposes and for the benefit of
the other parties submits to the Jurisdiction of such courts. Each of the
Obligors irrevocably waives any objection which it might have now or hereafter
to such courts being nominated as the forum to hear and determine any
Proceedings and agrees not to claim that any such court is not a convenient or
appropriate forum.
24.3 SUBMISSIONS NOT TO AFFECT: The submissions in this Clause shall not affect
the right of the Lender to take Proceedings in any other competent jurisdiction
nor shall the taking of Proceedings in any jurisdiction preclude the Lender from
taking Proceedings in any other competent jurisdiction.
24.4 CONSENT TO ENFORCEMENT: Each Obligor irrevocably and generally consents in
respect of any Proceedings anywhere to the giving of any relief or the issue of
any process in connection with those Proceedings including, without limitation,
the making, enforcement or execution against any assets whatsoever (irrespective
of their use or intended use) of any order or judgment which may be made or
given in those Proceedings, and agree that any final order or judgment shall be
conclusive.
24.5 SERVICE OF PROCESS AND PROCESS AGENT: Each Obligor irrevocably consents to
service of process or any other documents in connection with Proceedings in any
court by facsimile transmission, personal service, delivery at any address
specified in this Agreement or any other usual address, mail or in any other
manner permitted by English law, the law of the place of service or the law of
the jurisdiction where proceedings are instituted. Each Obligor shall at all
times maintain an agent for service of process and any other documents in
Proceedings in England or any other Proceedings in connection with this
Agreement. If, following such a request, an Obligor fails to appoint such all
agent, the Lender shall be entitled to appoint one on behalf of such Obligor.
Any writ, judgment or other notice of legal process shall be sufficiently served
on such Obligor if delivered to such agent at its address for the time being.
Each Obligor irrevocably undertakes not to revoke the authority of such agent
and if, for any reason, the Lender requests an Obligor to do so he shall
promptly appoint another such agent with all address in England and advise the
Lender.
24.6 WAIVER OF IMMUNITY: Each Obligor irrevocably agrees that, should any party
take any Proceedings anywhere (whether for all injunction, specific
Page 27
<PAGE> 31
performance, damages or otherwise), no immunity (to the extent that it may at
any time exist, whether on the grounds of sovereignty or otherwise) from those
Proceedings, from attachment (whether in aid of execution, before judgment or
otherwise) of its assets or from execution of judgment shall be claimed by it or
on its behalf or with respect to its assets, any such immunity being irrevocably
waived. Each Obligor irrevocably agrees that it and its assets are, and shall
be, subject to such Proceedings, attachment or execution in respect of its
obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
written above.
BORROWER:
AMKOR/ANAM PILIPINAS, INC.
By /s/ Unreadable
---------------------------------
Title:
Name:
Address: KM 22 East Service Road
South Superhighway
Muntinlupa, Metro Manila
Philippines
Telephone No.: (63-2) 845 7215
Fax No.: (63-2) 845-7275
Attention: Mr. Danny D. Franklin
Page 28
<PAGE> 32
GUARANTOR:
ANAM INDUSTRIAL CO., LTD.
By /s/ ILLEGIBLE
--------------------------------
Title:
Name:
Address: 280-8,2-ka
Sungsu-dong
Sungdong-ku
Seoul
Korea
Telephone No.: (822) 460-5179
Fax No.: (822) 460-5127
Attention: Mr. K. H. KIM
LENDER:
THE KOREA DEVELOPMENT BANK
By /s/ ILLEGIBLE
--------------------------------
Title:
Name:
Address: 10-2, Kwanchol-dong
Chongno-ku
(C.P.O. Box 28)
Seoul, Korea
Telephone No.: (822) 398-6312
Fax No.: (822) 723-0386
Attention: Mgr. Int'l Loan Dept.
Page 29
<PAGE> 33
SCHEDULE 1
NOTICE OF DRAWDOWN
To: The Korea Development Bank
10-2, Kwanchol-dong
Chongno-ku
(C.P.O. Box 28)
Seoul, Korea
Attention: Mgr. Int'l Loan Dept.
VIA FAX: (822) 723-0386
Re: US$55,000,000 Bridge Loan Agreement dated as of [ ] July 1997
- -------------------------------------------------------------------
We refer to the above agreement (the "Agreement") between ourselves as
Borrower, Anam Industrial Co., Ltd as Guarantor and yourselves as Lender. Terms
defined in the Agreement shall have the same meanings when used in this notice.
We hereby give you our irrevocable notice that we wish to drawdown an
Advance under the Agreement on ___________ 1997 (or, if that is not a Business
Day, on the next Business Day).
The proceeds of the Advance are to be made available by credit to
account number [ ] in favor of [ ] at [ ].
We confirm that no Event of Default has occurred or will occur as a
result of making the Advance **[, other than any waived in accordance with
Clause 20.2 of the Agreement,] and that all the representations and warranties
in Clause 12.1 **[, except to any extent waived in accordance with Clause 20.2,]
are true and accurate on the date of this Notice as if made with reference to
the facts and circumstances now prevailing.
Dated [ ] 1997
AMKOR/ANAM PILIPINAS, INC.
By:____________________________________
Name:
Title:
** Those words in square brackets should be included in the notice only where
applicable.
Page 30
<PAGE> 34
SCHEDULE 2
CONDITIONS PRECEDENTS
1. a duly executed copy of the Borrower's certificate, substantially in the
form of Schedule 3 hereto (together with all attachments thereto);
2. a duly executed copy of the Guarantor's certificate, substantially in the
form of Schedule 4 hereto (together with all attachments thereto);
3. certified copies of all applications, approvals, registrations and consents
(including, without limitation, all foreign exchange approvals, approval of
the Central Bank of the Philippines (Central Bank) authorizing the
execution, delivery and performance by the Borrower of this Agreement, the
approval of the Central Bank approving the terms and conditions (including
the Final Repayment Date) of an executed copy of this Agreement, and the
municipal permits and licences from the Municipality of Muntinlupa, Metro
Manila) as are required by the Borrower in order to enter into and perform
this Agreement;
4. certified copies of all applications, approvals, registrations and consents
(if any) as required by the Guarantor in order to enter into and perform
this Agreement;
5. an acceptance letter addressed to the Lender from the process agent
appointed by the Borrower and the Guarantor pursuant to Clause 24.5 of this
Agreement;
6. a list of the current directors and/or managers of the Borrower;
7. legal opinions of Messrs. SyCip Salazar in respect of Philippine law,
Messrs. Kim & Chang in respect of Korean law, each in form and substance
satisfactory to the Lender and an English legal opinion from Freshfields
substantially in the form set out in Schedule 5; and
8. such other documents as may be reasonably requested by the Lender.
Page 31
<PAGE> 35
SCHEDULE 3
FORM OF CERTIFICATE OF BORROWER
To: The Korea Development Bank
We, __________________ and _____ ______, Directors of Amkor/Anam Pilipinas, Inc.
(the Company)
HEREBY CERTIFY that:
(a) attached hereto marked "A" are true and correct copies of all documents
which contain or establish or relate to the constitution of the Company;
(b) attached hereto marked "B" is a true and correct copy of resolutions duly
passed at meetings of the Board of Directors of the Company duly convened
and held on [ ] 1997 at which a duly qualified quorum of the Directors was
present for the purposes of approving and authorizing the signature,
delivery and performance of the US$55,000,000 bridge loan agreement (the
Loan Agreement) between the Company, Anam Industrial Co., Ltd and The Korea
Development Bank and any fee letter pursuant to Clause 8.2 of the Loan
Agreement and appointing the authorized officers whose specimen signatures
are set out in this certificate; and such resolutions have not been
amended, modified or revoked and are in full force and effect;
(c) neither the members nor the Directors of the Company have taken any action
for the winding up of the Company and we have received no notice of any
proceedings being instituted for the winding up, liquidation or appointment
of a receiver in respect of all or any of the assets of the Company.
The following signatures are the true signatures of the persons who have been
authorized to sign the Loan Agreement, any fee letter and to give notices and
communications including each Notice of Drawdown pursuant to Clause 4 under or
in connection with the Loan Agreement.
NAME POSITION SIGNATURE
---- -------- ---------
- ---------------------- ---------------------- ----------------------
- ---------------------- ---------------------- ----------------------
- ---------------------- ---------------------- ----------------------
Signed: ________________________ ________________________
Director Director
Date: ____________ __,1997
Page 32
<PAGE> 36
SCHEDULE 4
FORM OF CERTIFICATE OF THE GUARANTOR
TO: The Korea Development Bank
We, __________________ and ___________, Directors of Anam Industrial Co., Ltd
(the Guarantor)
HEREBY CERTIFY that:
(a) attached hereto marked "A" are true and correct copies of all documents
which contain or establish or relate to the constitution of the Guarantor;
(b) attached hereto marked "B" is a true and correct copy of resolutions duly
passed at meetings of the Board of Directors of the Guarantor duly convened
and held on [ ] 1997 at which a duly qualified quorum of the Directors was
present for the purposes of approving and authorising the signature,
delivery and performance of US$55,000,000 bridge loan agreement (the Loan
Agreement) between Amkor/Anam Pilipinas, Inc. as Borrower, the Guarantor
and The Korea Development Bank as Lender and appointing the authorised
officers whose specimen signatures are set out in this certificate; and
such resolutions have not been amended, modified or revoked and are in full
force and effect;
(c) attached hereto marked "C" is a certified copy of the Company Registry
extracts concerning the Guarantor;
(d) neither the members nor the Directors of the Guarantor have taken any
action for the winding up of the Guarantor and we have received no notice
of any proceedings being instituted for the winding up, liquidation or
appointment of a receiver in respect of all or any of the assets of the
Guarantor.
The following signatures are the true signatures of the persons who have been
authorised to sign the Loan Agreement and to give notices and communications,
under or in connection therewith.
Page 33
<PAGE> 37
NAME POSITION SIGNATURE
---- -------- ---------
- ---------------------- ---------------------- ----------------------
- ---------------------- ---------------------- ----------------------
- ---------------------- ---------------------- ----------------------
Signed: ________________________ ________________________
Director Director
Date: ____________ __,1997
Page 34
<PAGE> 38
SCHEDULE 5
FRESHFIELDS' LEGAL OPINION
To: The Korea Development Bank
Dated __ July 1997
Our Ref. RM/CJW/ECRH
Dear Sirs,
We refer to the Bridge Loan Agreement (the Loan Agreement) dated as of July
1997, made between (1) Amkor/Anam Pilipinas, Inc. (the Borrower), (2) Anam
Industrial Co., Ltd. (the Guarantor), and (3) yourselves as Lender. We have
been asked to give this opinion to you.
We have examined an executed copy of the Loan Agreement and relied upon the
statements as to factual matters contained in or made pursuant to the Loan
Agreement.
This opinion is confined to matters of English law. Accordingly, we express no
opinion herein with regard to any system of law other than the laws of England
as currently applied by the English courts. This opinion is to be governed by
and construed in accordance with English law as at the date of this opinion.
In considering the Loan Agreement and in rendering this opinion we have with
your consent and without any further enquiry assumed:
(a) the due incorporation and capacity of each of the Borrower and Guarantor
under the laws of the Republic of the Philippines and the Republic of
Korea, respectively,
(b) the genuineness of all signatures on, and the authenticity and completeness
of, the Loan Agreement;
(c) that the Loan Agreement has been duly authorised, executed and delivered by
each of the parties thereto in accordance with all applicable laws (other
than, in the case of the Borrower and the Guarantor, the laws of England);
and
(d) that the Loan Agreement constitutes legal, valid and binding obligations of
each of the parties thereto enforceable under all applicable laws (other
than, in the case of the Borrower and the Guarantor, the laws of England).
To the extent that the laws of the Republic of Philippines or the laws of the
Republic of Korea may be relevant to our opinion we have assumed the correctness
of the opinions of Messrs. SyCip Salazar and Messrs. Kim & Chang,
Page 35
<PAGE> 39
respectively and ________ exclusively thereon. We express ______ views on the
validity of the matters set out in such opinion.
On the basis of and subject to, the foregoing and the qualifications and
observations set out below and any matters not disclosed to us, and having
regard to such considerations of English law in force as at the date of this
letter as we consider relevant, we are of the opinion that:
(a) the obligations of the Borrower and the Guarantor under the Loan Agreement
constitute legal, valid and binding obligations of the Borrower and the
Guarantor, respectively enforceable by the Lender;
(b) no consents, licenses, approvals or authorisations of any governmental or
other authority or agency in the United Kingdom are required by law in
connection with the execution, delivery and performance of the Loan
Agreement by the Borrower or the Guarantor;
(c) no filing or registration of the Loan Agreement is necessary under English
law; and
(d) the choice of English law to govern the Loan Agreement will be recognised
and upheld by the English courts.
This opinion is subject to the following qualifications:
1. Clause 15.3 of the Loan Agreement would be unenforceable if it were held to
constitute a penalty and not a genuine and reasonable pre-estimate of the damage
likely to be suffered as a result of the default in payment of the amount in
question. We express no opinion on whether such provision does constitute such a
genuine and reasonable pre-estimate.
2. In some circumstances the court would not give effect to clause 22 of the
Loan Agreement, in particular if to do so would not accord with public policy or
would involve the court in making a new contract for the parties.
3. A determination, calculation or certificate by you as to any matter provided
for in the Loan Agreement might in certain circumstances be held by the court
not to be final, conclusive and binding (for example, if it could be shown to
have any unreasonable or arbitrary basis) notwithstanding that the Loan
Agreement provides that it is to be so.
4. English courts can give judgments in a currency other than sterling if,
subject to the terms of the contract, it is the currency which most truly
expresses the plaintiff's loss, but such judgments may be required to be
converted into sterling for enforcement purposes.
5. This opinion is not to be taken to imply that an English court will
necessarily grant any remedy, the availability of which is subject to equitable
Page 36
<PAGE> 40
considerations of which is otherwise in the discretion of the court. In
particular orders for specific performance and injunctions are, in general,
discretionary remedies under English law and specific performance is not
available where damages are considered by the court to be an adequate
alternative remedy.
6. An English court might not enforce a provision of the Loan Agreement which is
or becomes illegal by the law of a foreign jurisdiction in which it is to be
performed or contrary to exchange control regulations of a foreign jurisdiction.
7. Claims under the Loan Agreement may become barred under the Limitation Act
1980 or the Foreign Limitation Periods Act 1984 or may be or become subject to
the defense of set-off or to counterclaim.
8. The enforcement of obligations under the Loan Agreement may be limited by the
provisions of English law applicable to agreements held to have been frustrated
by events happening after their execution.
9. The choice of English law to govern the Loan Agreement would not be
recognised or upheld if there were reasons for avoiding the choice of law on the
grounds that its application would be manifestly incompatible with public
policy. The choice of English law would not be upheld, for example, if it was
made with the intention of evading the law of the jurisdiction with which the
contract had its most substantial connection and which, in the absence of
English law, would have invalidated the contract or been inconsistent therewith.
10. An English court has power to stay all action where it is shown that there
is some other forum, having competent jurisdiction, which is more appropriate
for the trial of the action and in which the case can be tried more suitably for
the interests of all the parties and the ends of justice.
11. An English court may refuse to give effect to any provision of the Loan
Agreement (i) for the payment of expenses in respect of the costs of enforcement
(actual or contemplated) or of unsuccessful litigation brought before an English
court or where the court has itself made an order for costs or (ii) which would
involve the enforcement of foreign revenue or penal laws.
12. Under the rules of procedure applicable, an English court may, at its
discretion, order a plaintiff in an action, being a party who is not ordinarily
resident in some part of the United Kingdom, to provide security for costs.
13. A participant in the Loan Agreement will not be able to enforce any of its
rights under the Loan Agreement, including, without limitation, clause 19.3(b)
of the Loan Agreement directly against the Borrower.
14. The above opinion is subject to all applicable laws affecting creditors'
rights generally in the event of the insolvency, bankruptcy, reorganisation or
liquidation of any party to the transaction.
Page 37
<PAGE> 41
We should also like to make the following observations in relation to the
opinion expressed above.
(a) An English Court is likely to construe very restrictively the provisions of
clause 14.6 of the Loan Agreement.
(b) If, notwithstanding the provisions of the Loan Agreement, the Borrower or
the Guarantor failed to maintain an agent for service of process in
England, it would be necessary to initiate any legal proceedings in England
by serving a writ outside the jurisdiction and, for this purpose, the leave
of the court (as to which the court has a discretion) would have to be
obtained;
(c) We express no view on any provision requiring written amendments or waivers
in so far as such provision suggests that oral or other modifications,
amendments or waivers could not be effectively agreed upon or granted by or
between the parties or implied by the course of conduct of the parties; and
(d) It should be understood that we have not been responsible for investigating
or verifying the accuracy of the facts including statements of foreign law
contained in or relevant to the Loan Agreement.
This opinion is given for your benefit only in relation to the Loan Agreement
and may not be disclosed to or relied upon by anyone else or by you for any
other purpose.
Yours faithfully,
Page 38
<PAGE> 42
SCHEDULE 6
LIST OF ENCUMBRANCES/SECURITY INTERESTS OUTSTANDING OF
BORROWER AND THE BORROWER'S AFFILIATES
1. Mortgage Trust Indenture between Amkor/Anam Pilipinas, Inc. (AAPI) and
Philippine Commercial International Bank - Trust Services (PCIB) as Trustee
dated 29 July 1992 for a P315,000,000 loan (increased or decreased from time to
time depending on availments with participating banks) secured by fixed assets
of API
2. Mortgage Trust Indenture between Amkor/Anam Advanced Packaging, Inc. and AAPI
Realty Corporation and PCIB as Trustee on loans obtained by AAPI in the amount
of P281,500,000 (increased or decreased from time to time depending on
availments with participating banks) secured by fixed assets of Amkor/Anam
Advanced Packaging, Inc. and real estate mortgages in favor of PCIB on
properties owned by AAPI Realty Corporation at Binan, Laguna.
3. US$20,000,000 loan between AAPI and Philippine National Bank secured by
various machineries and equipment owned by Automated MicroElectronics, Inc.
Page 39
<PAGE> 43
SCHEDULE 7
LIST OF INDEBTEDNESS OF THE BORROWER, THE GUARANTOR
AND THE BORROWER'S AFFILIATES
A. BORROWER
<TABLE>
<CAPTION>
NAME OF BANK AMOUNT
------------ -------------
<S> <C>
SHORT TERM LOANS
ABN-AMRO 5,000,000.00
ALLIED BANK 9,900,000.00
ARAB BANK 10,000,000.00
ASIAN BANK 12,000,000.00
ASIATRUST 750,000.00
BANCO DE ORO 500,000.00
BANGKOK BANK 1,000,000.00
BANQUE NATIONALE DE PARIS 4,000,000.00
BANK OF THE PHILIPPINE ISLANDS 16,600,000.00
CITIBANK 5,000,000.00
COCOBANK 1,800,000.00
CREDIT LYONNAIS 3,000,000.00
EAST-WEST BANK 4,000,000.00
EXPORT BANK 6,000,000.00
FAREAST BANK 4,975,000.00
HONGKONG BANK 1,000,000.00
KREDIET BANK 3,000,000.00
LAND BANK 9,800,000.00
METROBANK 23,300,000.00
MULTINATIONAL INVESTMENT BANK CORP 2,000,000.00
PBCOM 2,000,000.00
PCIB 25,750,000.00
PNB 5,000,000.00
SOLID BANK 3,000,000.00
STANDARD CHARTERED BANK 950,000.00
UNION BANK 4,400,000.00
WESTMONT BANK 2,400,000.00
PENTA CAPITAL 380,228.14
--------------
SUB-TOTAL 167,505,228.14
==============
</TABLE>
Page 40
<PAGE> 44
<TABLE>
<S> <C>
LONG TERM LOANS
BPI 3,625,000.00
PCIB 5,925,542.53
CHO HUNG, FINANCE LTD. 40,000,000.00
KDB ASIA LIMITED 121,250,000.00
PNB 20,000,000.00
--------------
190,800,542.53
--------------
B. BORROWER'S AFFILIATES:
1. AUTOMATED MICROELECTRONICS, INC.
EXPORT BANK 750,000.00
--------------
2. AMKOR/ANAM ADVANCED PACKAGING, INC.
EXPORT BANK 750,000.00
--------------
GRAND TOTAL 359,805,770.87
==============
</TABLE>
Page 41
<PAGE> 45
C. GUARANTOR
<TABLE>
<CAPTION>
*1 USD = 888,10 Korean Won
---------------------------------------
NAME OF BANK AMOUNT (WON) AMOUNT (USD)
- ------------ -------------- -------------
<S> <C> <C>
SHORT TERM LOANS (KW);
SEOUL BANK 5,000,000,000 5,629,996.62
SHINHAN BANK 10,000,000,000 11,259,993.24
ROYAL BANK OF CANADA 2,000,000,000 2,251,998.65
CITIBANK 400,000,000 450,399.73
SHINHAN MERCHANT BANK 20,000,000,000 22,519,986.49
FIRST NAT'L BANK OF CHICAGO 2,000,000,000 2,251,998.65
SUB TOTAL 39,400,000,000 44,364,373.38
LONG TERM LOANS (KW);
KOREA DEVELOPMENT BANK 114,449,870,000 128,870,476.30
CHOHUNG BANK 161,931,400,000 182,334,647.00
COMMERCIAL BANK OF KOREA 2,340,980,000 2,635,941.90
HOUSING BANK OF KOREA 1,498,000,000 1,686,746.99
SHINHAN BANK 66,658,000,000 75,056,862.97
KOREA TECHNOLOGY BANK 1,072,000,000 1,207,071.28
SUB TOTAL 347,950,250,000 391,791,746.42
SHORT TERM LOANS (US$);
KOREA DEVELOPMENT BANK 12,639,100.00
KOREA EXCHANGE BANK 87,359,550.00
CHOHUNG BANK 107,928,700.00
COMMERCIAL BANK OF KOREA 16,178,199.00
HANIL BANK 14,418,000.00
SEOUL BANK 17,355,000.00
ARAB BANK 8,398,950.00
KWANGJU BANK 1,639,674.00
SHINHAN BANK 54,363,150.00
ROYAL BANK OF CANADA 9,034,450.00
BANK OF AMERICA 20,997,400.00
BANQUE OF NATIONALE DE PARIS 16,671,100.00
FIRST NAT'L BANK OF CHICAGO 27,703,950.00
CREDIT LYONNAIS BANK 25,938,150.00
CHASE MANHATTAN BANK 33,755,900.00
SUB TOTAL 454,381,273.00
</TABLE>
Page 42
<PAGE> 46
<TABLE>
<S> <C>
LONG TERM LOANS (US$);
SEOUL BANK 699,000.00
KOREA EXCHANGE BANK 16,139,400.00
CHOHUNG BANK 2,410,000.00
SHINHAN BANK 11,320,000.00
KOREA DEVELOPMENT BANK 57,005,698.61
KOREA MERCHANT BANK 12,860,046.45
CREDIT LYONNAIS BANK 7,798,566.15
SUB TOTAL 108,232,711.21
LONG TERM LOANS (LEASE);
HYUNDAI INT'L MERCHANT BANK 41,057,370.75
KOREA DEVELOPMENT LEASING BANK 10,127,524.32
KOREA MERCHANT BANK 10,609,400.99
KYUNGSOO MERCHANT BANK 18,985,109.18
KUMHO MERCHANT BANK 30,562,128.32
KOREA INDUSTRIAL LEASING CO., LTD 9,908,391.49
ASEA MERCHANT BANK 29,284,181.42
SHINHAN MERCHANT BANK 6,736,460.33
KOREA EXCHANGE LEASING CO., LTD. 18,245,447.00
SUB TOTAL 175,516,013.80
GRAND TOTALS $1,174,286,117.82
</TABLE>
Page 43
<PAGE> 1
EXHIBIT 10.6
EXECUTION COPY
LOAN AGREEMENT
dated as of March 28, 1996
AMKOR/ANAM PILIPINAS, INC.
AS BORROWER
AND
THE KOREA DEVELOPMENT BANK
AS BANK
U.S.$71,250,000 LOAN
GUARANTEED BY
ANAM INDUSTRIAL CO., LTD.
MILBANK, TWEED, HADLEY & MCCLOY
HONG KONG
<PAGE> 2
TABLE OF CONTENTS
(CONTINUED)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS.................................. 1
SECTION 2. COMMITMENT AND LOANS................................................ 6
SECTION 3. PAYMENTS OF PRINCIPAL AND INTEREST; OPTIONAL
PREPAYMENTS ........................................................ 7
SECTION 4. PAYMENTS; COMPUTATIONS; ETC......................................... 8
SECTION 5. YIELD PROTECTION, TAX, ETC.......................................... 10
SECTION 6. CONDITIONS PRECEDENT................................................ 13
SECTION 7. REPRESENTATIONS AND WARRANTIES...................................... 15
SECTION 8. COVENANTS OF THE BORROWER........................................... 18
SECTION 9. EVENTS OF DEFAULT................................................... 21
SECTION 10.MISCELLANEOUS....................................................... 23
EXHIBIT A - FORM OF NOTICE OF BORROWING
EXHIBIT B - FORM OF GUARANTEE
EXHIBIT C - FORM OF OPINION OF SPECIAL PHILIPPINE COUNSEL TO
THE BANK
EXHIBIT D - FORM OF OPINION OF SPECIAL KOREAN COUNSEL TO THE
BANK
EXHIBIT E - FORM OF OPINION OF SPECIAL NEW YORK COUNSEL TO
THE BANK
</TABLE>
<PAGE> 3
LOAN AGREEMENT dated as of March 28, 1996, between: AMKOR/ANAM
PILIPINAS, INC., a corporation duly organized and validly existing under the
laws of the Republic of Philippines (the "Borrower"), and THE KOREA DEVELOPMENT
BANK (the "Bank").
The Borrower has requested that the Bank make loans to it in an
aggregate principal amount not exceeding U.S.$71,250,000 to finance the
expansion of the Borrower's semiconductor assembly plant in the Philippines and
the Bank is prepared to make such loans upon the terms and conditions hereof.
Accordingly, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS
1.01 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa.
"Affiliate" shall mean, with respect to any Person, any other Person
that directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise), provided,
that, in any event, any Person that owns directly or indirectly securities
having 5% or more of the voting power for the election of directors or other
governing body of a corporation or 5% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person will be deemed to control such corporation or other Person.
"Applicable Margin" shall mean 0.80% per annum.
"Applicable Lending Office" shall mean, the Bank, the "Lending Office"
or "Lending Offices" of the Bank (or of an affiliate of the Bank) designated for
the relevant Tranche of Loan on the signature pages hereof or such other office
or offices of the Bank (or of an affiliate of the Bank) as the Bank may, subject
to Section 10.06 hereof, from time to time specify to the Borrower as the
office(s) by which the Loans (or portions thereof) of such Tranche are to be
made and maintained.
"Basic Documents" shall mean, collectively, this Agreement and the
Guarantee.
"Business Day" shall mean any day (a) on which commercial banks are not
authorized or required to close in Manila, Hong Kong, Seoul, or New York City
and (b) if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, or an
<PAGE> 4
2
Interest Period for, a Loan or a notice by the Borrower with respect to any such
borrowing, payment, prepayment or Interest Period, that is also a London
Business Day.
"Central Bank" shall mean the Bangko Sentral ng Pilipinas.
"Closing Date" shall mean the date upon which the initial Loan
hereunder is made.
"Commitment" shall mean, collectively, the Tranche A Commitment and the
Tranche B Commitment.
"Commitment Termination Date" shall mean September 28, 1996; provided,
that if such day is not a Business Day, then the Commitment Termination Date
shall be the next preceding Business Day.
"Debit-Equity Ratio" shall mean, at any time, the ratio of total
liabilities to total equity of the Borrower; and as used in this definition,
"total liabilities" and "total equity" shall have the respective meanings
assigned to them under GAAP and applied on a basis consistent with those used in
the preparation of the financial statements referred to, in Section 8.01,
provided that "total liabilities" shall include any and all debts of the
Borrower regardless of the nature o r maturity thereof (including without
limitation all amounts from time to time outstanding hereunder) and, provided,
further, that "total equity" shall exclude appraisal surplus, if any, of the
Properties or assets of the Borrower.
"Default" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "U.S.$" shall mean lawful money of the United States of
America.
"Event of Default" shall have the meaning assigned to such term in
Section 9 hereof.
"Fee Letter" shall mean the arrangement fee letter agreement referred
to in Section 2.04(b) hereof.
"Final Maturity Date" shall mean March 28, 2001; provided that if the
Final Maturity Date would otherwise be a day that is not a Business Day, then
the Final Maturity Date shall be the next preceding Business Day.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the Philippines.
"Guarantee" shall mean a Guarantee Agreement substantially in the form
of Exhibit B hereto between the Guarantor and the Bank, as the same shall be
modified and supplemented and in effect from time to time.
<PAGE> 5
3
"Guarantor" shall mean Anam Industrial Co., Ltd., a corporation
organized under the laws of Korea.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in t he ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for account of such Person; (e)
capitalized lease obligations of such Person; (f) obligations of such Person
under interest rate protection agreements; and (g) Indebtedness of others
guaranteed by such Person.
"Interest Period" shall mean, with respect to any Loan, (i) initially,
each period commencing on the date such Loan is made and ending on the
Commitment Termination Date, and (ii) thereafter, each successive six-month
period commencing on the last day of the next preceding Interest Period for such
Loan and ending on the numerically corresponding day in t he sixth calendar
month thereafter, except that each Interest Period that commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of such sixth subsequent calendar month.
Notwithstanding the foregoing: (i) any Interest Period that commences before,
and would otherwise end after, a Principal Payment Date shall end on such
Principal Payment Date; (ii) the first Interest Period for any Loan made
subsequent to the initial Loan shall end-on the last day of the Interest Period
for the initial Loan in effect on the date of such subsequent Loan; (iii) each
Interest Period that would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (iv) anything in this Agreement to the contrary
notwithstanding, the final Interest Period for each Loan shall end on the Final
Maturity Date.
"Korea" shall mean the Republic of Korea.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the Guarantee, a Person shall be
deemed to own subject to a Lien any Property that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
<PAGE> 6
4
"Loans" shall mean, collectively, the Tranche A Loans and the Tranche B
Loans, and "Loan" shall mean any thereof.
"London Business Day" shall mean any day on which dealings in Dollar
deposits are carried out in the London interbank market.
"London Interbank Rate" shall mean, with respect to any Interest Period
for any Loan therefor, the rate per annum determined by the Bank in its sole
discretion to be the arithmetic mean (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the respective rates per annum quoted on the "LIBO" page
of the Reuters screen (or such other page as may replace such "LIBO" page on
such screen for the purpose of displaying London interbank offered rates of
major banks for Dollar deposits) at approximately 11:00 a.m. London time (or as
soon thereafter as-practicable) on the date two London Business Days prior to
the first, day of such Interest Period for a period equal or approximately equal
to such Interest Period in respect of an amount comparable to the principal
amount of such Loan scheduled to be outstanding for such Interest Period;
provided that if for any Interest Period for any Loan, no such rate appears on
the Reuters screen (or if the basis for determining the rate so appearing is
changed in a manner which the Bank determines is unacceptable), the London
Interbank Rate in respect of such Interest Period shall be the arithmetic mean,
as determined by the Bank, of the rates per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) quoted by reference banks in London
selected by the Bank in its sole discretion at approximately 11:00 a.m. London
time (or as soon thereafter as practicable) on the date two London Business Days
prior to the first day of such Interest Period for the offering by such
reference bank to leading banks in the London interbank market of Dollar
deposits having a term comparable to such Interest Period and in an amount
comparable to the principal amount of such Loan scheduled to be outstanding for
such Interest Period.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the Property, business, operations, financial condition, prospects, liabilities
or capitalization of the Borrower taken as a whole, (b) the ability of the
Borrower to perform its obligations hereunder, (c) the validity or
enforceability of any of the Basic Documents, (d) the rights and remedies of the
Bank under any of the Basic Documents or (e) the timely payment of the principal
of or interest on the Loans or other amounts payable in connection therewith.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Philippines" shall mean the Republic of Philippines.
"Post-Default Rate" shall mean, in respect of any principal of any Loan
or any other amount payable by the Borrower under this Agreement or the Fee
Letter that is not paid when due (whether at stated maturity, by acceleration,
by optional or mandatory prepayment or otherwise), a rate per annum during the
period from and including the due date to but excluding
<PAGE> 7
5
the date on which such amount is paid in full equal to the sum of 1% per annum
plus the Applicable Margin plus the London Interbank Rate for the overdue amount
for such period as the Bank shall elect in its sole discretion (provided that no
such period shall exceed 6 months).
"Principal Payment Date" shall mean each of (i) the six (6) semi-annual
dates occurring 24, 30, 36, 42, 48 and 54 months after the date hereof and (ii)
the Final Maturity Date; provided that if any such day is not a Business Day,
then the relevant Principal Payment Date (other than in the case of the Final
Maturity Date) shall be the next succeeding Business Day (unless such Business
Day falls in a subsequent calendar month, in which event the relevant Principal
Payment Date shall be the next preceding Business Day).
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the date three months after the date
hereof and each successive date occurring three months thereafter (or if there
is no such date in the appropriate month, the last day of such month provided
that if any such date is not a Business Day, the relevant Quarterly Date shall
be the next succeeding Business Day (unless such succeeding Business Day falls
in another calendar month, in which event the relevant Quarterly Date shall be.
the next preceding Business Day) and that if,. in any such successive third
calendar month after the date hereof, there is no date numerically corresponding
to the date hereof, the relevant Quarterly Date shall be the last Business Day
of such third calendar month.
"Regulatory Change" shall mean, with respect to the Bank, any change
after the date of this Agreement in applicable law, regulations or treaty or the
adoption or making after such date of any interpretation, directive or request
applying to a class of banks including the Bank of or under any applicable law,
regulations or treaty (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"Tranche" of a Loan or a Commitment, as the case may be, shall refer,
respectively, to whether a Loan is a Tranche A Loan or a Tranche B Loan or
whether a Commitment is a Tranche A Commitment or a Tranche B Commitment, each
of which shall constitute a Tranche.
"Tranche A Commitment" shall mean the obligation of the Bank to make
Tranche A Loans in an aggregate amount up to but not exceeding the amount set
opposite the Bank's name on the signature pages hereof under the caption
"Tranche A Commitment" or, as the context may require, such amount.
"Tranche A Loans" shall have the meaning attributed thereto in Section
2.01(a) hereof.
<PAGE> 8
6
"Tranche B Commitment" shall mean the obligation of the Bank to make
Tranche B Loans in an aggregate amount up to but not exceeding the amount set
opposite the Bank's name on the signature pages hereof under the caption
"Tranche B Commitment" or, as the context may require, such amount.
"Tranche B Loans" shall have the meaning attributed thereto in Section
2.01(b) hereof.
1.02 Accounting Terms and Determination. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Bank hereunder shall be prepared, in accordance
with GAAP, applied on a basis consistent with that used in the audited financial
statements of the Borrower referred to in Section 7.02 hereof. To enable the
ready and consistent determination of compliance with the covenants set forth in
Section 8 hereof, the Borrower will not change the last day of its fiscal year
from December 31 of each year, or the last day of the first fiscal semi-annual
period in each of its fiscal years from June 30 of each year.
SECTION 2. COMMITMENT AND LOANS
2.01 Loans.
(a) The Bank agrees, on the terms and conditions of this Agreement, to
make one or more term loans ("Tranche A Loans") to the Borrower in Dollars on
any Business Day occurring on or before the Commitment Termination Date in an
aggregate principal amount up to but not exceeding the amount of the Tranche A
Commitment of the Bank.
(b) The Bank agrees, on the terms and conditions of this Agreement, to
make one or more term loans ("Tranche B Loans") to the Borrower in Dollars on
any Business Day occurring on or before the Commitment Termination Date in an
aggregate principal amount up to but not exceeding the amount of the Tranche B
Commitment of the Bank.
2.02 Borrowings. The Borrower shall give the Bank notice of each
borrowing hereunder as provided in Section 4.05 hereof in substantially the form
of Exhibit A hereto. The amount of the Loans to be made by the Bank on the date
of such borrowing shall, subject to the terms and conditions of this Agreement,
be made available to the Borrower by depositing the same, in immediately
available funds, to such account, for account of the Borrower, as shall be
designated by the Borrower in the relevant notice of borrowing.
<PAGE> 9
7
2.03 Changes of Commitment.
(a) The Borrower shall have the right at any time to terminate, in
whole or in part, the aggregate unused amount of the Commitment; provided that
the Borrower shall give the Bank notice of each such termination as provided in
Section 4.04 hereof.
(b) The aggregate amount of the Commitment shall be automatically
reduced to zero on the Commitment Termination Date.
(c) Commitment once terminated may not be reinstated.
2.04 Fees.
(a) The Borrower shall pay to the Bank a commitment fee at a rate per
annum equal to 0.25% on the daily average unused and available amount of the
Commitment, for the period from and including the date thirty (30) days after
the date of this Agreement to but not including the earliest of (i) the date the
entire Commitment is terminated pursuant to Section 2.03 hereof, (ii) the date
on which the full amount of the Commitment is drawn down hereunder or (iii) the
Commitment Termination Date. Accrued commitment fee shall be payable on each
Quarterly Date, on the date of each partial termination of the Commitment
pursuant to Section 2.03(a) hereof, and on the earliest of (i) the date the
entire undrawn Commitment is terminated pursuant to Section 2.03(a) hereof, (ii)
the date on which the full amount of the Commitment is drawn down hereunder or
(iii) the Commitment Termination Date.
(b) Whether or not any Loan is made hereunder, the Borrower shall pay
to the Bank a non-refundable arrangement fee in the amount and at the time set
forth in, and otherwise in accordance with the terms of, the arrangement fee
letter agreement dated even date herewith between the Borrower and the Bank.
2.05 Lending Offices. The Loans of each Tranche made by the Bank shall
be made and maintained at the Bank's Applicable Lending Office for Loans of such
Tranche.
SECTION 3. PAYMENTS OF PRINCIPAL AND INTEREST; OPTIONAL PREPAY MENTS.
3.01 Repayment of Loans. The Borrower hereby promises to pay to the
Bank the principal of the Loans in seven substantially equal installments, each
(as nearly as possible) equal to an amount that is one-seventh of the amount
outstanding thereof on the initial Principal Payment Date, commencing on the
initial Principal Payment Date and thereafter on each subsequent Principal,
Payment Date. Anything in this Agreement to the contrary notwithstanding, the
principal repayment installment payable on the Final Maturity Date shall in all
cases be in an amount equal to the entire principal amount of the Loans
outstanding on such date.
<PAGE> 10
8
3.02 Interest. The Borrower hereby promises to pay to the Bank interest
on the unpaid principal amount of each Loan for the period from and including
the date of such Loan to but excluding the date such Loan shall be paid in full,
for each Interest Period relating thereto, at the London Interbank Rate for such
Loan for such Interest Period plus the Applicable Margin. Notwithstanding the
foregoing, the Borrower hereby promises to pay to the Bank interest at the
applicable Post-Default Rate on any principal of any Loan and on any other
amount payable by the Borrower hereunder to or for account of the Bank, which
shall not be paid in full when due (whether at stated maturity, by acceleration,
by mandatory prepayment or otherwise), for the period from and including the due
date thereof to but excluding the date the same is paid in full. Accrued
interest on each Loan shall be payable on the last day of each Interest Period
therefor and upon the payment or prepayment thereof (but only on the principal
amount so paid or prepaid), except that interest payable at the Post-Default
Rate shall be payable from time to time on demand. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Bank shall give notice thereof to the Borrower.
3.03 Optional Prepayments. The Loans may be prepaid in part or in full
on the last day of any Interest Period therefor, provided that (i) the Borrower
shall give the Bank notice of each such prepayment as provided in Section 4.04
hereof, (ii) upon any such prepayment the Borrower shall pay interest accrued on
the amount so prepaid up to, but not including, the date of such prepayment (to
the extent not already paid) together with any amount payable in respect of such
prepayment under Section 5.04 hereof and all other amounts then due and payable
hereunder, and (iii) any such partial prepayment shall be applied to the
repayment installments of the Loans in the inverse order of maturity.
Any amount prepaid may not be reborrowed.
SECTION 4. PAYMENTS; COMPUTATIONS; ETC.
4.01 Payment.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by this Borrower under this
Agreement and the Fee Letter, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Bank at account
number-544-7-71671 (CHIPS UID 069628) maintained by the Bank with Chemical Bank
New York, New York, or any other account specified by the Bank, not later than
10:00 a.m. New York time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day).
(b) The Bank may (but shall not be obligated to) debit the amount of
any such payment that is not made by such time to any ordinary deposit account
of the Borrower with the Bank (with notice to, the Borrower).
(c) The Borrower shall, at the time of making each payment under this
Agreement, specify to the Bank the Loans or other amounts payable by the
Borrower hereunder
<PAGE> 11
9
to which such payment is to be applied (and in the event that the Borrower fails
to so specify, or if an Event of Default has occurred and is continuing, the
Bank may apply such payment in such manner as it may determine to be
appropriate).
(d) Except as otherwise provided herein, if the due date of any payment
under this Agreement would otherwise fall on a day that is not a Business Day,
such date shall be extended to the next succeeding Business Day, and interest
shall be payable for any principal so extended for the period of such extension.
(e) Except to the extent otherwise provided herein: (a) each payment of
commitment fee shall be applied pro rata according to the amount of the
respective Tranche A Commitment and Tranche B Commitment; (b) each drawdown of
Loans shall be made pro rata according to the amount of the respective Tranche A
Commitment and Tranche B Commitment; (c) each repayment or prepayment of Loans
by the Borrower shall be made pro rata in accordance with the respective
aggregate outstanding amount of the Tranche A Loans and Tranche B Loans; and (d)
each payment of interest on Loans by the Borrower shall be made (subject to any
deduction or withholding, and without limiting any obligation of the Borrower to
pay any additional amount, in each case contemplated by Section 5.05 hereof) pro
rata in accordance with the amounts of interest on such Loans then due and
payable in respect of each Tranche.
4.02 Computations. Each of (a) interest on Loans, (b) the commitment
fee payable under Section 2.04(a) hereof and (c) any interest to be calculated
at the relevant Post Default Rate on Loans or on any of the fees payable under
Section 2.04 hereof, shall be computed on the basis of a year of 360 days and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such amount is payable.
4.03 Minimum Amounts. Except for any prepayments made pursuant to
Section 5 hereof, each borrowing of principal of Loans (if less than the full
amount of the available Commitment) shall be in an aggregate amount at least
equal to U.S.$5,000,000 and in an integral multiple of U.S.$1,000,000, each
partial prepayment of principal of Loans shall be in an aggregate amount at
least equal to U.S.$5,000,000 and in an integral multiple of U.S.$1,000,000 and
each partial cancellation of Commitment shalt be in an aggregate amount at least
equal to U.S.$5,000,000 and in an integral multiple of U.S.$1,000,000.
4.04 Certain Notices. Notices by the Borrower to the Bank of
termination of -the Commitment and of borrowings and optional prepayments of
Loans shall be irrevocable and shall be effective only if received by the Bank
not later than 10:00 a.m. Seoul time on the number of days or Business Days
prior to the date of the relevant termination, borrowing or prepayment or the
first day of such Interest Period specified below:
<PAGE> 12
10
<TABLE>
<CAPTION>
Number of Days or
Notice Business Days Prior
------ -------------------
<S> <C>
Termination of Commitment 30 days
Borrowing of Loans 5 Business Days
Prepayment of Loans 30 Days
</TABLE>
Each such notice of termination shall specify the amount of the Commitment to be
terminated. Each such notice of borrowing or optional prepayment shall specify
the Loans to be borrowed or prepaid. and the amount (subject to Section 4.03
hereof) of each Loan to be borrowed or prepaid and the date of borrowing or
optional prepayment (which shall be a Business Day).
4.05 Set-off, Etc.
(a) The Borrower agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim the Bank may otherwise
have, the Bank shall be entitled, at its option, to offset balances held by it
for account of the Borrower at any of its offices, in Dollars or in any other
currency, against any principal of or interest oh any of the Loans or any other
amount payable to the Bank hereunder, that is not paid when due (regardless of
whether such balances are then due to the Borrower), in which case it shall
promptly notify the Borrower thereof, provided that the Bank's failure to give
such notice shall not affect the validity thereof.
(b) Nothing contained herein shall require the Bank to exercise any
such right or shall affect the right of the Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower.
SECTION 5. YIELD PROTECTION, TAX, ETC.
5.01 Additional Costs.
(a) The Borrower shalt pay directly to the Bank from time to time such
amounts as the Bank may determine to be necessary to compensate the Bank for any
costs that it determines are attributable to its making or maintaining of any
Loans or its obligation to make any Loans hereunder, or any reduction in any
amount receivable by the Bank hereunder in respect of any of such Loans or such
obligation (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), resulting in whole or in part from any
Regulatory Change that:
<PAGE> 13
11
(i) changes the basis of taxation of any amounts payable to
the Bank under this Agreement in respect of any of such Loans (other
than taxes imposed on or measured by the overall net income of the Bank
or of its Applicable Lending office for any of such Loans by the
jurisdiction in which the Bank has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, the Bank
(including any of such Loans or any deposits referred to in the
definition of "London Interbank Rate" in Section 1.01 hereof), or any
commitment of the Bank (including the Commitment hereunder); or
(iii) imposes any other condition affecting this Agreement (or
any of such extensions of credit or liabilities) or the Commitment.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Borrower shall pay directly to the
Bank from time to time on request such amounts as the Bank may determine to be
necessary to compensate the Bank for any costs that it determines are
attributable to the maintenance by the Bank (or any Applicable Lending Office),
pursuant to any law or regulation or any interpretation, directive or request
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) of any court or governmental or monetary authority
(i) following any Regulatory Change or (ii) implementing any risk-based capital
guideline or other requirement (whether or not having the force of law and
whether or not the failure to comply therewith would be unlawful) heretofore or
hereafter issued by any government or governmental or supervisory authority
implementing at the national level the Basle Accord, of capital in respect of
the Commitment or Loans (such compensation to include an amount equal to any
reduction of the rate of return on assets or equity of the Bank (or any
Applicable Lending Office) to a level below that which the Bank (or any
Applicable Lending Office) could have achieved but for such law, regulation,
interpretation, directive or request). For purposes of this Section 5.01(b),
"Basle Accord" shall mean the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, modified and
supplemented and in effect from time to time or any replacement thereof.
