<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1998
REGISTRATION NO. 333-37235
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
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.
DONNA M. PETKANICS, 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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>
<CAPTION>
PROPOSED MAXIMUM
AMOUNT TO MAXIMUM OFFERING AGGREGATE OFFERING
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER SECURITY PRICE(1)(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, $.001 par value(3)... 40,250,000 Shares $12.00 $483,000,000
- -----------------------------------------------------------------------------------------------------------------
% Convertible Subordinated Notes due 2003 and
Common Stock, $.001 par value... $172,500,000 $172,500,000
=================================================================================================================
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTRATION FEE
- -------------------------------------------------- -------------------
<S> <C>
Common Stock, $.001 par value(3)... $142,485(3)
- -------------------------------------------------------------------------------------------
% Convertible Subordinated Notes due 2003 and
Common Stock, $.001 par value... $50,888(4)
- ---------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Includes the aggregate value offered if the Underwriters exercise the
options to purchase shares of Common Stock and Convertible Notes 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.
(3) $121,970 of the fee paid previously; $20,515 paid herewith.
(4) Fee paid previously.
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
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to an offering
in the United States and Canada of an aggregate of 28,000,000 shares of Common
Stock and $120,000,000 aggregate principal amount of % Subordinated
Convertible Notes due 2003 (the "Convertible Notes") of Amkor Technology, Inc.
(the "U.S. Offering"), together with separate Prospectus pages relating to a
concurrent offering outside the United States and Canada of an aggregate of
7,000,000 shares of Common Stock and $30,000,000 aggregate principal amount of
the Convertible Notes of Amkor Technology, Inc. (the "International Offering"),
in each case excluding shares issuable upon exercise of the Underwriters'
over-allotment options. The complete Prospectus for the U.S. Offering follows
immediately. Following such Prospectus are the following alternate pages from
the Prospectus for the International Offering: a front cover page, five pages
comprising the "Underwriting" section and a back cover page. All of the other
pages of the Prospectus for the U.S. Offering are to be used for both the U.S.
Offering and the International Offering.
If this Registration Statement becomes effective in accordance with Rule
430A under the Securities Act of 1933, as amended, the complete Prospectus for
each of the U.S. and International Offerings in the forms in which they are to
be used will be filed with the Securities and Exchange Commission pursuant to
Rule 424 under the Securities Act of 1933, as amended.
<PAGE> 3
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.
SUBJECT TO COMPLETION, DATED MARCH 31, 1998
PROSPECTUS
35,000,000 SHARES
COMMON STOCK
[AMKOR LOGO] $150,000,000
% CONVERTIBLE SUBORDINATED NOTES DUE 2003
AMKOR TECHNOLOGY, INC.
------------------
Amkor Technology, Inc. ("Amkor" or the "Company") hereby offers 30,000,000
shares of Common Stock, par value $.001 per share ("Common Stock"), and
$150,000,000 aggregate principal amount of % Convertible Subordinated Notes
due 2003 (the "Convertible Notes"). In addition, certain stockholders of the
Company (the "Selling Stockholders") are hereby offering 5,000,000 shares of
Common Stock. The Convertible Notes will mature on , 2003. Interest on
the Convertible Notes is payable on and of each year, commencing
, 1998. The Convertible Notes are convertible into shares of Common
Stock at any time on or before the close of business on the last trading day
prior to maturity, unless previously redeemed, at a conversion price of
$ per share, subject to adjustment in certain events as described herein.
The Convertible Notes are subordinated in right of payment to all existing
and future Senior Debt (as defined) of the Company and effectively subordinated
to all existing and future liabilities and obligations of the Company's
subsidiaries. The Convertible Notes are not redeemable by the Company prior to
, 2001. On or after , 2001, the Convertible Notes are
redeemable, in whole or from time to time in part, at the option of the Company,
at the redemption prices set forth herein plus accrued interest, if the closing
price of the Common Stock is at least 125% of the conversion price for at least
20 trading days within a period of 30 consecutive trading days ending on the
fifth trading day prior to the notice of redemption. No sinking fund is provided
for the Convertible Notes. In addition, following the occurrence of a Designated
Event (i.e., a Change of Control or Termination of Trading (each as defined)),
each holder has the right to cause the Company to purchase the Convertible Notes
at 101% of their principal amount together with accrued and unpaid interest. See
"Description of Convertible Notes."