(c) The Bank shall notify the Borrower of any event occurring after the
date of this Agreement entitling the Bank to compensation under paragraph (a) or
(b) of this Section 5.01 as promptly as practicable after the Bank obtains
actual knowledge thereof. The Bank will furnish to the Borrower a certificate
setting forth the basis and amount of each request by the Bank for compensation
under paragraph (a) or (b) of this Section 5.01. Determinations and allocations
by the Bank for purposes of this Section 5.01 of the effect of any Regulatory
Change pursuant to paragraph (a) or (b) of this Section 5.01, or of the effect
of capital maintained Pursuant to paragraph (b) of this Section 5.01, on its
costs or rate of return of maintaining Loans or its obligation to make Loans, or
on amounts receivable by it in respect of Loans, and of the
<PAGE> 14
12
amounts required to compensate the Bank under this Section 5.01, shall be
conclusive, provided that such determinations and allocations are made on a
reasonable basis.
(d) The Borrower shall be required to make any payment under this
Section 5.01, the Borrower may, not later than 30 days after receipt of notice
that such payment is required, upon giving not less than 15 days' prior notice
to the Bank claiming Additional Costs, prepay in full (but not in part) the
Loans, together with accrued interest thereon and all other amounts payable to
the Bank hereunder without prepayment penalty.
5.02 Alternative Interest Rate. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any London Interbank
Rate for any Interest Period:
(a) the Bank determines, which determination shall be conclusive, that
the Reuters screen is not publishing a rate or rates from which the London
Interbank Rate can be determined and that quotations of interest rates for the
relevant deposits referred to in the definition of "London Interbank Rate" in
Section 1.01 hereof are not being provided by any reference bank in the relevant
amounts or for the relevant maturities for purposes of determining rates of
interest for Loans as provided herein; or
(b) the Bank determines, which determination shall be conclusive, that
the relevant rates of interest referred to in the definition of "London
Interbank Rate" in Section 1.01 hereof upon the basis of which the rate of
interest for Loans for such Interest Period is to be determined are not likely
adequately to cover the cost to the Bank of making or maintaining Loans for such
Interest Period;
then the Bank shall give the Borrower prompt notice thereof whereupon, during
the period of 30 days next succeeding the date of any such notice, the Bank and
the Borrower will negotiate in good faith for the purpose of agreeing upon an
alternative, mutually acceptable basis for determining the interest rate to be
applicable to the Loans for such Interest Period (hereinafter called the
"Substitute Basis"). If at the expiry of said thirty-day period the Bank and the
Borrower have agreed upon a Substitute Basis, the Substitute Basis shall be
retroactive to and take effect from the beginning of such, Interest Period (but
shall not affect the rate of interest for any prior Interest Period). If at the
expiry of said thirty-day period a Substitute Basis shall not have been agreed
upon as aforesaid, the Commitment shall automatically be cancelled and the
Borrower shall, on the fifth Business Day next succeeding the expiry of said
thirty-day period, prepay in full (but not in part) the Loans together with (a)
accrued interest thereon at a rate equal to the cost (expressed as a rate per
annum) to the Bank (as reasonably determined by the Bank) of funding the Loans
for the period from the last day of the immediately preceding Interest Period to
the date of prepayment plus the Applicable Margin and (b) all other amounts
payable to the Bank hereunder.
5.03 Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for the Bank or its Applicable Lending
Office to honor its obligation to make or maintain Loans hereunder, then the
Bank shall promptly notify the
<PAGE> 15
13
Borrower thereof, whereupon the aggregate principal amount of the Loans then
outstanding shall forthwith be repaid by the Borrower together with interest
accrued thereon and any other amounts payable to the Bank under this Agreement.
Upon the occurrence of any such change making it unlawful for the Bank to give
effect to its obligations to make or maintain its Loans as aforesaid, the Bank
shall promptly notify the Borrower thereof, and promptly provide the Borrower
with evidence certified by the Bank as to such change.
5.04 Compensation. The Borrower shall pay to the Bank, upon the request
of the Bank, such amount or amounts as shall be sufficient (in the reasonable
opinion of the Bank) to compensate it for any loss, cost or expense that the
Bank determines is attributable to:
(a) any payment, mandatory or optional prepayment of a Loan for any
reason (including the acceleration of the Loans pursuant to Section 9 hereof) on
a date other than the last day of an Interest Period for such Loan (without
prejudice, however, to the provisions in Section 3.03 hereof); or
(b) any failure by the Borrower for any reason (including the failure
of any of the conditions precedent specified in Section 6 hereof to be
satisfied) to borrow a Loan from the Bank on the date for such borrowing
specified in the relevant notice of borrowing given pursuant to Section 2.02
hereof, or
(c) any failure by the Borrower to make a prepayment of any Loan on a
date notified to the Bank as the date for such prepayment pursuant to Section
4.04 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid or prepaid or
not borrowed or prepaid for the period from the date of such payment, prepayment
or failure to borrow or prepay to the last day of the then current Interest
Period for such Loan (or, in the case of a failure to borrow or prepay, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing or prepayment) at the applicable rate of interest for such
Loan provided for herein over (ii) the amount of interest that otherwise would
have accrued on such principal amount at a rate per annum equal to the amount
the Bank would have bid in the London interbank market for Dollar deposits of
leading banks in amounts comparable to such principal amount and with maturities
comparable to such period (as reasonably determined by the Bank).
5.05 Taxes. The Borrower covenants and agrees that, whether or not any
Loan is made hereunder: (a) all payments by the Borrower under or in respect of
this Agreement and the Fee Letter, including amounts payable under clause (b) of
this Section 5.05, shall be made free and clear of and without reduction by
reason of any present or future income, stamp and other taxes, levies,
deductions, charges or withholdings whatsoever imposed, withheld, levied or
collected by the Philippines or any political subdivision or taxing authority
thereof or therein, and interest thereon and penalties with respect thereto, if
any, on or in respect of this Agreement, the Fee Letter or the Loans, or the
registration, notarization or other formalization thereof or any
<PAGE> 16
14
payments in respect thereof (collectively, "Taxes"), all of which will be paid
by the Borrower for its own account, prior to the date on which penalties attach
thereto; (b) the Borrower will indemnify the Bank against, and reimburse the
Bank on demand for, any Taxes and any loss, liability, claim or expense,
including interest, penalties and legal fees, that the Bank incurs at any time
by reason of any failure of the Borrower to make any payment of Taxes when due
or by reason of any change described in Section 5.03 hereof, (c) without
limiting the provisions of Section 5.01(a) (but without duplication), in the
event that the Borrower is required, by any Regulatory Change, to deduct or
withhold any Taxes from any amounts payable on, under or in respect of this
Agreement or the Loans, the Borrower shall immediately pay such additional
amount or amounts as may be required, after such deduction or withholding, to
enable the Bank to receive from the Borrower an amount equal to the full amount
stated to be payable under this Agreement; (d) if at any time the Borrower is
required to make any deduction or withholding from any sum payable by it
hereunder (or if thereafter there is any change in the rates at which or the
manner in which such deductions or withholdings are calculated), the Borrower
shall promptly notify the Bank, and shall promptly (and in any event within 30
days) after it has made any payment from which it is required to make any
deduction or withholding deliver to the Bank a certified copy of any receipt
issued by the applicable taxation or other authority evidencing the deduction or
withholding of all amounts required to be deducted or withheld from such payment
and the Borrower shall indemnify the Bank against any loss the Bank may suffer
as a result of the Borrower's failing to provide any certified copies of tax
receipts or otherwise failing to comply with the administrative procedures
required in order to enable the Bank to claim any credit or offset available to
it in computing its overall net income; (e) the Borrower shall furnish to the
Bank certified copies of tax receipts in respect of any payment of Taxes as
contemplated by this Section 5.05 within 30 days after the respective due dates
therefor, and the Borrower shall promptly furnish to the Bank any other
information, documents and receipts that the Bank may require, in its sole
discretion and from time to time, to establish to its satisfaction that full and
timely payment has been made of all Taxes required to be paid hereunder, and (f)
the covenants and agreements of the Borrower under this Section 5.05 shall
survive the expiration of the Commitment and repayment of the Loans.
SECTION 6. CONDITIONS PRECEDENT
6.01 Initial Loan. The obligation of the Bank to make the initial Loan
hereunder is subject to the condition precedent that the Bank shall have
received the following documents, each of which shall be in form and substance
satisfactory to the Bank:
(a) Borrower Corporate Documents. The following documents, each
certified as indicated below:
(i) a certificate of a director of the Borrower, dated the
Closing Date and certifying (A) that attached thereto is a true and
complete copy of the articles of incorporation and bylaws of the
Borrower as amended and in effect at all times from the date on which
the resolutions referred to in clause (B) were adopted to and including
the
<PAGE> 17
15
date of such certificate, (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the board of directors of
the Borrower authorizing the execution, delivery and performance of
this Agreement and borrowings hereunder, and that such resolutions have
not been modified, rescinded or amended and are in full force and
effect, and (C) as to the incumbency and specimen signature of each
officer of the Borrower executing this Agreement and each other
document to be delivered by the Borrower from time to time in
connection herewith (and the Bank may conclusively rely on such
certificate until it receives notice in writing from the Borrower);
(ii) a certificate of another officer of the Borrower as to
the incumbent and specimen signature of such director of the Borrower;
(iii) a certificate of good standing issued by the Securities
and Exchange Commission of the Philippines;
(iv) the certificate of registration of the Borrower's
Articles of Incorporation issued by the Securities and Exchange
Commission of the Philippines.
(b) Guarantor Corporate Documents. The following documents, each
certified as indicated below:
a certificate of the Representative Director or any other duly
authorized officer of the Guarantor, dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of the
articles of incorporation and the corporate registry extracts of the
Guarantor as appended and in effect at all times from the date on which
the resolutions referred to in clause (B) were adopted to and including
the date of such certificate, (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the board of directors of
the Guarantor authorizing the execution, delivery and performance of
the Guarantee, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, and (C) as to
the incumbency and specimen signature of each officer of the Guarantor
executing the Guarantee and each other document to be delivered by the
Guarantor from time to time in connection therewith (and the Bank may
conclusively rely on such certificate until it receives notice in
writing from the Guarantor).
(c) Officer's Certificate. A certificate of a duly authorized officer
of the Borrower, dated the Closing Date, to the effect set forth in the first
sentence of Section 6.02 hereof.
(d) Opinion of Special Philippine Counsel to the Bank. An opinion,
dated the Closing Date, of Puno & Puno, Philippine counsel to the Bank,
substantially in the form of Exhibit C hereto.
<PAGE> 18
16
(e) Opinion of Special Korean Counsel to the Bank. An opinion, dated
the Closing Date, of Kim & Chang, special Korean counsel to the Bank,
substantially in the form of Exhibit D hereto.
(f) Opinion of Special New York Counsel to the Bank. An opinion, dated
the Closing Date, of Milbank, Tweed, Hadley & McCloy, special New York counsel
to the Bank, substantially in the form of Exhibit E hereto.
(g) Guarantee. The Guarantee, duty executed and delivered by the
Guarantor and the Bank.
(h) Governmental Approvals. Certified copies of all governmental
licenses, approvals, filings and registrations (including all foreign exchange
approvals, approval of the Central Bank authorizing the execution, delivery and
performance by the Borrower of the Loan Agreement, the approval of the Central
Bank approving the terms and conditions (including the Final Maturity Date) of
an executed copy of this Agreement, and the municipal permits and licenses from
the Municipality of Muntinlupa, Metro Manila) that in the opinion of the Bank or
its counsel are required under applicable law for the Borrower to make and
perform this Agreement and to borrow hereunder, for the Guarantor to make and
perform the Guarantee, and for this Agreement and the Guarantee to be admissible
in evidence in the United States of America, the State of New York, the
Philippines or Korea, as the case may be.
(i) Process Agent Acceptance Letter. An acceptance letter or letters
from the process agent referred to in Section 10.12 hereof and in Section 5.09
of the Guarantee accepting its respective appointments set forth herein and
therein.
(j) Fees. The fees referred to in Section 2.04 hereof, to the extent
then due and payable, have been paid (or the Bank shall have received evidence
satisfactory to it that irrevocable instructions have been issued for such
payment on the relevant due date or dates).
(k) Other Documents. Such other documents as the Bank or special New
York counsel to the Bank may reasonably request.
6.02 Initial and Subsequent Loans. The obligation of the Bank to make
any Loan to the Borrower upon the occasion of each borrowing hereunder
(including the initial borrowing) is subject to the further conditions precedent
that, both immediately prior to the making of such Loan and also after giving
effect thereto and to the intended use thereof: (a) no Default shall have
occurred and be continuing; and (b) the representations and warranties made by
the Borrower in Section 7, hereof shall be true and complete on and as of the
date of the making of such Loan with the same force and effect as if made on and
as of such date (or, if any such representation or warranty is expressly stated
to have been made as of a specific date, as of such specific date). Each notice
of borrowing by the Borrower hereunder shall constitute a certification by the
Borrower to the effect set forth in the preceding sentence (both as of the date
<PAGE> 19
17
of such notice and, unless the Borrower otherwise notifies the Bank Prior to the
date of such borrowing, as of the date of such borrowing).
6.03 Conditions for Benefit of Bank. The conditions set for in this
Section 6 are for the exclusive benefit of the Bank and may be waived only by
the Bank.
SECTION 7. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Bank that:
7.01 Corporate Existence. The Borrower: (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
Philippines; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could have a Material
Adverse Effect.
7.02 Financial Condition. The Borrower has heretofore furnished to the
Bank the balance sheet of the Borrower as at December 31, 1995 and the related
statements of incorporate, retained earnings and cash flow of the Borrower for
the fiscal year ended on said date, with the opinion thereon of Sycip, Gorres,
Velayo & Co., certified public accountants. All such financial statements are
complete and correct and fairly present the financial condition of the Borrower,
as at said date and the results of its operations for the fiscal year ended on
said date (subject to normal year-end audit adjustments), all in accordance with
GAAP applied on a consistent basis. The Borrower has on the date hereof no
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said balance
sheet as at said date. Since December 31, 1995, there has been no material
adverse change in the financial condition, operations, business or prospects
taken as a whole of the Borrower from that set forth in said financial
statements as at said date.
7.03 Litigation. There are no legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Borrower) threatened against the Borrower
which, if adversely determined, could have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement,
the consummation of the, transactions herein contemplated or compliance with the
terms and Provisions hereof will conflict with or result in a breach of, or
require any consent under, the articles of incorporation and bylaws of the
Borrower, or any applicable law or regulation, or any order, writ, injunction or
decree of any court or governmental authority or agency, or any agreement or
instrument to which the Borrower is a party or by which it or any of its
Property is bound or to which any of them is subject, or constitute a default
under any such agreement or
<PAGE> 20
18
instrument, or result in the creation or imposition of any Lien upon any
Property of the Borrower pursuant to the terms of any such agreement or
instrument.
7.05 Corporate Action. The Borrower has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
this Agreement; the execution, delivery and performance by the Borrower of this
Agreement have been duly authorized by all necessary corporate action on its
part (including any required shareholder approvals); and this Agreement has been
duly and validly executed and delivered by the Borrower and constitutes its
legal, valid and binding obligation, enforceable against the Borrower in
accordance with its terms.
7.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by the Borrower of this Agreement or for the legality, validity or
enforceability hereof, except that the amount of each borrowing hereunder shall
be reported to, and registered with, the Central Bank.
7.07 Taxes. The Borrower has filed all income tax returns and all other
material tax returns that are required to be filed by it and has paid all taxes
due pursuant to such returns or pursuant to any assessment received by the
Borrower. The charges, accruals and reserves on the books of the Borrower in
respect of taxes and other governmental charges are, in the opinion of the
Borrower, adequate. The Borrower has not given or been requested to give a
waiver of the statute of limitations relating to the payment of any taxes or
other impositions.
7.08 Capitalization. The authorized capital stock of the Borrower
consists, on the date hereof, of an aggregate of 81,279,809 shares consisting of
77,833,333 shares of common stock, par value P1.00 per share, each of which
shares is fully paid, subscribed and nonassessable. As of the date hereof at
least 40% of such shares of common stock are owned beneficially and of record by
the Guarantor.
7.09 Subsidiaries. The Borrower does not have, on the date hereof, any
subsidiaries other than Automated Microelectronics, Inc.
7.10 True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Borrower to the Bank in connection with the negotiation, preparation or delivery
of this Agreement and the Guarantee or included herein or therein or delivered
pursuant hereto or thereto, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading. All written information furnished after the date
hereof by the Borrower to the Bank in connection with this Agreement and the
Guarantee and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of projections)
based on reasonable estimates, on the date as of which such information is
stated or certified. There is no fact known to the Borrower that could have a
<PAGE> 21
19
Material Adverse Effect that has not been disclosed herein, in the Guarantee or
in a report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Bank for use in connection with the transactions
contemplated hereby or thereby.
7.11 Ranking. The obligations of the Borrower under this Agreement rank
at least with all other unsecured and unsubordinated Indebtedness of the
Borrower except for such Indebtedness as is entitled to priority by operation of
law.
7.12 Lien. No Lien exists over all or any of the Borrower's Property
other than as disclosed in the financial statements referred to in Section 7.02.
The representations herein shall be deemed automatically to be renewed
and restated on the last day of each Interest Period for any Loan.
SECTION 8. COVENANTS OF THE BORROWER. The Borrower covenants and agrees
with the Bank that, so long as any Commitment or Loan is outstanding and until
payment in full of all amounts payable by the Borrower hereunder:
8.01 Financial Statements Etc. The Borrower shall deliver to the Bank:
(a) as soon as available and in any event within 60 days after the end
of each semi-annual fiscal period of each fiscal year of the Borrower,
statements of income, retained earnings and cash flow of the Borrower for such
period and for the period from the beginning of the respective fiscal year to
the end of such period, and the related balance sheet of the Borrower as at the
end of such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year,
accompanied by a certificate of a senior financial officer of the Borrower,
which certificate shall state that said financial statements fairly present the
financial condition and results of operations of the Borrower, in each case in
accordance with GAAP, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower, statements of income, retained earnings and
cash flow of the Borrower for such fiscal year and the related balance sheet of
the Borrower as at the end of such fiscal year, setting forth in each case in
comparative form the corresponding figures for the Preceding fiscal year, and
accompanied (i) in the case of said statements and balance sheet of the
Borrower, by an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that said financial
statements fairly present the financial condition and results of operations of
the Borrower as at the end of, and for, such fiscal year in accordance with
generally accepted accounting principles, and a certificate of such accountants
stating that, in making the examination necessary for their opinion, they
obtained no knowledge, except as specifically stated, of any Default, and (ii)
in the case of said statements and balance sheet, by a certificate of a senior
financial officer of the Borrower, which certificate
<PAGE> 22
shall state that said financial statements fairly present the financial
condition and results of operations of the Borrower, in each case in accordance
with GAAP, consistently applied, as at the end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, which the Borrower shall have
filed with any governmental agency in connection with this Agreement or: as
shall now or hereafter be necessary under applicable laws and regulations for
the Borrower to make and perform this Agreement and to borrow hereunder;
(d) promptly after the Borrower knows or has reason to believe that any
Default has occurred, a notice of such Default describing the same in reasonable
detail and, together with such notice or as soon thereafter as possible, a
description of the action that the Borrower has taken or proposes to take with
respect thereto; and
(e) from time to time such other information regarding the financial
condition, operations, business or prospects of the Borrower as the Bank may
reasonably request. The Borrower will furnish to the Bank, at the time it
furnishes each set of financial statements pursuant to paragraph (a) or (b)
above, a certificate of a senior financial officer of the Borrower to the effect
that no Default has occurred and is continuing (or, if any Default has occurred
and is continuing, describing the same in reasonable detail and describing the
action that the Borrower has taken or proposes to take with respect thereto).
8.02 Litigation. The Borrower will promptly give to the Bank notice of
all legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, and any material development in
respect of such legal or other proceedings, affecting the Borrower or any of its
Property, except proceedings which, if adversely determined, would not have a
Material Adverse Effect.
8.03 Corporate Existence, Etc. The Borrower will:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises;
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental of regulatory authorities if failure to
comply with such requirements could have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its Property
prior to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained;
<PAGE> 23
20
(d) promptly obtain all foreign exchange control
authorizations and all such other governmental approvals and filings as shall
now or hereafter be necessary under applicable laws and regulations for the
Borrower to make and perform this Agreement and to borrow hereunder (including
any filing with the Central Bank with respect to each borrowing hereunder) and
promptly furnish copies thereof to the Bank, and promptly execute, acknowledge,
deliver, file, notarize and register at its own expense all such additional
agreements, instruments and documents, and perform such other acts, as the Bank
or its counsel may deem desirable to effectuate the purposes of this Agreement.
Without limiting the generality of the foregoing, the Borrower shall promptly
deliver to the Bank evidence in form and substance satisfactory to it that the
Borrower has filed a report with the Central Bank setting forth the amount of
each borrowing hereunder following the date thereof;
(e) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(f) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP and consistently applied; and
(g) permit representatives of the Bank, during normal business hours,
to examine, copy and make extracts from its books and records, to inspect any of
its Properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by the Bank.
8.04 Insurance. The Borrower will keep insured by financially sound and
reputable insurers all Property of a character usually insured by corporations
engaged in the same or similar business similarly situated in the Philippines
against loss or damage of the kinds and in the amounts customarily insured
against by such corporations and carry such other insurance as is usually
carried by such corporations.
8.05 Prohibition of Fundamental Changes. The Borrower will not enter
into any transaction of merger or consolidation or amalgamation, or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution). The
Borrower will not acquire any business or Property from, or capital stock of, or
be a party to any acquisition of, any Person except for purchases of inventory
and other Property to be sold or used in the ordinary course of business. The
Borrower will not convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or a substantial part of its
business or Property, whether now owned Or hereafter acquired including
receivables and leasehold interests, but excluding (a) any inventory or other
Property sold or disposed of in the ordinary course of business and on ordinary
business terms and (b) the five lease agreements, each between Corinthian
Commercial Corporation and the Borrower, and dated, respectively, December 14,
1984 (as amended on April 28, 1992), October 1, 1990, March 12, 1992, February
28, 1995 and October 17, 1995, all relating to the use of the Borrower's plant
facility, consisting of 82,286.67 square meters, located at Sucat, Muntinlupa
City, the Philippines.
<PAGE> 24
22
8.06 Transactions with Affiliates. Except as expressly permitted by
this Agreement, the Borrower will not directly or indirectly: (a) transfer,
sell, lease, assign or otherwise dispose of any Property to an Affiliate; (b)
merge into or consolidate with or purchase or acquire Property from an
Affiliate; or (c) enter into any other transaction directly or indirectly with
or for the benefit of an Affiliate (including guarantees and assumptions of
obligations of an Affiliate); provided that (x) any Affiliate who is an
individual may serve as a director, officer employee of the Borrower and receive
reasonable compensation for his or her services in such capacity and (y) the
Borrower may enter into transactions (other than extensions of credit by the
Borrower to an Affiliate) providing for the leasing of Property, the rendering
or receipt of services or the purchase or sale of inventory and other Property
in the ordinary course of business if the monetary or business consideration
arising therefrom would be substantially as advantageous to the Borrower as the
monetary or business consideration which would obtain in a comparable
transaction with a Person not an Affiliate.
8.07 Use of Proceeds. The Borrower will use the proceeds of the Loans
hereunder solely to finance the expansion of the Borrower's semiconductor
assembly plant in the Philippines (in compliance with all applicable legal and
regulatory requirements); provided that the Bank shall not have any
responsibility as to the use of any of such proceeds.
8.08 Ranking. The Borrower will cause its obligations under this
Agreement to rank at all times in right of payment at least pari passu with all
its other unsecured and unsubordinated Indebtedness, whether now or hereafter
outstanding (except for such Indebtedness as is entitled to priority by
operation of law) and not create, incur, assume or suffer to exist any Lien
whatsoever on any of its Property, whether now owned or hereafter acquired,
except as otherwise agreed by the Bank; provided, however, that the Borrower
shall be permitted to assume, suffer to exist, or create Liens: (a) for taxes,
assessments or governmental charges on properties or assets of the Borrower if
the same shall not at the time be delinquent or thereafter can be paid without
penalty; (b) imposed by law, such as carriers', warehousemen's and mechanics'
liens and other similar Liens arising in are ordinary course of business in
transactions not involving borrowed money or the advance of credit if the
Borrower shall take all reasonable steps to discharge such Lien as soon as
reasonably practical; (c) arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old-age pensions, or other social
security or retirement benefits or similar legislation; (d) on Property acquired
after the date hereof, which Liens are limited to the particular properties or
assets being acquired and were in existence prior to such acquisition or which
are created at the time of purchase solely to secure the purchase price of such
properties or assets; (e) existing on the date hereof and heretofore disclosed
in writing to the Bank, provided that there shall be no renewals of such Liens
or extensions of such Liens to Property other than Property now subject to such
Liens or to secure amounts of Indebtedness greater than such amounts as exist on
the date hereof, or (f) in favor of the Bank.
8.09 No Dividends. If any Default shall occur and be continuing, the
Borrower shall not, without the consent of the Bank, declare or pay dividends or
make any distributions to its shareholders.
<PAGE> 25
23
8.10 Debt-Equity Ratio. The Borrower shall not permit (i) the
Debt-Equity Ratio at any time to exceed 4:1 or (ii) its debt-equity ratio
calculated in accordance with and pursuant to the rules and regulations of the
Central Bank to exceed the ratio from time to time required to be maintained by
the Borrower thereunder.
SECTION 9. EVENTS OF DEFAULT. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) The Borrower shall: (i) default in the payment of any principal of
any Loan when due (whether at stated maturity or at mandatory prepayment or
otherwise); or (ii) default in the payment of any interest on any Loan, any fee
or any other amount payable by it hereunder or under the Guarantee when due and
such default shall have continued unremedied for 2 Business Days; or
(b) The Borrower or the Guarantor shall default in the payment when due
of any principal of or interest on any of its other Indebtedness aggregating (i)
in the case of the Borrower, U.S.$200,000 or more, and (ii) in the case of the
Guarantor, U.S.$1,000,000 or more; or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
Indebtedness shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid in full
(whether by redemption, purchase, offer to purchase or otherwise), prior to its
stated maturity; or
(c) Any representation, warranty or certification made or deemed made
herein or in the Guarantee (or in any modification or supplement hereto or
thereto) by the Borrower or the Guarantor, or any certificate furnished to the
Bank pursuant to the provisions hereof or thereof, shall prove to have been
false or misleading as of the time made or furnished in any material respect; or
(d) The Borrower shall default in the performance of any of its
obligations under Section 8.01(d) or 8.05; the Guarantor shall default in the
performance of any of its payment obligations under the Guarantee; or the
Borrower or the Guarantor shall default in the of any of its other obligations
(other than those referred to elsewhere in this Section 9) in this Agreement or
the Guarantee, as the case may be, and such default shall continue for a period
of 30 days after notice thereof to the Borrower or the Guarantor, as the case
may be, by the Bank; or
(e) The Borrower or the Guarantor shall admit in writing its inability
to, or be generally unable to, pay its debts as such debts become due; or
(f) The Borrower or the Guarantor shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
examiner or
<PAGE> 26
24
liquidator of itself or of all or a substantial part of its Property, (ii) make
a general assignment for the benefit of its creditors, (iii) commence a
voluntary, case under the relevant bankruptcy law of any jurisdiction, (iv) file
a petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement or winding-up,
or composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the relevant bankruptcy law of any jurisdiction or
(vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(g) A proceeding or case shall be commenced, without the application or
consent of the Borrower or the Guarantor, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of the Borrower or the Guarantor, as the case may be, or any substantial
part of its Property, or (iii) similar relief in respect of the Borrower or the
Guarantor, as the case may be, under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 30 or more days; or an order for relief
against the Borrower or the Guarantor, as the case may be, shall be entered in
an involuntary case under the relevant bankruptcy law; or
(h) Any governmental authority shall take any action to condemn, seize
or appropriate any material portion of the Borrower's or the Guarantor's assets
(whether with or without payment of compensation) or to declare a moratorium on
the payment of any class of obligations including the obligations owed to the
Bank hereunder, or shall have taken any other action that, in the opinion of the
Bank, materially adversely affects the Borrower's or the Guarantor's ability to
perform its respective obligations hereunder or under the Guarantee, as the case
may be; or
(i) A final judgment or judgments for payment of money in excess of
U.S.$500,000 in aggregate shall be rendered by a court or courts against the
Borrower and/or the Guarantor and the same shall not be disclosed (or provision
shall not be made for such discharge), or a stay of execution thereof shall not
be procured, within 30 days after the date of entry thereof, and the Borrower or
the Guarantor, as the case may be, shall not within said period of 30 days, or
such longer period during which the execution thereof shall have been stayed,
appeal time from and cause the execution thereof to be stayed during such
appeal; or
(j) There shall occur a disturbance in the financial markets or any
other adverse change of circumstances of any kind (including a material adverse
change in the operations, business, assets, structure, control or financial
condition of the Borrower or the Guarantor) that shall, in the opinion of the
Bank imperil or preclude the fulfillment of the obligations of the Borrower
hereunder or of the Guarantor under the Guarantee; or
<PAGE> 27
25
(k) The Guarantor shall cease to own collectively, beneficially and of
record, at least 40% of the subscribed and issued common shares of, or shall
cease to control the management of, the Borrower; or
(l) Except for expiration in accordance with its terms, the Guarantee
shall be terminated or shall cease to be in full force and effect, for whatever
reason or the Guarantor shall purport to repudiate the Guarantee;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f), (g) or (h) of this Section 9 with respect to the Borrower or the
Guarantor, the Bank may, by notice to the Borrower, terminate the Commitment
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrower hereunder
(including any amounts payable under Section 5.04 hereof) to be forthwith due
and payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrower; and (2) in the case of the occurrence
of an Event of Default referred to in clause (f), (g) or (h) of this Section 9
with respect to the Borrower, the Commitment shall automatically be terminated
and the principal amount then outstanding of, and the accrued interest on, the
Loans and all other amounts payable by the Borrower hereunder (including any
amounts payable under Section 5.04 hereof) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower.
SECTION 10. MISCELLANEOUS
10.01 Waiver. No failure on the part of the Bank to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
10.02 Language; Notices. All notices, communications, instruments,
evidences, reports, opinions and other documents given hereunder (including any
modifications of, or waivers or consents under, this Agreement), unless
submitted in the English language, shall be accompanied by an English
translation for each copy of the foregoing so given. All notices, requests and
other communications provided for herein (including any modifications of, or
waivers or consents under, this Agreement) shall be given or made in writing
(including by telex or telecopy) delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof);
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this Agreement
all such communications shall be deemed to have been duly given when transmitted
by telex or telecopier (provided such transmission by telecopy is accompanied by
or generates
<PAGE> 28
26
a simultaneous confirmation of transmission) or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
10.03 Expenses, Etc. The Borrower agrees to pay or reimburse the Bank
for paying: (a) all reasonable out-of-pocket costs and expenses of the Bank
(including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to the Bank, of Kim & Chang, special Korean counsel to
the Bank, and of Puno & Puno, special Philippine counsel to the Bank), in
connection with (i) the negotiation, preparation, execution and delivery of this
Agreement and the Guarantee and the making of the Loans hereunder and (ii) any
modification, supplement or waiver of any of the terms of this Agreement or the
Guarantee; (b) all reasonable costs and expenses of the Bank (including
reasonable counsels' fees) in connection with (i) any Default and any
enforcement or collection proceedings resulting therefrom or in connection with
the negotiation of any restructuring (whether or not consummated) of the
obligations of the Borrower hereunder and (ii) the enforcement of this Section
10.03; and (c) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or the Guarantee or any other document referred to
herein or therein. The Borrower agrees to pay, or reimburse each Participant (as
defined in Section 10.06(c) hereof) that shall have become a Participant on or
prior to the Closing Date for paying, all reasonable out-of-pocket costs and
expenses of such Participant (including all reasonable fees and expenses of
legal counsel, if any) in connection with the negotiation, preparation,
execution and delivery of the participation agreement relating hereto to which
such Participant is party.
The Borrower hereby agrees (i) to indemnify the Bank and its respective
directors, officers employees, attorneys and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them (whether or not the Bank is a party thereto) arising out
of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to the extensions of credit hereunder or any actual or proposed use by
the Borrower of the proceeds of any of the extensions of credit hereunder,
including, the reasonable fees and disbursements, of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified) and (ii) not to assert any claim against the Bank, any of its
affiliates, or any of their respective directors, officers, employees, attorneys
and agents, on any theory of liability, for special, indirect, consequential or
punitive damages arising out of or otherwise relating to any of the transactions
contemplated herein or in the Guarantee.
10.04 Amendments, Etc. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Borrower and the Bank.
10.05 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
<PAGE> 29
27
10.06 Assignments and Participations.
(a) The Borrower may not assign any of its rights or obligations
hereunder without the prior consent of the Bank.
(b) The Bank may assign any, of the Loans and the Commitment with a
prior written notice to the Borrower (and, in the case of the outstanding
Commitment with the consent of the Borrower). Upon execution and delivery by the
assignee to the Borrower and the Bank of an instrument in writing pursuant to
which such assignee agrees to become a "Bank" hereunder having the Commitment
and Loans specified in such instrument, and upon consent thereto by the Borrower
and the Bank, to the extent required above, the assignee shall have, to the
extent of such assignment (unless otherwise provided in such assignment with the
consent of the Borrower), the obligations, rights and benefits of the Bank
hereunder holding the Commitment and Loans (or portions thereof) assigned to it
and the Bank shall, to the extent of such assignment, be released from the
Commitment (or portion thereof) so assigned.
(c) The Bank may sell or agree to sell to one or more other Persons a
participation in all or any part of the Loans held by it, or of the Commitment,
in which event each purchaser of a participation (a "Participant") shall be
entitled to the rights and benefits of the provision of (x) Sections 8.01(e)
hereof, (y) in the case only of any Participant that shall have become a
Participant on or prior to the Closing Date, Sections 5 and 10.03 hereof to the
fullest extent thereof and (z) in the case of each other Participant, Section 5
hereof, but only to the extent of said rights and benefits that could have been
claimed by the Bank granting the relevant participation to such Participant in
the absence of such participation, with respect to its participation in such
Loans and Commitment as if (and the Borrower shall be directly obligated to such
Participant under such provisions as if) such Participant were a "Bank" for
purposes of said Sections, but shall not have any other rights or benefits under
this Agreement of the Guarantee (the Participant's rights against the Bank with
respect of such participation to be those set forth in the agreements executed
by the Bank with the Participant or Participants).
(d) The Bank may furnish any information concerning the Guarantor in
the possession of the Bank from time to time to assignees and Participants
(including prospective assignees and Participants).
10.07 Survival. The obligations of the Borrower under Sections 5.01 and
10.03 hereof shall survive the repayment of the Loans and the termination of the
Commitment. In addition, each representation and warranty made, or deemed, to be
made by a notice of any Loan, herein or pursuant hereto shall survive the making
of such representation and warranty, and the Bank shall not be deemed to have
waived, by reason of making any Loan, any Default may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that the Bank may have had notice or knowledge or reason to
believe that such representation or warranty was false or misleading at the time
such Loan was made.
<PAGE> 30
28
10.08 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
10.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
10.10 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York, United States of America.
10.11 Immunity. To the extent that the Borrower may be or hereafter
become entitled, in any jurisdiction in which judicial proceedings may at any
time be commenced with respect to this Agreement, to claim for itself or its
property, assets or revenues immunity (whether by reason of sovereignty or
otherwise) from suit, jurisdiction of any court (including any court of the
United States of America, the State of New York, the Philippines or Korea),
attachment (before or after judgment), set-off, execution of a judgment or other
legal process, and to the extent that in any such jurisdiction there may be
attributed such an immunity (whether or not claimed), the Borrower hereby
irrevocably waives such immunity.
10.12 Jurisdiction, Service of Process. Any action or proceeding
against the Borrower with respect to this Agreement or any judgment entered by a
court in respect thereof may be brought in the Supreme Court of the State of New
York, County of New York or in the United States District Court for the Southern
District of New York, or in the courts of the Republic of Indonesia or Korea as
the Bank may elect, and the Borrower submits to the nonexclusive jurisdiction of
each such court for the purpose of any such action. The Borrower hereby
irrevocably designates, appoints and empowers Anam USA, Inc., located at Goshen
Corporate Park 1345, Enterprise Drive, West Chester, PA 19380, U.S.A., to be its
authorized agent to receive for and on its behalf and on behalf of its
properties and assets service of process in the State of New York for a period
from the date not less than 3 days prior to the Closing Date to the date 6
months after the Final Maturity Date. Such service shall be deemed completed
upon delivery thereof to the relevant process agent whether or not said agent
transmits the same to the Borrower and the Borrower agrees that the failure of
the Borrower to receive a copy of any process shall not affect in any way the
validity of such service or of any judgment based thereon. The Borrower agrees
that it will at all times maintain in New York, New York or in such other state
of the United States as the Bank shall agree an agent for service of process in
connection with any such action against the Borrower, which agent shall be
reasonably acceptable to the Bank. The Borrower irrevocably consents to the
service of process in any action in said courts by the mailing thereof by the
Bank by registered or certified mail, postage-prepaid, to the Borrower at its
address specified herein, or in any other manner permitted by law. Without
limiting the foregoing, the Borrower agrees that the Bank may at its option
submit any dispute in connection with this Agreement to any other court having
jurisdiction over the Borrower or its Property. The Borrower irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such action or
<PAGE> 31
29
proceeding brought in such a court and any claim that any such action or
proceeding brought in such a court has been brought in an inconvenient forum.
10.13 Judgment Currency. This is an international loan transaction in
which the specification of Dollars and payment in New York, New York is of the
essence, and Dollars shall be the currency of account in all events. In the
event that any payment is received by the Bank, whether pursuant to a judgment
or otherwise, in a currency other than Dollars, the Borrower hereby agrees to
indemnify the Bank against any resulting shortfall (and the Bank shall have a
separate cause of action therefor).
10.14 Waiver of Jury Trial. EACH OF THE BORROWER AND THE BANK HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.15 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions and without affecting the validity or
enforceability of such provisions in any other jurisdiction.
10.16 Treatment of Certain Information. The Borrower acknowledges that
from time to time financial advisory, investment banking and other services may
be offered or provided to the Borrower or the Guarantor (in connection with this
Agreement or otherwise) by the Bank or by one or more subsidiaries or affiliates
of the Bank, and the Borrower hereby authorizes the Bank to share any
information delivered to it by the Borrower or the Guarantor pursuant to this
Agreement, or in connection with the decision of the Bank to enter into this
Agreement, to any such subsidiary or affiliate.
<PAGE> 32
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
BORROWER
AMKOR/ANAM PILIPINAS, INC.
By: /s/ (ILLEGIBLE)
------------------------------------
Name:
Title:
Address for Notices:
KM 22 East Service Road
South Superhighway
Muntinlupa, Metro Manila
Philippines
Attention: Mr. Danny D. Franklin
Telex: 26506 AMKPH
Telecopier: (63-2) 845-7275
Telephone: (63-2) 845-7215
<PAGE> 33
31
<TABLE>
<CAPTION>
BANK
----
Commitment THE KOREA DEVELOPMENT BANK
----------
Tranche A Tranche B
- --------- ---------
<S> <C> <C>
U.S.$20,610,000 U.S.$50,640,000 By: /s/ (ILLEGIBLE)
-----------------------------------------
Name:
Title:
Address for Notices
and
Initial Lending Office
for Tranche A and Trance B Loans:
Head Office
10-2, Kwanchol-dong
Chongno-Ku
(C.P.O. Box 28)
Seoul, Korea
Attention: Manager, International Loan Dept.
Telex: K26544/K27463 KODBANK
Telecopier: (822) 723-0386, 733-2971
Telephone: (822) 398-6312
</TABLE>
<PAGE> 34
Exhibit A
[FORM OF NOTICE OF BORROWING]
NOTICE OF BORROWING
To: The Korea Development Bank,
as Bank
party to the Loan Agreement
referred to below
Date: [____________]
Ladies and Gentlemen:
Pursuant to the Loan Agreement dated as of March 28, 1996 ("Loan
Agreement") and made between ourselves as Borrower and yourselves as the Bank,
we hereby:
(1) Give you notice that we wish to borrow Loans (the "Loans") in the
aggregate principal amount of U.S.$_________ on _________, 199_. Such
sum is to be available to us by remitting to our account number
_________ with ___________________ for our account.
(2) Confirm and certify that (i) no Default has occurred and is continuing,
and (ii) the representations and warranties made in Section 7 of the
Loan Agreement are true and complete on and as of the date hereof, and
will be true and complete on and as of the date of the Loans, as if
made on and as of such date.
(3) Confirm that the Loans are "Loans" under the Loan Agreement and that
the Guarantor has been notified of our intent to borrow the amount set
forth herein.
Terms defined in the Loan Agreement, unless otherwise defined herein,
shall have the same meanings in this Notice.
For and on behalf of
AMKOR/ANAM PILIPINAS, INC.
By
------------------------------------
Name:
Title:
<PAGE> 35
EXHIBIT B
[FORM OF GUARANTEE]
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of March 28, 1996: between ANAM INDUSTRIAL
CO., LTD., a corporation, duly organized and validly existing under the laws of
Korea (the "Guarantor"); and THE KOREA DEVELOPMENT BANK, as the Bank party to
the Loan Agreement referred to below (in such capacity, together with its
successors, the "Bank").
Amkor/Anam Pilipinas, Inc., a Philippine corporation (the "Borrower")
and the Bank are parties to a Loan Agreement dated as of March 28, 1996 (as
modified and supplemented and in effect from time to time, the "Loan
Agreement"), providing, subject to the terms and conditions thereof, for the
making of loans by the Bank to the Borrower in an aggregate principal amount not
exceeding U.S.$71,250,000.
To induce the Bank to enter into the Loan Agreement and the Bank to
make loans thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantor has
agreed to guarantee the Guaranteed Obligations (as hereinafter defined).
Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined
in the Loan Agreement are used herein as defined therein.
Section 2. The Guarantee.
2.01 The Guarantee. The Guarantor hereby guarantees to the Bank and its
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the principal of and interest on the
Loans made by the Bank to the Borrower and all other amounts from time to time
owing to the Bank by the Borrower under the Loan Agreement and interest thereon,
in each case strictly in accordance with the terms thereof (such obligations
being herein collectively called the "Guaranteed Obligations"). The Guarantor
hereby further agrees that if the Borrower shall fail to pay in full when due
(whether at stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Guarantor will promptly pay the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Guaranteed Obligations, the same will be promptly paid in
full when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal. This Guarantee Agreement
is a guarantee of payment and not merely of collection.
<PAGE> 36
2
2.02 Obligations Unconditional. The obligations of the Guarantor under
Section 2.01 hereof are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of the Loan Agreement or any
other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 2.02 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of the Guarantor hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantor, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts (including with respect to enforcement of
the Guaranteed Obligations) mentioned in any of the provisions of the
Loan Agreement or any other agreement or instrument referred to herein
or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall
be accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Loan
Agreement or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Bank as security
for any of the Guaranteed Obligations shall fail to be perfected; or
(v) any regulatory change or other governmental action
(whether adverse or not.
No change in the name, objects, capital stock, status or constitution
of the Borrower or any merger, consolidation or corporate reorganization of the
Borrower shall in any way affect the liability of the Guarantor under this
Guarantee Agreement, and the Guaranteed Obligations shall be guaranteed by this
Guarantee Agreement notwithstanding that the obtaining of the Loans or the
incurring of any other obligations under the Loan Agreement by the Borrower
shall be in excess of the powers of the Borrower or of its officers, directors
or other agents, acting or purporting to act on its behalf, or be in any way
irregular or defective.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment protest and all notices whatsoever, and any requirement that the Bank
exhaust any right,
<PAGE> 37
3
power or remedy or proceed against the Borrower under the Loan Agreement or any
other agreement or instrument referred to herein or therein, or against any
other Person under any other guarantee of, or security for, any of the
Guaranteed Obligations.
2.03 Reinstatement. The obligations of the Guarantor under this Section
2 shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Borrower in respect of the Guaranteed Obligations
is rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Guarantor agrees that it will indemnify the
Bank on demand for all reasonable costs and expenses (including fees of counsel)
incurred by the Bank in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
2.04 Subrogation. (a) The Guarantor hereby agrees that until the
payment and satisfaction in full of all Guaranteed Obligations and the
expiration or termination of the Commitment of the Bank under the Loan Agreement
it shall not exercise any right or remedy arising by reason of any performance
by it of its guarantee in Section 2.01 hereof, whether by subrogation or
otherwise, against the Borrower or any other guarantor of any of the Guaranteed
Obligations or any security for any of the Guaranteed Obligations. In the event,
that the Guarantor shall receive any payment on account of such rights of
subrogation while any portion of the Guaranteed Obligations remains outstanding,
the Guarantor agrees to pay all such amounts so received (but not in excess of
the Guaranteed Obligations then outstanding) to the Bank to be applied to the
payment of the Guaranteed Obligations and other amounts payable under the Loan
Agreement in accordance with the terms thereof.
2.05 Remedies. The Guarantor agrees that, as between the Guarantor and
the Bank, the obligations of the Borrower under the Loan Agreement may be
declared to be forthwith due and payable as provided in Section 9 of the Loan
Agreement (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Section 9) for purposes of Section 2.01
hereof notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligation from becoming automatically due and payable) as
against the Borrower and that, in the event of such declaration (or such
obligations being deemed to have become automatically due and payable), such
obligations (whether or not due and payable by the Borrower) shall forthwith
become due and payable by the Guarantor for purposes of said Section 2.01.
2.06 Continuing Guarantee. The guarantee in this Section 2 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
2.07 Taxes. The Guarantor covenants and agrees that, whether or not any
Loan is made under the Loan Agreement: (a) all payments by the Guarantor under
or in respect of this Guarantee Agreement, including amounts payable under
paragraph (b) of this Section 2.07, shall
<PAGE> 38
4
be made free and clear and without reduction by reason of any present or future
income, stamp and other taxes or charges whatsoever imposed, withheld, levied or
collected by Korea or the Philippines or any political subdivision or taxing
authority thereof on or in respect of this Guarantee Agreement or the Loans or
the registration, notarization or other formalization thereof or any payments in
respect thereof other than taxes imposed upon the respective overall net income
of the Bank by its jurisdiction of organization (each, a "Tax", and
collectively, "Taxes"), all of which will be paid by the Guarantor for its own
account, prior to the date on which penalties attach thereto; (b) the Guarantor
will indemnify the Bank against, and reimburse the Bank on demand for, any Taxes
and any interest or penalties thereon; (c) in the event that the Guarantor is
required by applicable law, decree or regulation to deduct or withhold any Taxes
from any amounts payable on, under or in respect of this Guarantee Agreement,
the Guarantor shall pay, on demand of the Bank, such additional amount or
amounts as may be required, after such deduction or withholding, to enable the
Bank to receive from the Guarantor an amount equal to the full amount payable
under this Guarantee Agreement; (d) the Guarantor shall furnish to the Bank
certified copies of satisfactory tax receipts in respect of any payment of Taxes
within 30 days after the respective due dates therefor; and (e) the covenants
and agreements of the Guarantor under this Section 2.07 shall survive the
repayment of the Loans.
2.08 Enforcement. The Guarantor agrees to pay on demand all expenses
incurred by the Bank in connection with the enforcement of this Guarantee
Agreement, including legal fees and expenses and other costs of collection.
Section 3. Representations and Warranties. The Guarantor represents and
warrants to the Bank that:
3.01 Corporate Existence. The guarantor: (a) is a corporation duty
organized and validly existing under the laws of Korea; (b) has all requisite
corporate power, and has all material governmental licenses, authorizations,
conscripts, and approvals necessary to own its assets and carry on its business
as now being or as proposed to be conducted; and (c) is qualified to do business
in all jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify would have a
material adverse effect on the consolidated financial condition, operations,
business or prospects taken as a whole of the Guarantor.
3.02 Financial Condition. The Guarantor has heretofore furnished to the
Bank the balance sheet of the Guarantor as at December 31, 1995 and the related
statements of income, retained earnings and cash flow of the Guarantor for the
fiscal year ended on said date, with the opinion thereon of Shinhan Accounting
Corporation, certified public accountants. All such financial statements are
complete and correct and fairly present the financial condition of the Guarantor
as at said date and the results of their operations for the fiscal year ended on
said date, all in accordance with generally accepted accounting principles and
practices in Korea applied on a consistent basis. The Guarantor has on the date
hereof no material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses
<PAGE> 39
5
from any unfavorable commitments, except as referred to or reflected or provided
for in said balance sheet as at said date. Since December 31, 1995, there has
been no material adverse change in the financial condition, operations, business
or prospects taken as a whole of the Guarantor from that set forth in said
financial statements as at said date.
3.03 Litigation. Except as disclosed to the Bank in writing prior to
the date of this Guarantee Agreement, there are no legal or arbitral proceedings
or any proceedings by or before any governmental or regulatory authority or
agency, now pending or (to the knowledge of the Guarantor) threatened against
the Guarantor which, if adversely determined, could have a material adverse
effect on the financial condition, operations, business or prospects taken as a
whole of the Guarantor.
3.04 No Breach. None of the execution and delivery of this Guarantee
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the articles of incorporation of the
Guarantor, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement or
instrument to which the Guarantor is a party or by which it is bound or to which
it is subject, or constitute a default under any such agreement or instrument,
or result in the creation or imposition of any Lien upon any of the revenues or
assets of the Guarantor pursuant to the terms of any such agreement or
instrument.
3.05 Corporate Action. The Guarantor has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Guarantee Agreement; the execution, delivery and performance by the Guarantor of
this Guarantee Agreement have been duly authorized by all necessary corporate
action on its part; and this Guarantee Agreement has been duly and validly
executed and delivered by the Guarantor and constitutes its legal, valid and
binding obligation, enforceable in accordance with its terms.
3.06 Approvals. All authorizations, approvals or consents of, and
filings and registrations with, any governmental or regulatory authority or
agency (including all foreign exchange approvals) that are necessary for the
execution, delivery or performance by the Guarantor of this Guarantee Agreement
or for the validity or enforceability hereof have been obtained or made and are
in full force and effect, except that a separate foreign exchange validation of
the Guarantor's Class A foreign exchange trading bank will be required at the
time of each payment in respect of this Guarantee Agreement.
3.07 Taxes. The Guarantor has filed all income tax returns and all
other material tax returns which are required to be filed by the Guarantor and
has paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Guarantor. The charges, accruals and reserves on the books of
the Guarantor in respect of taxes and other governmental charges are, in the
opinion of the Guarantor, adequate.
<PAGE> 40
6
3.08 Ranking. The obligations of the Guarantor under this Guarantee
Agreement rank at least pari passu with all other unsecured Indebtedness of the
Guarantor.
3.09 Sovereign Immunity. The execution, delivery and performance of
this Guarantee Agreement by the Guarantor constitute private and commercial acts
rather than governmental or public acts; and the Guarantor is not entitled to
claim immunity from legal proceedings with respect to itself or any of its
properties or assets on the grounds of sovereignty or otherwise under any law or
in any jurisdiction where an action may be brought for the enforcement of its
obligations hereunder or the attachment of property or the execution of any
judgment with respect thereto; and to the extent that the Guarantor or any of
its properties or assets may hereafter acquire such right of immunity the same
is hereby irrevocably waived by the Guarantor.
3.10 Ownership of Borrower. The Guarantor owns at least 40% of the
subscribed and issued common shares of, and controls the management of, the
Borrower.
Section 4. Covenants. The Guarantor agrees that, until the payment and
satisfaction in full of the Guaranteed Obligations and the expiration or
termination of the Commitment of the Bank under the Loan Agreement:
4.01 Financial Statements The Guarantor shall deliver to the Bank:
(a) as soon as available and in any event within 60 days after
the end of each semi-annual fiscal period of each fiscal year of the
Guarantor, statements of income of the Guarantor for such period and
for the period from the beginning of the respective fiscal year to the
end of such period, and the related balance sheet of the Guarantor as
at the end of such period, setting forth in each case in comparative
form the corresponding figures for the corresponding period in the
preceding fiscal year, accompanied by a certificate of a senior
financial officer of the Guarantor, which certificate shall state that
said financial statements fairly present the financial condition and
results of operations of the Guarantor, in accordance with generally
accepted accounting principles in Korea, consistently applied, as at
the end of, and for such period (subject to normal year-end audit
adjustments);
(b) as soon as available and in any event within 120 days
after the end of each fiscal year of the Guarantor, statement of
income, retained earnings and cash flow of the Guarantor for such
fiscal year and the related balance sheet of the Guarantor as at the
end of such fiscal year, setting forth in each case in comparative form
the corresponding figures for the preceding fiscal year, and
accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state
that said financial statements fairly present the financial condition
and results of operations of the Guarantor as at the end of, and for,
such fiscal year in accordance with generally accepted accounting
principles in Korea, and a certificate of such
<PAGE> 41
7
accountants stating that, in making the examination necessary for their
opinion, they obtained no knowledge, except as specifically stated, of
any Default;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Guarantor shall have filed with any governmental agency or any national
securities exchange;
(d) promptly after the Guarantor knows or has reason to
believe that any Default has occurred, a notice of such Default
describing the same in reasonable detail and, together with such notice
or as soon thereafter as possible, a description of the action that the
Guarantor has taken or proposes to take with respect thereto; and
(e) from time to time such other information regarding the
financial condition, operations, business or prospects of the Guarantor
as the Bank may reasonably request.
The Guarantor will furnish to each Bank, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Guarantor to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Guarantor has taken or proposes to take with respect thereto).
4.02 Litigation. The Guarantor will promptly give to the Bank notice of
all legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, affecting the Guarantor, except
proceedings which, if adversely determined, would not have a material adverse
effect on the financial condition, operations, business or prospects taken as a
whole of the Guarantor or its ability to perform its obligations hereunder.
4.03 Corporate Existence, Etc. The Guarantor will: preserve and
maintain its corporate existence and all of its material rights, privileges and
franchises; comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure to
comply with such requirements would materially and adversely affect the
financial condition, operations, business or prospects taken as a whole of the
Guarantor; pay and discharge all taxes, assessments and governmental charges or
levies imposed on it or on its income or profits or on any of its property prior
to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained; maintain all of its properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted; permit
representatives of the Bank, during normal business hours, to examine, copy and
make extracts from its books and records, to inspect its properties, and to
discuss its business and, affairs with its officers, all to the extent
reasonably requested by the Bank; and keep insured by financially sound and
reputable insurers all property of a character usually insured by corporations,
engaged in the same or similar business similarly situated against loss or
damage of the kinds and in the amounts customarily insured against by such
corporations and carry such other insurance as is usually carried by such
corporations.
<PAGE> 42
8
4.04 Authorizations. The Guarantor will promptly obtain all exchange
control authorizations and all such other governmental approvals, filings and
reports (including any filings or periodic reports required under the Foreign
Exchange Management Act of Korea and regulations promulgated thereunder or
pursuant thereto) as shall now or hereafter be necessary under applicable laws
and regulations for the Guarantor to make and perform this Guarantee Agreement
and will promptly furnish copies thereof to the Bank.
4.05 Merger; Disposition of Assets. The Guarantor shall not consolidate
with or merge into any other corporation or entity, nor shall dispose of
(whether in one transaction or in a series of transactions) all or any
substantial part of its property, whether now owned or hereafter acquired
(excluding any inventory or other assets sold or disposed of in the ordinary
course of business), provided that the Guarantor may merge or consolidate with
any other Person if the Guarantor is the surviving or succeeding entity, and
such merger or consolidation will not have a materially adverse effect (in the
reasonable opinion of the Bank) on the Guarantor's ability to perform its
obligations hereunder.
4.06 Ranking. The Guarantor will cause its obligations under this
Guarantee Agreement to rank at all times in right of payment at least pari passu
with all other unsecured and unsubordinated Indebtedness of the Guarantor,
whether now or hereafter outstanding (except for Liens created by operation of
law), and will not create, incur, assume or suffer to exist any Lien whatsoever
on any of its Property, whether now owned or hereafter acquired, except Liens to
secure any credit facility in existence on the date of the Loan Agreement which
by the terms of such credit facility requires the creation of such Lien as a
condition to the advance of credit and except as otherwise agreed by the Bank;
provided, however, that the Guarantor shall be permitted to assume or create
Liens: (i) for taxes, assessments or governmental charges on properties or
assets of the Guarantor if the same shall not at the time be delinquent or
thereafter can be paid without penalty; (ii) imposed by law, such as carriers',
warehousemen's and mechanics' liens, Liens arising from employees' claims for
wages and severance payments and other similar Liens arising in the ordinary
course of business in a transaction not involving borrowed money or. the advance
of credit if the Guarantor shall take all reasonable steps to discharge such
Lien as soon as reasonably practical; (iii) arising out of pledges or deposits
under worker's compensation laws, unemployment insurance, old-age pensions, or
other social security or retirement benefits or similar legislation; (iv) on
Properties or assets acquired after the date hereof, which Liens are limited to
the particular Properties or assets, being acquired and were in existence prior
to such acquisition or which are created at the time of purchase solely to
secure the purchase price of such Properties or assets; (v) existing on the date
hereof and disclosed in the financial statements referred to in Section 3.02
hereof or otherwise heretofore disclosed in writing to the Bank, provided that
there shall be no renewals of such Liens or extensions of such Liens to Property
other, than Property now subject to such Liens or to secure amounts of
Indebtedness greater than such amounts as exist on the date hereof; (vi) over
any assets in Korea in favor of a bank or other financial institution securing
any credit facility granted to the Guarantor or any of its subsidiaries or
affiliates, by such bank or other financial institution through a lending office
in Korea, (vii) arising in the ordinary course of business with respect to the
Guarantor's obligations under, or in connection with, any accounts receivable or
inventory
<PAGE> 43
9
financing and securing Indebtedness not exceeding U.S.$20,000,000 at any one
time; and (viii) in favor of the Bank.
4.07 Ownership of Borrower and Dividends. The Guarantor shall ensure
that it own and maintain at least 40% of the subscribed and issued common shares
of, and control the management of, the Borrower, and that, if any Default shall
occur and be continuing, the Borrower shall not declare or pay dividends or make
any distributions to its shareholders.
4.08 Debt-Equity Ratio. The Guarantor shall not permit the Debt-Equity
Ratio (as defined in the following sentence) to exceed 6:1 at any time.
"Debt-Equity Ratio" shall mean, at any time, the ratio of total liabilities to
total equity of the Guarantor and "total liabilities" and "total equity", as
used herein, shall have the respective meanings assigned to such term under
generally accepted accounting principles in Korea applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 4.01.
Section 5. Miscellaneous.
5.01 No Waiver. No failure on the Part of the Bank or any of its agents
to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Bank or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
5.02 Governing Law. This Guarantee Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, United States of
America.
5.03 Notice. All notice requests, consents and demands hereunder shall
be in writing and telexed, telecopied or delivered to the intended recipient at
the "Address for Notices" specified beneath its name on the signature pages
hereof or, as to any party, at such other address as shall be designated by such
party in a notice to each other party. Except as otherwise provided in this
Guarantee Agreement, all such communications shall be deemed to have been duly
given when transmitted by telex or telecopier (provided such transmission by
telecopy is accompanied by or generates a simultaneous confirmation of
transmission) or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
5.04 Amendments, Waivers, Etc. The terms of this Guarantee Agreement
may be waived, altered or amended only by an instrument in writing duly executed
by the Guarantor and the Bank. Any such amendment or waiver shall be binding
upon the Bank, each holder of any of the Guaranteed Obligations and the
Guarantor.
5.05 Successors and Assigns. This Guarantee Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Guarantor, the Bank and
<PAGE> 44
10
each holder of any of the Guaranteed Obligations (provided, however, that the
Guarantor shall not assign or transfer its rights or obligations hereunder
without the prior written consent of the Bank).
5.06 Counterparts. This Guarantee Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Guarantee
Agreement by signing any such counterpart.
5.07 Severability. If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Bank in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
5.08 Stamp Tax, Etc. The Guarantor agrees to pay all stamp and other
duties and taxes imposed by any taxing authority on this Guarantee Agreement and
shall indemnify the Bank against all liabilities, costs, claims and expenses
resulting from any omission to pay or delay in paying any such duty or tax.
5.09 Jurisdiction; Service of Process. Any action or proceeding against
the Guarantor with respect to this Guarantee Agreement or any judgment entered
by a court in respect thereof may be brought in any court of or in the State of
New York, Singapore or Korea as the Bank in its sole discretion may elect, and
the Guarantor submits to the non-exclusive jurisdiction of each such court for
the purpose of any such action. The Guarantor hereby irrevocably designates,
appoints and empowers Anam USA, Inc., located at Goshen Corporate Park 1345,
Enterprise Drive, West Chester, PA 19380, U.S.A., as its authorized agent to
receive for and on its behalf and on behalf of its properties and assets service
of process in the State of New York. Such service shall be deemed completed upon
delivery thereof to the relevant process agent whether or not said agent
transmits the same to the Guarantor and the Guarantor agrees that the failure of
the Guarantor to receive a copy of any process shall not affect in any way the
validity of such service or of any judgment based thereon. The Guarantor agrees
that it will at all times maintain in New York, New York or in such other state
of the United States as the Bank shall agree an agent for service of process in
connection with any such action against the Guarantor, which agent shall be
reasonably acceptable to the Bank. The Guarantor irrevocably consents to the
service of process in any action in said courts by the mailing thereof by the
Bank by registered or certified mail, postage prepaid, to the Guarantor at its
address specified herein, or in any other manner permitted by law. Without
limiting the foregoing, the Guarantor agrees that the Bank may at its option
submit any dispute in connection with this Guarantee Agreement to any other
court having jurisdiction over the Guarantor or the Guarantor's property. The
Guarantor irrevocably waives any objection which it may now or hereafter have to
any such action relating to this Guarantee Agreement on the ground of improper
venue or inconvenient forum.
<PAGE> 45
11
5.10 Judgment Currency. This is a guaranty of an international loan
transaction in which the specification of Dollars and payment in New York, New
York are of the essence, and Dollars shall be the currency of account in all
events. In the event that any payment is received by the Bank hereunder, whether
pursuant to a judgment or otherwise, in a currency other than Dollars, the
Guarantor hereby agrees to indemnify the Bank, against any resulting shortfall
(and the Bank shall have a separate cause of action therefor).
5.11 Set-Off. The Guarantor expressly agrees that the Bank may at any
time set off or apply any and all deposits by the Guarantor with such Person or
any of its branches or affiliates (whether general or special, time or demand,
matured or unmatured, in whatever currency) against any amount or amounts due
and unpaid by the Guarantor under this Guarantee Agreement.
<PAGE> 46
12
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee
Agreement to be duly executed and delivered as of the day and year first above
written.
ANAM INDUSTRIAL CO., LTD.
By:
---------------------------------
Name:
Title:
Address for Notices:
280-8, 2-ka
Sungsu-dong
Sungdong-ku
Seoul
Korea
Attention: Mr. K.H. Kim
Telex: K27381, K26540
Telecopier: (822) 460-5127
Telephone: (822) 460-5179
<PAGE> 47
13
THE KOREA DEVELOPMENT BANK
as Bank
By:
-------------------------------------------
Name:
Title:
Head Office
10-2, Kwanchol-dong
Chongno-ku
(C.P.O. Box 29)
Seoul, Korea
Attention: Manager, International Loan Dept.
Telex: K26544/K27463 KODBANK
Telecopier: (822) 723-0386, 733-2971
Telephone: (822) 398-6312
<PAGE> 48
Exhibit C
[FORM OF OPINION OF PHILIPPINE COUNSEL THE BANK]
____________, 1996
To: The Korea Development Bank
as Bank
party to the Loan Agreement
referred to below
Ladies and Gentlemen:
We have been requested to issue to you this opinion as your special
Philippine counsel in connection with the Loan Agreement dated as of March 28,
1996 (the "Loan Agreement") between Amkor/Anam Pilipinas, Inc. (the "Borrower")
and The Korea Development Bank as Bank, providing for the making of loans by the
Bank to the Borrower in an aggregate principal amount not exceeding
U.S.$71,250,000.00. This opinion is delivered to you pursuant to Section 6.01(d)
of the Loan Agreement. Terms defined in the Loan Agreement have their respective
defined meanings when used herein.
In connection therewith, we have examined the Constitution, laws and
regulations of the Republic of the Philippines and the following documents:
(a) a copy of the executed Loan Agreement;
(b) a copy of the executed Guarantee;
(c) Certified True Copies of the Articles of Incorporation and
By-Laws of the Borrower;
(d) an original of the Secretary's Certificate dated 15 March 1996
containing the Board Resolutions adopted during, the meeting
of the Board of Directors of the Borrower authorizing the
execution, delivery with, performance of the Loan Agreement;
(e) Certified True Copies of various General Information Sheets
filed with the Securities and Exchange Commission (SEC) for
the Fiscal Years Ending July 2, 1995, December 24,1994,
December 26,1993, December 27, 1992, December 29, 1991 and
December 30, 1990;
<PAGE> 49
2
(f) Environmental Compliance Certificate issued by the Department
of Environmental and Natural Resources (DENR);
(g) Certified True Copy of the Certificate of Registration No. EP
94-061 issued by the Board of Investments on 23 March 1994,
certifying that the Board has duly registered Amkor/Anam
Pilipinas, Inc. in accordance with the provisions of the
Omnibus Investments Code of 1987, together with the General
Terms and Conditions for registration and the Annual/Semestral
Report On Actual Operations for the year starting January 1,
1995 to December 31, 1995;
(h) Certified True Copy of the Mayor's Permit & Business License
issued by the City of Muntinlupa, effective up to December 31,
1996;
(i) Certified True Copy of the Certificate of Registration of
Business Name issued by the Department of Trade and Industry,
effective up to June 25, 1999;
(j) Certified True Copy of the Certificate of Accreditation issued
by the Bureau of Export Trade Promotion with Accreditation No.
BOI-95-0104, certifying that the corporation is an eligible
exporter satisfying the requirements of Republic Act No. 7844,
otherwise known as the Export Development Act, and its
implementing rules and regulations, which Certificate is valid
until 18 August, 1996;
(k) a copy of an executed U.S.$50,000,000.00 Loan Agreement dated
as of September 7, 1995 between Amkor/Anam Pilipinas, Inc., as
Borrower, The Korea Development Bank, as Lender and KDB Asia
Limited, as Agent;
(l) a copy of an executed U.S.$40,000,000.00 Guaranteed Floating
Rate Notes due February 2000 of Amkor/Anam Pilipinas, Inc.
guaranteed by Anam Industrial Co., Ltd.;
(m) a copy of an executed Mortgage Trust Indenture dated July 29,
1992 between Amkor/Anam Pilipinas, Inc. and PCIBank - Trust
Services, as Trustee;
(n) a copy of a Real Estate Mortgage executed by IMI Realty, Inc.
to secure a U.S.$5,000,000.00 loan granted by Bank of the
Philippine Islands in favor of Amkor/Anam Pilipinas, Inc.;
(o) Certified True Copies of pleadings, judgments and/or decisions
or documents relative to any cases filed or threatened in any
court, tribunal or arbitral body or quasi-judicial body in the
Philippines;
(p) Certified True Copy of a letter from the Central Bank of the
Philippines approving the loan and containing the various
conditions for such approval.
<PAGE> 50
3
In the examination of the documents made available to us, we have
assumed the genuineness of all signatures and the authenticity of all documents
submitted to us as originals, and the accurate conformity with the originals of
all documents submitted to us as copies or and we have found nothing to indicate
that such assumptions are not fully justified. As to any other matters of fact
material to the opinions expressed herein, we have relied upon certificates or
statements of officers and other representatives of the Borrower.
Based upon the foregoing, and subject to the qualifications set forth
below, and having due regard to such legal considerations as we deem relevant,
we are of the opinion that:
1. The Borrower is a corporation duly organized and validly existing
under the laws of the Philippines and has full power and authority to own
property and assets, to carry on business as now being conducted, and to enter
into and perform the Loan Agreement.
In this connection, we have examined the following documents furnished
to us by Amkor/Anam Pilipinas, Inc., to wit:
a. Certified true copy of a Certification dated 28 February 1996
issued by the Director of the Administrative and Finance
Department of the Securities and Exchange Commission (SEC),
certifying that the Borrower has not been dissolved by action
of its stockholders and that the SEC has not received any
information derogatory to the good standing of the Borrower in
the Philippines which would prevent it from conducting its
normal corporate franchise;
b. Certified true copy of the Articles of Incorporation of
Advanced Micro Devices (Philippines) Inc. dated 16 August 1976
which was subsequently amended to change the name of the
Borrower to Amkor/Anam Pilipinas, Inc.;
c. Certified true copies of two (2) separate Certificates issued
by the SEC of the Filing of Amended Articles of Incorporation
and the Filing of By-Laws of Amkor/Anam Philipinas, Inc.
(formerly: Advanced Micro Devices (Philippines, Inc.) both
dated 31 May 1989 whereby Article 1 of the Articles of
Incorporation (Name of the Corporation) was amended, and
photocopies of the Amended Articles of Incorporation and
By-Laws attached to the said Certificates;
d. Certified true copy of the Certificate of Filing of
Certificate of Increase of Capital Stock dated 22 March 1991
issued by the SEC;
e. Certified, true copy of the Certificate of Filing of Amended
Articles of incorporation dated 30 September 1993 whereby
Article VII of the Articles of Incorporation was amended to
increase the authorized capital stock of the Borrower to
P93,500,000.00, and photocopies of the Amended Articles of
incorporation and By-Laws;
<PAGE> 51
4
f. Certified true copy of the Certificate of Amendment of
Articles of Incorporation and By-Laws dated 25 August 1995,
certifying, among others, that the authorized capital stock of
the Borrower was increased to P153,500,000.00, and photocopies
of the Amended Articles and By-Laws;
g. Certified true copies of various General Information Sheets
filed with the SEC for the Fiscal Years Ending July 2, 1995,
December 24, 1994, December 26, 1993, December 27, 1992,
December 29, 1991 and December 30, 1990;
h. Certified true copy of the Certificate of Registration No. EP
94-061 issued by the Board of Investments on 23 March 1994,
certifying that the Board has duly registered Amkor/Anam
Pilipinas, Inc. in accordance with the provisions of the
Omnibus Investments Code of 1987, together with the General
Terms and Conditions for registration and the Annual/Semestral
Report On Actual Operations for the year starting January 1,
1995 to December 31, 1995;
i. Certified true copy of the Mayor's Permit & Business License
issued by the City of Muntinlupa, effective up to December 31,
1996;
j. Certified true copy of the Certificate of Registration of
Business Name issued by the Department of Trade and Industry,
effective up to June 25, 1909; and
k. Certified true copy of Certificate of Accreditation issued by
the Bureau of Export Trade Promotion with Accreditation No.
BOI-95-0104, certifying that the Borrower is an eligible
exporter satisfying the requirements of Republic Act No. 844,
otherwise known as the Export Development Act, and its
implementing rules and regulations, which Certificate is valid
until 18 August, 1996.
2. The making and performance by the Borrower of the Loan
Agreement:
(i) have been duly authorized by all necessary corporate
and other action of the Borrower pursuant to the
Secretary's Certificate dated 15 March, 1996
containing the Board Resolutions adopted during the
meeting of the Board of Directors of the Borrower
authorizing the execution, delivery and performance
of the Loan Agreement.
(ii) do not and will not violate any provision of the
Articles of Incorporation, ByLaws, or other
equivalent documents, of the Borrower, or of
applicable laws or regulations of the Philippines, or
of any judgment, decree, order or award of any court,
regulatory body or arbitral tribunal known to us, and
(iii) do not and will not result in the breach of, or
constitute a default under or require any waiver or
consent under, any loan agreement, indenture or
<PAGE> 52
5
other agreement, instrument or document whatsoever
known to us to which the Borrower is a party or by
which it or any of its property, assets or revenues
may be bound or affected.
In regard to paragraph 2(iii) above, we have examined the following
documents furnished to us by Amkor/Anam Pilipinas, Inc., to wit:
a. U.S.$50,000,000.00 Loan Agreement dated as of September 7,
1995 between Amkor/Anam, Pilipinas, Inc., as Borrower, The
Korea Development Bank, as Lender and KDB Asia Limited, as
Agent;
b. U.S.$40,000,000.00 Guaranteed Floating Rate Notes due February
2000 of Amkor/Anam Pilipinas, Inc. guaranteed by Anam
Industrial Co., Ltd.;
c. Mortgage Trust Indenture dated July 29, 1992 between
Amkor/Anam Pilipinas, Inc. and PCIBank - Trust Services, as
Trustee; and
d. Real Estate Mortgage executed by IMI Realty, Inc. to secure a
U.S.$5,000,000.00 loan granted by Bank of the Philippine
Islands in favor of Amkor/Anam Pilipinas, Inc.
3. Assuming that the Loan Agreement is legal, valid and enforceable
(subject to customary qualifications) under the laws of the State of New York by
which it is expressed to be governed, the Loan Agreement constitutes the legal,
valid and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its terms.
4. All consents, approvals, licenses and authorizations (including any
applicable foreign exchange approvals) of, any submissions to and registrations
with, any governmental authority required under applicable laws and regulations
of the Philippines for the making and performance by the Borrower of the Loan
Agreement have been obtained or made and are in full force and effect, (except
that the Borrower is required to file a report with Bangko Sentral ng Pilipinas
setting forth the amount of each borrowing under the Loan Agreement).
5. The Loan Agreement is the direct and unconditional general
obligation of the Borrower, ranking in right of payment and collateral security
at least pari passu with all other unsecured Indebtedness of the Borrower,
except as regards statutory preferences which are applicable generally to
corporations established under Philippine law.
The Loan Agreement, being an unsecured indebtedness of the Borrower,
enjoys no preference with respect to any specific movable or immovable property
of the Borrower. However, the credit under the Loan Agreement, if appearing in a
public instrument, may fall within the purview of Article 2244 of the New Civil
Code of the Philippines, the pertinent portion of which reads:
<PAGE> 53
6
"Act. 2244. With reference to other property, real and
personal, of the debtor, the following claims or credits shall be
preferred in t he order named:
(14) Credits which, without special privilege, appear (a) in a
public instrument; or (b) in the final judgment, if they have been the
subject of litigation. These credits shall have preference among
themselves in the order of priority of the dates of the instruments and
of the judgments, respectively."
If the indebtedness is not made to appear in a public instrument, then
it shall fall under the pertinent provision of Article 2245 of the New Civil
Code of the Philippines, to wit:
"Art. 2245. Credits of any other kind or class or by any other
right or title not comprised in the four preceding articles, shall
enjoy no preference."
In the order of preference of credits, an unsecured indebtedness which
appears in a public instrument enjoys preference over an unsecured indebtedness
which does not appear in a public instrument pursuant to Article 2251 of the New
Civil Code of the Philippines, which reads:
"Art. 2251. Those credits which do not enjoy any preference
with respect to specific property, and those which enjoy preference, as
to the amount not paid, shall be satisfied according to the following
rules:
(1) In the order established in article 2244;
(2) Common credits referred to in article 2245 shall be paid
pro rata regardless of dates."
6. To the best of our knowledge, information and belief, there is no
suit, action, tax claim or proceeding at law or in equity, now pending before
any court, governmental agency or authority or arbitral tribunal or threatened
against, or affecting the Borrower or any of its property, assets or revenues
which, if adversely determined, would materially and adversely affect the
financial condition of the Borrower or the ability of the Borrower to perform or
observe its obligations under the Loan Agreement.
7. The Borrower is subject to civil and commercial laws of the
Philippines with respect to its obligations under the Loan Agreement, and the
making and performance by the Borrower of the Loan Agreement constitute private
and commercial acts rather than governmental or public acts; and neither the
Borrower nor any of its property, assets or revenues enjoys any right of
immunity from suit, court jurisdiction, attachment prior to judgment, attachment
in aid of execution, set-off, enforcement and execution of judgments or orders,
or from any other legal process with respect to its obligations under the Loan
Agreement. The Borrower's agreement in the Loan Agreement to waive and not to
claim any immunity, to which it or any of its property, assets or revenues may
be or become entitled, is legal, valid and binding under the laws of the
Philippines.
<PAGE> 54
7
8. There is no withholding or other tax or charge applicable to any
payment to made by the Borrower pursuant to the terms of the Loan Agreement or
imposed on the Bank by virtue of the execution and delivery of the Loan
Agreement. Based on Article 11 of the "Convention Between The Republic of Korea
And The Republic of The Philippines For The Avoidance of Double Taxation And The
Prevention of Fiscal Evasion With Respect To Taxes On Income", interest payments
received by the Bank under the Loan Agreement will be exempt from Philippine
withholding tax. The Borrower's obligation under the Loan Agreement to make
payments thereunder free and clear of and without reduction by reason of Taxes,
in the event that the Philippines or any governmental sub-division thereof
should in the future impose (or, as the case may be, increase) any such tax,
withholding or charge, whether by change in law, regulation or the
interpretation thereof so that the Bank shall receive the amount due as if no
such tax, withholding or charge, whether by change in law, regulation or the
interpretation thereof so that the Bank shall receive the amount due as if no
such tax, withholding or charge had been imposed, is valid and binding on the
Borrower.
9. The Loan Agreement is subject to documentary stamp tax pursuant to
Section 173 of Republic Act No. 7660, as amended, in the amount provided in
Section 6 of Revenue Regulations No. 9-94 which is "thirty centavos (P0.30) on
each two hundred pesos, or fractional part thereof, of the face value" of the
Loan Agreement.
Other than the documentary stamp tax, no other tax is payable in
respect of the execution and delivery of the Loan Agreement.
10. Under the laws of the Philippines, the choice of New York law to
govern the validity, construction and performance of the Loan Agreement is a
valid choice.
11. The submission of the Borrower in the Loan Agreement to the
jurisdiction of the courts in the State of New York and Korea referred to
therein constitutes the legal and valid undertaking of the Borrower and does not
contravene any provision of the laws of the Philippines.
12. It is not necessary or advisable under; the laws of the
Philippines, in order to assure the validity, effectiveness and enforceability
of the Loan Agreement or any part thereof, that the Loan Agreement be registered
or recorded in any public office or agency, or that any other instrument-
relating thereto be executed, delivered, registered or recorded in the
Philippines.
13. It is not necessary under the laws of the Philippines, in order to
enable the Bank or any of its successors or assigns to enforce its rights under
the Loan Agreement, that any such Person should be licensed, qualified or
otherwise entitled to carry on business in the Philippines.
14. Neither the Bank nor any of its successors or assigns are or will
be deemed to be resident, domiciled or carrying on business in the Philippines
by reason of the execution, delivery, performance and/or enforcement of the Loan
Agreement.
Our opinions expressed herein are subject to the following reservations
and qualifications:
<PAGE> 55
8
A. The binding effect and/or enforceability of the obligations of
the Loan Agreement may be limited or affected by the
bankruptcy, insolvency, liquidation, reorganization or
reconstruction of the Borrower pursuant to the current laws
and regulations of the Philippines which affect the validity
and enforcement of creditors' rights generally; and
B. Nothing in this letter/opinion should be taken as indicating
that the remedies of specific performance or injunction (being
in some instances discretionary remedies of the court) would
necessarily or readily be available with respect to any
particular provision of the Loan Agreement in any particular
instance.
We express no opinion as to any law other than the laws of the
Philippines as in effect on the date hereof. This opinion is directly addressed
to you and may be relied upon and availed of only by you and your counsel.
Very truly yours,
PUNO AND PUNO
By:
REGIS V. PUNO
<PAGE> 56
EXHIBIT D
[FORM OF OPINION OF SPECIAL KOREAN COUNSEL TO THE BANK]
________________, 1996
To: The Korea Development Bank,
as Bank
party to the Loan Agreement
referred to below
Ladies and Gentlemen:
We have acted as your special Korean counsel in connection with the
Guarantee Agreement dated as of March 28, 1996 (the"'Guarantee") between Anam
Industrial Co., Ltd. (the "Guarantor") and the Bank (as defined below) relating
to the Loan Agreement dated as of March 28, 1996 (the "Loan Agreement") between
Amkor/Anam Pilipinas, Inc. (the "Borrower") and The Korea Development Bank, as
Bank (the "Bank"), providing for the making of loans by the Bank to the Borrower
in an aggregate principal amount not exceeding U.S.$71,250,000. Terms defined in
the Loan Agreement have their respective defined meanings when used herein.
In rendering the opinions expressed below, we have examined the
following documents:
(a) an executed copy of the Loan Agreement;
(b) an executed copy of the Guarantee:
(c) certified copies of the articles of incorporation and
corporate registry extracts of the Guarantor; and
(d) a certified copy of the minutes of a meeting of the Board of
Directors of the Guarantor authorizing the execution, delivery
and performance of the Guarantee.
In addition, we have examined such other documents and records and such
matters of law as we have deemed appropriate as a basis for the opinions
hereinafter expressed.
<PAGE> 57
2
In such examination, we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as originals, and the
conformity with the originals of all documents submitted to us as copies
thereof, and we have found nothing to indicate that such assumptions are not
fully justified. As to any other matters fact material to the opinions expressed
herein, we have relied upon certain certificates or statements of officers and
other representatives of the Guarantor.
Based upon the foregoing, and subject to the qualifications set forth
below, and having regard to such legal considerations as we deem relevant, we
are of the opinion that:
1. The Guarantor is a corporation duly organized and validly existing
under the laws of Korea and has full power and authority (corporate and
otherwise) to own Property and assets, to carry on business as now being
conducted and to make and perform the Guarantee.
2. The making and performance by the Guarantor of the Guarantee (i)
have been duly authorized by all necessary corporate and other action of the
Guarantor, (ii) do not and will not violate any provision of the articles of
incorporation, or equivalent documents, of the Guarantor or of applicable laws
or regulations of Korea or, of any judgment, decree, order or award of any
court, regulatory body or arbitral tribunal known to us, and (iii) do not and
will not result in the breach of, or constitute a default under or require any
waiver or consent under, any loan agreement, indenture or other agreement,
instrument or document whatsoever known to us to which the Guarantor is a party
or by which, it or any of its property, assets or revenues may be bound or
affected. Mr. ____________of Anam Industrial Co., Ltd. has been duly authorized
to execute and deliver the Guarantee and all other documents, certificates,
notices and other instruments on behalf of the Guarantor required by the terms
of the Loan Agreement or the Guarantee and such person's signature thereon
legally binds the Guarantor.
3. Assuming that the Guarantee is legal, valid and enforceable under
the law of the State of New York by which it is expressed to be governed, the
Guarantee constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms.
4. All consents, approvals, licenses and authorizations (including,
without limitation, all foreign exchange approvals) of, and filings and
registrations with, any governmental authority required under applicable laws
and regulations of Korea for (i) the making and performance by the Guarantor of
the Guarantee, and (ii) the Guarantee to be admissible in evidence in Korea have
been obtained or made and are in full force and effect; provided, however, that
each actual payment by the Guarantor under the Guarantee will require a separate
payment authorization of the Guarantor's designated foreign exchange bank (the
"Designated Bank"). The granting of any such authorization is largely an
administrative act in nature designed in order for the Designated Bank to verify
that the amount being remitted conforms to the amount required to be remitted
under the Guarantee as initially approved by the Designated Bank and,
accordingly, such authorization should be readily granted for all payments by
the Guarantor under the Guarantee that do so conform. We note that any amendment
to the Guarantee or any
<PAGE> 58
3
assignment thereof resulting in a conflict with the initial approval of the
Designated Bank would require a separate approval of the relevant authority at
the time of such amendment or assignment. We also note that in order to be
admitted in evidence by a court in Korea, documents submitted to the court must
be in the Korean language or accompanied by a Korean language translation.
5. The Guarantee is the direct and unconditional general obligation of
the Guarantor, ranking in right of payment and collateral security at least pari
passu with all other unsecured Indebtedness of the Guarantor except for
statutory preferences which are applicable generally to corporations established
under Korean law.
6. The Guarantor is subject to civil and commercial law of Korea with
respect to its obligations under the Guarantee, and the making and performance
by the Guarantor of the Guarantee constitute private and commercial acts rather
than governmental or public acts; and neither the Guarantor nor any of its
property, assets or revenues enjoys any right of immunity from suit, court
jurisdiction, attachment prior to judgment, attachment in aid of execution,
setoff, execution or from any other legal process with respect to its
obligations under the Guarantee.
7. There is no tax of any kind due in connection with the execution and
delivery of the Guarantee, and there is no withholding or other tax or charge
applicable to any payment to be made by the Guarantor pursuant to the terms of
the Guarantee or imposed on the Bank (other than the tax to be imposed on the
overall net income of the Bank) by virtue of the execution and delivery of the
Guarantee, except that the stamp tax in the amount of W350,000 would be payable
on the execution of the Loan Agreement to the extent executed in Korea. The
Guarantor's obligation under the Guarantee to make payments thereunder free and
clear of and without reduction by reason of Taxes (including any such Tax set
forth in the preceding sentence) and including in the event that Korea or any
governmental subdivision thereof should in the future impose (or, as the case
may be, increase) any such tax, withholding or charge, whether by change in law,
regulation or the interpretation thereof so that each Bank shall receive the
amount due as if no such tax, withholding or charge had been imposed, is valid
and binding on the Guarantor.
8. Under the laws of Korea, the choice of New York law to govern the
validity, construction and performance of the Guarantee is a valid choice of
law. We note, however, that in the event of an action, proceeding or litigation
in a Korean court, (a) Korean law bearing upon the capacity of the Guarantor to
enter into contracts and (b) Korean laws, decrees and administrative regulations
requiring governmental approvals, authorizations and consents for actions or
contracts executed by the Guarantor, will be applied by the Korean court.
9. The submission of the Guarantor in the Guarantee to the jurisdiction
of New York and United States courts referred to therein constitutes the legal
and valid undertaking of the Guarantor and does not contravene any provision of
the laws of Korea.
<PAGE> 59
4
10. It is not necessary or advisable under the laws of Korea, in order
to assure the validity, effectiveness and enforceability of the Guarantee or any
part thereof, that the Guarantee be filed, registered or recorded in any public
office or elsewhere, or that any other instrument relating thereto be executed,
delivered, filed, registered or recorded in Korea.
Our opinions expressed above are subject to the following reservation
qualifications:
(A) The binding effect of the obligations of the Guarantor under
the Guarantee may be limited or affected by the bankruptcy,
insolvency, liquidation, reorganization or reconstruction of
the Guarantor Pursuant to the bankruptcy laws or other similar
laws of Korea which affect the enforcement of creditors'
rights generally; and
(B) Nothing in this letter should be taken as indicating that the
remedies of specific performance or injunction (being in some
instances discretionary remedies of the court) would
necessarily be available with respect to any particular
provision of the Guarantee in any particular instance.
As we are duly licensed attorneys of Korea and do not represent
ourselves to be familiar with the laws of the United States of America or any
state thereof, or the laws of any jurisdiction other than Korea, we express no
opinion in respect of any of such laws other than the laws of Korea as in effect
on the date hereof. We have assumed that there is nothing in the law of any
jurisdiction other than Korea that affects this opinion.
This opinion is limited to the matters addressed herein and is not to
be read as an opinion with respect to any other matter.
This opinion is addressed to you and may be relied upon only by you and
your counsel.
Very truly yours,
Kim & Chang
<PAGE> 60
EXHIBIT E
[FORM OF SPECIAL NEW YORK COUNSEL TO THE BANK]
_______________, 1996
Re: Loan Agreement dated as of March 28, 1996
between Amkor/Anam, Pilipinas, Inc., as
Borrower, and The Korea Development Bank, as
Bank
The Korea Development Bank,
as Bank
party to the Loan Agreement
referred to below
Ladies and Gentlemen:
We have acted as your special New York counsel in connection with the
Loan Agreement dated as of March 28, 1996 (the "Loan Agreement") between
Amkor/Anam Pilipinas Inc., as Borrower and The Korea Development Bank, as Bank.
Terms defined in the Loan Agreement are used herein with the same meanings. In
this connection, we have examined an executed copy of each of the Loan Agreement
and the Guarantee (collectively, the "Documents").
We have also reviewed such other documents and such matters of law as
we have considered relevant hereto (and in such examination and review we have
assumed the genuineness of all signatures, the authenticity of documents
submitted to us as originals and the conformity, with the original documents of
all documents submitted to us as copies). With your permission and without
independent investigation, we have assumed for purposes of our opinion set forth
below that with respect to each party to any of the Documents, (i) such party is
duly organized and validly existing in the jurisdiction of its organization,
(ii) such party has full power, authority, and legal right to make and perform
the Documents to which it is a party, (iii) each of the Documents to which it is
a party has been duly authorized, executed and delivered by it, (iv) all
consents, approvals, licenses. and authorizations of, or filings and
registrations with, any governmental authority required under any law or any of
such party's corporate or other organizational documents or any agreement or
instrument to which it is a party or that binds or affects it or any of its
property, for the making and performance by such party of any of the Documents
to which it is a party and the consummation of the transactions contemplated by
such Documents have been obtained or made and are valid and sufficient for their
intended purposes and in full force and effect, and (v) except with respect to
the Borrower in respect of the Loan Agreement and the Guarantor in respect of
the Guarantee, each Document to which it is a part constitutes its legal, valid
and binding obligation. As to certain of the foregoing matters, we understand
you have obtained the opinions of Kim & Chang, in respect of certain Korean
legal matters, and Puno & Puno, in respect of certain Philippine legal matters.
<PAGE> 61
2
Based on and subject to the foregoing, and further subject to the
qualifications set forth below, and having due regard for legal considerations
we deem relevant, it is our opinion that, under the law of the State of New
York, (i) the Loan Agreement constitutes the valid and binding obligation of the
Borrower enforceable against the Borrower and (ii) the Guarantee constitutes the
valid and binding obligation of the Guarantor enforceable against the Guarantor,
in each case in accordance with the terms of the Loan Agreement and the
Guarantee, respectively, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally. Our opinion as to enforceability is further subject
to (i) general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including (a) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy, and (b)
concepts of materiality, reasonableness, good faith and fair dealing, and (ii)
in view of each party to each of the Documents being a non-U.S. Person, the
possible judicial application of non-U.S. laws or governmental actions affecting
the enforcement of creditors' rights.
We express no opinion herein as to (i) the subject matter jurisdiction
of the District Courts of the United States of America to adjudicate any
controversy relating to any of the Documents; (ii) any provision of any of the
Documents to the extent that it provides an indemnity for payment in a currency
other than U.S. Dollars; (iii) whether a court outside of the State of New York
would honor the choice of New York law in any of the Documents; (iv) the waiver
of immunity in Section 10.11 of the Loan Agreement or Section 3.09 of the
Guarantee to the extent such waiver purports to apply to immunity acquired by
any party after the date of the Loan Agreement or the Guarantee, respectively;
and (v) the last sentence in Section 10.12 of the Loan Agreement or in Section
5.09 of the Guarantee insofar as it constitutes either a waiver of forum non
conveniens in respect of the United States District Court referred to in said
Section 10.12 of the Loan Agreement or Section 5.09 of the Guarantee of a waiver
of the right to object to improper venue.
We do not herein express any opinion as to any law other than the law
of the State of New York and the Federal law of the United States of America. In
rendering the foregoing opinions we have assumed that enforcement of the
Documents in accordance with New York law would not violate any provision of any
law or public policy of Korea, the Republic of Philippines or any other
jurisdiction (other than the State of New York) that bears a reasonable relation
to the Documents or the parties thereto. This opinion may be relied upon solely
by you.
Very truly yours,
YJK/GSG
<PAGE> 1
EXHIBIT 10.7
EXECUTION COPY
================================================================================
LOAN AGREEMENT
US$50,000,000
dated as of September 7, 1995
between
AMKOR/ANAM PILIPINAS, INC.
as Borrower
THE KOREA DEVELOPMENT BANK
as Lender
and
KDB ASIA LIMITED
as Agent
- --------------------------------------------------------------------------------
Lee & Ko
Seoul, Korea
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1. Interpretation.............................................1
Section 2. The Facility...............................................4
Section 3. The Drawdowns..............................................5
Section 4. Interest...................................................6
Section 5. Repayment, Prepayment and Cancellation.....................7
Section 6. Fees and Expenses..........................................8
Section 7. Payments and Evidence of Debt..............................9
Section 8. Market Disruption.........................................10
Section 9. Change of Law or Circumstances............................11
Section 10. Taxes and Other Deductions................................12
Section 11. Representations and Warranties............................12
Section 12. Covenants.................................................14
Section 13. Events of Default.........................................16
Section 14. Default Interest..........................................19
Section 15. Indemnities...............................................19
Section 16. Lender and Agent..........................................20
Section 17. Assignment................................................23
Section 18. Governing Law and Jurisdiction............................23
Section 19. Miscellaneous.............................................24
</TABLE>
SCHEDULE
CONDITIONS PRECEDENT DOCUMENTS
EXHIBITS
EXHIBIT A FORM OF NOTICE OF DRAWDOWN
EXHIBIT B FORM OF GUARANTY
<PAGE> 3
LOAN AGREEMENT
THIS AGREEMENT is made on the 7th day of September, 1995
BETWEEN:
(1) AMKOR/ANAM PILIPINAS, INC., a corporation duly organized and existing under
the laws of the Republic of Philippines with its registered head office at
KM 22 East Service Road, South Superhighway, Muntinlupa, Metro Manila,
Philippines, as borrower ("BORROWER");
(2) THE KOREA DEVELOPMENT BANK, of 10-2, Kwanchol-dong, Chongno-ku, Seoul,
Korea, as lender ("LENDER"); and
(3) KDB ASIA LIMITED of Suite 2101-2103, Two Exchange Square, 8 Connaught
Place, Hong Kong as agent ("AGENT").
IT IS HEREBY AGREED as follows:
SECTION 1. INTERPRETATION
1.1 Definitions. In this Agreement, unless the context requires otherwise:
"AFFILIATE" means any person directly or indirectly controlling, directly
or indirectly controlled by, or under direct or indirect common control
with, Borrower. For purposes of this definition, "CONTROL" (including
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the power, directly
or indirectly, to direct or cause the direction of the management and
policies of any person whether through the ownership of voting securities
or by contract or otherwise;
"AVAILABILITY PERIOD" means the period commencing on the date of this
Agreement and ending on the earlier of (i) the date nine (9) months from
the date of this Agreement, and (ii) the date on which the Facility is
fully drawn, cancelled or terminated under the provisions of this
Agreement;
"BANKING DAY" means a day (excluding Saturday or Sunday) on which banks are
open for business in London and New York City, provided that in relation to
any period of notice it shall mean such a day in Seoul, London and New York
City;
"CENTRAL BANK" means the Bangko Sentral ng Pilipinas;
"DEBT-EQUITY RATIO" means, at any time, the ratio of total liabilities to
total equity of Borrower at such time. As used in this definition, the
terms "TOTAL LIABILITIES" and "TOTAL EQUITY" shall have the respective
meanings assigned to them by generally accepted accounting principles
applied on a basis consistent with those used in the
<PAGE> 4
preparation of the financial statements referred to in Section 11.10,
provided that the term "TOTAL LIABILITIES" shall include any and all debts
of Borrower regardless of the nature or maturity thereof (including without
limitation the Loan from time to time outstanding hereunder) and, provided,
further, that the term "TOTAL EQUITY" shall not in any event include
appraisal surplus, if any, of Borrower;
"DOLLARS" and "US$" mean the lawful currency of the United States of
America;
"DRAWDOWN" means each drawdown under the Facility pursuant to Section 3 or,
where the context so requires, the amount of such drawdown;
"ENCUMBRANCE" means:
(a) any mortgage, charge, pledge, lien, encumbrance, hypothecation or
other security interest or security arrangement of any kind;
(b) any arrangement whereby any rights are subordinated to any rights of
any third party; and
(c) any contractual right of set-off;
"EVENT OF DEFAULT" means any event or circumstance specified as such in
Section 13; and "PROSPECTIVE EVENT OF DEFAULT" means any event or
circumstance which with the giving of notice and/or the passage of time
and/or the making of any relevant determination and/or the forming of any
necessary opinion would be an Event of Default;
"FACILITY" means the loan facility to be made available under this
Agreement;
"GUARANTOR" means Anam Industrial Co., Ltd., a corporation organized and
existing under the laws of Korea with its registered head office at 280-8,
2-ka, Sungsu-dong, Sungdong-ku, Seoul, Korea;
"GUARANTY" means the joint and several guaranty to be executed by Guarantor
in the form set forth in Exhibit B;
"INTEREST PAYMENT DATE" means the last day of an Interest Period;
"INTEREST PERIOD" means, in relation to the Loan, an interest period
ascertained in accordance with Section 4;
"KOREA" means the Republic of Korea;
"LIBOR" means, in relation to any relevant sum and any relevant period, the
rate which shall be determined by Agent to be the arithmetic mean (rounded
upwards to the nearest 1/16%) of the rates of interest of offered
quotations by principal banks in the London interbank market for deposits
in Dollars for a period equal or comparable to such period as displayed on
the "LIBO" page (or such other page as may replace such "LIBO" page for the
purpose of displaying such rates of interest) of the Reuters
-2-
<PAGE> 5
Monitor Screen as in effect at or about 11:00 a.m. (London time) on the
second London Banking Day before the first day of such period;
"LOAN" means the aggregate principal amount drawn and for the time being
outstanding under the Facility;
"LONDON BANKING DAY" means a day on which Dollar deposits may be dealt in
on the London interbank market;
"MARGIN" means nine-tenths of one percent (0.90%);
"NOTICE OF DRAWDOWN" means a notice in the form set forth in Exhibit A;
"PHILIPPINES" means the Republic of Philippines; and
"REPAYMENT DATE" means the date five (5) years after the date of the
initial Drawdown.
1.2 Construction. In this Agreement, unless the context requires otherwise, any
reference to:
an "AUTHORIZATION" includes any approvals, consents, licenses, permits,
franchises, permissions, registrations, resolutions, directions,
declarations and exemptions;
"INDEBTEDNESS" includes any obligation of any person for the payment or
repayment of money, whether present or future, actual or contingent,
including but not limited to any such obligation:
(a) under or in respect of any acceptance, bill, bond, debenture, note or
similar instrument;
(b) under or in respect of any guarantee, indemnity, counter-security or
other assurance against financial loss;
(c) in respect of the purchase, hire or lease of any asset or service; or
(d) in respect of any indebtedness of any other person whether or not
secured by or benefitting from an Encumbrance on any property or asset
of such person;
"LAW" and/or "REGULATION" includes any constitutional provisions, treaties,
conventions, statutes, acts, laws, decrees, ordinances, subsidiary and
subordinate legislation, orders, rules and regulations having the force of
law and rules of civil and common law and equity and, for the avoidance of
doubt, includes Central Bank circulars;
a "MONTH" means a period starting on one day in a calendar month and ending
on the numerically corresponding day in the next calendar month or (if
there is no such numerically corresponding day or if a period starts on the
last day in a calendar month) on the last day of such next calendar month;
-3-
<PAGE> 6
an "ORDER" includes any judgment, injunction, decree, determination or
award of any court, arbitration or administrative tribunal;
a "PERSON" includes any individual, company, body corporate or
unincorporated or other juridical person, partnership, firm, joint venture
or trust or any federation, state or subdivision thereof or any government
or agency of any thereof;
"TAX" includes any tax, levy, duty, charge, impost, fee, deduction or
withholding of any nature now or hereafter imposed, levied, collected,
withheld or assessed by any taxing or other authority and includes any
interest, penalty or other charge payable or claimed in respect thereof and
"TAXATION" shall be construed accordingly.
1.3 Successors and Assigns. The expressions "BORROWER", "LENDER" and "AGENT"
shall, where the context permits, include their respective successors and
permitted assigns and any persons deriving title under them.
1.4 Miscellaneous. In this Agreement, unless the context requires otherwise,
references to statutory provisions shall be construed as references to
those provisions as replaced, amended, modified or re-enacted from time to
time; words importing the singular include the plural and vice versa and
words importing a gender include every gender; references to this Agreement
shall be construed as references to such document as the same may be
amended, supplemented or novated from time to time; unless otherwise
stated, references to Sections, the Schedule and the Exhibits are to
sections of and the schedule and the exhibits to this Agreement and
references to this Agreement include the Schedule and the Exhibits. Section
headings are inserted for reference only and shall be ignored in construing
this Agreement.
SECTION 2. THE FACILITY
2.1 Amount. Subject to the provisions of this Agreement, the aggregate
principal amount of the Facility available to Borrower is Fifty Million
Dollars (US$50,000,000).
2.2 Purpose. The proceeds of the Facility shall be used exclusively for
financing Borrower's expansion of its semiconductor assembly plants in
Philippines. Neither Agent nor Lender shall have any responsibility for the
application of the proceeds by Borrower.
SECTION 3. THE DRAWDOWNS
3.1 Availability of Drawdowns. Subject to Sections 3.2, 3.3 and 3.4 and the
other terms and conditions of this Agreement, Borrower may make Drawdowns
on any Banking Day during the Availability Period, provided that:
(a) the amount of each Drawdown shall be in the minimum amount of One
Million Dollars (US$1,000,000) or any larger amount being an integral
multiple of One Million Dollars (US$1,000,000); and
-4-
<PAGE> 7
(b) the aggregate principal amount of all Drawdowns shall not exceed the
aggregate principal amount of the Facility available for drawdown
under this Agreement.
3.2 Conditions of Initial Drawdown. The obligation of Lender to make the
Facility available in respect of the initial Drawdown is subject to the
conditions that:
(a) Agent shall have received, before the initial Notice of Drawdown is
given or at such later time as Agent may agree, all of the documents
and evidence specified in the Schedule hereto in form and substance
satisfactory to it. Copies required to be certified shall be certified
in a manner satisfactory to Agent by a duly authorized officer of
Borrower or other party concerned; and
(b) Agent shall have received not later than 12:00 noon (Seoul time) on
the fifth (5th) Banking Day before the date on which such Drawdown is
to be made (or such later time as Agent may agree) a duly completed
and signed Notice of Drawdown.
3.3 Conditions of Subsequent Drawdowns. The obligation of Lender to make the
Facility available in respect of each Drawdown subsequent to the initial
Drawdown is subject to the conditions that:
(a) Agent shall have received a timely Notice of Drawdown in accordance
with the terms, mutatis mutandis, of Section 3.2(b);
(b) Agent shall have received evidence that all Drawdowns previously made
hereunder have been duly registered with the Central Bank; and
(c) all documents and evidence delivered to Agent pursuant to Section
3.2(a) shall be in full force and effect.
3.4 Other Conditions Precedent. The obligations of Lender as described in the
first paragraph of each of Sections 3.2 and 3.3 are also subject to the
conditions that:
(a) no Event of Default or prospective Event of Default shall have
occurred (or would occur as a result of any Drawdown being made) and
all representations and warranties made by Borrower in or in
connection with this Agreement shall be true and correct as at the
date of the making of such Drawdown with reference to the facts and
circumstances then subsisting; and
(b) not later than 11:00 a.m. (Seoul time) on the second (2nd) Banking Day
before the date on which such Drawdown is proposed to be made, Agent
shall have received and found satisfactory such additional
information, legal opinions and documents relating or relevant to this
Agreement as Agent may reasonably require as a result of circumstances
arising or becoming known to Agent since the date of this Agreement.
3.5 Notice of Drawdown Irrevocable. A Notice of Drawdown once given shall be
irrevocable and Borrower shall be bound to make a Drawdown in accordance
-5-
<PAGE> 8
therewith, except as otherwise provided in this Agreement. If for any
reason a Drawdown is not made in accordance with the corresponding Notice
of Drawdown, Borrower shall on demand pay to Agent for the account of
Lender such amount as Lender may certify to be necessary to compensate it
for any loss or expense incurred in liquidating or redeploying funds
arranged for the purpose of the proposed Drawdown or otherwise as a
consequence of the proposed Drawdown not having been made in accordance
with such Notice of Drawdown.
3.6 Cancellation. Any part of the Facility undrawn at the end of the
Availability Period shall be cancelled.
SECTION 4. INTEREST
4.1 Interest. Borrower shall pay interest on the Loan in accordance with the
provisions of this Section.
4.2 Interest Periods. The Interest Periods applicable to the Loan shall be six
(6) months, provided that:
(a) the first Interest Period in relation to each Drawdown shall commence
on the date on which such Drawdown is made;
(b) in relation to each Drawdown after the initial Drawdown, the first
Interest Period shall end on the last day of the then current Interest
Period in respect of the initial Drawdown;
(c) each Interest Period (except the first Interest Period in relation to
each Drawdown) shall commence on the last day of the preceding
Interest Period;
(d) any Interest Period which would otherwise end on a non-Banking Day
shall instead end on the next following Banking Day or, if that
Banking Day is in another calendar month, on the immediately preceding
Banking Day;
(e) if any Interest Period commences on the last Banking Day of a calendar
month or on a day for which there is no numerically corresponding day
in the calendar month six (6) months thereafter that Interest Period
shall, subject to paragraphs (b) and (f), end on the last Banking Day
of such later calendar month; and
(f) any Interest Period which would otherwise extend beyond the Repayment
Date shall instead end on that date.
4.3 Rate and Calculation. The rate of interest applicable to the Loan for each
Interest Period shall be the rate per annum conclusively determined by
Agent to be the aggregate of LIBOR for that Interest Period and the Margin.
Interest shall accrue from day to day, shall be calculated on the basis of
the actual number of days elapsed and a 360 day year, including the first
day of the period during which it accrues but
-6-
<PAGE> 9
excluding the last, and shall be paid in arrears on each Interest Payment
Date. Agent shall notify Borrower of each interest rate determined under
this Section.
SECTION 5. REPAYMENT, PREPAYMENT AND CANCELLATION
5.1 Repayment. Subject as otherwise provided herein, Borrower shall repay the
Loan in one lump sum, together with all accrued interest and other monies
due and payable in connection with the Facility, on the Repayment Date.
5.2 Voluntary Prepayment. Borrower may prepay all or part of the Loan on any
Interest Payment Date after the end of the Availability Period, provided
that:
(a) Borrower shall have given to Agent not less than thirty (30) days'
prior written notice specifying the amount and date of prepayment;
(b) the amount of any partial prepayment shall be at least One Million
dollars (US$1,000,000) and an integral multiple of One Million Dollars
(US$1,000,000);
(c) Borrower shall have provided Agent with evidence that Borrower has
obtained any governmental authorizations necessary for such
prepayment; and
(d) all other sums then due and payable under this Agreement shall have
been paid.
5.3 Provisions Applicable to Prepayments. Any notice of prepayment given by
Borrower under any provision of this Agreement shall be irrevocable and
Borrower shall be bound to make a prepayment in accordance therewith.
Prepayments shall be made in inverse order of maturity and amounts prepaid
may not be reborrowed under this Agreement.
5.4 Other Amounts. If the Loan or any part thereof is prepaid under any
provision of this Agreement, Borrower shall also pay to Agent for the
account of Lender:
(a) at the time of prepayment, interest accrued up to the date of
prepayment and all other sums payable by Borrower under this
Agreement; and
(b) on demand, such amount as Lender may certify to be necessary to
compensate it for any loss or expense incurred as a consequence of
such prepayment (including any loss incurred in liquidating or
redeploying funds acquired to maintain the Loan).
5.5 No Voluntary Cancellation. Borrower may not cancel all or any part of the
Facility before the end of the Availability Period.
-7-
<PAGE> 10
SECTION 6. FEES AND EXPENSES
6.1 Front-end Fee. Borrower shall pay to Agent for the account of Lender a
front-end fee in accordance with a letter of even date herewith addressed
by Agent to and accepted by Borrower in accordance with the terms stated
therein.
6.2 Commitment Fee. Borrower shall pay to Agent for the account of Lender a
commitment fee at the rate of one-eighth of one percent (0.125%) per annum
during the period from the date of this Agreement up to and including the
last day of the Availability Period calculated on the daily undrawn balance
of the Facility on the basis of the actual number of days elapsed and a
year of 360 days. Such commitment fee shall be payable in arrears at the
end of each successive quarterly period from the date of this Agreement and
on the last day of the Availability Period.
6.3 Agency Fee. Borrower shall pay to Agent for its own account an agency fee
in accordance with a letter of even date herewith addressed by Agent to and
accepted by Borrower in accordance with the terms stated therein.
6.4 Expenses. Borrower shall forthwith on demand and whether or not any
Drawdown is made pay to or reimburse each of Agent and Lender for its own
account for all reasonable costs, charges and expenses (including legal and
other fees on a full indemnity basis and translation, communication,
advertisement, travel and all other out-of-pocket expenses) incurred by it
in connection with the negotiation, preparation, execution and (where
relevant) registration of this Agreement and any other documentation
required hereunder and the arrangement of the Facility and any amendment
hereto and any inspection, calculation, approval, consent or waiver to be
conducted, made or given by Agent or Lender pursuant to any provision of
this Agreement.
6.5 Enforcement Costs. Borrower shall from time to time forthwith on demand pay
to or reimburse each of Agent and Lender for all reasonable costs, charges
and expenses (including legal and other fees on a full indemnity basis and
all other out-of-pocket expenses) incurred by it in exercising any of its
rights or powers under this Agreement or in suing for or seeking to recover
any sums due under this Agreement or otherwise preserving or enforcing its
rights under this Agreement or in defending any claims brought against it
in respect of this Agreement.
6.6 Taxes. Borrower shall pay all present and future stamp and other like
duties and taxes and all notarial, registration, recording and other like
fees which may be payable in respect of this Agreement and shall indemnify
Agent and Lender against all liabilities, costs and expenses which may
result from any default in paying such duties, taxes or fees.
SECTION 7. PAYMENTS AND EVIDENCE OF DEBT
7.1 The Drawdowns. Amounts to be advanced by Lender to Borrower under this
Agreement shall be made available to Borrower by payment to such account as
shall
-8-
<PAGE> 11
be designated by Borrower in the relevant Notice of Drawdown. Borrower
shall be deemed to have borrowed the relevant amount when such payment is
made by Lender.
7.2 Payments by Borrower. All payments by Borrower under this Agreement shall
be made to Agent not later than 10:00 a.m. (New York time) on the relevant
due date in same day funds (or in such other funds as may then be customary
for the settlement in Dollars in New York City of transactions of this
nature) to the account of Agent (account no. 001-1-385903) with The Chase
Manhattan Bank N.A., New York (or to such other account as Agent may
designate), in each case under telex advice to Agent. Agent shall forthwith
transfer the amounts received by it in like funds as are received by Agent
and to such account or accounts as Lender shall have previously notified to
Agent.
7.3 Allocation of Receipts. If any amount received by Agent is less than the
full amount due, Agent in consultation with Lender shall have the right to
allocate the amount received towards principal, interest and/or other sums
owing hereunder as it considers appropriate.
7.4 Banking Days. Subject to Section 4.2, if any sum would otherwise become due
for payment on a non-Banking Day, that sum shall become due on the next
following Banking Day and interest shall be adjusted accordingly, except
that if the repayment due under Section 5.1 would then become due in
another calendar month, such repayment shall become due on the immediately
preceding Banking Day.
7.5 Evidence of Debt. Agent shall maintain on its books in accordance with its
usual practice a set of accounts recording the amounts from time to time
owing by Borrower hereunder. In any legal proceeding and otherwise for the
purposes of this Agreement the entries made in such accounts shall, in the
absence of manifest error, be conclusive and binding on Borrower as to the
existence and amounts of the obligations of Borrower recorded therein.
7.6 Certificate Conclusive and Binding. Where any provision of this Agreement
provides that Lender or Agent may certify or determine an amount or rate
payable by Borrower, a certificate by Lender or Agent as to such amount or
rate shall be conclusive and binding on Borrower in the absence of manifest
error.
SECTION 8. MARKET DISRUPTION
8.1 Market Disruption. If in relation to any Interest Period:
(a) Agent determines (which determination shall be conclusive and binding)
that, by reason of circumstances affecting the London interbank market
generally, adequate and fair means do not exist for ascertaining LIBOR
for that Interest Period; or
(b) less than two (2) rates appear on the Reuters Monitor Screen for that
Interest Period; or
-9-
<PAGE> 12
(c) Agent determines that deposits in Dollars in the required amount for
the relevant Interest Period are not available to it in the London
interbank market or that the average of the rates shown on the Reuters
Monitor Screen does not adequately reflect the cost to Lender of
obtaining funds for that Interest Period,
Agent shall promptly notify Borrower and no further Drawdown shall be made
unless and until an alternative basis is agreed upon in accordance with
Section 8.2.
8.2 Alternative Basis by Agreement. Immediately following such notification,
Borrower and Agent, in consultation with Lender, shall negotiate in good
faith with a view to agreeing upon an alternative basis for funding the
Loan and determining the applicable interest rate. If an alternative basis
is agreed within a period of thirty (30) days after such notification or
such longer period for discussion as Borrower and Agent may agree, the
alternative basis shall take effect in accordance with its terms.
8.3 Alternative Basis Determined by Lender. If an alternative basis is not so
agreed and any Drawdown has been made, Borrower shall pay interest to
Lender on the Loan for the relevant Interest Period at the rate per annum
equal to the aggregate of (i) the Margin and (ii) the cost (expressed as an
annual interest rate) to Lender of funding the Loan during the relevant
Interest Period (as conclusively determined by Lender).
8.4 Cancellation and Prepayment. If an alternative basis is not so agreed
pursuant to Section 8.2:
(a) if no Drawdown has been made, the Facility shall be cancelled and all
sums outstanding under this Agreement shall be paid to Agent at the
end of the period for negotiation ascertained in accordance with
Section 8.2; or
(b) if any Drawdown has been made, Agent may require Borrower to prepay
the Loan by giving written notice to Borrower specifying a prepayment
date which is not less than fourteen (14) days after such notice is
given. On the specified date the Facility shall be cancelled and
Borrower shall prepay the Loan in full together with interest thereon
from the beginning of the relevant Interest Period to the date of
prepayment. For this purpose, the interest rate from time to time
applicable to the Loan shall be the rate ascertained in accordance
with Section 8.3 in relation to the relevant period.
SECTION 9. CHANGE OF LAW OR CIRCUMSTANCES
9.1 Unlawfulness. If it becomes unlawful for Lender to give effect to its
obligations hereunder, Lender shall through Agent so notify Borrower,
whereupon the Facility shall be cancelled and Lender's obligation to
maintain the Loan shall cease. Borrower shall forthwith after such
notification, or such longer period as Lender may certify as being
permitted by the relevant law, prepay the Loan in full together with
interest accrued thereon to the date of prepayment and any other monies
owing hereunder to Lender.
-10-
<PAGE> 13
9.2 Increased Cost. If Lender determines that any change in any applicable law
or regulation or in the interpretation or application thereof or
compliance by Lender with any applicable direction, request or requirement
(whether or not having the force of law) of any competent governmental or
other authority does or will:
(a) subject Lender to any tax or other payment with reference to sums
payable by Borrower under this Agreement (except (i) tax on Lender's
overall net income in the jurisdiction of its principal office or
such other jurisdiction where its overall net income would ordinarily
(but for its entering into of this Agreement) be taxed or (ii) as
referred to in Section 10); or
(b) impose on Lender any other condition the effect of which is to (i)
increase the cost to Lender of maintaining the Facility or (ii)
reduce the amount of any payment receivable by, or the effective
return to, Lender in respect of the Facility,
Lender may through Agent so notify Borrower, and Borrower shall from time
to time upon demand (whether or not the Loan has been repaid) pay to Agent
for the account of Lender such amounts as Lender may certify to be
necessary to compensate it for such tax, payment, increased cost or
reduction (each an "INCREASED COST"). Where such increased cost arises
from circumstances contemplated above which affect Lender's business
generally or the manner in which or extent to which Lender allocates
capital resources, Lender shall be entitled to such increased cost as it
determines and certifies is fairly allocable to the Facility. So long as
the circumstances giving rise to such increased cost continue, Borrower
may, after giving Agent not less than thirty (30) days' prior written
notice, prepay all (but not only part) of the Loan in accordance with
Sections 5.3 and 5.4, and upon the giving of such notice the Facility
shall be cancelled and no further Drawdowns shall be made.
SECTION 10. TAXES AND OTHER DEDUCTIONS
10.1 Payments to be Free and Clear. All sums payable by Borrower under this
Agreement shall be paid in full without set-off or counterclaim or any
restriction or condition and free and clear of any tax or other deductions
or withholdings of any nature.
10.2 Grossing-up of Payments. If Borrower or any other person is required by
any law or regulation to make any deduction or withholding (on account of
tax or otherwise) from any payment for the account of Agent or Lender,
Borrower shall, together with such payment, pay such additional amount as
will ensure that Agent or Lender receives (free and clear of any tax or
other deductions or withholdings) the full amount which it would have
received if no such deduction or withholding had been required. Borrower
shall promptly forward to Agent copies of official receipts or other
evidence showing that the full amount of any such deduction or withholding
has been paid over to the relevant taxation or other authority.
-11-
<PAGE> 14
SECTION 11. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender and Agent as follows:
11.1 Incorporation and Qualification. Borrower is a corporation duly organized
and validly existing under the laws of Philippines. Each Affiliate is duly
organized and validly existing under the laws of its respective
jurisdiction of organization. Borrower and each Affiliate are qualified or
registered to do business in every jurisdiction where the failure to so
qualify or register could have a material adverse effect on Borrower or
Borrower and the Affiliates taken as a whole.
11.2 Power and Authority. Borrower has full legal right, power and authority to
carry on its present business, to own its properties and assets, to incur
the indebtedness and other obligations provided for in this Agreement, to
execute and deliver this Agreement and all other documents hereunder and
to perform and observe the terms and conditions hereof and thereof.
11.3 Authorization of Borrowing. Borrower has taken all appropriate and
necessary corporate and legal action to authorize the execution and
delivery of this Agreement and all other documents hereunder and to
authorize the performance and observance of the terms and conditions
hereof and thereof.
11.4 Authorizations and Approvals. Borrower has obtained or effected all
authorizations necessary for the valid execution, delivery and performance
of this Agreement and such authorizations are in full force and effect or,
by the date on which the initial Notice of Drawdown is given, such
authorizations will have been obtained and be in full force and effect and
there has been no default under the conditions of any of the same,
provided that the amount of each Drawdown made hereunder must be
registered with the Central Bank.
11.5 Agreement Binding; Compliance with Law and Other Agreements. This
Agreement constitutes the legal, valid and binding obligation of Borrower
enforceable in accordance with its terms. The execution, delivery and
performance of the terms of this Agreement, the payment by Borrower of all
amounts due on the dates and in the currency provided for herein and the
application of the Loan proceeds as provided in Section 2.2 hereof (i)
will not violate or contravene any provision of law or regulation which is
applicable to Borrower; (ii) will not conflict with the Articles of
Incorporation or Bylaws (or comparable constituent documents) of Borrower;
(iii) will not conflict with or result in the breach of any provision of,
or in the imposition of any Encumbrance under, any agreement or instrument
to which Borrower is a party or by which it or any of its properties or
assets is bound; and (iv) will not constitute a default or an event that,
with the giving of notice or the passing of time, or both, would
constitute a default under any such agreement or instrument.
11.6 No Event of Default. Borrower is not in default under any agreement or
obligation applicable to it or its assets or revenues, the consequences of
which default could materially and adversely affect its business or
financial condition or its ability to perform its obligations under this
Agreement and no Event of Default or prospective Event of Default has
occurred.
-12-
<PAGE> 15
11.7 Compliance with Law. Borrower and each Affiliate are in full compliance
with all applicable laws, regulations and orders, whether or not having
the force of law, including without limitation, tax laws.
11.8 Ranking of Loan. This Agreement is the direct, unconditional and general
obligation of Borrower. Borrower's obligations hereunder rank and will
rank at least pari passu in priority of payment and in all other respects
with all other unsecured indebtedness of Borrower except for those
preferred by operation of law.
11.9 Legal Actions. All registrations, recordings or filings required as a
condition to the legality, validity or enforceability of this Agreement
or any other document to be executed and delivered pursuant to the terms
of this Agreement have been made by Borrower, provided that the amount of
each Drawdown made hereunder must be registered with the Central Bank.
11.10 Financial Statements. The most recent audited financial statements of
Borrower for the time being (including the audited profit and loss
account and balance sheet) were prepared in accordance with all
applicable laws and regulations of the Philippines and generally accepted
accounting principles and policies consistently applied and show a true
and fair view of the financial position of Borrower as at the end of, and
the results of its operations for, the financial period to which they
relate and, as at the end of such period, Borrower did not have any
significant liabilities (contingent or otherwise) or any unrealized or
anticipated losses which are not disclosed by or reserved against in,
such financial statements, and there has been no material adverse change
in the business or financial condition of Borrower since the date of such
financial statements.
11.11 Encumbrances. No Encumbrance exists over all or any part of the property,
assets or revenues of Borrower other than those disclosed in the
financial statements referred to in Section 11.10 or those notified by
Borrower to Agent in writing prior to the date hereof.
11.12 Litigation. No litigation, administrative proceeding or arbitration is
presently pending or threatened against Borrower or any Affiliate or
their assets or revenues which, if adversely determined, could have a
material effect on the ability of Borrower to perform its obligations
under this Agreement.
11.13 Sovereign Immunity. Borrower is generally subject to civil and commercial
law and to legal proceedings and neither Borrower nor any of its assets
or revenues is entitled to claim immunity or privilege (sovereign or
otherwise) from any set-off, judgment, execution, attachment or other
legal process.
11.14 Shareholding of Borrower. Guarantor is the legal and beneficial owner of
forty percent (40%) of the issued and outstanding voting share capital of
Borrower.
-13-
<PAGE> 16
SECTION 12. COVENANTS
12.1 Financial Statements. Throughout the life of this Agreement, Borrower
shall provide Agent with copies of its unaudited financial statements for
the first six months of each fiscal year and its audited financial
statements for each fiscal year as they are available but in any event
not later than ninety (90) days after the close of each fiscal period
covered by an unaudited financial statement and not more than one hundred
and twenty (120) days after the close of each fiscal period covered by an
audited financial statement and such other information respecting the
financial condition and operations of Borrower as Agent may from time to
time reasonably request. Each financial statement provided hereunder
shall have been prepared in accordance with generally accepted accounting
principles in the Philippines consistently applied, and be accompanied by
a certificate executed by the principal financial officer of Borrower
stating (i) that as of the date of such financial statement Borrower is
in full compliance with all terms and conditions hereof, including
without limitation all financial covenants, and of any document executed
pursuant hereto, and (ii) that as of such date no Event of Default or
prospective Event of Default has occurred and is continuing.
12.2 Debt-Equity Ratio. Borrower shall not permit the Debt-Equity Ratio to
exceed 80:20 at any time during the life of the Facility, provided that
Borrower shall in no event permit its debt- equity ratio calculated
pursuant to the rules and regulations of the Central Bank to exceed the
ratio from time to time required to be maintained by Borrower under such
rules and regulations.
12.3 Taxes. Borrower shall pay and discharge and shall cause each Affiliate to
pay and discharge, all taxes, assessments and governmental charges upon
them or their respective assets promptly when due and, in any event,
prior to the date on which penalties may become attached thereto.
12.4 Representations and Warranties. Borrower shall ensure that the
representations and warranties contained in this Agreement remain at all
times true and accurate by reference to the facts and circumstances from
time to time existing.
12.5 Continuing Governmental Authorizations. (a) Borrower undertakes to
maintain in full force and effect all governmental authorizations
referred to in Section 11.4 and to obtain or effect any new or additional
governmental authorizations, as may be required or advisable in respect
of the performance by Borrower of any of the terms and conditions of this
Agreement.
(b) Borrower shall promptly, and in any event not later than fifteen
(15) days from the date of each Drawdown, forward to Lender evidence
that the amount of such Drawdown has been duly registered with the
Central Bank.
12.6 Maintenance and Continuity of Business. (a) Borrower shall maintain and
shall cause each Affiliate to maintain their respective corporate
existences in compliance with all applicable laws and regulations, and
Borrower shall maintain and shall cause each Affiliate to maintain the
present character of their respective businesses.
-14-
<PAGE> 17
(b) Borrower shall maintain insurance on and in relation to its
businesses, properties and assets with reputable underwriters or
insurance companies against such risks and in such amount as are
customary for businesses of a like nature in the jurisdiction in
which such properties and assets are located or in which such
businesses are conducted.
(c) Borrower shall not, except with the prior written consent of Agent,
(i) merge or consolidate with any other corporation or (ii) purchase
or otherwise acquire all or substantially all of the assets of any
other corporation or (iii) sell, lease, transfer or otherwise
dispose of all or any material portion of its property or assets,
whether by a single transaction or by a number of transactions
whether related or not, or (iv) declare or pay any dividend or make
any other income distribution to its shareholders if an Event of
Default or prospective Event of Default has occurred and has not
been remedied to the satisfaction of Lender.
12.7 Notice. As soon as possible but in any event within seven (7) days after
occurrence, Borrower shall give written notice to Agent of any Event of
Default or prospective Event of Default, or any litigation,
administrative proceeding or arbitration referred to in Section 11.12,
and of any other matter which has resulted or might result in a material
adverse change in Borrower's operations or financial condition or affect
Borrower's ability to pay, when due, any amounts due under this
Agreement.
12.8 Encumbrances. Borrower shall not permit any loan, debt, guarantee or
other obligation constituting indebtedness of Borrower or any other
person to be secured by any Encumbrance on any assets or future revenues
of Borrower without the prior written consent of Agent; provided,
however, that the foregoing shall not apply to Encumbrances arising by
operation of law or arising in the ordinary course of business of
Borrower where the amount covered by such Encumbrance is determined by
Agent not to be material.
12.9 Shareholding by Guarantor. Borrower shall procure that Guarantor at all
times owns beneficially and directly not less than forty percent (40%) of
the issued and outstanding voting share capital of Borrower.
12.10 Use of Facility. Borrower shall use the proceeds of the Facility
exclusively for the purposes specified in Section 2.2.
12.11 Further Documents. Borrower shall furnish Agent with all such other
documents and instruments and do all such other acts and things as Agent
may reasonably require to carry out the transactions contemplated herein
or in the documents to be delivered hereunder.
SECTION 13. EVENTS OF DEFAULT
13.1 Events of Default. Each of the following events or occurrences shall
constitute an Event of Default under this Agreement:
-15-
<PAGE> 18
(a) Borrower fails to pay when due any sum payable under this Agreement
when due or otherwise in accordance with the provisions of this
Agreement.
(b) Any representation, warranty or statement made or deemed to be made
by Borrower in this Agreement or in any document executed hereunder
or by Guarantor in the Guaranty proves to have been incorrect or
misleading in any respect considered by Lender to be material.
(c) Borrower or Guarantor fails duly and punctually to perform or
observe any obligation or covenant made by it in this Agreement or
the Guaranty or any other document executed hereunder or thereunder
and as a result thereof it might reasonably be considered by Lender
that the ability of Borrower or Guarantor to promptly comply with
their respective obligations under this Agreement or the Guaranty is
materially adversely affected thereby.
(d) Borrower or Guarantor fails to perform or observe any obligation or
covenant contained in this Agreement or the Guaranty other than as
referred to in paragraphs (b) and (c) above and such failure is not
remediable or, if remediable, continues for a period of thirty (30)
days after receipt by Borrower or Guarantor of notice of such
failure from Agent.
(e) Borrower, Guarantor or any Affiliate fails to discharge when due any
other indebtedness or to honor any guarantee of any such
indebtedness, or there occurs any event of default (however so
described) under any other agreement pursuant to which any
indebtedness or guarantee of Borrower, Guarantor or any Affiliate is
created, secured or evidenced, if the effect of such failure or
occurrence is to cause or permit such indebtedness or guarantee to
become or to be declared due prior to its normal maturity.
(f) Any change occurs in the financial or other condition of Borrower,
Guarantor or any Affiliate which may reasonably be considered by
Lender to materially adversely affect the ability of Borrower or
Guarantor to comply with all or any of their respective obligations
under this Agreement or the Guaranty.
(g) Borrower, Guarantor or any Affiliate becomes insolvent or commits or
permits any act of bankruptcy, which term shall include (i) the
filing of a petition in any bankruptcy, reorganization, winding-up
or liquidation proceeding or other proceeding analogous in purpose
or effect, (ii) the failure by Borrower, Guarantor or such Affiliate
to have any such petition filed by another party discharged within
thirty (30) days, (iii) the application for or consent to the
appointment of a receiver or trustee for the bankruptcy,
reorganization, winding-up or liquidation of Borrower, Guarantor or
such Affiliate or of a substantial portion of its properties or
assets, (iv) the making by Borrower, Guarantor or such
-16-
<PAGE> 19
Affiliate of an assignment for the benefit of, or any composition or
arrangement with, its creditors, (v) the admission in writing by
Borrower, Guarantor or such Affiliate of its inability to pay its
debts, (vi) the passing of a resolution by Borrower, Guarantor or
such Affiliate approving any reorganization, winding-up or
liquidation of Borrower, Guarantor or such Affiliate or of a
substantial portion of its properties or assets, (vii) the entry of
any court order or judgment confirming the bankruptcy or insolvency
of Borrower, Guarantor or such Affiliate or approving any
reorganization, winding-up or liquidation of Borrower, Guarantor or
such Affiliate or of a substantial portion of its properties or
assets, or (viii) any creditor of Borrower, Guarantor or such
Affiliate exercises a contractual right to assume the financial
management of Borrower, Guarantor or such Affiliate.
(h) A writ of attachment or execution or similar process is issued
against a substantial part of the assets of Borrower, Guarantor or
any Affiliate which remains undismissed, unbonded or undischarged
for a period of thirty (30) days.
(i) Borrower, Guarantor or any Affiliate ceases its operations or sells
or otherwise disposes of all or a substantial part of its assets
(whether by a single transaction or a series of transactions)
without the prior written consent of Lender; or Borrower, Guarantor
or any Affiliate decides to cease its operations or to sell or
otherwise dispose of all or a substantial part of its assets without
the prior written consent of Lender; or any governmental or other
authority expropriates or nationalizes or threatens to expropriate
or nationalize, all or a substantial part of the assets of Borrower,
Guarantor or any Affiliate.
(j) This Agreement, the Guaranty or any provision hereof or thereof
ceases for any reason to be in full force and effect or is
terminated or jeopardized or becomes invalid or unenforceable or if
there is any dispute regarding the validity or enforceability of the
same in each case in a manner which, in the opinion of Lender, might
materially and adversely affect the interests of Lender hereunder,
or if there is any purported termination or repudiation of the same.
(k) Any governmental authorization granted or required in connection
with this Agreement or the Guaranty is terminated or revoked or is
modified in any manner unacceptable to Lender.
(l) It becomes impossible or unlawful for Borrower or Guarantor to
perform or comply with any one or more of their respective
obligations under this Agreement or under the Guaranty.
(m) Borrower, Guarantor or any Affiliate voluntarily or involuntarily
merges or consolidates with any other entity without the prior
written consent of Lender.
(n) Guarantor ceases at any time to own beneficially and directly at
least forty percent (40%) of the issued and outstanding voting share
capital of Borrower without the prior written consent of Lender.
(o) Philippines or any competent authority thereof declares any
moratorium on the payment of its indebtedness or the indebtedness of
any governmental agency or authority thereof or juridical residents
or nationals therein, or Philippines segregates all or a portion of
its foreign exchange assets or earnings for the benefit of any
creditor or class of creditors.
(p) Any event occurs which in the reasonable opinion of Lender does or
will prevent or materially imperil fulfillment by Borrower or
Guarantor of their respective obligations under this Agreement or
the Guaranty.
-17-
<PAGE> 20
13.2 Consequences of Default. (a) If an Event of Default shall occur and be
continuing, Agent may, and upon written request by Lender shall, at the
same or different times take one or more of the following actions:
(i) to declare the Loan and accrued interest payable hereunder to
be, whereupon they shall become, immediately due and payable
without demand, notice or other legal formality of any kind,
all of which are expressly waived by Borrower; and/or
(ii) to declare any undrawn portion of the Facility to be
terminated, whereupon such portion of the Facility shall
forthwith terminate,
Provided, however, that upon the occurrence of any event described in
Section 13.1(g), all sums then owing by Borrower hereunder shall, without
any declaration or other action by Agent or Lender hereunder,
automatically be immediately due and payable, and the Facility shall be
immediately cancelled without demand, notice or other legal formality of
any kind, all of which are expressly waived by Borrower.
(b) In addition to the actions permitted in paragraph (a) above, Agent
may, and upon written request by Lender shall, take any action,
exercise any other right or pursue any other remedy conferred upon
it by this Agreement and/or any applicable law or regulation or
otherwise as a consequence of any Event of Default.
13.3 No Waiver. No waiver of any Event of Default shall constitute a waiver of
any other or any succeeding Event of Default except to the extent
provided in such waiver.
SECTION 14. DEFAULT INTEREST
14.1 Non-Payment. (a) If Borrower fails to pay any sum payable under this
Agreement when due, Borrower shall pay interest on such sum from and
including the due date to the date of actual payment (as well after as
before judgment) at the rate per annum conclusively determined by Agent
to be the higher of: (a) the aggregate of (i) one percent (1%) and (ii)
the rate of interest (if any) payable in respect of such sum immediately
before the due date; and (b) the aggregate of (i) one percent (1%), (ii)
the Margin and (iii) LIBOR calculated with reference to such periods and
such amounts as Agent considers appropriate or, if any of the
circumstances described in Section 8.1 applies, the rate from time to
time certified by Lender or Agent to be the rate representing the cost to
it of funding the unpaid sum. For these purposes, LIBOR shall be
determined by Agent on such date or dates on or after the due date for
payment as Agent may select.
(b) Interest at the rate or rates determined from time to time as
aforesaid shall accrue from day to day, shall be calculated on the
basis of the actual number of days elapsed and a 360 day year, shall
be compounded at the end of each successive funding period
considered appropriate by Agent for the purposes of this Section and
shall be payable from time to time on demand.
-18-
<PAGE> 21
14.2 Other Events of Default. If an Event of Default other than that described
in Section 13.1(a) shall occur and be continuing, Borrower shall pay to
Agent on demand interest on the amount of the Loan then outstanding from
and including the date of such default to and including the date the
default is cured (after as well as before judgment) at the rate which is
one percent (1%) per annum above the interest rate then applicable to the
Loan.
SECTION 15. INDEMNITIES
15.1 General Indemnity. Borrower shall indemnify Lender and Agent against all
losses, liabilities, damages, costs and expenses (including loss of
profit) which Lender or Agent may incur as a consequence of any Event of
Default or any other breach by Borrower of any of its obligations under
this Agreement or otherwise in connection with this Agreement (including
any loss or expense incurred in liquidating or redeploying funds acquired
to maintain the Loan and any interest or fees incurred in funding any
unpaid sum, but taking into account any interest paid by Borrower in
respect of such unpaid sum under Section 14).
15.2 Currency Indemnity. Dollars shall be the currency of account and of
payment in respect of sums payable under this Agreement. If an amount is
received in another currency, pursuant to a judgment or order in the
liquidation of Borrower or otherwise, Borrower's obligations under this
Agreement shall be discharged only to the extent that Lender or Agent (as
the case may be) may purchase Dollars with such other currency in
accordance with normal banking procedures upon receipt of such amount. If
the amount in Dollars which may be so purchased, after deducting any
costs of exchange and any other related costs, is less than the relevant
sum payable under this Agreement, Borrower shall indemnify Lender and
Agent against the shortfall. This indemnity shall be an obligation of
Borrower independent of and in addition to its other obligations under
this Agreement and shall take effect notwithstanding any time or other
concession granted to Borrower or any judgment or order being obtained or
the filing of any claim in the liquidation, dissolution or bankruptcy (or
analogous process) of Borrower.
SECTION 16. LENDER AND AGENT
16.1 Appointment. Lender hereby irrevocably appoints Agent to act as its agent
for the purposes set out in this Agreement and irrevocably authorizes
Agent to take such action on its behalf and to exercise and enforce such
rights, powers and discretions as are expressly or by implication
delegated to Agent by the terms hereof and such rights, powers and
discretions as are reasonably incidental thereto.
16.2 Scope of Duties. In respect of its duties and functions hereunder Agent
shall be considered to be acting solely as an agent of Lender in an
administrative capacity only and shall not be deemed a trustee of Lender
or an agent or trustee of Borrower for any purpose. Agent shall have no
duties or obligations except those provided for in this Agreement.
-19-
<PAGE> 22
16.3 Specific Duties and Obligations. Agent shall:
(a) promptly account to Lender all payments received by Agent from
Borrower or otherwise in connection with the Facility in accordance
with the provisions of this Agreement; and
(b) promptly inform Lender of:
(i) the contents of any document which Agent receives in respect
of the Facility and which it considers to be material; and
(ii) any material Event of Default of which an officer of Agent
acting in respect of this Agreement and in his capacity as
such has actual knowledge;
(c) save as otherwise provided in this Agreement, take or refrain from
taking any action in accordance with any lawful and proper
instructions given to it by Lender and any such action taken or
refrained from being taken shall be binding on Lender; and
(d) consult with Lender to the extent practicable before giving any
notice or making any declaration under Section 13.2 or effecting any
amendment or waiver under Section 19.3.
16.4 Rights and Powers. Agent may:
(a) perform any of its duties and functions hereunder through its
directors, officers, employees or agents;
(b) engage and pay for the advice or services of lawyers, accountants or
other experts or professional advisers as Agent may consider
necessary or desirable and rely and act upon such advice;
(c) refrain from exercising any of its rights, powers and discretions
unless and until instructed by Lender and refrain from acting upon
any instructions to commence legal proceedings until it has been
indemnified or secured to its satisfaction against any liabilities,
costs and expenses which it may incur;
(d) refrain from taking any action which in its opinion would or might
contravene any law in any relevant jurisdiction or render it liable
to any person and do all such things in its opinion necessary to
comply with any such law; and
(e) assume that no Event of Default or prospective Event of Default has
occurred and that no party is in breach of its obligations under
this Agreement unless Agent receives specific written notice to the
contrary.
16.5 No Liability to Lender. Agent shall have no liability or obligation to
Lender:
-20-
<PAGE> 23
(a) as a result of any failure or delay by Borrower or any other party
in performing its respective obligations under this Agreement;
(b) for the authorization, execution, legality, validity,
enforceability, effectiveness, genuineness or sufficiency of this
Agreement, the Guaranty or any other document relevant to this
transaction, or for the accuracy of any representation, warranty or
statement made in or in connection with this Agreement or the
Guaranty or for the accuracy or completeness of any information
supplied by any person whether or not such information was or is
circulated by Agent;
(c) to take any steps to ascertain whether an Event of Default has
occurred or whether Borrower or any other party is otherwise in
breach of any of its obligations under this Agreement;
(d) to provide any credit or other information concerning the financial
or other condition of Borrower or any other party other than as
expressly provided for herein; or
(e) to account for any sum received by Agent (other than for the account
of Lender) by way of fees or reimbursement of expenses in connection
with this Agreement or for any benefit received by it arising out of
any present or future banking or other relationship with Borrower.
16.6 No Liability to Borrower. Agent shall have no liability or obligation to
Borrower as a result of any failure or delay by Lender or any other party
in performing its respective obligations under this Agreement.
16.7 Liability and Indemnity. Neither Agent nor any of its directors,
officers, employees or agents shall be liable for any action taken or
omitted to be taken in connection with this Agreement unless resulting
directly from gross negligence or wilful misconduct. Lender shall
indemnify Agent (to the extent not reimbursed by Borrower) from and
against all claims, actions, liabilities, damages, penalties, losses,
costs and expenses (including legal fees) which Agent may incur in any
way relating to or arising out of this Agreement or otherwise in
connection with the Facility, unless and to the extent that any of the
foregoing results directly from Agent's gross negligence or wilful
misconduct.
16.8 Acknowledgment by Lender. Lender acknowledges to and agrees with Agent
that:
(a) it has itself been and will continue to be solely responsible for
making its own analysis of and investigations into the status,
creditworthiness, prospects, business, operations, assets and
condition of Borrower and any other person referred to herein and
for making its own decisions as to the entering into or the taking
or not taking of any action in connection with this transaction; and
(b) it has not relied upon any representation or statement made by Agent
as an inducement to its entering into this Agreement.
-21-
<PAGE> 24
16.9 Certifications by Agent. Where any provision of this Agreement provides
that Agent may certify an amount or rate payable by Lender, a certificate
as to such amount or rate shall be conclusive and binding on Lender.
16.10 Resignation of Agent. Agent may resign at any time by giving not less
than thirty (30) days' prior written notice to Lender and Borrower.
Lender shall have the right to appoint a successor Agent, but if it does
not do so within the thirty (30) day notice period the retiring Agent may
do so on its behalf. Agent's resignation shall not take effect until a
successor Agent has been appointed in writing signed by Lender and by
such successor. Upon such appointment the successor Agent shall succeed
to and become vested with all the rights, powers, discretions and duties
of the retiring Agent and the retiring Agent shall be discharged from any
further duties and obligations hereunder. The parties hereto agree to
execute whatever documents may be necessary to effect such a change of
Agent. After any retiring Agent's resignation Sections 16.5, 16.6 and
16.7 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
16.11 No Partnership. Nothing contained or implied in this Agreement shall
constitute or be deemed to constitute a partnership between any of the
parties hereto.
SECTION 17. ASSIGNMENT
17.1 Borrower. Borrower shall not assign or transfer any of its rights or
obligations hereunder.
17.2 Lender. Lender may assign or transfer all or any part of its rights,
benefits and obligations hereunder upon written notice of such assignment
or transfer to Borrower. Borrower shall take any and all actions Lender
may reasonably require to perfect and complete any such assignment or
transfer, including without limitation the giving of its consent thereto.
Upon any assignment or transfer by Lender, the assignee or transferee
shall be entitled, to the extent of the interest assigned or transferred,
to the benefit of the indemnities, tax reimbursements and rights of
set-off of Lender pursuant to the provisions of this Agreement as fully
as if it were a party hereto. The acts of Lender or the failure of Lender
to act hereunder shall in all circumstances be conclusive and binding on
any transferee or assignee of Lender's interest hereunder.
17.3 Participations. Lender may at any time grant one or more participations
in its rights and/or obligations under this Agreement but no other party
hereto shall be concerned in any way with any participation so granted.
17.4 Disclosure. Lender may disclose to (a) its head office, other branch
offices, auditors, relevant authorities and other persons as required
under any prevailing law or banking regulations and to (b) a transferee,
assignee or participant or potential transferee, assignee or participant,
in each case, on a confidential basis such information about Borrower as
Lender shall consider appropriate.
-22-
<PAGE> 25
SECTION 18. GOVERNING LAW AND JURISDICTION
18.1 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with
the laws of the State of New York, the United States of America.
18.2 Jurisdiction. Borrower agrees that any legal action or proceeding arising
out of or relating to this Agreement may be brought in any court of the
State of New York or Federal court of the United States of America
located in the City and State of New York and irrevocably submits to the
non-exclusive jurisdiction of such courts. The foregoing, however, shall
not limit the rights of Lender to bring any legal action or proceeding or
to obtain execution of judgment in any other jurisdiction.
18.3 Process Agent. Borrower irrevocably appoints Anam USA, Inc., currently
located at Goshen Corporate Park 1345, Enterprise Drive, West Chester, PA
19380, U.S.A., as its agent to accept on its behalf service of any and
all process or other documents which may be served in any action or
proceedings in any such court. If for any reason the agent named above
(or its successor) no longer serves as agent of Borrower for this
purpose, Borrower shall promptly appoint a successor agent satisfactory
to Lender and notify Lender thereof, provided that until Lender receives
such notification, it shall be entitled to treat the agent named above
(or its said successor) as the agent of Borrower for the purposes of this
Section. Borrower agrees that any such legal process shall be
sufficiently served on it if delivered to such agent for service at its
address for the time being in New York, New York whether or not such
agent gives notice thereof to Borrower.
18.4 No Limitation on Right of Action. Nothing herein shall limit the right of
Lender to commence any legal action against Borrower and/or its property
in any other jurisdiction or to serve process in any manner permitted by
law, and the taking of proceedings in any jurisdiction shall not preclude
the taking of proceedings in any other jurisdiction whether concurrently
or not.
18.5 Waiver of Immunity. Borrower irrevocably waives any immunity to which it
or its property may at any time be or become entitled, whether
characterized as sovereign immunity or otherwise, from any set-off or
legal action in New York, New York or elsewhere, including immunity from
service of process, immunity from jurisdiction of any court or tribunal,
and immunity of any of its property from attachment prior to judgment or
from execution of a judgment.
SECTION 19. MISCELLANEOUS
19.1 Term. The term of this Agreement shall commence on the date first set
forth above and shall end on the date of termination of the Facility or,
if later, upon payment in full of all principal, interest and other sums
payable by Borrower hereunder. The representations and warranties of
Borrower set forth herein shall survive the making of the Loan and the
indemnities of Borrower contained herein shall survive repayment of the
Loan.
-23-
<PAGE> 26
19.2 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire obligation of the parties hereto and supersede any
prior expressions of intent or understandings with respect to this
transaction.
19.3 Amendment. Any amendment or waiver of any provision of this Agreement and
any waiver of any default under this Agreement shall only be effective if
made in writing and signed by or on behalf of the party against whom the
amendment or waiver is asserted. For these purposes, any amendment or
waiver which is made in writing by Agent at the direction of Lender shall
be binding on Lender.
19.4 Waiver; Cumulative Rights. The failure or delay of Agent or Lender to
require performance by Borrower of any provision of this Agreement shall
not affect its right to require performance of such provision nor shall
any single or partial exercise of the same preclude any further exercise
thereof or the exercise of any other right, power or remedy. Each and
every right, power and remedy granted to Lender and Agent hereunder or by
law shall be cumulative and may be exercised in part or in whole from
time to time.
19.5 Severability. If any one or more of the provisions contained in this
Agreement or any document executed in connection herewith shall be
invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
19.6 Set-Off. To the extent permitted by law, Lender and Agent may at any time
set off or apply any and all deposits by Borrower with Lender or, as the
case may be, Agent, at its head office or at any branch, subsidiary or
affiliate of its head office (whether general or special, time or demand,
matured or unmatured) in reduction of amounts due to it hereunder.
19.7 Notices. (a) Each notice, demand or other communication to be given or
made under this Agreement shall be in writing and delivered or sent to
the relevant party at its address or telex number or fax number set out
below (or such other address or telex number or fax number as the
addressee has by five (5) days' prior written notice specified to the
other parties):
To Borrower: Amkor/Anam Pilipinas, Inc.
KM 22 East Service Road
South Superhighway
Muntinlupa, Metro Manila
Philippines
Fax No.: 63-2-845-7285
Attention: Mr. Danny D. Franklin
To Lender: The Korea Development Bank
10-2, Kwanchol-dong
Chongno-ku,
Seoul, Korea
-24-
<PAGE> 27
Telex No.: K27463
Answerback: KODBANK
Fax No.: 723-0386
Attention: International Loan Department
To Agent: KDB Asia Limited
Suite 2101-2103
Two Exchange Square
8 Connaught Place
Hong Kong
Telex No.: 65276, 80439
Answerback: KDB HX, KDBA HX
Fax No.: 723-0386
Attention: Mr. Su Jae Kim
(b) Any notice, demand or other communication so addressed to the
relevant party shall be deemed to have been delivered (i) if given
or made by letter, when actually delivered to the relevant address,
(ii) if given or made by telex, when despatched with confirmed
answerback and (iii) if given or made by fax, when despatched with a
simultaneous confirmation of transmission, provided that, if such
day is not a working day in the place to which it is sent, such
notice, demand or other communication shall be deemed delivered on
the next following working day at such place.
(c) All notices, demands or other communications hereunder and any other
documents required to be delivered hereunder shall be in the English
language or accompanied by a certified translation thereof into the
English language.
(d) All communications between Lender and Borrower in relation to this
Agreement shall be made through Agent.
19.8 Counterparts. This Agreement may be signed in any number of counterparts.
Any single counterpart or a set of counterparts signed, in either case,
by all parties hereto shall constitute a full and original agreement for
all purposes.
-25-
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized signatories as of the day and year
first written above.
BORROWER
AMKOR/ANAM PILIPINAS, INC.
By: /s/ (ILLEGIBLE)
- --------------------------------
Name:
Title:
LENDER
THE KOREA DEVELOPMENT BANK
By: /s/ (ILLEGIBLE)
- --------------------------------
Name:
Title:
AGENT
KDB ASIA LIMITED
By: /s/ (ILLEGIBLE)
- --------------------------------
Name:
Title:
-26-
<PAGE> 29
SCHEDULE
CONDITIONS PRECEDENT DOCUMENTS
1. The Guaranty duly executed by Guarantor.
2. Certified copies of appropriate consents, licenses, approvals or
authorizations of and filings or registrations with such governmental
authorities in any jurisdiction, including the Philippines and Korea, as
may be necessary or advisable to authorize the borrowings under the Loan
Agreement and the execution and performance of the Loan Agreement or the
Guaranty and to permit payment and remittance in Dollars of all payments at
the times, at the places and in the manner provided for under the Loan
Agreement, including without limitation:
(a) the approval of the Central Bank authorizing the execution, delivery
and performance by Borrower of the Loan Agreement; and
(b) the approval of the Central Bank approving the terms and conditions of
an executed copy of the Loan Agreement.
3. In relation to Borrower:
(a) certified copies of:
(i) the Certificate of Registration of Borrower's Articles of
Incorporation issued by the Securities and Exchange Commission
of the Philippines;
(ii) the Articles of Incorporation and By-Laws of the Borrower;
(iii) the Certificate of Good Standing issued by the Securities and
Exchange Commission of the Philippines;
(iv) the Municipal permits and licenses from the Municipality of
Muntinlupa, Metro Manila; and
(v) the minutes of a meeting of the Board of Directors of Borrower
adopting resolutions authorizing the execution and performance
of the Loan Agreement and further authorizing the authority of
the persons signing the Loan Agreement and any other documents
to be executed by Borrower pursuant thereto; and
(b) a certificate of the Corporate Secretary of Borrower certifying:
(i) the incumbency and specimen signatures of the directors acting
at the meeting of the Board of Directors referred to in (a)(v)
above; and
<PAGE> 30
(ii) the incumbency and specimen signatures of the persons
authorized to sign the documents as referred to in (a)(v)
above; and
(c) written confirmation of acceptance of appointment from the agent for
service of process named in Section 18.3 of the Loan Agreement.
4. In relation to Guarantor:
(a) certified copies of:
(i) the Articles of Incorporation of Guarantor;
(ii) the Commercial Registry extracts relating to Guarantor;
(iii) the minutes of a meeting of the board of directors of Guarantor
adopting resolutions authorizing the execution and performance
of the Guaranty and further authorizing the authority of the
person signing the Guaranty and any other documents to be
executed by Guarantor in relation thereto; and
(iv) the seal certificate for the Representative Director of
Guarantor participating in the meeting referred to in (iii)
above;
(b) a certificate of the Representative Director of Guarantor certifying
(aa) the documents referred to in paragraph 4(a) above, (bb) the
incumbency and specimen signature and/or seal impression of the person
authorized to sign the documents as referred to in (a)(iii) above and
(cc) that the seal impressions set out beside the names of each
director listed in the minutes of the meeting referred to in (a)(iii)
above are the respective genuine seal impressions of each such
director; and
(c) written confirmation of acceptance of appointment from the agent for
service of process named in Section 11.3 of the Guaranty.
Favorable legal opinions of Korean counsel, Philippine counsel and New York
counsel to Agent and Lender.
5. Such other documents relating to any of the matters contemplated under the
Loan Agreement and the Guaranty as Agent may request.
S-2
<PAGE> 31
EXHIBIT A
FORM OF NOTICE OF DRAWDOWN
__________, 1995
To: KDB Asia Limited
Suite 2101-2103
Two Exchange Square
8 Connaught Place
Hong Kong
Re: US$50,000,000 Loan Agreement dated September 7. 1995
Dear Sirs:
We refer to the above Loan Agreement, and hereby give notice that we wish to
make a Drawdown under the Facility on _________, 199_ in the amount of
US$__________.
The proceeds of the Drawdown are to be used exclusively for the purposes
specified in the Loan Agreement.
The proceeds of the Drawdown should be disbursed by credit to account number
[ ] in favour of [ ] with [ ].
We hereby certify to you that as of the date of this notice:
(a) the representations and warranties set out in Section 11 of the Loan
Agreement, repeated with reference to the facts and circumstances
subsisting at the date of this notice, remain true and correct;
(b) no Event of Default or prospective Event of Default has occurred which
remains unwaived or unremedied or would result from the making of the
Drawdown; and
(c) all applicable conditions precedent specified in Section 3 of the Loan
Agreement have been met.
Terms defined in the Loan Agreement shall have the same meanings when used in
this notice.
<PAGE> 32
For and on behalf of
AMKOR/ANAM PILIPINAS, INC.
By_______________________________________
Name:
Title:
A-2
<PAGE> 33
EXHIBIT B
FORM OF GUARANTY
THIS GUARANTY is made on the 7th day of September, 1995
BY:
ANAM INDUSTRIAL CO., LTD., a corporation organized and existing under the laws
of Korea with its registered head office at 280-8, 2-ka, Sungsu-dong,
Sungdong-ku, Seoul, Korea ("GUARANTOR").
IN FAVOUR OF:
(1) THE KOREA DEVELOPMENT BANK of 10-2, Kwanchol-dong, Chongno-ku, Seoul, Korea
as lender ("LENDER"); and
(2) KDB ASIA LIMITED of Suite 2101-2103, Two Exchange Square, 8 Connaught
Place, Hong Kong as agent ("AGENT").
WHEREAS:
(A) By a loan agreement (the "LOAN AGREEMENT") dated September 7, 1995 and made
between (1) Amkor/Anam Pilipinas, Inc., as borrower ("BORROWER"), (2)
Lender and (3) Agent, Lender has agreed to make available to Borrower a
loan facility in an aggregate principal amount of up to US$50,000,000 (the
"FACILITY") upon the terms set out therein.
(B) It is a condition precedent to Lender making the Facility available to
Borrower that Guarantor enter into this Guaranty.
NOW THIS GUARANTY WITNESSES as follows:
SECTION 1. INTERPRETATION
In this Guaranty, unless the context requires otherwise:
(a) terms and expressions defined in the Loan Agreement have the same meanings
when used in this Guaranty; and
(b) "SECURED INDEBTEDNESS" means all and any sums (whether principal, interest,
fees or otherwise) which are or at any time may become payable by Borrower
under the Loan Agreement and all other monies hereby secured.
B-1
<PAGE> 34
(c) "DEBT-EQUITY RATIO" means, at any time, the ratio of total liabilities to
total equity of Guarantor at such time. As used in this definition, the
terms "TOTAL LIABILITIES" and "TOTAL EQUITY" shall have the respective
meanings assigned to them by generally accepted accounting principles
applied on a basis consistent with those used in the preparation of the
financial statements referred to in Section 8.1(j).
SECTION 2. GUARANTY
2.1 Guarantor irrevocably and unconditionally guarantees, as primary obligor
and not merely as surety to Lender and Agent, jointly and severally with
Borrower, the due and punctual payment of the Secured Indebtedness when and
as the same shall become due and payable, whether at stated maturity, upon
acceleration, extension or otherwise, according to the terms of the Loan
Agreement.
2.2 Guarantor agrees to pay to Agent for the account of Lender any amount of
the Secured Indebtedness in the currency or respective currencies in which
the same is payable under the terms of the Loan Agreement at any time on
demand against Agent's invoice accompanied by Agent's simple certificate
stating that Borrower has failed to pay the same pursuant to the Loan
Agreement, which invoice shall be final and conclusive as to the amount
owed absent manifest error.
2.3 This Guaranty shall be a continuing guaranty and shall remain in full force
and effect until the Secured Indebtedness has been paid in full and shall
not be (or be construed as to be) discharged by any intermediate discharge
or payment of or on account of the Secured Indebtedness or any settlement
of accounts between Agent or Lender and Borrower or anyone else.
SECTION 3. INDEMNITY
Without prejudice to the guaranty contained in Section 2, Guarantor
unconditionally and irrevocably undertakes, as a separate, additional and
continuing obligation and as a primary obligor, to indemnify Lender and Agent
from time to time on demand against all losses, liabilities, damages, costs and
expenses whatsoever arising out of any failure by Borrower to make due and
punctual payment of the Secured Indebtedness or in the due and punctual
performance and observance of all other obligations under the Loan Agreement.
This indemnity shall remain in effect notwithstanding that the guaranty under
Section 2 ceases to be valid or enforceable against Guarantor for any reason
whatsoever.
SECTION 4. PRESERVATION OF RIGHTS
4.1 The obligations of Guarantor herein contained shall be in addition to and
not in substitution for any other guaranty or security which Lender or
Agent may now or hereafter hold in respect of the Secured Indebtedness.
Lender and Agent may change or release any such guaranty or security and
such shall have no effect whatsoever on this Guaranty.
B-2
<PAGE> 35
4.2 Neither the obligations of Guarantor hereunder nor the rights, powers and
remedies conferred upon Lender and Agent by this Guaranty or by law shall
be discharged, impaired or otherwise affected by:
(a) the winding-up, dissolution, administration or reorganization of
Borrower or any change in its status, function, control or ownership;
(b) any of the obligations of Borrower under the Loan Agreement being or
becoming illegal, invalid or unenforceable in any respect;
(c) any variation or amendment to the terms of the Loan Agreement or any
other document referred to therein;
(d) the granting of any time or indulgence to Borrower or any other
person;
(e) the invalidity or unenforceability of any obligation or liability of
Borrower under the Loan Agreement;
(f) any invalidity or irregularity in the execution of the Loan Agreement
or this Guaranty;
(g) any deficiency in the powers of Borrower to enter into or perform any
of its obligations under the Loan Agreement or any irregularity in the
exercise thereof or any lack of authority by any person purporting to
act on behalf of Borrower;
(h) any other guarantee or security which Lender or Agent may now or
hereafter hold in respect of the Secured Indebtedness being or
becoming wholly or partly void, voidable or unenforceable;
(i) any waiver, exercise, omission to exercise, compromise, renewal or
release of any rights against Borrower or any other person or any
compromise, arrangement or settlement with any of the same; or
(j) any act, omission, event or circumstance which would or may but for
this provision operate to prejudice, affect or discharge this Guaranty
or the obligations of Guarantor hereunder.
4.3 Lender or Agent shall not be obliged before exercising any of the rights,
powers or remedies conferred upon it under this Guaranty or by law:
(a) to make any demand of Borrower;
(b) to take any action or obtain judgement in any court against Borrower;
(c) to make or file any claim or proof in a winding-up or dissolution of
Borrower; or
B-3
<PAGE> 36
(d) to enforce or seek to enforce any other security taken in respect of
the Secured Indebtedness.
4.4 Guarantor represents to and undertakes with Lender and Agent that it has
not taken and will not take any security in respect of its liability under
this Guaranty whether from Borrower or any other person. So long as any sum
remains owing by Borrower to Agent or Lender, Guarantor shall not exercise
any right of subrogation or any other rights of a surety or enforce any
security or other right or claim against Borrower (whether in respect of
its liability under this Guaranty or otherwise) or any other person who has
guaranteed or given any security in respect of the Secured Indebtedness or
claim in the insolvency or liquidation of Borrower or any such other person
in competition with Lender. If Guarantor receives any payment or benefit in
breach of this Section, it shall hold the same upon trust for Lender and
Agent as a continuing security for the Secured Indebtedness.
SECTION 5. COSTS, CHARGES AND EXPENSES
Guarantor shall from time to time forthwith on demand pay to or reimburse Lender
and Agent for all costs, charges and expenses (including legal and other fees on
a full indemnity basis) incurred by Lender or Agent in connection with the
preparation and execution of this Guaranty and in exercising any of its rights
or powers hereunder or in suing for or seeking to recover any sums due hereunder
or otherwise preserving or enforcing its rights hereunder or in defending any
claims brought against it in respect of this Guaranty or in releasing this
Guaranty upon payment of the Secured Indebtedness.
SECTION 6. TAXES AND OTHER DEDUCTIONS
6.1 All sums payable by Guarantor under this Guaranty shall be paid in full
without set-off or counterclaim or any restriction or condition and free
and clear of any tax or other deductions or withholdings of any nature.
6.2 If Guarantor or any other person is required by any law or regulation to
make any deduction or withholding (on account of tax or otherwise) from any
payment for the account of Lender or Agent, Guarantor shall, together with
such payment, pay such additional amount as will ensure that Lender or
Agent receives (free and clear of any tax or other deductions or
withholdings) the full amount which it would have received if no such
deduction or withholding had been required. Guarantor shall promptly
forward to Agent copies of official receipts or other evidence showing that
the full amount of any such deduction or withholding has been paid over to
the relevant taxation or other authority.
SECTION 7. CURRENCY INDEMNITY
If an amount due to Lender or Agent from Guarantor in one currency (the "FIRST
CURRENCY") is received by Lender or Agent in another currency (the "SECOND
CURRENCY"), Guarantor's obligations in respect of such amount shall only be
discharged to the extent that Lender or
B-4
<PAGE> 37
Agent may purchase the first currency with the second currency in accordance
with normal banking procedures. If the amount of the first currency which may be
so purchased (after deducting any costs of exchange and any other related costs)
is less than the amount so due, Guarantor shall indemnify Lender or Agent
against the shortfall.
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1 Guarantor represents and warrants to Lender and Agent as follows:
(a) Guarantor is a corporation duly organized and validly existing under
the laws of Korea. Guarantor is qualified or registered to do business
in every jurisdiction where the failure to so qualify or register
could have a material adverse effect on Guarantor.
(b) Guarantor has full legal right, power and authority to carry on its
present business, to own its properties and assets, to incur the
indebtedness and other obligations provided for in this Guaranty, to
execute and deliver this Guaranty and all other documents hereunder
and to perform and observe the terms and conditions hereof and
thereof.
(c) Guarantor has taken all appropriate and necessary corporate and legal
action to authorize the execution and delivery of this Guaranty and
all other documents hereunder and to authorize the performance and
observance of the terms and conditions hereof and thereof.
(d) Guarantor has obtained or effected all authorizations necessary for
the valid execution, delivery and performance of this Guaranty and
such authorizations are in full force and effect or, by the date on
which the initial Notice of Drawdown is given, such authorizations
will have been obtained and be in full force and effect and there has
been no default under the conditions of any of the same.
(e) This Guaranty constitutes the legal, valid and binding obligations of
Guarantor enforceable in accordance with its terms. The execution,
delivery and performance of the terms of this Guaranty or the payment
by Guarantor of all amounts due on the dates and in the currency
provided for herein (i) will not violate or contravene any provision
of law or regulation which is applicable to Guarantor; (ii) will not
conflict with the Articles of Incorporation or By-laws (or comparable
constituent documents) of Guarantor; (iii) will not conflict with or
result in the breach of any provision of, or in the imposition of any
Encumbrance under, any agreement or instrument to which Guarantor is a
party or by which it or any of its properties or assets is bound; and
(iv) will not constitute a default or an event that, with the giving
of notice or the passing of time, or both, would constitute a default
under any such agreement or instrument.
(f) Guarantor is not in default under any agreement or obligation
applicable to it or its assets or revenues, the consequences of which
default could materially and adversely affect its business or
financial condition or its ability to perform its obligations under
this Guaranty and no Event of Default or prospective Event of Default
has occurred.
B-5
<PAGE> 38
(g) Guarantor is in full compliance with all applicable laws, regulations
and orders, whether or not having the force of law, including without
limitation, tax laws.
(h) This Guaranty is the direct, unconditional and general obligation of
Guarantor. Guarantor's obligations hereunder rank and will rank at
least pari passu in priority of payment and in all other respects with
all other unsecured indebtedness of Guarantor except for those
preferred by operation of law.
(i) All registrations, recordings or filings required as a condition to
the legality, validity or enforceability of this Guaranty or any other
document to be executed and delivered pursuant to the terms of this
Guaranty have been made by Guarantor.
(j) The most recent audited financial statements of Guarantor for the time
being (including the audited profit and loss account and balance
sheet) were prepared in accordance with all applicable laws and
regulations of Korea and generally accepted accounting principles and
policies consistently applied and show a true and fair view of the
financial position of Guarantor as at the end of, and the results of
its operations for, the financial period to which they relate and, as
at the end of such period Guarantor did not have any significant
liabilities (contingent or otherwise) or any unrealized or anticipated
losses which are not disclosed by or reserved against in, such
financial statements, and there has been no material adverse change in
the business or financial condition of Guarantor since the date of
such financial statements.
(k) No litigation, administrative proceeding or arbitration is presently
pending or threatened against Guarantor or its assets or revenues
which, if adversely determined, could have a material effect on the
ability of Guarantor to perform its obligations under this Guaranty.
(l) Guarantor is generally subject to civil and commercial law and to
legal proceedings and neither Guarantor nor any of its assets or
revenues is entitled to claim immunity or privilege (sovereign or
otherwise) from any set-off, judgment, execution, attachment or other
legal process.
(m) Guarantor is the legal and beneficial owner of forty percent (40%) of
the issued and outstanding voting share capital of Borrower.
SECTION 9. COVENANT
9.1 Guarantor undertakes and agrees with Lender and Agent as follows:
(a) Throughout the life of this Guaranty, Guarantor shall provide Agent
with copies of its unaudited financial statements for the first six
months of each fiscal year and its audited financial statements for
each fiscal year as they are available but in any event not later than
ninety (90) days after the close of each fiscal period covered by an
unaudited financial statement and not more than one hundred and twenty
(120) days after the close of each fiscal period covered by an audited
financial statement and such other information respecting the
financial condition and operations of Guarantor
B-6
<PAGE> 39
as Agent may from time to time reasonably request. Each financial statement
provided hereunder shall have been prepared in accordance with generally
accepted accounting principles in Korea consistently applied, and be
accompanied by a certificate executed by the principal financial officer of
Guarantor stating (i) that as of the date of such financial statement
Guarantor is in full compliance with all terms and conditions hereof,
including without limitation all financial covenants, and of any document
executed pursuant hereto, and (ii) that as of such date no Event of Default
or prospective Event of Default has occurred and is continuing.
(b) Guarantor shall pay and discharge all taxes, assessments and
governmental charges upon it or its assets promptly when due and, in
any event, prior to the date on which penalties may become attached
thereto.
(c) Guarantor shall ensure that the representations and warranties
contained in this Guaranty remain at all times true and accurate by
reference to the facts and circumstances from time to time existing.
(d) Guarantor undertakes to obtain or effect any governmental
authorizations as may be required or advisable in respect of the
performance by Guarantor or Borrower of any of the terms and
conditions of this Guaranty or, as the case may be, the Loan
Agreement, including, without limitation, any filings or periodic
reports required under the Foreign Exchange Management Act of Korea
and regulations thereunder.
(e) Guarantor shall maintain its corporate existence in compliance with
all applicable laws and regulations, and Guarantor shall maintain the
present character of its business.
(f) Guarantor shall maintain insurance on and in relation to its
businesses, properties and assets with reputable underwriters or
insurance companies against such risks and in such amount as are
customary for businesses of a like nature in the jurisdiction in which
such properties and assets are located or in which such businesses are
conducted.
(g) Guarantor shall not, except with the prior written consent of Agent
and Lender, (i) merge or consolidate with any other corporation or
(ii) purchase or otherwise acquire all or substantially all of the
assets of any other corporation or (iii) sell, lease, transfer or
otherwise dispose of all or any material portion of its property or
assets, whether by a single transaction or by a number of transactions
whether related or not, or (iv) declare or pay any dividend or make
any other income distribution to its shareholders if an Event of
Default or prospective Event of Default has occurred and has not been
remedied to the satisfaction of Agent.
(h) As soon as possible but in any event within seven (7) days after
occurrence, Guarantor shall give written notice to Agent of any Event
of Default or prospective Event of Default, or any litigation,
administrative proceeding or arbitration referred to in Section 8. 1
(k), and of any other matter which has resulted or might result in a
material adverse change in Guarantor's operations or financial
condition or affect Guarantor's ability to pay, when due, any amounts
due under this Guaranty.
B-7
<PAGE> 40
(i) Guarantor shall at all times own beneficially and directly not less
than forty percent (40%) of the issued and outstanding voting share
capital of Borrower.
(j) Guarantor shall furnish Lender with all such other documents and
instruments and do all such other acts and things as Lender may
reasonably require to carry out the transactions contemplated herein
or in the documents to be delivered hereunder.
(k) Guarantor shall not permit the Debt-Equity Ratio to exceed 6:1 at any
time during the life of the Facility.
SECTION 10. ASSIGNMENT
10.1 Guarantor shall not assign or transfer any of its rights or obligations
hereunder.
10.2 Lender may at any time assign, transfer or grant participations in all or
any part of the rights, benefits and obligations under the Loan Agreement
and this Guaranty pursuant to the terms of Section 17 of the Loan
Agreement and Guarantor hereby irrevocably consents to, and agrees to be
bound by, such assignment or transfer. Lender may make disclosures in
accordance with, and Guarantor shall do such acts and things as provided
in, Section 17 of the Loan Agreement but as if references to Borrower were
references to Guarantor.
SECTION 11. GOVERNING LAW AND JURISDICTION
11.1 This Guaranty shall be governed by and construed in accordance with the
laws of the State of New York, the United States of America.
11.2 Guarantor agrees that any legal action or proceeding arising out of or
relating to this Guaranty may be brought in any Court of the State of New
York or Federal court of the United States of America located in the City
and State of New York and irrevocably submits to the non-exclusive
jurisdiction of such courts. The foregoing, however, shall not limit the
rights of Lender or Agent to bring any legal action or proceeding or to
obtain execution of judgment in any other jurisdiction.
11.3 Guarantor irrevocably appoints Anam USA, Inc., currently located at Goshen
Corporate Park 1345, Enterprise Drive, West Chester, PA 19380, U.S.A., as
its agent to accept on its behalf service of any and all process or other
documents which may be served in any action or proceedings in any such
court. If for any reason the agent named above (or its successor) no
longer serves as agent of Guarantor for this purpose, Guarantor shall
promptly appoint a successor agent satisfactory to Agent and notify Agent
thereof, provided that until Agent receives such notification, it shall be
entitled to treat the agent named above (or its said successor) as the
agent of Guarantor for the purposes of this Section. Guarantor agrees that
any such legal process shall be sufficiently served on it if delivered to
such agent for service at its address for the time being in New York, New
York whether or not such agent gives notice thereof to Guarantor.
B-8
<PAGE> 41
11.4 Nothing herein shall limit the right of Lender or Agent to commence any
legal action against Guarantor and/or its property in any other
jurisdiction or to serve process in any manner permitted by law, and the
taking of proceedings in any jurisdiction shall not preclude the taking of
proceedings in any other jurisdiction whether concurrently or not.
11.5 Guarantor irrevocably waives any immunity to which it or its property may
at any time be or become entitled, whether characterized as sovereign
immunity or otherwise, from any set-off or legal action in New York, New
York or elsewhere, including immunity from service of process, immunity
from jurisdiction of any court or tribunal, and immunity of any of its
property from attachment prior to judgment or from execution of a
judgment.
SECTION 12. NOTICES
12.1 Each notice, demand or other communication to be given or made to
Guarantor under this Guaranty shall be in writing and delivered at its
address or telex number or fax number set out below (or such other address
or telex number or fax number as Guarantor has by five (5) days' prior
written notice specified to Agent):
To Guarantor: Anam Industrial Co., Ltd.
280-8, 2-ka
Sungsu-dong, Sungdong-ku
Seoul, Korea
Telex No.: K27381, K26540
Answerback: ANAMIC
Fax No.: 460-5127
Attention: Mr. K.H. Kim
12.2 Any notice, demand or other communication so addressed shall be deemed to
have been delivered (i) if given or made by letter, when actually
delivered to the relevant address, (ii) if given or made by telex, when
despatched with confirmed answerback and (iii) if given or made by fax,
when despatched with a simultaneous confirmation of transmission.
12.3 Any notice, demand or other communication from Guarantor to Lender or
Agent shall be given or made in accordance with Section 19.7 of the Loan
Agreement.
SECTION 13. MISCELLANEOUS
13.1 To the extent permitted by law, Lender or Agent may at any time set off or
apply any and all deposits by Guarantor with Lender or, as the case may
be, Agent, at its head office or at any branch, subsidiary or affiliate of
its head office (whether general or special, time or demand, matured or
unmatured) in reduction of amounts due to it hereunder.
B-9
<PAGE> 42
13.2 Lender or Agent may place and keep any monies received by virtue of this
Guaranty (whether before or after the insolvency or liquidation of
Guarantor or Borrower) to the credit of a suspense account for so long as
Lender may think fit in order to preserve its rights to sue or prove for
the whole amount of its claims against Guarantor, Borrower or any other
person.
13.3 The failure or delay of Lender or Agent to require performance by
Guarantor of any provision of this Guaranty shall not affect its right to
require performance of such provision nor shall any single or partial
exercise of the same preclude ally further exercise thereof or the
exercise of any other right, power or remedy. Each and every right, power
and remedy granted to Agent and Lender hereunder or by law shall be
cumulative and may be exercised in part or in whole from time to time.
13.4 If any one or more of the provisions contained in this Guaranty shall be
invalid, illegal or unenforceable in any respect under any applicable law,
the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
13.5 Any amendment or waiver of any provision of this Guaranty and any waiver
of any default under this Guaranty shall only be effective if made in
writing and signed by Agent.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by its
duly authorized representative as of the day and year first written above.
GUARANTOR
ANAM INDUSTRIAL CO., LTD.
By_________________________________
Name:
Title:
B-10
<PAGE> 1
EXHIBIT 10.8
COMMERCIAL OFFICE LEASE
CHANDLER CORPORATE CENTER, PHASE II, G.P.
1347 N. Alma School Road
Chandler, Arizona
PARTIES:
THIS LEASE is made and entered into this 6th day of September 1993, by
and among CHANDLER CORPORATE CENTER PHASE II, G.P., an Arizona General
Partnership, as Landlord, AMKOR ELECTRONICS, INC. Tenant.
W I T N E S S E T H:
1. Premises.
(a) Landlord does hereby lease to Tenant and Tenant hereby hires
from Landlord those certain premises (hereinafter called "premises" or "leased
premises") outlined in red on the floor plan attached hereto as Exhibit "A" and
"B" and by this reference incorporated herein, said premises consisting of
11,200 square feet and 2,309 square feet respectively of space being known as:
1347 N. Alma School Road, Suite 100 and 225, respectively, Chandler, Arizona.
(b) Said letting and hiring is upon and subject to the terms,
covenants and conditions herein set forth, and Landlord and Tenant covenants as
a material part of the consideration for this Lease to keep and perform each and
all of said terms, covenants and conditions by it to be kept and performed and
that this Lease is made upon the condition of such performance.
2. Purpose. The premises are to be used for conducting related office
business and for no other purposes without the written consent of Landlord.
3. Term. The term of this Lease shall be for a period of Five (5)
years, commencing on the 1st day of January, 1994 and ending on the 31st day of
December, 1998. If Landlord is able to deliver possession to Tenant on all or
part of the said premises early or prior to the above stated commencement date
of January 1, 1994, commencement date shall then begin on that earlier date.
Commencement of this Lease shall begin upon the earliest date Landlord is able
to give possession to Tenant.
<PAGE> 2
4. Possession. If the Landlord, for any reason whatsoever, cannot
deliver possession of the said premises to Tenant at the commencement of the
term hereof, this Lease cannot be void or voidable, nor shall Landlord be liable
to Tenant for any loss or damage resulting therefrom but in that event all rent
shall be abated during the period between the commencement of the said term and
the time when Landlord delivers possession. If the failure to deliver possession
extends beyond two months from the commencement date of the term hereof, Tenant
shall have the option to terminate this Lease without penalty or any obligation.
5. RENTAL
(a) Guaranteed Minimum Monthly Rental.
Tenant shall pay to Landlord during the term of this Lease,
beginning on or before January 1, 1994 and including each month thereafter
through December 31, 1998 the sum of FOURTEEN THOUSAND SEVENTY ONE DOLLARS AND
87/100 ($14,071.87) per month as Minimum Monthly Rental for the demised
premises. Tenant shall pay to Landlord prior to January 1, 1994 the Following
Sum: FORTY TWO THOUSAND TWO HUNDRED FIFTEEN DOLLARS AND 61/100 ($42,215.61) as
advance rent payments representing the 1st three months rent payable in advance.
Beginning April 1994 and continuing through the expiration of this lease ending
December 31, 1998 the following sum: FOURTEEN THOUSAND SEVENTY ONE DOLLARS AND
.87/100 ($14,071.87) per month, which sum shall be paid in .advance on the first
day of each calendar month. If and at which earlier time Landlord is able to
deliver possession on all or part of the said premises to Tenant prior to
commencement date originally stated in paragraph 3 above of this Lease, then
commencement date shall begin at that early time and Tenant shall then begin
paying Lease payments to Landlord at that time. The sum of the Lease payments
and the sum of the advance Lease payments as stated in this paragraph will stay
the same, except if commencement begins prior to that date stated in paragraph 3
payments will begin upon commencement.
All rental to be paid by Tenant to Landlord shall be in lawful money
of the United States of America and shall be paid without deduction or offset,
except as provided below and without prior notice or demand. The due date of
Guaranteed Minimum Monthly Rental is the first day of each calendar month. If
the Guaranteed Monthly Rental is not received by Landlord within ten (10) days
of its due date, it is in default. Any Guaranteed Minimum Monthly Rent in
default shall be subject to an additional charge of five percent (5%) per month
on the unpaid balance thereof as a late charge. In addition to Guaranteed Rent,
Tenant agrees to pay any excise, privilege or sales taxes or any tax levied on
the rental or the receipt thereof, except Landlord's income tax.
<PAGE> 3
(b) Rental Adjustment.
Effective January 1, 1995 and on January 1st of each year during the
term of this lease, the Guaranteed minimum monthly Rental could be increased by
no more than 5% to compensate for changes in property taxes and operating costs
of the building. Landlord shall provide to Tenant, documentation to substantiate
any such increase and shall include a schedule of actual operating costs and
property taxes from year to year, with calculation of Tenants proportionate
share of any increases in operating costs and property taxes.
Said rental shall be paid to Landlord and checks made payable to
Chandler Corporate Center, in Lawful money of the United States of America at
1351 N. Alma School Rd. Suite 270, Chandler, Arizona 85224, or to such other
person or at such other place as Landlord may from time to time designate in
writing.
6. ADDITIONAL EXPENSES. All expenses such as but not limited to
management, utilities, janitorial, maintenance of building and grounds, taxes,
insurance, etc., will remain the responsibility of the Landlord.
7. USES PROHIBITED. Tenant shall not do or permit anything to be done
in or about the premises nor bring or keep anything therein which will cause a
cancellation of any insurance policy covering said building or any part thereof
or any of its contents. Tenant shall not do or permit anything to be done in or
about the premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the building or injure or annoy them or use or
allow the premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the premises. Tenant shall not commit or suffer to be committed
any waste in or upon the premises.
8. COMPLIANCE WITH LAW. Tenant shall not use the premises or permit
anything to be done in or about the premises which will in any way conflict with
any law, stature, ordinance or governmental rule or regulation now in force or
which may hereafter be enacted or promulgated. Tenant shall at its sole cost and
expense promptly comply with all laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which may hereafter be in
force and with the requirements of any board of fire underwriters or other
similar body now or hereafter constituted relating to or affecting the
condition, use or occupancy of the premises, excluding structural changes not
related to or affected by Tenant's improvements or acts. Landlord affirms that
it has complied with all laws, statutes, ordinances and governmental rules and
regulations or requirement with respect to
<PAGE> 4
the engineering, design and construction of the leased premises and agrees to
hold Tenant harmless for and defend Tenant against any damages resulting from
defects or negligence in engineering, design or construction of the leased
premises. The judgment of any court of competent jurisdiction or the admission
of Landlord or Tenant in any action against Landlord or Tenant, whether Landlord
or Tenant are opposing parties thereto or not, that Landlord or Tenant has
violated any law, statute, ordinance or governmental rule, regulation or
requirement, shall be conclusive of that f act as between Landlord and Tenant.
9. CONSTRUCTION AND ALTERATIONS.
(a) Tenant shall not make or suffer to be made any other
alterations, additions or improvements to or for the premises or any part
thereof without the written consent of Landlord first had and obtained. The use
by Tenant of detachable wall partitions or office systems (such as those
produced, designed and distributed by manufacturers such as Haworth Office
Systems, Knoll International, or Steel Case) shall not be considered an
alteration, addition or improvement requiring any consent of the Landlord in
spite of the fact that said systems may be attached to the ceiling, floor and
permanent wall of the leased premises. Any alterations, additions or
improvements to or of said premises, except furniture, trade fixtures,
detachable wall partitions and office systems as described above, and security
or alarm system control devices shall at once become a part of the realty and
belong to Landlord. In the event Landlord consents to the making of any
alterations, additions or improvements to the premises by Tenant, the same shall
be made by Tenant at Tenant's sole cost and expense and any contractor or person
selected by Tenant to make the same must first be approved of in writing by
Landlord. Upon the expiration or sooner termination of this Lease, Tenant shall,
upon demand by Landlord, at Tenant's sole cost and expense, forthwith and with
all due diligence remove any alterations, additions or improvements made by
Tenant, designated by Landlord to be removed, and Tenant shall, forthwith and
with all due diligence at its sole cost and expense, repair any damage to the
premises caused by such removal.
10. REPAIR AND JANITORIAL SERVICE. By entering into possession of the
leased premises, Tenant accepts the premises as being in good condition and
repair, damage thereto by fire, earthquake, act of God or the elements and
reasonable wear and tear excepted. Landlord agrees to maintain in good working
order and repair and operate on a regular and continual basis all fixtures,
lighting, fountains and other appurtenances of the office complex of which the
leased premises is a part. Tenant shall, upon the expiration or sooner
termination of the term hereof, surrender the
<PAGE> 5
premises to Landlord in the same condition as when received, ordinary wear and
tear and damage by fire, earthquake, act of God or the elements excepted.
11. ABANDONMENT. Tenant shall not vacate or abandon the premises at any
time during the term, and if Tenant shall abandon, vacate or surrender said
premises, or be dispossessed by process of law, or otherwise, any personal
property belonging to Tenant and left on the premises shall be deemed to be
abandoned.
12. LIENS. Tenant shall keep the premises and the property in which the
premises are situated free from any liens arising out of any work performed for,
materials furnished to, or obligations incurred by Tenant.
13. ASSIGNMENT AND SUBLETTING. Tenant shall not assign, transfer
mortgage, pledge, hypothecate or encumber this Lease, or any interest therein,
and shall not sublet the said premises or any part thereof, or any right or
privilege appurtenant thereto, or suffer any other person (the agents and
servants of Tenant excepted) to occupy or use the said premises, or any portion
thereof, without the written consent of Landlord first had and obtained, which
consent shall not be unreasonably withheld. A consent to one assignment,
subletting, occupation or use by any other person shall not be deemed to be a
consent to any subsequent assignment, subletting, occupation or use by another
person. Any such assignment or subletting without such consent shall be void,
and shall, at the option of Landlord, terminate this Lease. This Lease shall
not, nor shall any interest therein, be assignable as to the interest of Tenant
by operation of law, without the written consent of Landlord.
14. INDEMNIFICATION OF LESSOR. Tenant shall hold Landlord harmless from
and defend Landlord against any and all claims of liability for any injury or
damage to any person or property whatsoever: (1) occurring in, on or about the
premises or any part thereof, and (2) occurring in, on or about any facilities
(including, without prejudice to the generality of the term "facilities",
stairways, passageways, hallways and parking areas), the use of which Tenant may
have in conjunction with other tenants of the building, when such injury or
damage is caused in part or in whole by the act, neglect, fault of or omission
of any duty with respect to the same by Tenant, its agents, servants, employees,
or invitees.
15. INSURANCE.
(a) The Landlord shall keep the building containing the leased
property insured against loss or damage by fire with extended coverage
endorsement in an amount sufficient to prevent the Landlord from becoming a
coinsurer under the terms of the
<PAGE> 6
applicable policies but, in any event in an amount not less than eighty (80%)
percent of the full insurable value as determined from time to time. The term
"full insurable value" shall mean actual replacement cost (exclusive of the cost
of excavation, foundations and footings) without deduction for physical
depreciation. Such insurance shall be issued by financially responsible insurers
duly authorized to do business in this state.
(b) Tenant agrees to provide, pay for and maintain public liability
and property damage insurance of not less than $1,000,000 with respect to bodily
injury or death to any one person and of not less than $1,000,000 in respect to
damage to property of others, for the protection of the Landlord and the Tenant
against liability that may or might arise from any accident or any injury or
death to any person, or damage to property, with Landlord and Tenant as named
insureds. Tenant further agrees to furnish Landlord with certificates of
insurance or other evidence that such insurance is in effect, which certificate
shall contain a clause requiring the insurer to give ten (10) days written
notice to Landlord prior to any change or cancellation of the policy or policies
providing such coverage.
(c) So long as their respective insurers so permit, Tenant and
Landlord hereby mutually waive their respective rights of recovery against each
other for any loss insured by fire, extended coverage and other property
insurance policies existing for, the benefit of the respective party. Each party
shall obtain any special endorsements, if required by their insurer, to evidence
compliance with the aforementioned waiver.
16. SERVICES AND UTILITIES. Tenant shall pay f or all telephone and
other such services for the leased premises as Tenant shall contract for.
17. PERSONAL PROPERTY TAXES. Tenant agrees to pay or cause to be paid,
before delinquency, any and all taxes levied or assessed and which become
payable during the term hereof upon all equipment, furniture, fixtures, and
other personal property located in the premises; except that which may be owned
by Landlord.
18. SUBORDINATION, ATTORNMENT.
(a) This Lease, at Landlord's option, shall be subordinate to the
lien of any first deed of trust or first mortgage subsequently placed upon the
real property of which the leased premises are a part, and to any and all
advances made on the security thereof, and to all renewals, modifications,
consolidations, replacements and extensions thereof; provided, however, that as
to the lien of any such deed of trust or mortgage, Tenant's right to quiet
possession of the premises shall not be
<PAGE> 7
disturbed if Tenant is not in default and so long as Tenant shall pay the rent
and observe and perform all of the provisions of this Lease, unless this Lease
is otherwise terminated pursuant to its terms. If any mortgagee, trustee or
ground lessor shall elect to have this Lease prior to the lien of its mortgage,
deed of trust or ground lease, whether this Lease is dated prior or subsequent
to the date of recording thereof.
(b) In the event any proceedings are brought for foreclosure, or in
the event of the exercise of the power of sale under any mortgage or deed of
trust made by the Landlord covering the demised premises, Tenant shall attorn to
the purchaser as the Landlord under this Lease.
(c) If upon any sale, assignment, or hypothecation of the leased
premises or the land thereunder by Landlord, or at any other time, an estoppel
certificate shall be requested of Tenant, Tenant agrees to deliver such estoppel
certificate (in recordable form) addressed to any such proposed mortgagee or
purchaser or to the Landlord certifying the requested information, including
among other things the dates of commencement and termination of this Lease, the
amounts of security deposits, and that this Lease is in full force and effect
(if such be the case) and that there are no differences, offsets or defaults as
actually exist. Tenant shall be liable for any loss or liability resulting from
any incorrect information certified, and such mortgagee and purchaser shall have
the right to rely on such estoppel certificate. Tenant shall in the same manner
acknowledge and execute any assignment of rights to received rents as required
by any mortgagee of Landlord.
19. HOLDING OVER. If, with Landlord's consent, Tenant holds possession
of the premises after the term of this Lease, without exercising an option to
renew pursuant to the terms of Paragraph 3 hereof, Tenant shall become a tenant
from month to month upon the terms herein specified but as a monthly rental
equivalent to the then prevailing rental paid by Tenant at the expiration of the
term of this Lease pursuant to all of the provisions of Paragraphs 5 and 6
hereof, payable in advance on or before or upon the first day of each month, and
Tenant shall continue in possession until such tenancy shall be terminated by
Landlord, or until Tenant shall have given to Landlord a written notice at least
one month prior to the date of termination of such monthly tenancy of his
intention to terminate such tenancy.
20. ENTRY BY LESSOR.
(a) Landlord understands that the work to-be performed by Tenant on
the leased premises is of a highly technical and confidential nature, and,
therefore, Landlord agrees to provide Tenant with reasonable notice of
Landlord's desire to enter upon the leased premises and shall provide Tenant
with an opportunity to
<PAGE> 8
be present when entry on the premises by Landlord is made f or purposes of
inspecting, showing to prospective purchasers or tenants or repairing and
maintaining the premises.
(b) When an emergency situation exists in which material and
significant damage to the leased premises may result unless entry is made
immediately, Landlord shall have the right to enter the leased premises without
any notice to Tenant.
(c) Landlord may, for purposes of repairing or maintaining the
premises, erect scaffolding and other necessary structures which are reasonably
required by the character of the work to be performed, always providing the
entrance to the premises shall not be blocked thereby, and further providing
that the business of Tenant shall not be interfered with unreasonably. Tenant
hereby waives any claim f or damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the premises, and any other loss occasioned thereby.
21. DEFAULT.
(a) If default shall be made in the payment of the rent or any
installment thereof or in the payment of any other lien required to be paid by
Tenant under this Lease, or any other agreement between Landlord and Tenant, and
such default shall continue for ten (10) days after written notice thereof to
Tenant, or if default shall be made in the performance of any of the other
covenants or conditions which Tenant is required to observe and perform
hereunder and such default shall continue for thirty (30) days after written
notice thereof to Tenant, or if the interest of Tenant in this Lease shall be
levied on under execution or other legal process, or if any petition shall be
filed by or against Tenant to declare Tenant a bankrupt, or if Tenant be
declared insolvent according to law by a court of competent jurisdiction, or if
any assignment of Tenant's property shall abandon or vacate the premises during
the term of this Lease, then Landlord may treat the occurrence of any one or
more of the foregoing events as a breach of this Lease, and thereupon at its
options may, without notice or demand of any kind to Tenant or any other
persons, have any one or more of the following described remedies, in addition
to all other rights and remedies provided at law or in equity:
(b) Upon any default by Tenant Landlord may re-enter the premises
and take possession of the same and without terminating this Lease, at any time
and f rom time to time relet the premises or any part thereof for the account of
Tenant, for such term upon such reasonable conditions and at such rental as
Landlord may deem proper. In such event Landlord may receive and collect the
rent
<PAGE> 9
from such reletting and apply it against any amounts due from Tenant hereunder
(including without limitation such expenses as Landlord may have incurred in
recovering possession of the premises, placing the same in good order and
condition, repairing the same for reletting, and all other expenses, commissions
and charges including reasonable and necessary attorneys' fees which Landlord
may have paid or incurred in connection with such repossession and reletting).
Landlord may execute any lease made pursuant hereto in Landlord's name, and
Tenant thereunder shall be under no obligation to see to the application by
Landlord of any rent collected by Landlord nor shall Tenant have any right to
collect any rent thereunder. Whether or not the premises are relet, Tenant shall
pay Landlord, until the end of the term hereof, the amount of all rent and other
charges required to be paid the Tenant hereunder, less the proceeds of such
reletting during the term hereof, if any, after payment of Landlord's expenses
as provided above. Such payments by Tenant shall be due at such times as are
provided elsewhere in this Lease, and Landlord need not wait until the
termination of this Lease to recover them by legal action or otherwise. Landlord
shall not, by any re-entry or other act, be deemed to have terminated this Lease
or the liability of Tenant for the total rent hereunder unless Landlord shall
give Tenant written notice of Landlord's election to terminate this Lease.
(c) Upon any default by Tenant Landlord may give written notice to
Tenant of Landlord's election to terminate this Lease, re-enter the premises and
take possession of the same. in such event Landlord shall thereupon be entitled
to recover from Tenant the worth, at the time of such termination of the excess,
if any, of the rent and other charges required to be paid by Tenant hereunder
for the balance of the term hereof (if this Lease had not been so terminated)
over the then reasonable rental value of the premises for the same period.
22. RECONSTRUCTION.
(a) In the event the premises or the building of which the premises
are a part are damaged by fire or other perils covered by extended coverage
insurance, Landlord agrees to forthwith repair the same; and this Lease shall
remain in full force and effect, except that Tenant shall be entitled to a
proportionate reduction of rent while such repairs are being made, such
proportionate reduction to be based upon the proportion of the square footage of
the leased premises which is deemed unusable by Tenant bears to the entire
leased premises or the extent to which the damage or making of repairs shall
interfere with the business carried on by Tenant in the premises.
(b) In the event the premises or the building of which the premises
are a part are damaged as a result of any cause other
<PAGE> 10
than the perils covered by fire and extended coverage insurance, then Landlord
shall forthwith repair the same, provided the extent of the destruction be less
than twenty-five percent (25%) of the then full replacement value of the
premises or the building of which the premises are a part. In the event the
destruction of the premises or of the building is to an extent greater than
twenty-five percent (25%) of the then full replacement value, then Landlord
shall have the option either: (1) to repair or restore such damage, this Lease
continuing in full force and effect, but the rent to be proportionately reduced
as hereinabove in this paragraph provided; or (2) give notice to Tenant at any
time within thirty (30) days after such damage, terminating this Lease as of the
date specified in such notice, which date shall be no less than thirty (30) nor
more than sixty (60) days after the giving of such notice. In the event of
giving of such notice, this Lease shall expire and all interest to the Tenant in
the premises shall terminate on the date so specified in such notice and the
rent, reduced by any proportionate reduction, based upon the extent, if any, to
which such damage interfered with the business carried on by Tenant in the
premises, shall be paid up to date of such termination.
(c) Notwithstanding anything to the contrary contained in this
paragraph, Lessor shall not have any obligation whatsoever to repair,
reconstruct or restore the premises when the damage resulting from any casualty
covered under this Paragraph occurs during the last six (6) months of the last
one-year option renewal term of this Lease.
(d) Any repairs required to be made by Landlord to the leased
- -premises by this Paragraph 22 shall be done in like quality, detail,
workmanship and finish as the original constructions.
23. EMINENT DOMAIN. If all or any part of the premises shall be
taken or appropriated by any public or quasi-public authority under the power of
eminent domain, either party hereto shall have the right, at its option, to
terminate this Lease, and Landlord shall be entitled to any and all income,
rent, award, or any interest therein whatsoever which may be paid or made in
connection with such public or quasi-public use or purpose, and Tenant shall not
have claim against Landlord for the value of any unexpired term of this Lease.
If a part of the premises shall be so taken or appropriated and neither party
hereto shall elect to terminate this Lease, the rental thereafter to be paid
shall be equitably reduced. Before Tenant may terminate this Lease by reason of
taking or appropriation as above provided, such taking or appropriation shall be
of such an extent and nature as to substantially handicap, impede or impair
Tenant's use of the premises if any part of the building other than the premises
shall be so taken or appropriated, Landlord shall have the right, at its option,
to terminate this Lease and shall be entitled to the entire award, as above
provided.
<PAGE> 11
Clauses, plats and riders, if any, signed by Landlord and Tenant
and endorsed on or affixed to this Lease are a part hereof.
24. SALE BY LESSOR. In the event of a sale or conveyance by Landlord of
the building containing the premises, the same shall operate to release Landlord
from any future liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, and in such event Tenant agrees to
look solely to the responsibility of the successor in interest of Landlord in
and to this Lease. This Lease shall not be affected by any such sale, and Tenant
agrees to attorn to the purchaser or assignee.
25. ATTORNEYS' FEES. In the event of any action or proceeding brought
by either party against the other under this Lease the prevailing party shall be
entitled to recover f or the reasonable fees of its attorneys in such action or
proceeding such amount as the Court may adjudge reasonable as attorneys' fees.
26. SURRENDER OF PREMISES. The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of the Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, operate as an assignment to it
of any or all such subleases or subtenancies.
27. WAIVER. The waiver by Landlord of any term covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure .of Tenant
to pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such rent.
28. NOTICES. All notices and demands which may or are required to be
given by either party to the other hereunder shall be in writing. All notices
and demands by the Landlord to the Tenant shall be sent by United States
certified or registered mail, postage prepaid, addressed to the Tenant at the
premises, or to such other place as the Tenant may from time to time designate
in a notice to the Landlord. All notices and demands by the Tenant to the
Landlord shall be sent by United States certified or registered mail, postage
prepaid addressed to the Landlord at 1351 N. Alma School Rd., Suite 270,
Chandler, Arizona 85224 or such other person or place as the Landlord may from
time to time designate in a notice to the Tenant. Notice or demand shall be
deemed complete upon mailing.
29. DEFINED TERMS AND MARGINAL HEADINGS. The words"landlord" and
"Tenant" as used herein shall include the plural as well as the
<PAGE> 12
singular. Words used in masculine gender include the feminine and neuter. If
there is more than one Tenant the obligations hereunder imposed upon Tenant
shall be joint and several. The marginal headings and titles to the paragraphs
of this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
30. TIME. Time is of the essence of this Lease and each and all of its
provisions.
31. SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained shall, subject to the provisions as to assignment, apply to and bind
the heirs, successors, executors, administrators and assigns of the parties
hereto.
32. PARKING. Landlord shall provide Tenant with adequate parking spaces
for its employees or agents. Landlord shall provide tenant with f if teen (15)
private covered parking spaces.
33. SIGN. Landlord shall provide signage to tenant. Landlord will
likewise at its sole cost maintain said sign. said sign shall be in as prominent
and visible a position in relation to Parking Lot as is permitted by city
ordinance and/or any other pertinent governmental regulation.
34. SECURITY DEPOSIT. Tenant has deposited with Landlord the sum of
TWENTY-EIGHT THOUSAND ONE HUNDRED FORTY THREE DOLLARS AND 74/100, ($28,143.74)
(Two months rent). Said sum shall be held by Landlord as security for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term hereof. If Tenant
defaults with respect to any provision of the Lease, including but not limited
to the provisions relating to the payment of rent, Landlord may (but shall not
be required to) use, apply or retain all or Any part of this security deposit
for the payment of any rent or any other sum in default, or for the payment of
any other amount which Landlord may spend or become obligated to spend by reason
of Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of said
deposit is so used or applied, Tenant shall, upon demand therefore, deposit cash
with Landlord in an amount sufficient to restore the security deposit to its
original amount and Tenant's failure to do so shall be a material breach Of this
Lease. Landlord shall be required to keep this security deposit separate from
its general funds, but Tenant shall not be entitled to interest on such deposit.
If Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the security deposit or any balance thereof shall be returned
to Tenant (or, at Landlord's option, to the last assignee of Tenant's interest
hereunder) at the expiration of the
<PAGE> 13
Lease term, or may be treated by Tenant at its option as the last month's rental
of the Lease term.
35. QUIET ENJOYMENT. Landlord covenants that if and so long as Tenant
pays the rents due hereunder and performs the other terms, conditions and
covenants of this Lease, Tenant shall quietly enjoy the leased premises subject
to the terms of the Lease.
36. OPTION TO RENEW LEASE AFTER EXPIRATION OF CURRENT LEASE. Landlord
agrees to give Tenant an option to renew the Leased premises for an additional
five (5) years. The Lease rate at that time shall be at whatever the market rate
is at that time.
37. OPTION TO LEASE ADDITIONAL SPACE. Landlord agrees to give Tenant
the First right to Lease all additional space in the building as those current
Leases expire.
38. TENANT IMPROVEMENTS. Landlord agrees to provide at Landlords sole
cost approximately six (6) private offices along the far north and east side of
Suite #100, which is now an open work area. Landlord also agrees to provide
normal Tenant improvements throughout Suite #225 consisting of walls, doors,
ceiling, paint, carpet, A/C, heat and electrical.
All Tenant improvements shall be done in a like quality and workmanship fashion
equal to what now exists.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease the
day and year first above written.
Landlord: Tenant:
CHANDLER CORPORATE CENTER, AMKOR ELECTRONICS, INC.
PHASE II G.P.;
By: /s/ Kevin A. Bierl By: /s/ John N. Boruch
---------------------------- ----------------------------------
Kevin A. Bierl John N. Boruch
Its: Managing General Partner President
<PAGE> 14
FIRST AMENDMENT
This shall serve as the FIRST AMENDMENT, dated January 5, 1994, to that
Lease dated September 6, 1993, by and between CHANDLER CORPORATE CENTER PHASE
II, G.P., an Arizona General Partnership, ("Landlord"), and AMKOR ELECTRONICS,
INC., ("Tenant") as Tenant located at the certain premises known as 1347 N. Alma
School Road, Chandler, Arizona Suite 100 and 225 (the "Leased Premises"),
however, the language contained herein shall prevail if in conflict with any
previous language.
Whereas Landlord and Tenant entered into that certain Lease dated
September 6, 1993, for the rental of approximately 13,509 rentable square feet
of office space (known as Suite 100 located on the first floor of the building
containing approximately 11,200 square feet and Suite 225, located on the second
floor of the building, containing approximately 2,309 square feet) for a period
of five (5) years commencing on the 1st day of January, 1994 and terminating on
the 31st day of December, 1998.
Now, therefore, in consideration of these recitals and the conditions
and covenants hereinafter contained, the Landlord and Tenant agree as follows:
1. Paragraph 3., Titled "TERM" of the aforesaid Lease is hereby
modified and the following shall prevail:
TERM: The term of this Lease shall be for a period of Five (5)
years, commencing on the 1st day of December 1993, and ending on the 30th day of
November, 1998.
2. Paragraph 4., Titled "POSSESSION" of the aforesaid Lease is hereby
modified and the following shall prevail:
POSSESSION: Landlord shall deliver possession to Tenant of said
premises at time of commencement of this Lease being Decem&--- 1, 1993.
3. Paragraph 5., Titled ."RENTAL", Subtitled, (a) "GUARANTEED MINIMUM
MONTHLY RENTAL" of the aforesaid Lease is hereby modified and the following
shall prevail:
RENTAL
(a) GUARANTEED MINIMUM MONTHLY RENTAL:
Tenant shall pay to Landlord during the term of this Lease,
beginning on or before March 1, 1994 and including each month thereafter through
November 30, 1998 the sum of FOURTEEN THOUSAND SEVENTY ONE DOLLARS AND 87/100
($14,071.87)per month a minimum monthly rental for the demised premises.
Landlord hereby acknowledges receipt from Tenant the sum Of FORTY TWO THOUSAND
TWO HUNDRED FIFTEEN DOLLARS AND 611100 ($42,215.61) representing
<PAGE> 15
FIRST AMENDMENT TO LEASE
January 5, 1994
Page Two
the first three (3) months rent payable in advance, beginning December, 1993 and
continuing through. February, 1994. Beginning March 1, 1994 and continuing
through the expiration of this Lease ending November 30,1998 the following sum:
FOURTEEN THOUSAND SEVENTY ONE DOLLARS AND 87/100 ($14,071.87) per month, which
sum shall be paid in advance on the first day of each calendar month.
4. Paragraph 36., Titled "'OPTION TO RENEW LEASE AFTER EXPIRATION OF
CURRENT LEASE," of the aforesaid Lease is hereby modified and the following
shall prevail:
OPTION TO RENEW LEASE AFTER EXPIRATION OF CURRENT LEASE:
If Tenant is not then in default under any of the terms and
provisions of this Lease, Tenant shall have the option to extend the term of
this Lease for an additional term of five (5) years, from and after the
expiration of the initial term of their Lease, upon giving of written notice of
the exercise of such option to Landlord before May 31, 1998 delivered in person,
or by Registered Certified Mail.
Said option shall be on the same terms and conditions as the basic
terms of the original Lease with exception that the -monthly rental rate shall
be adjusted to the current monthly rental rate at that time of exercise of
option.
5. Paragraph 37., Titled "OPTION TO LEASE ADDITIONAL SPACE" of the
aforesaid Lease is hereby modified and the following shall prevail:
OPTION TO LEASE ADDITIONAL SPACE:
If Tenant is not in default under any of the terms and provisions of
this Lease, Tenant shall have the 1st option to Lease all additional space in
the same building (known as the space .currently occupied by Chickasha Cotton
Oil and All State Insurance) as those current Leases expire 7/96 and 9/95
respectively. Said option shall be on the same terms and conditions as the basic
terms of this Lease with exception the monthly rental rate shall be adjusted to
the current monthly rental rate at that time of exercise option. This option to
Lease the additional space shall be exercised by given written notice of the
exercise of such option to Landlord six (6) months prior to the expiration of
existing Leases, delivered in person or by Registered Certified Mail.
<PAGE> 16
FIRST AMENDMENT TO LEASE
January 5, 1994
Page Three
The Lease and this First Amendment, except as herein modified, are
confirmed and ratified in all respects and they shall remain in full force and
effect between the parties hereto, their successors and assignors.
LANDLORD: CHANDLER CORPORATE CENTER PHASE II,, G. P.,
an Arizona General Partnership.
BY: /s/ KEVIN A. BIERL
----------------------------
Kevin A. Bierl
ITS: Managing General Partner
DATE: 1/5/95
--------------------------
TENANT: AMKOR ELECTRONICS, INC.
BY: /s/ JOHN N. BORUCH
----------------------------
John N. Boruch
ITS: President
DATE: 1/4/95
--------------------------
<PAGE> 17
SECOND AMENDMENT
This shall serve as the SECOND AMENDMENT, dated February 24, 1994, to
that original Lease dated September 6, 1993, by and between CHANDLER CORPORATE
CENTER PHASE II, G.P., an Arizona General Partnership, ("Landlord"), and AMKOR
ELECTRONICS, INC., ("Tenant") as Tenant located at the certain premises known as
1347 N. Alma School Road, Chandler, Arizona Suite 100 and 225 (the "Leased
Premises") , however, the language contained herein shall prevail if in conflict
with any previous language.
Whereas Landlord and Tenant entered into that certain original Lease
dated September 6, 1993, for the rental of approximately 13,509 rentable square
feet of office space (known as Suite 100 located on the first floor of the
building containing approximately 11,200 square feet and Suite 225, located on
the second floor of the building, containing approximately 2,309. square feet)
for a period of five (5) years commencing on the 1st day of January, 1994 and
terminating on the 31st- day of December, 1998. There was a First Amendment to
the Lease dated January 5, 1994 which amended the term to begin on the 1st day
of December, 1993 and ending on the 30th day of November, 1998.
Now, therefore, in consideration of these recitals and the conditions
and covenants hereinafter contained, the Landlord and Tenant agree as follows:
1. Paragraph 5., Titled "RENTAL", Subtitled, (a) "GUARANTEED MINIMUM
MONTHLY RENTAL" of the aforesaid Lease is hereby modified and-the following
shall prevail:
RENTAL
(a) GUARANTEED MINIMUM MONTHLY RENTAL:
In exchange for Tenant improvements completed and paid for by
Tenant, Landlord agrees to give credit to Tenant by reducing the guaranteed
minimum monthly rental as follows upon Tenant providing Landlord lien waivers
for all work completed:
Now then, Tenant shall pay to Landlord during the term of this
Lease, beginning on or before March 1, 1994 and including each Month thereafter
through November 30, 1998 the sun of THIRTEEN THOUSAND FIVE HUNDRED FORTY FIVE
DOLLARS AND 56/100 ($13,545.56) per month as minimum monthly rental for the
demised premises which sum shall be paid in advance on the 1st day of each
calendar month.
<PAGE> 18
SECOND AMENDMENT TO LEASE
February 24, 1994
Page Two
The original Lease the First Amendment, and this Second Amendment except as
herein modified, are confirmed and ratified in all respects and they shall
remain in full Force and effect between the parties hereto, their successors and
assignors.
LANDLORD: CHANDLER CORPORATE CENTER PHASE II,, G. P.,
an Arizona General Partnership.
BY: /s/ KEVIN A. BIERL
----------------------------
Kevin A. Bierl
ITS: Managing General Partner
DATE: 2/21/94
--------------------------
TENANT: AMKOR ELECTRONICS, INC.
BY: /s/ JOHN N. BORUCH
----------------------------
John N. Boruch
ITS: President
DATE: 2/24/94
--------------------------
<PAGE> 1
EXHIBIT 10.9
COMMERCIAL OFFICE LEASE
This Lease Agreement ("Lease") is entered into this first day of
October 1996 ("Effective Date") by and between the 12/31/87 Trusts of Susan Y.,
David D., and John T. Kim, c/o Amkor Electronics, Inc., 1345 Enterprise Drive,
West Chester, Pennsylvania 19380 ("Lessors") and Amkor Electronics, Inc., a
Pennsylvania corporation, with its principal office at 1345 Enterprise Drive,
West Chester, Pennsylvania 19380 ("Lessee").
1. PREMISES
a. Lessors do hereby lease to Lessee and Lessee does hereby lease from
Lessors those certain premises located at 1345 Enterprise Drive, West
Chester, PA and consisting of approximately 77,742 (27,793 = office space;
49,949 = warehouse space) square feet (the "Premises").
b. Said letting is upon and subject to the terms, covenants and conditions
herein set forth, and Lessors and Lessee covenant as a material part of
the consideration for this Lease to keep and perform each and all of said
terms, covenants and conditions by each to be kept and performed and that
this Lease is made upon the condition of such performance.
2. PURPOSE
The Premises are to be used for conducting Lessee's lawful business
activities and for no other purposes without the written consent of Lessors.
3. TERM
The initial term of this Lease shall be for a period of ten (10) years
commencing on the first (1st) day of October 1996 and ending on the thirtieth
(30th) day of September 2006. The Lease may thereafter be extended pursuant
to paragraph 20 herein.
4. RENT
a. Guaranteed Minimum Monthly Rental
Lessee shall pay to Lessors during the term of this Lease, beginning on
the date of occupancy and continuing through the expiration of this Lease,
the annual rental of Eight Hundred Twenty-Two Thousand Four Hundred
Forty-Five Dollars and Eight Cents ($822,445.08) paid in equal monthly
installments of Sixty-Eight Thousand Five Hundred Thirty-Seven Dollars and
Nine Cents ($68,537.09) in advance on the first day of each and every
month during the term of this Lease ("Guaranteed Monthly Rental"). If the
Guaranteed Monthly Rental is not received by Lessors within ten (10) days
of its due date, it is in default. Any Guaranteed
<PAGE> 2
Monthly Rental in default may be subject, at Lessors' discretion, to an
additional charge of five percent (5%) per month on the unpaid balance
thereof as a late charge. In addition to Guaranteed Monthly Rental, Lessee
agrees to pay any excise, privilege or sales taxes or any tax levied on
the rental or the receipt thereof, except Lessors' income tax.
Said Guaranteed Monthly Rental shall be paid to Lessors by check or wire
transfer in equal amounts to Susan Y. Kim as Trustee for the 12/31/87
Trust of Susan Y. Kim; David D. Kim as Trustee for the 12/31/87 Trust of
David D. Kim; and John T. Kim as Trustee for the 12/31/87 Trust of John T.
Kim, in lawful money of the United States of America at 1345 Enterprise
Drive, West Chester, Pennsylvania 19380, or to such other person or at
such other place as Lessors may from time to time designate in writing.
b. Rental Adjustments
Effective October 1, 1997 and on October 1 ("Adjustment Date") of each
year during the term of this Lease and any extension hereto, the
Guaranteed Monthly Rental shall be subject to adjustment based upon the
Consumer Price Index (CPI) as published by the Bureau of Labor Statistics
of the U.S. Department of Labor calculated as follows:
For each change of one (1) index point in the CPI, the Guaranteed Monthly
Rental shall be adjusted by a factor of one percent (1%). Said adjustment
will be based on the most recent CPI indices available prior to the
Adjustment Date.
5. ADDITIONAL EXPENSES
Lessee shall pay all local, state, and federal taxes, charges, assessments,
government fees of any kind, or like expenses, imposed upon the Premises
during the term of the Lease. Lessee shall further pay all other expenses
including, but not limited to management, utilities, janitorial, maintenance
of building, grounds, insurance, etc.
6. CARE OF PREMISES, ALTERATIONS, ETC.
Lessee shall take good care of the Premises and shall, at Lessee's own cost
and expense make all repairs to the Premises and fixtures other than
structural repairs. At the end of the term of this Lease, Lessee shall
deliver the Premises in good order and condition, damages by ordinary wear
and tear excepted.
a. The Lessee shall promptly execute and comply with all statutes,
ordinances, rules, orders, regulations and requirements of any
governmental or quasi-governmental authority, including departments,
bureaus and the like, having jurisdiction applicable to the Premises, for
the correction, prevention, and abatement of
2
<PAGE> 3
violations, nuisances or other grievances, in, upon, or connected with
the Premises during the term of this Lease, at Lessee's own cost and
expense.
b. Lessee, Lessee's successors, heirs, executors or administrators shall not
make any alterations to the Premises without the Lessors' consent in
writing, or occupy, or permit or suffer the same to be occupied for any
business or purpose deemed disreputable or extra-hazardous on account of
fire, under the penalty of damages and forfeiture, and in the event of a
breach thereof, the term herein shall immediately cease and terminate at
the option of the Lessors as if it were the expiration of the original
term.
c. Lessee will not do anything in or to the Premises, or bring anything into
the Premises, or permit anything to be done or brought into or kept in
the Premises, which will in any way increase the rate of insurance on
said Premises, nor use the Premises or any part thereof, nor allow or
permit its use for any business or purpose which would cause an increase
in the rate of insurance on said building, and the Lessee agrees to pay
as additional rent the cost of any increase in insurance on demand by
Lessors.
7. REAL ESTATE TAXES
Lessee acknowledges that the Premises comprise one hundred percent (100%) of
the building, and Lessee shall be responsible for the payment of all real
estate taxes assessed against the Premises. In the event that real estate
taxes due and owing by Lessors for the building shall be increased above
those charges during the base year (which is defined as the tax or fiscal
year used by the governmental authority assessing such taxes in effect on
the commencement date of this Lease), Lessee agrees to pay as additional
rent within thirty (30) days of receipt of notice from Lessors, an amount
equal to such additional real estate taxes.
8. SERVICES AND UTILITIES
Lessee shall pay for all telephone and other such services for the leased
Premises as contracted for by Lessee.
9. PERSONAL PROPERTY TAXES
Lessee agrees to pay or cause to be paid, before delinquency, any and all
taxes levied or assessed and which become payable during the term hereof
upon all equipment, furniture, fixtures, and other personal property located
in the Premises.
10. DAMAGE TO THE PREMISES
Lessee must give Lessors prompt notice of fire, accident, casualty, damage
or dangerous or defective conditions with respect to the Premises. Lessors
shall only be responsible for
3
<PAGE> 4
the damaged structural parts of the Premises. Lessors are not required to
repair or replace any equipment, fixtures, furnishings or decorations unless
originally installed by Lessors. Lessors are not responsible for delays due
to settling insurance claims, obtaining estimates, labor and supply problems
or any other cause not fully under Lessors' control.
a. If the fire or other casualty is caused by an act or neglect of Lessee,
Lessee's employees or persons on the Premises with permission of Lessee,
or at the time of the fire or casualty Lessee is in default in any term
of this Lease, then all repairs will be made at Lessee's expense and
Lessee must pay the full rent with no adjustment. The cost of the repairs
will be added to the rent.
b. Lessors have the right to demolish or rebuild the building if there is
substantial damage by fire or other casualty. Lessors may cancel this
Lease within thirty (30) days after the substantial fire or casualty by
giving Lessee notice of Lessors' intention to demolish or rebuild. The
Lease will end thirty (30) days after Lessors' cancellation notice to
Lessee. Lessee must deliver the Premises to Lessors on or before the
cancellation date in the notice and pay all rent due to the date of the
fire or casualty. If the Lease is canceled, Lessors are not required to
repair the Premises or building. The cancellation does not release Lessee
of liability in connection with the fire or casualty.
11. INSPECTION AND ENTRY BY LESSORS
Lessee agrees that Lessors and Lessors' agents and other representatives
shall have the right to enter into and upon the Premises, or any part
hereof, at all reasonable hours for the purpose of examining the same, or
making such repairs or alterations therein as may be necessary for the
safety and preservation of the Premises.
12. LIENS
Lessee shall keep the Premises and the property in which the Premises are
situated free from any liens arising out of any work performed for,
materials furnished to, or obligations incurred by Lessee.
13. INDEMNIFICATION OF LESSOR
Lessee shall hold Lessors harmless from and defend Lessors against any and
all claims of liability for any injury or damage to any person or property
whatsoever: (1) occurring in, on, or about the Premises or any part thereof;
and, (2) occurring in, on, or about any facilities (including, without
prejudice to the generality of the term "facilities," stairways,
passageways, hallways, and parking areas), the use of which Lessee may have
in conjunction with other tenants of the building, when such injury or
damage is caused in part or in whole by the act, neglect, fault of or
omission of any duty with respect to the same by Lessee, its agents,
servants, employees, or invitees.
4
<PAGE> 5
14. INSURANCE
Lessee agrees to provide, pay for, and maintain in full force and effect
during the entire term of this Lease liability insurance insuring Lessors
against any loss or damage sustained or to which Lessors may be subject by
reason of Lessee's occupancy and use of the Premises, which policy shall
have the following limits of liability: (1) commercial general liability of
One Million Dollars ($1,000,000) which includes bodily injury and property
damage; and, (2) insurance for fire and other perils up to a limit of Five
Million Dollars ($5,000,000). Lessee agrees to furnish to Lessors, prior to
the Effective Date of this Lease, a binder or other such certificate
evidencing such insurance coverage. Said certificate shall also name Lessors
as additional insured, as well as loss payee and certificate holder.
Lessee agrees that it will, at its own cost and expense, keep its furniture,
fixtures, equipment, records, and personal property insured against loss or
damage by fire or other peril normally covered by "extended coverage"
endorsements, and shall deliver to Lessors prior to the Effective Date of
this Lease, a binder or other such certificate of such insurance coverage.
15. SUBLETTING OR ASSIGNMENT
Neither the Premises nor any portion of the Premises may be sublet, nor may
this Lease be assigned without the express written consent of Lessors upon
such terms and conditions as Lessors may require.
16. DEFAULT
If Lessee defaults in fulfilling any of the terms and conditions of this
Lease other than the payment of rent or additional rent; or if the Premises
becomes vacant or deserted; or if any execution or attachment shall be
issued against Lessee or any of Lessee's property located or situated at or
on the Premises whereby the Premises shall be taken or occupied by someone
other than Lessee; or if this Lease shall be rejected under any applicable
provision of the bankruptcy laws; or if Lessee shall fail to take possession
within fifteen (15) days of the commencement of this Lease; and upon Lessors
serving written notice to Lessee specifying the nature of the default,
Lessee shall have thirty (30) days from the date of receipt of such notice
to cure the default (or if such default cannot be cured within such period,
Lessee must diligently and in good faith proceed to cure the default). If
Lessee shall have failed to cure or proceed to cure the default within such
period, Lessors may serve a thirty (30) day notice of cancellation of this
Lease upon Lessee and, upon the expiration of the cancellation period, this
Lease shall terminate and expire and Lessee shall quit and surrender the
Premises to Lessors but Lessee shall remain liable as provided in this
Lease.
If after default in payment of rent or violation of any other provision of
this Lease, or upon the expiration of this Lease, Lessee moves out or is
dispossessed and fails to remove any
5
<PAGE> 6
trade fixtures or other property prior to such said default, removal,
expiration of Lease, or prior to the issuance of the final order or
execution of the warrant, then and in that event, the said fixtures and
property shall be deemed abandoned by the said Lessee and shall become the
property of Lessors.
17. NO WAIVER BY LESSORS
The failure of Lessors to insist upon a strict performance of any of the
terms, conditions and covenants herein shall not be deemed a waiver of any
rights or remedies that Lessors may have, and shall not be deemed a waiver
of any subsequent breach or default in the terms, conditions and covenants
herein contained. This instrument may not be changed, modified, discharged
or terminated orally.
18. SUBORDINATION, ATTORNMENT
a. This Lease, at Lessors' option, shall be subordinate to the lien of any
first deed of trust or first mortgage placed upon the real property of
which the leased Premises are a part, and to any and all advances made on
the security thereof, and to all renewals, modifications, consolidations,
replacements, and extensions thereof provided, however, that as to the
lien of any such deed of trust or mortgage, Lessee's right to quiet
possession of the Premises shall not be disturbed if Lessee is not in
default and so long as Lessee shall pay the rent and observe and perform
all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms.
b. In the event any proceedings are brought for foreclosure, or in the event
of the exercise of the power of sale under any mortgage or deed of trust
made by the Lessors covering the demised Premises, Lessee shall attorn to
the purchaser as the Lessors under this Lease.
c. If upon any sale, assignment, or hypothecation of the leased Premises or
the land thereunder by Lessors, or at any other time, an estoppel
certificate shall be requested of Lessee, Lessee agrees to deliver such
estoppel certificate (in recordable form) addressed to any such proposed
mortgagee or purchaser or to the Lessors certifying the requested
information, including among other things the dates of commencement and
termination of this Lease, the amounts of security deposits, and that
this Lease is in full force and effect (if such be the case) and that
there are no differences, offsets or defaults that actually exist. Lessee
shall be liable for any loss or liability resulting from any incorrect
information certified, and such mortgagee and purchaser shall have the
right to rely on such estoppel certificate. Lessee shall in the same
manner acknowledge and execute any assignment of rights to received rents
as required by any mortgagee of Lessors.
6
<PAGE> 7
19. EMINENT DOMAIN
If all or any part of the Premises shall be taken or appropriated by any
public or quasi public authority under the power of eminent domain, either
party hereto shall have the right, at its option, to terminate this Lease,
and Lessors shall be entitled to any and all income, rent, award, or any
interest therein whatsoever which may be paid or made in connection with
such public or quasi-public use or purpose, and Lessee shall not have a
claim against Lessors for the value of any unexpired term of this Lease. If
a part of the Premises shall be so taken or appropriated and neither party
hereto shall elect to terminate this Lease, the rental thereafter to be paid
shall be equitably reduced. Before Lessee may terminate this Lease by reason
of taking or appropriation as above provided, such taking or appropriation
shall be of such an extent and nature as to substantially handicap, impede,
or impair Lessee's use of the Premises. If any part of the building other
than the Premises shall be so taken or appropriated, Lessors shall have the
right, at their option, to terminate this Lease and shall be entitled to the
entire award, as above provided.
20. OPTION TO RENEW
Lessee shall have an option to renew the Lease for an additional ten (10)
year term.
Said option shall be on the same terms and conditions as the terms and
conditions contained herein. In order to exercise this option, Lessee shall
notify the Lessors of its intention to exercise this option six (6) months
prior to the original termination date.
21. NOTICES
All notices and demands which may or are required to be given by either
party to the other hereunder shall be in writing. All notices and demands by
the Lessors to the Lessee shall be sent by United States certified and
registered mail, postage prepaid, addressed to the Lessee at the Premises,
or to such other place as the Lessee may from time to time designate in a
notice to the Lessors. All notices and demands by the Lessee to the Lessors
shall be sent by United States certified and registered mail, postage
prepaid, addressed to the Lessors at the Premises or such other person or
place as the Lessors may from time to time designate in a notice to the
Lessee. Notice or demand shall be deemed complete upon mailing.
22. QUIET POSSESSION
Lessors covenant that Lessee, on paying the rent and additional rent, and
faithfully performing the covenants required or imposed upon Lessee, shall
and may peacefully and quietly have, hold and enjoy the Premises for the
term of this Lease, provided however, that this covenant shall be
conditioned upon the retention of title to the Premises by the Lessors.
7
<PAGE> 8
23. SUCCESSORS AND ASSIGNS
The covenants and conditions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors,
executors, administrators, and assigns of the parties hereto.
24. GOVERNING LAW
This Lease shall be interpreted and construed in accordance with the laws of
the Commonwealth of Pennsylvania.
25. ENTIRE AGREEMENT
This instrument contains the entire agreement between the parties and the
execution hereof has not been induced by either party by any presentation,
promises, or understandings not expressed herein. Any changes or
modifications to this Lease must be by way of a writing executed by all
parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hand and seal as of the
date and year first written above.
The 12/31/87 Trusts of Susan Y., Amkor Electronics, Inc.
David D., and John T. Kim
By: /s/ Memma S. Kilgannon By: /s/ Frank Marcucci
-------------------------------------- -----------------------------
Memma S. Kilgannon Frank Marcucci, Executive VP
As Agent for the 12/31/87 Trusts
of Susan Y., David D., and John T. Kim
8
<PAGE> 1
EXHIBIT 10.10
COMMERCIAL OFFICE LEASE
This Lease Agreement ("Lease") is entered into this 14th day of June
1996 ("Effective Date") by and between the 12/31/87 Trusts of Susan Y., David
D., and John T. Kim, c/o Amkor Electronics, Inc., 1345 Enterprise Drive, West
Chester, Pennsylvania 19380 ("Lessors") and Amkor Electronics, Inc., a
Pennsylvania corporation, with its principal office at 1345 Enterprise Drive,
West Chester, Pennsylvania 19380 ("Lessee").
1. PREMISES
a. Lessors do hereby lease to Lessee and Lessee does hereby lease
from Lessors those certain premises located at 1900 South New
Price Road, Chandler, Arizona and consisting of approximately
42,682 square feet (the "Premises").
b. Said letting is upon and subject to the terms, covenants and
conditions herein set forth, and Lessors and Lessee covenant
as a material part of the consideration for this Lease to keep
and perform each and all of said terms, covenants and
conditions by it to be kept and performed and that this Lease
is made upon the condition of such performance.
2. PURPOSE
The Premises are to be used for conducting Lessee's lawful business
activities and for no other purposes without the written consent of
Lessors.
3. TERM
The initial term of this Lease shall be for a period of 10 (ten) years
beginning on the first (1st) day of June 1996 and ending on the
thirty-first (31st) day of May 2006. The Lease may thereafter be
extended pursuant to paragraph 20 herein.
4. RENT
a. Guaranteed Minimum Monthly Rental
Lessee shall pay to Lessors during the term of this Lease,
beginning June 1, 1996 (or upon such date as the Premises are
available for Lessee's occupancy) and continuing through the
expiration of this Lease ending May 31, 2006, the annual
rental of Six Hundred Forty Thousand Two Hundred Thirty
Dollars ($640,230) paid in equal monthly installments of Fifty
Three Thousand Three Hundred Fifty Two Dollars and Fifty Cents
($53,352.50) in advance on the first day of each and every
month during the term of this Lease. If the Guaranteed Monthly
Rental is not received by Lessors within ten (10) days of its
due date, it is in default. Any Guaranteed Minimum
Monthly Rent in default may be subject, at Lessors'
<PAGE> 2
discretion, to an additional charge of five percent (5%) per
month on the unpaid balance thereof as a late charge. In
addition to Guaranteed Rent, Lessee agrees to pay any excise,
privilege or sales taxes or any tax levied on the rental or
the receipt thereof, except Lessors' income tax.
Said rental shall be paid to Lessors by check or wire transfer
in equal amounts to Susan Y. Kim as Trustee for the 12/31/87
Trust of Susan Y. Kim; David D. Yjm as Trustee for the
12/31/87 Trust of David D. Yjm; and John T. Kim as Trustee for
the 12/31/87 Trust of John T. Kim, in lawful money of the
United States of America at 1345 Enterprise Drive, West
Chester, Pennsylvania 19380, or to such other person or at
such other place as Lessors may from time to time designate in
writing.
b. Rental Adjustments
Effective January 1, 1998 and on January I ("Adjustment Date")
of each year during the term of this Lease and any extension
hereto, the Guaranteed Minimum Monthly Rental shall be
adjusted in accordance with the increase in the Consumer Price
Index ("CPI") as published by the Bureau of Labor statistics
of the U.S. Department of Labor. The CPI published for the
month nearest (but preceding) the month in which the term
commences shall be the Base Index. The Base Rent shall be
adjusted by multiplying the Base Rent by a factor computed by
adding one (1) to fifty percent (50%) of a fraction, the
numerator of which shall be the difference between the CPI for
the month nearest (but preceding) the Adjustment Date and the
Base Index and the denominator of which shall be the Base
Index.
5. ADDITIONAL EXPENSES
Lessee shall pay all local, state, and federal taxes, charges,
assessments, government fees of any kind, or like expenses, imposed
upon the Premises during the term of the Lease. Lessee shall further
pay all other expenses including, but not limited to management,
utilities, janitorial, maintenance of building, grounds, insurance,
etc.
6. CARE OF PREMISES, ALTERATIONS, ETC.
Lessee shall take good care of the Premises and shall, at Lessee's own
cost and expense make all repairs to the Premises and fixtures other
than structural repairs. At the end of the term of this Lease, Lessee
shall deliver the Premises in good order and condition, damages by
ordinary wear and tear excepted.
a. The Lessee shall promptly execute and comply with all
statutes, ordinances, rules, orders, regulations and
requirements of any governmental or quasi-governmental
authority, including departments, bureaus and the like, having
jurisdiction applicable to the Premises, for the correction,
prevention, and abatement of
2
<PAGE> 3
violations, nuisances or other grievances, in, upon, or
connected with the Premises during the term of this Lease, at
the Lessee's own cost and expense.
b. Lessee, Lessee's successors, heirs, executors or
administrators shall not make any alterations to the Premises
without the Lessors' consent in writing, or occupy, or permit
or suffer the same to be occupied for any business or purpose
deemed disreputable or extra-hazardous on account of fire,
under the penalty of damages and forfeiture, and in the event
of a breach thereof, the term herein shall immediately cease
and terminate at the option of the Lessors as if it were the
expiration of the original term.
c. Lessee will not do anything in or to the Premises, or bring
anything into the Premises, or permit anything to be done or
brought into or kept in the Premises, which will in any way
increase the rate of insurance on said Premises, nor use the
Premises or any part thereof, nor allow or permit its use for
any business or purpose which would cause an increase in the
rate of insurance on said building, and the Lessee agrees to
pay as additional rent the cost of any increase in insurance
on demand by Lessors.
7. REAL ESTATE TAXES
Lessee acknowledges that the Premises comprise one hundred percent
(100%) of the building, and Lessee shall be responsible for the payment
of all real estate taxes assessed against the Premises. In the event
that real estate taxes due and owing by Lessors for the building shall
be increased above those charges during the base year (which is defined
as the tax or fiscal year used by the governmental authority assessing
such taxes in effect on the commencement date of this Lease), Lessee
agrees to pay as additional rent within thirty (30) days of receipt of
notice from Lessors, an amount equal to such additional real estate
taxes.
8. SERVICES AND UTILITIES
Lessee shall pay for all telephone and other such services for the
leased Premises as contracted for by Lessee.
9. PERSONAL PROPERTY TAXES
Lessee agrees to pay or cause to be paid, before delinquency, any and
all taxes levied or assessed and which become payable during the term
hereof upon all equipment, furniture, fixtures, and other personal
property located in the Premises.
3
<PAGE> 4
10. DAMAGE TO THE PREMISES
Lessee must give Lessors prompt notice of fire, accident, casualty,
damage or dangerous or defective conditions with respect to the
Premises. Lessors shall only be responsible for the damaged structural
parts of the Premises. Lessors are not required to repair or replace
any equipment, fixtures, furnishings or decorations unless originally
installed by Lessors. Lessors are not responsible for delays due to
settling insurance claims, obtaining estimates, labor and supply
problems or any other cause not fully under Lessors' control.
a. If the fire or other casualty is caused by an act or neglect
of Lessee, Lessee's employees or persons on the Premises with
permission of Lessee, or at the time of the fire or casualty
Lessee is in default in any term of this Lease, then a repairs
will be made at Lessee's expense and Lessee must pay the full
rent with no adjustment. The cost of the repairs will be added
to the rent.
b. Lessors have the right to demolish or rebuild the building if
there is substantial damage by fire or other casualty. Lessors
may cancel this Lease within thirty (30) days after the
substantial fire or casualty by giving Lessee notice of
Lessors' intention to demolish or rebuild. The Lease will end
thirty (30) days after Lessors' cancellation notice to Lessee.
Lessee must deliver the Premises to Lessors on or before the
cancellation date in the notice and pay all rent due to the
date of the fire or casualty. If the Lease is canceled,
Lessors are not required to repair the Premises or building.
The cancellation does not release Lessee of liability in
connection with the fire or casualty.
11. INSPECTION AND ENTRY BY LESSORS
Lessee agrees that Lessors and Lessors' agents and other
representatives shall have the right to enter into and upon the
Premises, or any part hereof, at all reasonable hours for the purpose
of examining the same, or making such repairs or alterations therein as
may be necessary for the safety and preservation of the Premises.
12. LIENS
Lessee shall keep the Premises and the property in which the Premises
are situated free from any liens arising out of any work performed for,
materials furnished to, or obligations incurred by Lessee.
13. INDEMNIFICATION OF LESSORS
Lessee shall hold Lessors harmless from and defend Lessors against any
and all claims of liability for any injury or damage to any person or
property whatsoever: (1) occurring in, on, or about the Premises or any
part thereof, and, (2) occurring in, on, or about any facilities
(including, without prejudice to the generality of the term
"facilities," stairways, passageways, hallways, and parking areas), the
use of which Lessee may have in
4
<PAGE> 5
conjunction with other tenants of the building, when such injury or
damage is caused in part or in whole by the act, neglect, fault of or
omission of any duty with respect to the same by Lessee, its agents,
servants, employees, or invitees.
14. INSURANCE
Lessee agrees to provide, pay for, and maintain in full force and
effect during the entire term of this Lease liability insurance
insuring Lessors against any loss or damage sustained or to which
Lessors may be subject by reason of Lessee's occupancy and use of the
Premises, which policy shall have the following limits of liability:
(1) commercial general liability of One Million Dollars ($1,000,000)
which includes bodily injury and property damage; and, (2) insurance
for fire and other perils up to a limit of Five Million Dollars
($5,000,000). Lessee agrees to furnish to Lessors, prior to the
Effective Date of this Lease, a binder or other such certificate
evidencing such insurance coverage. Said certificate shall also name
Lessors as additional insured, as well as loss payee and certificate
holder.
Lessee agrees that it will, at its own cost and expense, keep its
furniture, fixtures, equipment, records, and personal property insured
against loss or damage by fire or other peril normally covered by
"extended coverage" endorsements, and shall deliver to Lessors prior to
the Effective Date of this Lease, a binder or other such certificate of
such insurance coverage.
15. SUBLETTING OR ASSIGNMENT
Neither the Premises nor any portion of the Premises may be sublet, nor
may this Lease be assigned without the express written consent of
Lessors upon such terms and conditions as Lessors may require.
16. DEFAULT
If Lessee defaults in fulfilling any of the terms and conditions of
this Lease other than the payment of rent or additional rent; or if the
Premises becomes vacant or deserted; or if any execution or attachment
shall be issued against Lessee or any of Lessee's property located or
situated at or on the Premises whereby the Premises shall be taken or
occupied by someone other than Lessee; or if this Lease shall be
rejected under any applicable provision of the bankruptcy laws; or if
Lessee shall fail to take possession within fifteen (15)days of the
commencement of this Lease; and upon Lessors serving written notice to
Lessee specifying the nature of the default, Lessee shall have thirty
(30) days from the date of receipt of such notice to cure the default
(or if such default cannot be cured within such period, Lessee must
diligently and in good faith proceed to cure the default). If Lessee
shall have failed to cure or proceed to cure the default within such
period, Lessors may serve a thirty (30) day notice of cancellation of
this Lease upon Lessee and upon the expiration of the cancellation
period this Lease shall terminate and expire and Lessee shall
5
<PAGE> 6
quit and surrender the Premises to Lessors but Lessee shall remain
liable as provided in this Lease.
If after default in payment of rent or violation of any other provision
of this Lease, or upon the expiration of this Lease, Lessee moves out
or is dispossessed and fails to remove any trade fixtures or other
property prior to such said default, removal, expiration of Lease, or
prior to the issuance of the final order or execution of the warrant,
then and in that event, the said fixtures and property shall be deemed
abandoned by the said Lessee and shall become the property of Lessors.
17. NO WAIVER BY LESSORS
The failure of Lessors to insist upon a strict performance of any of
the terms, conditions and covenants herein shall not be deemed a waiver
of any rights or remedies that Lessors may have, and shall not be
deemed a waiver of any subsequent breach or default in the terms,
conditions and covenants herein contained. This instrument may not be
changed, modified, discharged or terminated orally.
18. SUBORDINATION, ATTORNMENT
a. This Lease, at Lessors' option, shall be subordinate to the
lien of any first deed of trust or first mortgage subsequently
placed upon the real property of which the leased Premises are
a part, and to any and all advances made on the security
thereof, and to all renewals, modifications, consolidations,
replacements, and extensions thereof, provided, however, that
as to the hen of any such deed of trust or mortgage, Lessee's
right to quiet possession of the Premises shall not be
disturbed if Lessee is not in default and so long as Lessee
shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. Lessee agrees to execute all
reasonable and customary documents as would be required of
Lessors by any financial institution through which Lessors may
apply for a mortgage upon the property.
b. In the event any proceedings are brought for foreclosure, or
in the event of the exercise of the power of sale under any
mortgage or deed of trust made by the Lessors covering the
demised Premises, Lessee shall attorn to the purchaser as the
Lessors under this Lease.
c. If upon any sale, assignment, or hypothecation of the leased
Premises or the land thereunder by Lessors, or at any other
time, an estoppel certificate shall be requested of Lessee,
Lessee agrees to deliver such estoppel certificate (in
recordable form) addressed to any such proposed mortgagee or
purchaser or to the Lessors certifying the requested
information, including among other things the dates of
commencement and termination of this Lease, the amounts of
security deposits, and that this Lease is in full force and
effect (if such be the case) and that
6
<PAGE> 7
there are no differences, offsets or defaults that actually
exist. Lessee shall be liable for any loss or liability
resulting from any incorrect information certified, and such
mortgagee and purchaser shall have the right to rely on such
estoppel certificate. Lessee shall in the same manner
acknowledge and execute any assignment of rights to received
rents as required by any mortgagee of Lessors.
19. EMINENT DOMAIN
If all or any part of the Premises shall be taken or appropriated by
any public or quasipublic authority under the power of eminent domain,
either party hereto shall have the right, at its option, to terminate
this Lease, and Lessors shall be entitled to any and all income, rent,
award, or any interest therein whatsoever which may be paid or made in
connection with such public or quasi-public use or purpose, and Lessee
shall not have a claim against Lessors for the value of any unexpired
term of this Lease. If a part of the Premises shall be so taken or
appropriated and neither party hereto shall elect to terminate this
Lease, the rental thereafter to be paid shall be equitably reduced.
Before Lessee may terminate this Lease by reason of taking or
appropriation as above provided, such taking or appropriation shall be
of such an extent and nature as to substantially handicap, impede, or
impair Lessee's use of the Premises. If any part of the building other
than the Premises shall be so taken or appropriated, Lessors shall have
the right, at their option, to terminate this Lease and shall be
entitled to the entire award, as above provided.
20. OPTION TO RENEW
Lessee shall have an option to renew the Lease for an additional ten
(10) year term. Said option shall be on the same terms and conditions
as the terms and conditions contained herein. In order to exercise this
option, Lessee shall notify the Lessors of its intention to exercise
this option six (6) months prior to the original termination date.
21. NOTICES
All notices and demands which may or are required to be given by either
party to the other hereunder shall be in writing. All notices and
demands by the Lessors to the Lessee shall be sent by United States
certified and registered mail, postage prepaid, addressed to the Lessee
at the Premises, or to such other place as the Lessee may from time to
time designate in a notice to the Lessors. All notices and demands by
the Lessee to the Lessors shall be sent by United States certified and
registered mail, postage prepaid, addressed to the Lessors at 1345
Enterprise Drive, West Chester, Pennsylvania 19380 or such other person
or place as the Lessors may from time to time designate in a notice to
the Lessee. Notice or demand shall be deemed complete upon mailing.
7
<PAGE> 8
22. QUIET POSSESSION
Lessors covenant that Lessee, on paying the rent and additional rent,
and faithfully performing the covenants required or imposed upon
Lessee, shall and may peacefully and quietly have, hold and enjoy the
Premises for the term of this Lease, provided however, that this
covenant shall be conditioned upon the retention of title to the
Premises by the Lessors.
23. SUCCESSORS AND ASSIGNS
The covenants and conditions herein contained shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors,
executors, administrators, and assigns of the parties hereto.
24. GOVERNING LAW
This Lease shall be interpreted and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
25. ENTIRE AGREEMENT
This instrument contains the entire agreement between the parties and
the execution hereof has not been induced by either party by any
presentation, promises, or understandings not expressed herein. Any
changes or modifications to this Lease must be by way of a writing
executed by all parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hand and seal as of the
date and year first written above.
The 12/31/87 Trusts of Susan Y., Amkor Electronics, Inc.
David D., and John T. Kim
By: /s/ Memma S. Kilgannon By: /s/ Frank Marcucci
---------------------------------- -----------------------------
Memma S. Kilgannon Frank Marcucci, Executive VP
As Agent for the 12/31/87 Trusts
of Susan Y., David D., and John T.
Kim
8
<PAGE> 9
AMENDMENT TO COMMERCIAL OFFICE LEASE
This Amendment to Commercial Office Lease ("Amendment") is entered into
this 24th day of April 1997 by and between the 12/31/87 Trusts of Susan Y.,
David D., and John T. Kim ("Lessors"), c/o Amkor Electronics, Inc., Attn. Memma
S. Kilgannon, Agent, 1345 Enterprise Drive, West Chester, Pennsylvania 19380 and
Amkor Electronics, Inc., ("Lessee") a Pennsylvania corporation, with its
principal office at 1345 Enterprise Drive, West Chester, Pennsylvania 19380
(collectively "Parties").
WHEREAS, the Parties entered into a Commercial Office Lease dated June
14, 1996 ("Lease") under which the Lessors did demise and let unto Lessee that
certain 42,682 square foot building located at 1900 South Price Road, Chandler,
Arizona ("Premises"); and
WHEREAS, the Parties desire to amend Section 13 of said Lease.
NOW, THEREFORE, intending to be legally bound, the Parties hereby agree
as follows:
1. The current provision under Section 13 shall be designated and
hereinafter referred to as subpart "a" and the following new subpart
"b" shall be hereby added:
13. INDEMNIFICATION OF LESSORS
b. Lessee shall further indemnify, defend and hold the
Lessors harmless from and against all claims,
expenses, liabilities, loss, damage costs, including
any actions or proceedings in connection therewith
and including reasonable attorneys' fees, incurred in
connection with, arising from, due to or as a result
of Lessee's, or any other party's, actions,
inactions, fault, negligence or performance or
non-performance of any responsibilities or
obligations with respect to the Premises and related
common areas under a certain Maintenance and
Indemnity Agreement executed between Lessee and
Lessors and dated April 24, 1997. Notwithstanding any
of the provisions of this Section b to the contrary,
Lessors and Lessee hereby waive any right of recovery
against the other for any loss, damage or injury to
the extent the same is covered by any applicable
policies of insurance.
2. All other terms and conditions of the Lease shall remain in full force
and effect.
IN WITNESS WHEREOF, the Parties hereto have set their hand and seal as
of the date and year first written above.
The 12/31/87 Trusts of Susan Y., Amkor Electronics, Inc.
David D., and John T. Kim
By: /s/ Memma S. Kilgannon By: /s/ Frank Marcucci
-------------------------------------- ----------------------------
Memma S. Kilgannon Frank Marcucci, Executive VP
As Agent for the 12/31/87 Trusts
of Susan Y., David D., and John T. Kim
<PAGE> 10
SECOND AMENDMENT TO COMMERCIAL OFFICE LEASE
This Amendment to Commercial Office Lease ("Amendment") is entered into
20th day of May 1997 by and between the 12/31/87 Trusts of Susan Y., David D.,
and John T. Aim ("Lessors"), c/o Amkor Electronics, Inc., Ann. Memma S.
Kilgannon, Agent, 1345 Enterprise Drive, West Chester, Pennsylvania 19380 and
Amkor Electronics, Inc. ("Lessee"), a Pennsylvania corporation, with its
principal office at 1345 Enterprise Drive, West Chester, Pennsylvania 19380
(collectively "Parties").
WHEREAS, the Parties entered into a Commercial Office Lease dated June
14, 1996 ("Lease") under which the Lessors did demise and let unto Lessee that
certain 42,682 square foot building located at 1900 South Price Road, Chandler,
Arizona ("Premises"), as amended by that certain Amendment to Commercial Office
Lease dated April 24, 1997; and
WHEREAS, the Parties desire to amend Section 3 of said Lease in regard
to the term thereof NOW, THEREFORE, intending to be legally bound, the Parties
hereby agree as follows:
1. The initial term of the Lease shall be extended for an additional
five (5) years revising the term from ten (10) years to fifteen (15) years.
Section 3 is hereby amended to read as follows:
"The initial term of this Lease shall be for a period of
fifteen (15) years beginning on the first (1st) day of June
1996 and ending on the thirty-first (31st) day of May 2011."
2. All other terms and conditions of the Lease shall remain in full
force and effect.
IN WITNESS WHEREOF, the Parties hereto have set their hand and seal as
of the date and year first written above.
The 12/31/87 Trusts of Susan Y., Amkor Electronics, Inc.
David D., and John T. Kim
By: /s/ Memma S. Kilgannon By: /s/ Frank Marcucci
-------------------------------------- ----------------------------
Memma S. Kilgannon Frank Marcucci, Executive VP
As Agent for the 12/31/87 Trusts
of Susan Y., David D., and John T. Kim
<PAGE> 1
EXHIBIT 10.11
CONTRACT OF LEASE
KNOW ALL MEN BY THESE PRESENTS:
This Contract of Lease, made and entered into this 1st day of October,
1990 at Makati, Metro-Manila, Philippines, by and between:
CORINTHIAN COMMERCIAL CORPORATION, a corporation duly
organized and existing under the laws of the Republic of the
Philippines, with office at T10 Sunvar Plaza, Pasay Road,
Makati, Metro- Manila, represented by its Treasurer, MARIXI R.
PRIETO, who has been duly authorized for the purpose,
hereinafter referred to as the LESSOR;
- and -
AMKOR/ANAM PILIPINAS INC., a corporation duly organized and
existing under the laws of the Republic of the Philippines
with principal office at the CCC Compound, Km. 22 South
Superhighway, Bo. Cupang, Muntinlupa, Metro-Manila,
represented in this act by its Financial Director and
Treasurer, DANNY D. FRANKLIN, who has been duly authorized for
the purpose, hereinafter referred to as the LESSEE.
W I T N E S S E T H: THAT
WHEREAS, on August 4, 1989, the parties hereto executed a Memorandum of
Agreement covering the lease of a portion of certain parcels of land situated at
Km. 22 South Superhighway, Bo. Cupang, Muntinlupa, Metro-Manila, and covered by
Transfer Certificates of Title Nos. 441394 and 441395 issued by the Registry of
Deeds for the province of Rizal, including the warehouses existing thereon,
specifically known as Warehouses 2 and 3;
WHEREAS, LESSEE desires to lease the aforementioned properties, which
are more particularly described as follows:
Covered Areas:
Motorpool - 346.50 sq.m. more or less
Warehouse 2 - 2,400 sq.m. more or less
Warehouse 3 - 2,400 sq.m. more or less
Middle Area bet. Whse. 2 & 3 - 1,179 sq.m. more or less
Canteen - 320 sq.m. more or less
Uncovered Areas:
Back of Warehouse 1 - 1,316.50 sq.m. more or less
Roadway leading to Whse. 2 & 3 - 2,398.50 sq.m. more or less
Canteen Area - 700 sq.m. more or less
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual covenants and stipulations hereinafter set forth, Lessor hereby
leases unto the LESSEE, and the LESSEE hereby accepts by way of lease from the
LESSOR, that portion of the land covered by Transfer Certificate of Title No.
441394 and 441395 including the Motorpool, Warehouses 2 and 3 and the Canteen
all of which are described above (hereinafter referred to as the leased
premises) subject to the following terms and
<PAGE> 2
-2-
conditions:
1. TERM: The term of the lease shall be as follows:
A. Motorpool and Back of Warehouse 1 - twenty-five (25) years
and nine and one half (9 1/2) months which shall commence on
March 16, 1990 and expire on December 31, 2015;
B. Portion of Warehouse 2 measuring 1,080 sq.m. more or less -
twenty-five (25) years and three (3) months which shall
commence on October 1, 1990 and expire on December 31, 2015;
C. Portion of Warehouse 2 measuring 1,320 sq.m. more or less,
Warehouse 3, Middle Area between Warehouses 2 and 3, Canteen,
Roadway leading to Warehouses 2 and 3 and Uncovered Canteen
area - twenty-five (25) years and two (2) months which shall
commence on November 1, 1990 and expire on December 31, 2015;
The LESSOR represents that it owns the leased premises in fee simple
and that it has the right to make this Lease Agreement and covenants that it
will execute and procure any further assurances of title of right to make this
Lease Agreement that may be required by Lessee from time to time during the term
hereof.
2. RENTAL RATE: The LESSEE shall pay the LESSOR as rental for the
leased premises the sum of FOUR HUNDRED FORTY-SEVEN THOUSAND NINE HUNDRED
FIFTY-FOUR AND 73/100 PESOS (P447,954.73) per month, which shall be increased by
ten percent (10%) each year beginning on the second year, cumulatively, up to
the last year of the term hereof.
3. PAYMENT DATE OF RENTAL: The rental shall be payable within the first
five (5) working days of every month at the principal office of the LESSOR
above. The LESSOR retains the option to change the due date to a later date.
4. RENTAL DEPOSIT: Upon the signing of this Contract, the LESSEE shall
keep on deposit with the LESSOR the amount of ONE MILLION THREE HUNDRED
FORTY-THREE THOUSAND EIGHT HUNDRED SIXTY-FOUR AND 19/100 PESOS ONLY
(P1,343,864.19), Philippine Currency. Upon the termination of this lease, the
deposit shall be promptly returned without interest to the LESSEE, or if
appropriate, applied to the payment of any rentals then outstanding and unpaid,
or any other amount then due and payable to the LESSOR or any damages which may
have been caused to the leased premises by the LESSEE or by the LESSEE's
employees, agents or representatives; provided, however, that should the deposit
be insufficient for the payments contemplated herein, the LESSEE shall continue
to be liable for the unpaid portion thereof until paid in full.
5. DAMAGE: The LESSEE acknowledges that it has accepted the leased
premises after due examination of the same, and that LESSOR shall not be liable
for any defect or change in the condition of the leased premises or of the
building resulting from any flaw in the electrical connections, or from water or
rain which may leak into, issue or flow from any part of the building, or from
the pipes or plumbing works of the leased premises or the building itself or
from any other place or
<PAGE> 3
-3-
quarter, or incurred in any other way or manner, or for any other reason other
than electrical or leaks unless such defect or change or any damage resulting
therefrom is attributable to the misconduct or negligence of the LESSOR or its
employees, agents or representatives. The LESSEE shall give the LESSOR or its
agent prompt notice in writing of any defects in the electrical installation,
the plumbing installation of other fixtures of the leased premises or of the
building itself. Upon receipt of any such notice or as soon as the existence of
such defects becomes known to the LESSOR, the LESSOR shall immediately cause
such defects installed by the LESSOR to be remedied or repaired, provided that
the necessity for effecting repairs on installations or fixtures shall not have
been caused by the misuse, negligence or fault of the LESSEE, or of any of its
employees, agents or representatives. If such defect or change is caused by the
LESSEE's visitor(s), the LESSEE and its employees shall cooperate fully with the
LESSOR in establishing the visitor's liability in a court of law. The monthly
rental or any other amount which may be payable by the LESSEE hereunder shall
not be abated or suspended while the repairs contemplated herein are being made
even if the LESSEE should suffer a loss or interruption of business by reason of
the making of such repairs. If the defects requiring such repairs shall have
resulted from the fault, misconduct or negligence of the LESSEE, its employees,
agents or representatives, the LESSOR shall have the option to repair such
defects at the expense of the LESSEE who hereby agrees to pay the actual
documented cost thereof on the rental payment date immediately following the
date of completion of such repairs.
The LESSOR shall not in anyway be responsible or liable for any damage
or injury to the LESSEE, its employees, agents, representatives or visitors, or
to any person or persons in or about the leased premises, unless such damage or
injury is due to the misconduct or negligence of the LESSOR, or its employees,
agents or representatives. The LESSEE agrees to indemnify and save the LESSOR
harmless from all fines, suits, proceedings, claims, demands or actions arising
or growing out of or in connection with the occupancy or use of the leased
premises or any part thereof or by reason of any breach, violation or
non-performance by the LESSEE of any covenant or condition hereof, unless the
cause or causes giving rise to any such fines, suits, proceedings, claims,
demands, or actions is/are due to the misconduct or negligence of the LESSOR,
its employees, agents or representatives.
6. NON-LIABILITY: The LESSOR shall not be liable for any damage, nor
shall this lease be affected or the rental payable hereunder abated or
suspended, by reason of any failure or interruption of the water supply,
electric current, air-conditioning or other services at the leased premises
unless such failure or interruption is due to the misconduct or negligence of
the LESSOR or its employees, agents or representatives. Neither shall the LESSOR
be liable for any damage, nor shall this lease be affected or the rental payable
hereunder abated or suspended by reason of any curtailment of or interference
with the water supply or electric current to the leased premises by any one
other than the LESSOR, or caused by any operation or activity conducted by or
for the Municipality of Cupang, Muntinlupa, Metro-Manila, and/or any other
governmental authority or agency in connection with the construction of any
public or quasi-public work. In the event of any such curtailment of or
interference with the water supply or electric current, the LESSOR shall take
<PAGE> 4
-4-
all such steps as may be necessary to secure the immediate or prompt restoration
of normal water supply or electric current to the leased premises.
The LESSOR shall likewise not be responsible for any interruption of
the water supply or electric current or the air-conditioning or other facilities
or services caused by circumstances beyond the control of the LESSOR or by force
majeure, fortuitous event or unforeseen circumstances. Any loss of business,
damage or injury which may be sustained by or caused to the LESSEE by reason of
any such interruptions shall not be the responsibility of the LESSOR.
7. REPAIRS: The LESSEE shall at its own expense maintain the leased
premises in good order and repair. The LESSEE shall be responsible for the
repair of all locks, electrical switches and similar installations turned over
to the LESSEE for its use, excepting any damage to any such installations
resulting from any structural defect of the leased premises or of the building
itself. When the leased premises are returned, such locks, electrical switches
and other installations must be intact and in good order, reasonable ordinary
wear and tear excluded. The repair of any breakage of glass materials or other
breakable parts within the leased premises shall likewise be the responsibility
of the LESSEE, if caused by the misconduct or negligence of the LESSEE, or its
employees, visitors, agents or representatives, otherwise, such breakage shall
be for the account of the LESSOR.
Subject to the provisions of the preceding paragraph thereof, the
LESSEE shall also be responsible for the proper maintenance and repair of the
external walls of the leased premises, the supporting posts and similar
portions, the floor of the leased premises (as well as of the floor constituting
its ceiling) and electrical, water and plumbing installations of common areas.
The repair of any damage for which the LESSEE is responsible shall be
undertaken by the LESSEE at its own expense, through qualified and/or licensed
workman or contractors upon demand of the LESSOR; provided, however, that should
the LESSEE fail or refuse to undertake such repairs promptly after due demand by
the LESSOR, then the LESSOR will effect such repairs, and all documented
expenses incurred for such repairs shall be charged against and paid for by the
LESSEE, on the rental payment date immediately following said date of
completion.
Existing electricals, plumbing or other service installations shall not
be tampered with, changed or altered, or new installations made, or alterations
within the premises effected or made by the LESSEE without the prior written
consent of the LESSOR, which consent shall not be unreasonably withheld.
8. LESSOR'S OBLIGATIONS: THEIR PREVENTION AND DELAY: This lease and the
obligation of the LESSEE to pay rent hereunder shall in no way be affected,
impaired or excused by reason of the LESSOR's inability, failure or delay in
supplying any service expressly or impliedly to be supplied by the LESSOR by
reason of this lease, or in making such repairs, additions or alterations which
it (the LESSOR) is obligated to make also by reason of this lease, or in
supplying any equipment or fixtures which it is obligated to furnish hereunder
or pursuant to this lease, if such inability, failure or delay on the part of
the LESSOR in the
<PAGE> 5
-5-
performance of any of the obligations contemplated herein is attributable to the
lack of materials or the occurrence of storms, floods, other fortuitous events
or force majeure, invasion, insurrection, riots or strikes or caused by the
lawful orders of any military, naval or civil authority, or any duly authorized
governmental action, or is the consequence of the enactment of any law, rule or
regulation prohibiting the performance of any such obligations.
9. The LESSEE agrees to submit all plans and specifications of future
major alterations, extensions, reconstruction and additions to the building for
approval of LESSOR before construction of said improvements.
At the expiration or cancellation of this lease, the LESSEE hereby
agrees that the LESSOR shall have the right to enter into the leased premises
and repossess itself thereof, and that all improvements except machineries,
furniture, fixtures, articles and effects of any kind, and equipment, by virtue
of this Agreement, introduced upon the leased premises by the LESSEE during the
life of this lease, shall become the property of the LESSOR in fee simple
without process of law and without any responsibility on the part of the LESSOR
to reimburse the LESSEE of the price or value thereof.
The LESSEE agrees to surrender all the improvements on the leased
premises at the expiration of the term of this lease in as good condition as
reasonable wear and tear will permit and without any delay whatsoever, devoid of
all occupants, machineries, equipment, furniture, articles and effects of any
kind. However, the LESSEE at any time during the period of the lease may opt to
sell or assign his right over the lands and/or buildings thereon, provided, the
written consent or the approval of the LESSOR is first obtained, which consent
and approval will not be unreasonably withheld.
10. USE AND ENJOYMENT OF THE LEASED PREMISES: The leased area shall be
used by the LESSEE in connection with semiconductor and electronics business and
may not be used for any other purpose without the written consent of the LESSOR.
The LESSOR warrants that the leased premises will be suitable for said use.
The LESSEE shall, at all times during the initial and any renewal of
the term of this Agreement, peaceably and quietly enjoy the Leased Premises
without any disturbance from the LESSOR or from any person claiming through the
LESSOR.
11. USE OF ROADWAYS AND EASEMENT: The LESSEE, shall throughout the term
of this lease have the right to use, without need of compensation, all roadways
located within the property described in the titles mentioned in paragraph 1
hereof and shown in the existing plan. This right of the LESSEE to use said
roadways shall be in the nature of an easement which the LESSEE may register in
accordance with law.
12. SIGNS AND ADVERTISEMENTS: The LESSEE may, only with the written
consent of the LESSOR, affix, inscribe or paint, or cause to be affixed,
inscribed or painted, any notice, sign or other advertising medium on any part
of the building subject matter of this Contract, as well as install or cause to
have installed on the leased premises any such notice, sign or advertising
medium.
<PAGE> 6
-6-
13. COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS: The LESSEE shall,
at its own cost and expenses, comply with all laws, ordinances and governmental
orders or requirements affecting or pertaining to its use of the leased area,
and to any enterprise, industry or business which it may conduct therein, or to
any articles or effects which the LESSEE may have introduced into the leased
area.
The LESSEE shall indemnify and hold harmless the LESSOR against all
actions, suits, damages and claims caused by the LESSEE or its authorized
representatives by reason of its violation, non- observance or non-compliance
with any of the laws, ordinances and governmental orders or requirements
contemplated hereunder.
14. LIABILITY FOR REAL ESTATE TAXES: The LESSOR shall pay all real
estate taxes and assessments levied or imposed upon the land. Taxes for existing
improvements shall also be for the account of LESSOR. Failure of the LESSOR to
pay such real estate taxes and assessments in a timely manner shall authorize
(but not obligate) the LESSEE to deduct the amount of such taxes and assessments
due and payable from the rentals due hereunder and to pay the amount thereof to
the appropriate taxing authority for the account of LESSOR. Any increase in the
real estate tax and/or any additional taxes, imposts or assessments which may
hereafter be imposed or were imposed on the leased premises from the time LESSEE
first started renting from LESSOR shall be for the account of the LESSEE.
15. INSURANCE ON LEASED PREMISES: The LESSOR agrees that throughout the
term of this lease, LESSOR will secure insurance coverage, and pay corresponding
premium thereof, on the leased premises from a reputable insurance company or
companies.
The policy contemplated hereunder shall not provide for the insurance
of LESSEE's leasehold improvements and contents thereon.
In case of the destruction of or damage to the building or any part
thereof, the LESSOR shall immediately cause the same to be restored or repaired.
To this end, all sums of money which the LESSOR shall receive under its
insurance policy contemplated herein shall be used for the rebuilding or repair
of the building which may have been destroyed or damaged.
16. ACCESS TO THE LEASED PREMISES BY THE LESSOR: The LESSEE shall
permit the LESSOR and/or its authorized representative to view the premises and
the conditions thereof at any time during regular working hours.
17. LESSEE'S RIGHT OF FIRST REFUSAL: Should the LESSOR wish to sell or
dispose of the leased premises at any time during the life of this contract, the
LESSEE or its assignee shall have the right of first refusal, and a right to
match the terms and conditions of a bonafide offer to the purchase of the leased
premises made by third party. The LESSOR shall notify the LESSEE in writing of
the LESSOR's offer to sell and of a third party's bonafide offer to purchase,
and the LESSEE shall have a period of ninety (90) days from receipt of such
written notice within which to accept or reject the offer to purchase, as the
case may be, and to sign a contract of purchase and sale; provided, however,
that the exercise of the LESSEE's rights hereunder shall be subject to the
condition that the LESSEE or its assignee shall
<PAGE> 7
-7-
have become or is qualified under the Constitution, and applicable laws to
acquire and hold private land in the Philippines. In the event the LESSEE is
disqualified or is not allowed to acquire and own land, the LESSOR hereby gives
the LESSEE the alternative option to look for a bonafide and qualified purchaser
for the leased premises and such purchaser so recommended by the LESSEE shall
have the first option to purchase the leased premises at the same price and
terms offered or to be offered to bonafide and qualified purchasers. Should the
LESSEE, however, not wish to exercise any of the options hereunder, within
ninety (90) days from the date of the LESSOR's notice of intention to sell,
transfer or assign, and the same is sold, transferred or assigned by the LESSOR
to a third party, then in that event, the LESSOR agrees to make it a condition
of the sale, transfer or assignment, that the vendee, transferee or assignee
shall respect all the terms and conditions of this AGREEMENT.
18. EXPROPRIATION: If any part of the leased premises be expropriated
for a public or quasi-public use by right of eminent domain, this Agreement, as
to the part so taken, shall terminate as of the date of occupation or possession
by the Government or as of the date title shall vest in the Government,
whichever shall first occur, and the rent payable hereunder shall be adjusted so
that the LESSEE shall be required to pay for the remainder of the term only,
such portion of the rental as the value of the part remaining after
expropriation bears to the value of the entire leased premises at the date of
the expropriation. However, if in the LESSEE's sole judgement the expropriation
of a part of the leased premises will render the remaining portion unusable or
unsuitable for the purposes for which the leased premises was leased, the LESSEE
shall have the further right to terminate this Agreement as of the date of the
occupation or possession by the Government or when title to the part so
expropriated vests in the Government, whichever shall first occur.
19. INDEMNIFICATION: As a consequence of the representations made by
LESSOR in Article 1 hereof, LESSOR shall indemnify and save the LESSEE harmless
against any and all liability, losses, expenses, costs, interests, damages,
including judicial costs and attorney's fees of whatever kind or nature that
LESSEE may sustain or incur by reason or in consequence of this LEASE AGREEMENT
including without limitation, that portion comprising of 1,080 sq.m. of
Warehouse 2 presently leased to Printech. LESSOR covenants and agrees to
reimburse or pay over to the LESSEE, on demand, all sums of money which the
LESSEE shall pay or become liable by reason of the foregoing, and will make such
payments to the LESSEE as soon as the LESSEE shall become liable therefor
whether or not the LESSEE shall have paid out such sums or any part therefor.
20. LESSEE'S OPTION TO TERMINATE LEASE: At any time after the
commencement date of this Contract as specified in paragraph 1 hereof, the
LESSEE shall have the option to terminate this Contract by serving written
notice to that effect on the LESSOR at least six (6) months prior to the
intended date of termination. In case of termination under this clause, the
LESSOR shall return any unused deposit to LESSEE.
21. DEFAULT IN PAYMENT OF RENTAL: It is an express condition of this
Contract that should the LESSEE default in the payments of rental as required
under paragraphs 2 and 3 hereof, or otherwise commits a substantial violation of
any of the terms and
<PAGE> 8
-8-
conditions hereof, and such default or violation shall continue for sixty (60)
days after notice thereof in writing to the LESSEE, then the LESSOR may decline
this Contract and have it terminated and cancelled and recover the possession of
the leased premises. The termination and cancellation of this Contract pursuant
to this provision may be effected by the LESSOR extrajudicially; provided,
however, that such termination or cancellation shall be without prejudice to the
right of the LESSEE over the alterations and improvements as provided for in
paragraph 9 hereof. Upon the termination or cancellation of this Contract, the
LESSEE shall peaceably surrender and yield up unto the LESSOR, or its authorized
representative, the leased premises, and the LESSOR may take over possession of
the same without becoming liable for trespass, and enter into contracts of lease
or any contracts with third persons in respect of the leased premises.
The acceptance by the LESSOR of arrears in rent or extension of payment
shall not be deemed a waiver by the LESSOR of any other condition contained in
this Contract. Likewise, the acceptance of payment or performance of one or more
obligations by the LESSEE shall not be deemed a waiver by the LESSOR of any
breach by the LESSEE of any other condition herein.
22. SUBLEASE BY LESSEE: The LESSEE is allowed to sublease the leased
premises or any portion thereof to VF (PHILIPPINES), INC., provided that in the
event of any such sublease, both the LESSEE and the SUBLESSEE shall be jointly
and severally liable to the LESSOR for the performance of any obligations
provided herein.
23. REGISTRATION OF CONTRACT: This Contract may, at the option of the
LESSEE, be registered in the appropriate office of the Registry of Deeds at the
expense of the LESSEE.
24. BINDING EFFECT OF CONTRACT: This Contract shall be binding not only
between the parties hereto but also upon their respective successors and
assigns. The LESSOR expressly warrants and represents that in case the leased
premises is sold or conveyed to, or encumbered in favor of, a party other than
the LESSEE, it shall make the necessary provisions to the end that the LESSEE's
rights of lease under this Contract remain in full force and effect. At least
seven (7) days prior to said sale, LESSOR shall inform the LESSEE of the
identity and address of the perspective buyer or buyers or its agent.
25. PENALTY CLAUSE: Should either of the parties hereto violate or fail
to comply with its respective obligations under this Contract, the offending
party shall become liable to the innocent party not only for actual damages, but
also for liquidated damages plus attorney's fees and expenses of litigation.
IN WITNESS WHEREOF, the parties have hereunto signed these presents on
the date and at the place first above written.
CORINTHIAN COMMERCIAL CORPORATION AMKOR ANAM PILIPINAS, INC.
LESSOR LESSEE
/S/ MARIXI R. PRIETO /S/ DANNY D> FRANKLIN
By: _____________________ By: _____________________
MARIXI R. PRIETO DANNY D. FRANKLIN
<PAGE> 9
-9-
Treasurer Financial Director and Treasurer
SIGNED IN THE PRESENCE OF
(ILLEGIBLE) (ILLEGIBLE)
- -------------------- --------------------
A C K N O W L E D G M E N T
REPUBLIC OF THE PHILIPPINES)
MUNICIPALITY OF MAKATI )S.S.
BEFORE ME, a Notary Public in and for Makati, Metro-Manila,
Philippines, personally appeared:
<TABLE>
<CAPTION>
NAME RES. CERT. NO. DATE/PLACE ISSUED
---- -------------- -----------------
<S> <C> <C>
Marixi R. Prieto 04685487 02-03-89, Makati
Corinthian Commercial 767848 01-11-90, Makati
Corporation
Danny D. Franklin B203027 09-20-83, United Kingdom
Amkor/Anam Pilipinas 379-249 01-11-90, Muntinlupa
Inc.
</TABLE>
both known to me and to me known to be the same persons who executed the
foregoing Contract of Lease, and they acknowledged to me that the same is their
free and voluntary act and deed and the free and voluntary act and deed of the
principals they respectively represent.
IN TESTIMONY WHEREOF, I have hereunder set my hand and affixed my
notarial seal on this day of , 19 at the municipality of Makati,
Metro-Manila, Philippines.
[Notary Public Seal]
Doc. No. ;
Page No. ;
Book No. ;
Series of 1990 .
<PAGE> 1
EXHIBIT 10.12
CONTRACT OF LEASE
KNOW ALL MEN BY THESE PRESENTS:
This CONTRACT OF LEASE, made and entered into this May 06, 1994 at Makati,
Metro Manila, Philippines, by and between:
SALCEDO SUNVAR REALTY CORPORATION, a corporation organized and
existing under and by virtue of the laws of the Republic of the
Philippines, with principal office at T-21 Sunvar Plaza Bldg., Pasay
Road, Makati, Metro Manila, herein represented by MR. LEONARDO P.
LORETO, JR. (hereinafter referred to as the "LESSOR");
- and -
AUTOMATED MICROELECTRONICS, INCORPORATED, a
corporation duly organized and existing under and by virtue of the
laws of the Republic of the Philippines, with principal office at
Km. 22, East Service Road, South Superhighway, Barrio Cupang, Metro
Manila, herein represented by MR. DANNY D. FRANKLIN, and hereinafter
referred to
as the "LESSEE".
WITNESSETH:
WHEREAS, LESSOR, by a certain lease agreement made and executed on May 03,
1994, leased from IMI Realty, Inc., certain parcels of land described in
Transfer Certificate of Title Nos. 188087, 188088, 188090, 188091 and 188092
with a total area of THIRTY FOUR THOUSAND FOUR HUNDRED NINETY (34,490) SQUARE
METERS, more or less, copies of the said titles attached hereto as Annexes
"A-1", "A-2", "A-3", "A-4" and "A-5" and collectively referred to as "the Land".
WHEREAS, under paragraph Nine (9) of the aforementioned lease contract,
LESSOR has the right to sublease the land or any portion thereof.
<PAGE> 2
Contract of Lease
Page two (2)
WHEREAS, LESSOR desires to sublease a portion of the Land to the extent of
FOURTEEN THOUSAND FOUR HUNDRED TWO (14,402) square meters and to lease the
buildings and improvements standing thereon to Automated MicroElectronics,
Incorporated, which area of land, buildings and improvements are more
particularly represented by the shaded portion of Annex "B", hereinafter
referred to as "the Leased Premises".
NOW, THEREFORE, it is agreed that in consideration of the rents herein
stipulated as well as compliance with the covenants, conditions and restrictions
herein imposed as to the use and occupancy of the Leased Premises on the part of
the LESSEE, the LESSOR hereby rents and delivers unto the LESSEE the Leased
Premises described in Annex "B".
The LESSEE hereby accepts this lease subject to the following terms,
covenants, conditions and restrictions:
1. TERM. - The term of the lease for the Leased Premises shall be from
February 1, 1994 to midnight 31 August 2003. LESSEE shall have the option to
renew the lease for another five (5) years by giving written notice to LESSOR of
its intention to renew at least one hundred twenty (120) days before the
expiration of the original term of the lease.
2. RENT. - The rental for the Leased Premises shall be ONE MILLION TWO
HUNDRED SIXTY FOUR THOUSAND SIX HUNDRED TEN PESOS (Pl,264,610.00) per month from
February 1, 1994 until August 31, 1995. Commencing on 01 September 1995 and
annually thereafter, the said rental shall be increased by ten percent (10%) by
applying the percentage of increase on the lease rental rate as follows:
<PAGE> 3
Contract of Lease
Page three (3)
<TABLE>
<CAPTION>
TOTAL
YEAR ANNUAL MONTHLY
------------------------ ------------- ------------
<S> <C> <C>
2/01/94 to 8/31/95 15,175,320.00 1,264,610.00
9/1/95 to 8/31/96 16,692,852.00 1,391,071.00
9/1/96 to 8/31/97 18,362,137.20 1,530,178.10
9/1/97 to 8/31/98 20,198,350.92 1,683,195.91
9/1/98 to 8/31/99 22,218,186.01 1,851,515.50
9/1/99 to 8/31/2000 24,440,004.61 2,036,667.05
9/1/2000 to 8/31/2001 26,884,005.07 2,240,333.76
9/1/2001 to 8/31/2002 29,572,405.58 2,464,367.13
9/1/2002 to 8/31/2003 32,529,646.14 2,710,803.85
</TABLE>
For the purpose of payment of the rental under this Contract.
<PAGE> 4
Contract of Lease
Page four (4)
2.1 The rental rate shall be evaluated after 10 years and this new
rate shall be based on the market value of the Leased Premises
at that time as well as prevailing rental market conditions.
The rental however shall not be unjustifiably increased and
shall be the subject of a third party arbitration by a
mutually acceptable and accredited realtor or appraiser if a
dispute arises thereon.
2.2 There shall be paid a deposit equivalent to one month rental
and an advance rental for one month payable upon signing of
this Contract. The deposit shall be refundable to the LESSEE
at the termination of this Contract subject to deductions to
cover damages to the Leased Premises and unpaid obligations
and liabilities of the LESSEE to the LESSOR, if any.
2.3 The rent shall be liquidated and paid at the office of the
LESSOR or its assigns without necessity of demand or services
of a collector, within the first ten (10) days of every
calendar month to which the rent corresponds.
The rent shall be subject to the mandatory withholding tax.
3. INTEREST AND PENALTY. - Without prejudice to the
<PAGE> 5
Contract of Lease
Page five (5)
exercise of the LESSOR of its rights under the penal
provisions herein, the LESSEE shall pay to the LESSOR interest
or any amount herein provided to be paid by the LESSEE that is
not paid on time, at an interest rate equivalent to Two
Percent (2%) per month to be computed from the date of
delinquency until the amount due is paid in full.
3.1 A payment made by the LESSEE to the LESSOR shall first apply
to the preceding interest charges, if any, and thence to all
arrearages in the amounts herein provided to be paid by the
LESSEE before it is applied to the current rental.
3.2 In the fulfillment of obligations involving the payment of
money, and without prejudice to the imposition of interest
charges mentioned above, the LESSEE is hereby given a grace
period of sixty (60) days from the due date within which to
make good the breach or default, after which period the LESSOR
may exercise its absolute right to rescind and cancel this
Contract of Lease for breach or non-performance of essential
conditions.
3.3 In case of cancellation or termination of this Contract or
breach of its terms, the offending party shall, in addition to
any liability under Par. 10 of this Contract, pay all
commercially reasonable attorney's
<PAGE> 6
Contract of Lease
Page six (6)
fees, costs, expenses of litigation and other incidental
damages that may be incurred by the aggrieved party in
enforcing its rights under this Contract.
4. LESSOR'S OBLIGATIONS. - The LESSOR is obliged:
(a) to deliver the Leased Premises in such conditions as to render them
fit for the uses and purposes for which they are intended;
(b) To make on the Leased Premises during the period of the lease all
the necessary repairs in order to keep them suitable for the uses and purposes
to which they have been intended except necessary repairs caused by fault or
negligence of the LESSEE, its employees, agents and guests;
(c) To maintain the LESSEE in the peaceful and adequate enjoyment of
the Leased Premises for the entire duration of the lease contract and any
renewal term without any disturbance from the LESSOR or from any person claiming
through the LESSOR;
(d) To insure the Leased Premises with such reputable insurance
companies acceptable to the LESSEE for such amount or amounts equivalent to the
replacement value of the things leased;
(e) To make some urgent repairs upon the Leased Premises and to allow
the LESSEE, if the LESSOR fails to make urgent repairs, in order to avoid an
imminent danger, to order the repairs at the LESSOR'S cost and if the urgent
repairs last more than forty (40) days, to allow a reduction of the rent in
proportion to the time including the first forty (40) days
<PAGE> 7
Contract of Lease
Page seven (7)
and the part of the property on which the LESSEE has been deprived.
(f) To allow access to the LESSEE, its employees and agents to enter
upon the Leased Premises at all reasonable times for the conduct of their
business.
5. TAXES. - The real estate tax of the Leased Premises at the current
rate as described in Annex "C" shall be for the account of the LESSOR. Any
increase in the real estate taxes over and above the current amount in so far as
they are due on the lands and buildings owned by the LESSOR shall be for the
account of the LESSOR. The real estate tax on all the equipment within the
Leased Premises as well as additions, improvements and alterations upon the
Leased Premises and any increase in real estate tax in respect thereto shall be
for the account of the LESSEE.
6. IMPROVEMENTS AND ALTERATIONS. - The LESSEE may, at its own expense,
undertake improvement, alterations or additions as long as they secure the prior
written consent of the LESSOR which consent shall not be unreasonably withheld;
provided, however, that all such alterations, additions or improvements
including but not limited to partitions, doors, toilets and canteen made by
either party, in or upon the Leased Premises, except movable furniture put in at
the expense of the LESSEE and removable without defacing or injuring the
building, shall become the property of the LESSOR and shall remain upon, and be
surrendered with the Leased Premises as part thereof at the termination of the
lease without compensation to the LESSEE. The LESSEE, however, may be required
by the LESSOR to restore the Leased Premises in its
<PAGE> 8
Contract of Lease
Page eight (8)
original condition ordinary wear and tear excepted at the expense of the LESSEE
if the LESSOR does not want to take possession of the alterations, additions or
improvements.
7. MAINTENANCE AND ORDINARY REPAIRS. - The LESSEE hereby accepts the
Leased Premises in good and sanitary order and condition. The LESSEE shall, at
its expense, maintain the Leased Premises in a clean and sanitary condition,
free from obnoxious odors, or other nuisances. The LESSEE shall be responsible
for the maintenance and ordinary repairs of the Leased Premises. Necessary
repairs on the structure of the buildings such as the roof as a result of normal
wear and tear shall be for the account of the LESSOR.
7.1 The LESSEE shall not claim any loss or damages on account of
necessary work that the LESSOR undertakes in the building and
which would in anyway interfere in the use of the premises
leased; provided, however, that the LESSOR shall give the
LESSEE notice of such an event in advance as far as possible
under the circumstances; provided, finally, that the LESSOR
shall exert its best efforts to perform all work in a manner
that does not unreasonably interfere with the LESSEE's use of
the Leased Premises.
7.2 LESSOR may not be liable for the presence of bugs, vermin,
termite or insects, if any, in the Leased Premises.
<PAGE> 9
Contract of Lease
Page nine (9)
7.3 The LESSOR shall not be liable for the failure of electric
current or water supply which are provided by public utility
companies and whose supply of such services are totally beyond
the control of LESSOR.
7.4 LESSOR shall, on a best effort basis, undertake to explore,
construct and develop such water well or wells inside the
Leased Premises as may be necessary to provide the LESSEE,
during the contractual life of the lease, with continuous and
adequate water supply at the current level or capacity. If the
business of the LESSEE would require a higher volume of supply
over and above the current level, due to growth or expansion,
the required increase in capacity shall be for the account of
the LESSEE. The current supply of electricity and water is
described in Annex "D" hereof.
7.5 The LESSEE shall comply with sanitary rules and safety
regulations which may be promulgated from time to time by the
LESSOR. The LESSEE shall also comply with government rules and
regulations and all applicable laws of the country.
8. USE OF LEASED PREMISES. - The premises hereby leased shall be used
as office, factory/warehouse for LESSEE's
<PAGE> 10
Contract of Lease
Page ten (10)
electronics assembly business. The LESSEE shall not bring into or store in the
Leased Premises any poison, explosives or highly inflammable material nor
install any apparatus unrelated to its business as an electronics company which
may expose the Leased Premises to fire or increase the fire hazard of the
building or change the insurance rate of the building. In the event of breach or
violation of this provision by the LESSEE, it shall be responsible for all
damages which such violations may cause the LESSOR and/or other tenants;
provided further, that the LESSOR, shall, in addition thereto, have the right to
cancel this Contract.
8.1 In the event of expansion or growth in the business of the
LESSEE, any required additional support facility or cost
related thereto, shall be for the sole account of the LESSEE.
9. SUBLEASE, TRANSFER OF RIGHTS. - The LESSOR grants the LESSEE the
right to sublease the Leased Premises under this contract upon written request
by the LESSEE and approved in writing by the LESSOR. The LESSOR shall not
unreasonably withhold its consent relative to a request to sublease made by the
LESSEE. The LESSEE shall be answerable for the rentals of the subleased space.
10. INDEMNITIES. - Either party shall hold the other party free and
harmless from any claim or demand by any third party for injury, loss or damage
including claims for property resulting from any accident in the Leased Premises
or
<PAGE> 11
Contract of Lease
Page eleven (11)
occasioned by any nuisance made or suffered on the Leased Premises, or by any
fire therein or growing out of or caused by any failure on the part of the
either party to maintain the Leased Premises in a safe, sanitary and secure
condition or by reason of either party's violation, non-observance or
non-performance of rules, regulations, ordinances, laws and the conditions of
this Contract concerning or affecting the Leased Premises or the improvements
thereon. Each party shall be responsible for all the acts and commissions of its
officers, employees, helpers, agents and all other persons allowed by it to have
access to the Leased Premises which may have caused damage thereto. Each party
shall not be held harmless for its own negligence or willful misconduct or the
negligence or willful misconduct of its agents, servants or employees acting in
their official capacity.
11. AWAI MEMBERSHIP. - The LESSEE agrees to pay its appropriate
membership dues and share in the expenses of the Advanced Warehousing
Association, Incorporated. The LESSEE further agrees to abide by and comply with
any and all reasonable rules of the Association regarding the use, occupation
and sanitation of the AWAI compound.
12. UTILITIES. - All utilities and services such as light, water,
telephone, garbage collection and other similar services shall be paid by and
for the account of the LESSEE. The LESSEE may at its own expense undertake the
necessary utility installation required by its business provided such
installation does not adversely affect the other tenants in the premises nor
endanger the structural soundness of the
<PAGE> 12
Contract of Lease
Page twelve (12)
building. The additional installation of electricity, water and telephone in the
Leased Premises shall be for the account of the LESSEE.
13. SALE OF LEASED PREMISES. - In the event the LESSOR desires to sell
the buildings subject of this lease, it shall first offer the sale thereof to
the LESSEE upon terms and conditions to be stipulated in such offer. Such offer
shall be communicated by the LESSOR to the LESSEE by personal delivery. Should
the LESSEE accept the offer, it shall be entitled to purchase the buildings at
the time of the offer is made. In the event that such offer shall not be
accepted by the LESSEE by notice in writing forwarded by personal delivery not
later than sixty (60) days after receipt of the offer, the LESSOR making the
offer shall be free to sell the buildings to any other person, firm or
corporation without restriction, except that the subsequent transfer of the
buildings shall not be on terms more favorable to the transferee than the terms
which the transfer was initially offered to the LESSEE. If within sixty (60)
days after expiration of the sixty-day period of any offer made hereunder, the
LESSOR offering to sell the buildings shall fail to consummate a sale or
transfer thereof to any other purchaser, then no sale of such buildings may be
made thereafter by the LESSOR without again re-offering the same to the LESSEE
in accordance with the provisions of this paragraph.
If the LESSEE to whom an offer is made is prohibited by law or
regulation from purchasing the buildings of the LESSOR, or its acquisition will
prejudice the interest of the LESSEE,
<PAGE> 13
Contract of Lease
Page thirteen (13)
the LESSEE shall have the right to look for a qualified purchaser for the
buildings and such qualified purchaser shall be entitled to purchase thereon
under such terms stated in the offer and in accordance with the procedure
hereinabove provided.
In the event LESSOR receives a bona fide offer from a third person to
purchase the buildings and such offer is acceptable to the LESSOR, LESSEE shall
have sixty (60) days from receipt of the notice of such offer within which to
purchase the buildings by matching the bona fide offer made by third person to
the LESSOR.
14. INSPECTION OF LEASED PREMISES. - During the term of the Contract,
the LESSEE shall allow the LESSOR, its agents or representatives to inspect the
Leased Premises during reasonable hours, with prior notice to the LESSEE.
15. INSURANCE. - During the term of this Contract, the LESSEE shall at
all times and at its own expense secure insurance coverage for all improvements
owned by it or introduced by it in the Leased Premises with responsible and
reputable insurers in such amounts and covering such risks as are usually
carried by companies engaged in similar business or by companies owning similar
property in their area in which they operate.
16. WARRANTY OF THE LESSOR. - The LESSOR warrants that it is the
absolute owner of the buildings and improvements and has the right to lease the
same together with the land on which the buildings and improvements are erected.
Furthermore, the LESSOR shall, in case of litigation or
<PAGE> 14
Contract of Lease
Page fourteen (14)
controversy concerning its right, title and interest in the Leased Premises,
defend and hold harmless the right of the LESSEE under the terms and conditions
of this Contract at the expense of the LESSOR.
17. NON-WAIVER. - No failure of the LESSOR or the LESSEE, no course of
dealing with respect to, and no delay in exercising any right, power or
privilege, under this contract shall be deemed a relinquishment or waiver of any
right or remedy that said LESSOR or LESSEE may have, nor shall be construed as a
waiver of any subsequent breach or default and the terms and conditions herein
contained shall continue to be in full force and effect. No waiver by the LESSOR
or LESSEE of any of their rights under this contract shall be deemed to have
been made unless expressed in writing and signed by the LESSOR or the LESSEE.
18. STRIKES AND LOCKOUTS. - In case the operation of the business of
the LESSEE is suspended due to strikes or lockouts, this Contract shall continue
in full force and effect notwithstanding said disturbance.
19. BREACH OF CONTRACT. - Should the LESSEE fail to pay the rentals as
herein provided or fail or neglect to perform or observe any agreement, covenant
or condition herein provided, or should the LESSEE cause deliberate damage to
the Leased Premises, the LESSOR shall forthwith give notice to the LESSEE of the
occurrence of such default or breach giving the LESSEE a period of sixty (60)
days from receipt of notice to correct the breach. If after the lapse of the
said period, no corrective actions are taken, then the LESSOR shall have the
<PAGE> 15
Contract of Lease
Page fifteen (15)
option to terminate this Contract without prejudice to the exercise of any and
all rights of the LESSOR arising from this Contract and those provided by law.
In cases where the curing period will be a period longer than sixty (60) days,
the LESSEE shall not be considered in default if it takes the corrective action
within twenty (20) days from receipt of the notice of its breach.
20. REGISTRATION OF LEASE. - The parties hereto agree that this lease
shall be registered with the office of the proper Register of Deeds and in the
event of sale, transfer or disposition of the Leased Premises, the LESSEE binds
itself to require the transferee to respect and abide by all the terms and
conditions of this Contract. The LESSEE shall bear the cost of documentary
stamps and registration costs.
21. RIGHT OF FIRST REFUSAL. - The LESSOR grants the LESSEE the right of
first refusal to lease the other buildings or additional buildings to be built
by the LESSOR on its Muntinlupa property. The terms of offer to lease such other
buildings or additional buildings to be built by the LESSOR shall be the same as
that offered to any third party.
22. PRE-TERMINATION. - After the original term provided under paragraph
one (1) hereof, upon One Hundred Twenty (120) days prior written notice, LESSEE
may pre-terminate this Contract without penalty.
23. SURRENDER OF PREMISES. - Upon the termination of this lease, the
LESSEE agrees to return and surrender to the LESSOR the Leased Premises without
any delay whatsoever. The
<PAGE> 16
Contract of Lease
Page sixteen (16)
LESSEE shall at its expense and within three (3) months from the expiration of
the lease, demolish and remove any improvements that the LESSOR may require the
LESSEE to remove.
IN WITNESS WHEREOF, the parties have hereunto set their hands this May 06,
1994 at Makati, Metro Manila.
SALCEDO SUNVAR REALTY CORPORATION
("Lessor")
By: /s/ LEONARDO P. LORETO, JR.
----------------------------
LEONARDO P. LORETO, JR.
President
AUTOMATED MICROELECTRONICS, INC.
("Lessee")
By: /s/ DANNY D. FRANKLIN
----------------------------
DANNY D. FRANKLIN
Treasurer
SIGNED IN THE PRESENCE OF:
[SIG]
- ---------------------------------- -------------------------------
REPUBLIC OF THE PHILIPPINES)
: S.S.
MAKATI, METRO MANILA )
ACKNOWLEDGMENT
BEFORE ME, a Notary Public in and for Makati, Metro Manila, Philippines,
personally appeared LEONARDO P. LORETO, JR. with Community Tax Certificate No.
6465617 issued at Paranaque, Metro Manila on February 23, 1993 in his capacity
<PAGE> 17
Contract of Lease
Page seventeen (17)
as President of SALCEDO SUNVAR REALTY, CORPORATION, a corporation with Community
Tax Certificate No. 0061289 issued at Makati, Metro Manila on December 21, 1993
and DANNY D. FRANKLIN with Passport No. 740022120 issued at British Embassy,
Manila on August 18, 1993 in his capacity as Treasurer of AUTOMATED
MICROELECTRONICS, INC., a corporation with Community Tax Certificate No. 0456127
issued at Muntinlupa, Metro Manila on January 20, 1993, to me known and known to
me to be the same persons who executed the foregoing instrument and acknowledged
to me that they executed the same as their free and voluntary act and deed of
the corporations they represent.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal this 1st day of June, 1994 at Makati, Metro Manila, Philippines.
[SIG]
ROANE ALFREDO P. LOPEZ III
NOTARY PUBLIC
Doc No. 8 Until December 31, 1996
Page No. 2 PTR NO. 9361623
Book No. I Issued at Makati, Metro Manila
Series of 1994. Issued On January 26, 1994
<PAGE> 1
EXHIBIT 10.13
LEASE CONTRACT
KNOW ALL MEN BY THESE PRESENTS:
This CONTRACT OF LEASE, made and executed this 6th day of November,
1996 by and between:
AAPI REALTY CORPORATION, a corporation duly organized and
existing under and by virtue of the laws of the Philippines with
principal office and place of business therein at NSC Compound, KM-22,
South Superhighway, Muntinlupa City, Philippines, represented herein by
its PRESIDENT, MR. LEONARD P. LORETO, JR. (hereinafter referred to as
the "LESSOR"):
- and -
AMKOR/ANAM ADVANCED PACKAGING, INC., a corporation duly
organized and existing under and by virtue of the laws of the
Philippines with principal office and place of business therein at
Laguna Technopark, Sta. Rosa, Laguna, Philippines, represented herein
by its TREASURER, MR. DANNY D. FRANKLIN, (hereinafter referred to as
the "LESSEE").
WITNESSETH: THAT
WHEREAS, the LESSOR is the absolute registered owner of three (3)
parcels of land with a total area of ONE HUNDRED SEVEN THOUSAND SEVEN HUNDRED
TWENTY ONE (107,721) SQUARE METERS, more or less, covering Lots 3, 4 and 5,
Phase 2, Block 5 located at Laguna Technopark, Brgy. of Binang, Municipality of
Binan, Province of Laguna, covered by TRANSFER CERTIFICATE OF TITLE NOS.
T-158425, T-158426 and T-158427 all issued on June 23, 1995 by the Registry of
Deeds for the Province of Laguna of the Land Registration Authority and more
<PAGE> 2
Lease Contract
Page two (2)
particularly described in Annexes A, B and C hereof and made integral parts of
this Lease Contract.
WHEREAS, the LESSOR has offered, and LESSEE has agreed to lease a
portion of the real property described above consisting of ONE HUNDRED TWO
THOUSAND ONE HUNDRED TWO EIGHTY (102,180) SQUARE METERS, more or less,
designated in a drawing attached hereto as Annex D and made an integral part
hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree as follows:
1. BASE TERM AND COMMENCEMENT DATE OF LEASE. - This lease shall be
effective for a period of fifty (50) years commencing on January 1, 1996 and
ending on December 31, 2046 and renewable for another twenty-five (25) years.
2. RENTALS DURING THE BASE TERM. - The monthly rental for the Leased
Premises shall be as follows: (a) for the developed portion consisting of THIRTY
SEVEN THOUSAND FIVE HUNDRED EIGHTY TWO (37,582) SQUARE METERS, the rental shall
be FORTY PESOS (P40.00) PER SQUARE METER; and (b) for the undeveloped portion
consisting of SIXTY FOUR THOUSAND FIVE HUNDRED NINETY EIGHT (64,598) SQUARE
METERS, the rental shall be TWELVE PESOS (P12.00) PER SQUARE METER. The rental
shall be subject to an annual adjustment.
<PAGE> 3
Lease Contract
Page three (3)
2.1 - The rental shall be paid by the LESSEE on a monthly basis.
2.2 - The rent shall be liquidated and paid at the office of the LESSOR
or its assigns without necessity of demand or services of a collector within
thirty (30) days of every calendar month to which the rent corresponds.
2.3 - The rent shall be subject to the mandatory withholding tax.
2.4 - Without prejudice to the exercise of the LESSOR of its rights
under the penal provisions herein, the LESSEE shall pay to the LESSOR interest
on any amount herein provided to be paid by the LESSEE that is not paid on time,
at an interest rate equivalent to one percent (1%) per month to be computed from
the date of delinquency until the amount due is paid in full.
A payment made by the LESSEE to the LESSOR shall first apply to the
preceding interest charges, if any, and thence to all arrearages in the amounts
herein provided to be paid by the LESSEE before it is applied to the current
rental. In the fulfillment of obligations involving the payment of money and
without prejudice to the imposition of interest charges and penalty mentioned
above, the LESSEE is hereby given a grace period of sixty (60) days from the due
date within which to make good the breach or default.
<PAGE> 4
Lease Contract
Page four (4)
For the purpose of payment of the rentals under this Agreement, the
following shall also apply:
3. LESSEE'S RIGHT TO EXTEND. - The LESSEE may, at its option, obtain an
extension of the term of this lease, for a further term of twenty-five (25)
years so as to expire on the seventy fifth anniversary of the commencement date
of this lease, and upon like terms and conditions as are set forth herein,
except rental, by giving to the LESSOR written notice of its election to extend
on or before the commencement of the one year prior to the expiration of the
base term.
4. TAXES ON LAND AND IMPROVEMENTS. - All taxes on buildings and
improvements shall be paid by LESSEE. All real estate taxes on the land hereby
leased shall be paid by LESSOR.
5. LANDSCAPING. - Any landscaping which the LESSEE may introduce to the
premises shall be at the expense and account of the LESSEE.
6. IMPROVEMENTS. - It is understood and agreed that the demised
premises consist of improved real estate; provided that any buildings, fixtures,
equipment or other improvements placed or constructed thereon by the LESSEE
belong to and at all times shall remain the property of the LESSEE. At the
expiration of the base term of this lease, or any renewal thereof, the LESSEE
shall have the right to remove any and all buildings and other improvements
within a period of one
<PAGE> 5
Lease Contract
Page five (5)
hundred eighty (180) calendar days from the date of expiration of this lease,
but the LESSEE shall repair any damage to the land caused by such removal. In
the event the LESSEE shall fail to remove such buildings and improvements, or
shall make only a partial removal thereof within the said one hundred eighty
(180) days, then it shall become elective with the LESSOR as to whether the
building and improvements, or such thereof as remain, shall belong to and become
the property of the LESSOR or whether full or partial removal thereof is
required. In such event the LESSOR shall notify the LESSEE, in writing, at or
prior to the expiration of one hundred eighty (180) day removal period above
provided, of LESSOR's decision under such election, including a full and
irrevocable description of such removals as the LESSOR may require; whereupon
the LESSEE shall have a reasonable time, but not exceeding one hundred eighty
(180) calendar days from date of delivery of the LESSOR's notice of election, in
which to comply with the LESSOR's written requirements. Any and all building and
improvement removals made pursuant to this provision shall be at the sole risk
and expense of the LESSEE. Removals, if any, shall be done in a clean and neat
manner, leaving no partially dismantled structures or unsightly conditions and
the premises and any remaining buildings shall be free and clear of any refuse,
debris, waste or unsanitary conditions.
<PAGE> 6
Lease Contract
Page six (6)
7. DELIVERY OF POSSESSION. - The LESSOR shall deliver the possession of
the demised premises to the LESSEE on the commencement of the term of this lease
in as good condition as the same now are, free from all tenancies and
occupancies, and free from all orders and notices and violation filed or entered
by any public or quasi-public authority, and free from complaints and/or reports
of violations, noted or existing in or filed with any municipal, provincial,
city and/or any other local authority.
8. WARRANTIES. - The LESSOR warrants the peaceful possession of the
leased premises by the LESSEE during the entire period of this lease. In case
the LESSOR should sell, mortgage, or otherwise dispose of the leased premises,
the LESSOR shall make it a condition of the sale, mortgage, or whatever
disposition thereof, that the rights of the LESSEE under this lease shall be
fully respected by the buyer, mortgagee or transferee. The LESSOR further agrees
to extend full cooperation and to do all and every act and thing necessary to
enable the LESSEE to register this lease with the Register of Deeds of the
Province of Laguna.
9. UNLAWFUL OCCUPATION. - The LESSOR represents that the demised
premises may be lawfully used for all industrial purposes for which they are
leased and in the event of the enactment or existence of any law, ordinance,
rule, ruling or regulation prohibiting
<PAGE> 7
Lease Contract
Page seven (7)
the use of said premises for any industrial purpose, then and in that event, at
the option of the LESSEE, this lease shall terminate and all liabilities
hereunder shall cease from and after the date such prohibition becomes
effective, and any unearned rent paid in advance by the LESSEE shall be refunded
to it.
10. RIGHT OF FIRST REFUSAL. - Should LESSOR desire to sell the leased
premises during the term of this Agreement, or any extension or extensions,
thereof, LESSOR shall first give written notice of such intention to LESSEE and
should LESSEE then be allowed under the Constitution and laws of the Philippines
to acquire land, LESSEE shall have the first option to purchase the leased
premises at the same price offered or to be offered to third persons. Should
LESSEE, however, not wish to exercise the option hereunder, any sale or
encumbrance made by LESSOR shall be subject to the terms of this Agreement.
11. SUPERIOR TITLE: CONDEMNATION. - Should the LESSEE be dispossessed
from the premises or any part thereof by reason of a right or title of any third
party superior to that of the LESSOR, or should the demised premises or any part
thereof be condemned or taken for temporary or permanent public or quasi-public
use by any legally constituted authority, then in any of such events (1) the
LESSEE shall have the right to terminate this lease effective on the date
<PAGE> 8
Lease Contract
Page eight (8)
possession is taken by such public authority and rental shall be apportioned as
of that date with proportionate refund by the LESSOR of any rent paid in
advance; or (2) if the lease is not terminated, the lease shall continue for the
balance of the term or any renewal thereof only as to the portion of the leased
premises remaining and the rental herein provided shall be equitably abated or
reduced as of the date of possession by such public authority in the proportion
which the space to be taken bears to the entire space originally leased. The
termination of the lease by the LESSEE shall be without prejudice to the rights
of the LESSEE to recover the compensation from the condemning authority for any
loss or damage of all leasehold improvements existing on the leased premises,
loss of business, or depreciation to, change to, or cost of removal of, or for
the value of stock, trade fixtures, machinery and equipment, and other personal
property belonging to the LESSEE, caused by such condemnation, and neither the
LESSOR nor the LESSEE shall have any rights in or to any award made to the other
by the condemning authority.
12. LESSEE'S COVENANTS. - The LESSEE hereby covenants with LESSOR:
a) to pay all charges for electric current and water, consumed and
all charges in respect of telephone and other utility services supplied to the
demised premises during the term of the lease;
<PAGE> 9
Lease Contract
Page nine (2)
b) Not to consent to any unlawful use of the demised premises;
c) Not to sublease the premises, or any part thereof, except to a
corporation then owned or controlled by the LESSEE or to any other affiliate
company of the LESSEE, without the written consent of the LESSOR; provided,
however, the LESSOR agree that such consent will not be unreasonably withheld.
13. SIGNS. - The LESSEE shall have the right to install or place signs
or posters anywhere on or about the premises and upon removal of said signs and
posters at the termination of this lease, LESSEE shall repair any damage caused
by such removal.
14. WAIVER OF SUBROGATION. - The LESSOR and the LESSEE waive all
rights, each against the other, for damages caused by fire or other perils
covered by insurance where such damages are sustained in connection with the
occupancy of the leased premises.
15. NOTICES: DELIVERY OF RENTAL FUNDS. - All notices to be given
hereunder by either party shall be in writing.
At or prior to the commencement date of this lease the LESSOR shall
deliver to LESSEE written notice of the full name and mailing address of the
individual or legal entity representing LESSOR duly empowered to receive all
notices and collect all rents hereunder either by personal delivery or by
registered
<PAGE> 10
Lease Contract
Page ten (10)
mail. The LESSOR, however, reserves the right to countermand such appointment at
any time and substitute a new appointment therefor, in which case proper notice
of such substitution shall be promptly given to LESSEE by personal delivery or
by registered mail.
16. QUIET POSSESSION. - LESSOR herein represents that it is the fee
owner of the premises hereby leased and hereby covenants that the LESSEE on
paying the rent and performing all and singular the covenants and conditions of
this lease on its part to be performed, shall and may peaceably and quietly
have, hold and enjoy the demised premises for the term aforesaid, and for the
term of any renewal or renewals thereof, free from molestation, eviction or
destruction by the LESSOR, or by any other person or persons lawfully claiming
the same, and that the LESSOR have good right to make this lease for the full
term hereby granted, including the period for which the LESSEE has the right to
effect a renewal thereof. LESSOR agrees that in the event the premises are sold
during the term of the lease or any extension thereof, a certified copy of the
Deed of Conveyance or an executed copy of the Assignment of this lease shall be
furnished to LESSEE, it being understood that the consideration for such
conveyance may be deleted from such instruments.
17. RIGHTS UPON DEFAULT. - That if the LESSEE shall neglect or fail to
perform or observe any of
<PAGE> 11
Lease Contract
Page eleven (11)
the covenants contained herein on its part to be observed and performed for
thirty (30) days after written notice by the LESSOR, or if the LESSEE shall be
adjudicated bankrupt or insolvent according to law, or shall make an assignment
for the benefit of creditors, then and in any of said cases the LESSOR may
lawfully enter into and upon the said premises or any part thereof in the name
of the LESSOR, and repossesses the same as of the former estate of the LESSOR
and expel the LESSEE and those claiming under and through it and remove its
effects (forcibly if necessary), without prejudice to any remedies which might
otherwise be used for arrears of rent or preceding breach of covenant and upon
entry as aforesaid this lease shall terminate and the LESSEE covenants that in
case of such termination it will indemnify the LESSOR against all unavoidable
loss of rent which the LESSOR may incur by reason of such termination during the
residue of the term above specified. In the event of non-payment of any rental
when due, the LESSEE shall pay a penalty at a rate of ten percent (10%) on the
amount in default in addition to attorney's fees, if any, and interest on any
amount herein provided that it is not paid on time as provided in Par. 2.3
hereof.
The covenants and agreements contained in the foregoing lease are
binding upon the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and assigns.
<PAGE> 12
Lease Contract
Page twelve (12)
18. REGISTRATION OF LEASE. - This lease shall be registered with the
proper governmental office including without limitation the Registrar of Deeds
for the Calamba Branch of the Land Registration Authority and all expenses to be
incurred in connection therewith shall be borne by the LESSEE.
19. ENTIRE AGREEMENT. - This agreement constitutes the entire agreement
of the parties hereto and cannot be changed in any manner except in writing
subscribed by the parties through their duly authorized officers.
20. BINDING EFFECT. - This agreement shall be binding upon, and inure
to the benefit of the parties and their successors and assigns.
IN WITNESS WHEREOF, the parties have signed these presents at Makati
City, Philippines, this 6th day of November, 1996.
AAPI REALTY CORPORATION
("the Lessor")
By: /s/ Leonardo P. Loreto, Jr.
--------------------------------------
LEONARDO P. LORETO, JR.
President
AMKOR/ANAM ADVANCED PACKAGING, INC.
("the Lessee")
By: /s/ Danny D. Franklin
--------------------------------------
DANNY D. FRANKLIN
Treasurer
<PAGE> 13
Lease Contract
Page thirteen (13)
SIGNED IN THE PRESENCE OF:
- ------------------------------- -------------------------------
[SIG] [SIG]
REPUBLIC OF THE PHILIPPINES )
): S.S.
MAKATI CITY )
ACKNOWLEDGMENT
BEFORE ME a Notary Public for and in Makati on this 6th day of
November, 1996 at Makati City personally appeared:
<TABLE>
<CAPTION>
COMMUNITY TAX
NAME CERTIFICATE NO. DATE AND PLACE OF ISSUE
---- --------------- -----------------------
<S> <C> <C>
AAPI Realty Corporation 63009 1/19/96 Binan Laguna
Leonardo P. Loreto, Jr. 13989100 2/26/96 Muntinlupa
Amkor/Anam Advanced
Packaging, Inc. 63011 1/19/96 Binan Laguna
Danny D. Franklin 740022120 issued 8/18/93 to expire 8/18/2003,
British Embassy Manila
</TABLE>
known to me and to me known to be the same persons who executed the foregoing
instrument and acknowledged to me that the same are their free and voluntary act
and deed.
WITNESS my hand and seal on the date and place first above written.
ANA LIZA A. PERALTA-NAZARENO
NOTARY PUBLIC
Doc No. 150 Until December 31, 1996
Page No. 30 PTR NO. 0314764
Book No. III Issued at Makati
Series of 1996. On 1/27/96
<PAGE> 14
ANNEX "A"
JUDICIAL FORM NO. 109-D Book T-793
(Revised January 1991) Page 25
SN No. 3664853 REPUBLIC OF THE PHILIPPINES
DEPARTMENT OF JUSTICE
Land Registration Authority
QUEZON CITY
REGISTRY OF DEEDS FOR THE PROVINCE OF LAGUNA
Transfer Certificate of Title
No. T-158425
IT IS HEREBY CERTIFIED that certain land situated in the Municipality of
Binan Province of Laguna bounded and described as follows:
A parcel of land (Lot 3, of the consolidation-subdivision plan Pos-04-009944,
being a portion of Lots 3, 4 and 5, Block 5, Pos-04-005875, LRC Record No. 8374,
situated in the Drgy. of Binan, Mun. of Binan, province of Laguna. Bounded on
the NW., NE., along lines 1-2-3 by Lot 4, of the consol. subd. plan; on the
NE., along line 3-4 by Lot 11, (Doopwell Site); along lines 4-5-6-7-8-9 by Road
Lot 8 (20.00 m. wide); on the SE., along lines 9-10, by Lot 2, Block 5 all of
Pos-04-05875; on the SW., along lines 10-11, by Road; along line 11-12 by Lot
12; along lines 12-13-1 by Lot 9, both of Block 5, Pos-04-005875.
(Cont'd on the next page)
is registered in accordance with the provisions of the Property Registration
Decree in the name of*
AAPI REALTY CORPORATION, -
as owner thereof in fee simple, subject to such of the encumbrances mentioned
in Section 44 of said Decree as may be subsisting, and to
Exemption from the provisions of Article 567 of the Civil Code is
specifically reserved.
IT IS FURTHER CERTIFIED that said land was originally registered on the 9th
day of August, in the year nineteen hundred and thirteen, in the Registration
Book of the Office of the Register of Deeds of Laguna, Volume A-5, page 20-29,
as Original Certificate of Title No. 242, pursuant to Decree No. 11567, issued
in I. R. C. __________ Record No. 8374, in the name of YCLA Sugar Dev. Corp.
This certificate is a transfer from Transfer certificate of Title No.
T-135617-19, which is cancelled by virtue hereof in so far as the
above-described land is concerned.
[SEAL] Entered at Santa Cruz, Laguna,
Philippines, on the 23rd day of June, in
the year nineteen hundred and
[SEAL] ninety-five at 11:50 a.m.
ATTEST:
Km. 22 South Superhighway, Muntinlupa,
M.M. /s/ DANTE A. ARRIOLA
- -------------------------------------- --------------------
(Owner's postal address) (Register of Deeds)
* State the civil status, name of spouse if married, age if a minor,
citizenship and residence of the registered owner. If the owner is a married
woman, state also the citizenship of her husband. If the land is registered in
the name of the conjugal partnership, state the citizenship of both spouses.
<PAGE> 15
MEMORANDUM OF ENCUMBRANCES
(When necessary use this page for the continuation of the technical description)
================================================================================
(CONTINUATION OF THE TECHNICAL DESCRIPTION)
Entry No. ........................
Beginning at a point marked 1 on plan, baing X degree, 11 deg. 13'"., 1880.48 m.
from Mon. No. 23, Bifian Estate; thence 77 deg. 47'E., 53.16 m. to point 2; S.
32 deg. 43'E., 179.65m. to point 3, S. 32 deg. 43'E., 15.35 m. to point 4; S. 12
deg. 08'E., 7.00 m. to point 5; S. 02 deg. 08'W., 7.00 m. to point 6; S. 07 deg.
53'E., 7.00 m. to point 9, S. 17 deg. 58'E., 7.00 m. to point 8; S. 22 deg.
58'E., 16.01 m. to point 9; S. 67 deg. 02'"., 165.46 m. to point 10; N. 03 deg.
52'W. 137.03 m. to point 11; N. 03 deg. 30'W., 92.18 m. to point 12; N. 02 deg.
31'E., 23.41 m. to point 13; N. 09 deg. 57'E., 7.54 m. to the point of
beginning; containing an area of TWENTY EIGHT THOUSANDS ONE HUDNRED NINETY NINE
(28,199) SQUARE METERS. All points referred to are indicated on the plan and are
marked on the ground by 1'.3 oyl.cone.mons., 15x60 om., bearing tue; date of
original survey, Jan. 1996 - Feb. 1997 and that of the ??? survey, July 25, 1994
and was approved on Jan. 13, 1995.
Dante A. Arriola
Register of Deeds
The Deed of Absolute Sale dated December 26, 1994 and identified as
Doc. No. 284, Page No. 46; Book No. XXIV, Series of 1994 of the Notarial
Register of Atty. Roman K. Osaro, and registered under Entry No. 278820, filed
in Env. No. T-158425, is subject to the "DECLARATION OF COVENANTS, CONDITIONS
AND RESTRICTIONS FOR THE LAGUNA TECHOPARK" and the "SUPPLEMENTAL DECLARATION
OF ANNEXATION and COVENANTS, CONDITIONS AND RESTRICTIONS FOR THE LAGUNA
TECHOPARK marked as Annexes 3 and 3-1, respectively of the said document.
June 23, 1995.
Dante A. Arriola
Register of Deeds
<PAGE> 16
ANNEX "B"
JUDICIAL FORM NO. 109-D Book T-793
(Revised January 1991) Page 267
SN No. 3664855 REPUBLIC OF THE PHILIPPINES
DEPARTMENT OF JUSTICE
Land Registration Authority
QUEZON CITY
REGISTRY OF DEEDS FOR THE PROVINCE OF LAGUNA
Transfer Certificate of Title
No. T-158426
IT IS HEREBY CERTIFIED that certain land situated in the Municipality of
Binan Province of Laguna bounded and described as follows:
A parcel of land (Lot 4, of the consolidation-subdivision plan Pos-04-009944,
being a portion of Lots 3, 4 and 5, Block 5, Pos-04-005875, LRC Record No. 8374,
situated in the Drgy. of Binan, Mun. of Binan, province of Laguna. Bounded on
the NW., along lines 1 to 12 by Lot 1; on the NE., along line 12-13 by Lot 5
both of the consol. subd. plan; on the SE., along lines 13-14-15-16-17 by Road
Lot 8 (20.00 m. wide); on the NW., SE., along lines 17-18-19, by Lot 11, Block
5 (Deepwell Site), both of Pos-04-005875; on the SW., SE., along lines 19-10-1
by Lot 3 of the consol. subd. plan. Beginning at a point marked 1 on
(Cont'd on the next page)
is registered in accordance with the provisions of the Property Registration
Decree in the name of*
AAPI REALTY CORPORATION, -
as owner thereof in fee simple, subject to such of the encumbrances mentioned
in Section 44 of said Decree as may be subsisting, and to
Exemption from the provisions of Article 567 of the Civil Code is
specifically reserved.
IT IS FURTHER CERTIFIED that said land was originally registered on the 9th
day of August, in the year nineteen hundred and thirteen, in the Registration
Book of the Office of the Register of Deeds of Laguna, Volume A-5, page 20-29,
as Original Certificate of Title No. 242, pursuant to Decree No. 11567, issued
in I. R. C. __________ Record No. 8374, in the name of YCLA Sugar Dev. Corp.
This certificate is a transfer from Transfer certificate of Title No.
T-135617-19, which is cancelled by virtue hereof in so far as the
above-described land is concerned.
[SEAL] Entered at Santa Cruz, Laguna,
Philippines, on the 23rd day of June, in
the year nineteen hundred and
[SEAL] ninety-five at 11:50 a.m.
ATTEST:
Km. 22 South Superhighway, Muntinlupa,
M.M. /s/ DANTE A. ARRIOLA
- -------------------------------------- --------------------
(Owner's postal address) (Register of Deeds)
* State the civil status, name of spouse if married, age if a minor,
citizenship and residence of the registered owner. If the owner is a married
woman, state also the citizenship of her husband. If the land is registered in
the name of the conjugal partnership, state the citizenship of both spouses.
<PAGE> 17
MEMORANDUM OF ENCUMBRANCES
(When necessary use this page for the continuation of the technical description)
================================================================================
(CONTINUATION OF THE TECHNICAL DESCRIPTION
Entry No._____________________,
plan, ???????? 11 dog. 13'E., 1880.48 m. from Mon. No. 23, Bihan Estate; thnoo
???? dog. 15'E., 12.93 m. to point 3; E. 13 dog. 21'E., 20.07 m. to point 3;
???? dog. 56'E., 20.07 m. to point 4; E. 18 dog. 30'E., 20.07 m. to point 5;
???? dog. 05'E., 20.07 m. to point 6; E. 23 dog. 40'E., 20.07 m. to point 7;
???? dog. 15'E., 20.07 m. to point 8; N. 28 dog. 50'E., 20.07 m. to point 9;
???? dog. 25'E., 20.07 m. to point 10; N. 34 dog. 00'E., 20.07 m. to point 11;
???? dog. 33'E., 19.47 m. to point 12; E. 32 dog. 43'E., 319.41 m. to point 13;
???? dog. 17'N., 100.69 m. to point 14; S. 52 dog. 17'N., 7.00 m. to point 15;
???? dog. 17'N., 7.00 m. to point 16; S. 32 dog. 13'N., 3.94 m. to point 17;
N. 32 dog. 43'N., 10.03 m. to point 18; N. 57 dog. 17'N., 8.50 m. to point 19;
N. 32 dog. 43'N., 179.65 m. to point 20; S. 77 dog. 47'W., 53.16 m. to point
of beginning; containing an area of THIRTY EIGHT THOUSAND ONE HUNDRED EIGHTY
ONE (38,181) SQUARE METERS. All points referred to are indicated on the plan
and are marked on the ground by P.S. cyl. como.mons., 15x60 cm., bearings true;
date of original survey, Jan. 1906 - Feb. 1907 and that of the subd. survey,
July 25, 1994 and was approved on Jan. 13, 1995.
/s/ DANTE A. ARRIOLA
DANTE A. ARRIOLA
Register of Deeds
The Deed of Absolute Sale dated December 26, 1994 and identified as
Doc. No. 224; Page No. 46; Book No. XXIV, Series of 1994, of the Notarial
Register of Atty. Ronan R. Osoro, and registered under Entry No. 278820, filed
in Env. No. T-158425, is subject to the "DECLARATION OF COVENANTS, CONDITIONS
AND RESTRICTIONS FOR THE LAGUNA TECHNOPARK" and the "SUPPLEMENTAL DECLARATION
OF ???? AND COVENANTS, CONDITIONS AND RESTRICTIONS FOR THE LAGUNA TECHNOPARK
marked as Annexes 3 and 3-1, respectively of the said document.
June 23, 1995.
/s/ DANTE A. ARRIOLA
DANTE A. ARRIOLA
Register of Deeds
(Memorandum of Encumbrances continued on Page________-B)
(Technical Description continued on Additional Sheet ______ Page ______-)
---------------------------------
Register of Deeds
<PAGE> 18
ANNEX "C"
JUDICIAL FORM NO. 109-D Book T-793
(Revised January 1991) Page 27
SN No. 3664855 REPUBLIC OF THE PHILIPPINES
DEPARTMENT OF JUSTICE
Land Registration Authority
QUEZON CITY
REGISTRY OF DEEDS FOR THE PROVINCE OF LAGUNA
Transfer Certificate of Title
No. T-158427
IT IS HEREBY CERTIFIED that certain land situated in the Municipality of
Binan Province of Laguna bounded and described as follows:
A parcel of land (Lot 5, of the consolidation-subdivision plan Pos-04-009944,
being a portion of Lots 3, 4 and 5, Block 5, Pos-04-005875, LRC Record No. 8374,
situated in the Drgy. of Binan, Mun. of Binan, province of Laguna. Bounded on
the SE., along line 1-2 by Road Lot 6, Pos-04-005875 (20.00 m. wide on the SW.,
along lines 2-3-4 by Lot 4; on the NW., along line 4-5 by Lot 1, both of the
consol. subd. plan; on the NW., NE., along lines 4-5-6-7 by Lot 9, on the NE.,
along lines 7-8-9 by Lot 6, both of Block 6, Pos-04-005875. Beginning at a point
marked 1 on plan, being N. 00 deg. 04'W., 1835.56 m. from Mon.
(Cont'd on the next page)
is registered in accordance with the provisions of the Property Registration
Decree in the name of*
AAPI REALTY CORPORATION, -
as owner thereof in fee simple, subject to such of the encumbrances mentioned
in Section 44 of said Decree as may be subsisting, and to
Exemption from the provisions of Article 567 of the Civil Code is
specifically reserved.
IT IS FURTHER CERTIFIED that said land was originally registered on the 9th
day of August, in the year nineteen hundred and thirteen, in the Registration
Book of the Office of the Register of Deeds of Laguna, Volume A-5, page 20-29,
as Original Certificate of Title No. 242, pursuant to Decree No. 11567, issued
in I. R. C. __________ Record No. 8374, in the name of YCLA Sugar Dev. Corp.
This certificate is a transfer from Transfer certificate of Title No.
T-155617-19, which is cancelled by virtue hereof in so far as the
above-described land is concerned.
[SEAL] Entered at Santa Cruz, Laguna,
Philippines, on the 23rd day of June, in
the year nineteen hundred and
[SEAL] ninety-five at 11:50 a.m.
ATTEST:
Km. 22 South Superhighway, Muntinlupa,
M.M. /s/ DANTE A. ARRIOLA
- -------------------------------------- --------------------
(Owner's postal address) (Register of Deeds)
* State the civil status, name of spouse if married, age if a minor,
citizenship and residence of the registered owner. If the owner is a married
woman, state also the citizenship of her husband. If the land is registered in
the name of the conjugal partnership, state the citizenship of both spouses.
<PAGE> 19
MEMORANDUM OF ENCUMBRANCES
(When necessary use this page for the continuation of the technical description)
================================================================================
(CONTINUATION OF THE TECHNICAL DESCRIPTION)
Exby No..............................
dog. 23. Difian Estate; ???????? 57 dob. 17., 325.00 no. to point 2; W 32
dog. 43 Dog. 319.41 m. to point 3 ???37 dog. 50'E., .50 m. to point 4; No. 38
dog. 04 Dog. 2.93 m. to point 5; No. 75 dog. 05'E., 172.77 m. to point 6; S. 17
dog. 25 Dog. 98.39 m. to point 7; S. 17 dog. 25'E., 64.04 m. to point 8; S.32
dog. 43'E., 111.03 m. to the point of beginning; containing an area of FORTY
ONE THOUSAND THREE HUNDRED FORTY ONE (41,341) SQUARE METERS. All points
referred to are indicated on the plan and are marked on the ground by P.S. cyl.
cono. ???? 15x60 cm., bearing true; date of original survey, Jan. 1906 - Feb.
1997 and that of the subd., survey, July 25, 1994 and was approved on Jan. 13,
1995.
DANTA A. ARRIOLA
--------------------------------
Danta A. Arriola
Register of Deeds
The deed of Absolute Sale dated December 26, 1994 and identified as Doc. No.
ES??? Page 46; Book No. XXIV, Series of 1994, of te Notarial Register of Atty.
Roman R. Osero, and registered under ENtry No. 278820, filed in Env. No.
T-159425, is subject to the "DECLARATION OF COVENANTS, CONDITIONS AND
RESTRICTIONS FOR THE LACURA TECHNOPARK" and the "SUPPLEMENTAL DECLARATION OF
AUTHORIZATION and COVENANTS, CONDITIONS AND RESTRICTIONS FOR THE LAGUNA
TECNOPARK, marked as Annexes 3 and 3-1, respectively of the said Document.
June 23, 1995.
DANTA A. ARRIOLA
--------------------------------
Danta A. Arriola
Register of Deeds
(Memorandum of Encumbrances continued on Page .........................-B)
(Technical Desription continued on Additinal Sheet.............., Page.....-)
--------------------------------
Register of Deeds
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
1. A.K. Industries, Inc. and its wholly owned subsidiary, Amkor-Anam, Inc.,
each a Texas corporation.
2. Amkor Electronics, Inc., a Pennsylvania corporation.
3. Amkor Anam Test Services, a California corporation.
4. C.I.L. Limited, a corporation organized under the laws of the British Cayman
Islands and its wholly owned subsidiary Amkor/Anam Euroservices S.A.R.L., a
corporation organized under the laws of France.
5. T.L. Limited, a corporation organized under the laws of the British Cayman
Islands and its subsidiaries, Amkor Anam Advanced Packaging, Inc., Amkor/Anam
Pilipinas, Inc., and its subsidiary Automated Microelectronics Inc., each
such subsidiary, a corporation organized under the laws of the Philippines.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
October 2, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 49,664 60,493
<SECURITIES> 881 3,794
<RECEIVABLES> 172,071 192,229
<ALLOWANCES> 1,179 1,979
<INVENTORY> 101,920 117,096
<CURRENT-ASSETS> 365,287 414,315
<PP&E> 451,360 545,661
<DEPRECIATION> 126,465 149,868
<TOTAL-ASSETS> 797,613 933,657
<CURRENT-LIABILITIES> 328,502 420,776
<BONDS> 0 0
0 0
0 0
<COMMON> 46 46
<OTHER-SE> 38,514 45,502
<TOTAL-LIABILITY-AND-EQUITY> 797,613 933,637
<SALES> 1,171,001 663,489
<TOTAL-REVENUES> 1,171,001 663,489
<CGS> 1,022,078 586,541
<TOTAL-COSTS> 1,022,078 586,541
<OTHER-EXPENSES> 103,911 68,523
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 22,245 16,355
<INCOME-PRETAX> 43,012 8,425
<INCOME-TAX> 10,776 5,389
<INCOME-CONTINUING> 31,288 1,178
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 31,288 1,178
<EPS-PRIMARY> 0.38 0.01
<EPS-DILUTED> 0.38 0.01
</TABLE>