Of the 35,000,000 shares of Common Stock (the "Shares") and $150,000,000
aggregate principal amount of Convertible Notes offered hereby, 28,000,000
Shares and $120,000,000 aggregate principal amount of Convertible Notes are
being offered by the U.S. Underwriters (as defined) in the United States and
Canada (the "U.S. Offering") and 7,000,000 Shares and $30,000,000 aggregate
principal amount of Convertible Notes are being offered by the International
Underwriters (as defined) 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 the
Public and Underwriting Discount per Share and per Convertible Note 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 family will beneficially own approximately 68.9% of the
Company's outstanding Common Stock. See "Principal and Selling Stockholders."
Prior to the Offerings, there has not been a public market for the Common
Stock or the Convertible Notes. It is currently estimated that the initial
public offering price of the Common Stock will be between $10.00 and $12.00 per
share. See "Underwriting" for information relating to the factors considered in
determining the initial public offering price. The Common Stock has been
approved for listing on the Nasdaq National Market under the symbol "AMKR,"
subject to official notice of issuance. The Company has applied for quotation of
the Convertible Notes on the Nasdaq Stock Market under the symbol "AMKRG."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES AND THE
CONVERTIBLE NOTES.
------------------
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>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO THE SELLING
THE PUBLIC COMMISSIONS(1) THE COMPANY(2) STOCKHOLDERS(2)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Per Share..................... $ $ $ $
Per Convertible Note.......... % % % --
Total Shares.................. $ $ $ $
Total Convertible Notes....... $ $ $ --
Total(3)...................... $ $ $ $
======================================================================================================================
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $5,000,000.
(3) The Company has granted the U.S. Underwriters and the International
Underwriters 30-day options to purchase up to 4,200,000 and 1,050,000
additional shares of Common Stock, respectively, and $18,000,000 and
$4,500,000 additional principal amount of Convertible Notes, respectively,
solely to cover over-allotments, if any. If such options are exercised in
full, the total Price to the Public, Underwriting Discounts and Proceeds to
the Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------
The Shares and the Convertible Notes 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 and the Convertible
Notes will be made at the office of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001 or through the facilities of The Depository Trust Company,
on or about , 1998.
------------------
SALOMON SMITH BARNEY
BANCAMERICA ROBERTSON STEPHENS
COWEN & COMPANY
, 1998
<PAGE> 4
[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), fleXBGA(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 SECURITIES OFFERED
HEREBY, INCLUDING PURCHASES OF SUCH SECURITIES TO STABILIZE THEIR MARKET PRICE,
PURCHASES OF SUCH SECURITIES TO COVER SOME OR ALL OF A SHORT POSITION IN SUCH
SECURITIES MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 5
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 Combined 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 capacity utilization rates, 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 December 31, 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.
According to industry estimates, independent packaging foundry revenues are
expected to grow at a compound annual rate of 16% over a period of five years
from $5.6 billion in 1997 to $11.6 billion in 2002.
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
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 1997 were derived from
services sold by the Company. Mr. James Kim, the Company's Chairman and Chief
Executive Officer, is a director of AICL, and he and other members of his family
beneficially own approximately 40.7% of AICL's outstanding common stock. The
Company expects that the businesses of the Company and AICL will continue to
remain highly interdependent by virtue of their supply relationship, overlaps
and 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.
The Company recently began offering wafer fabrication services through
AICL's new deep submicron CMOS foundry capable of producing 15,000 8" wafers per
month. Through a strategic relationship with TI, the Company and AICL have
qualified .25 micron CMOS process technology, and TI has agreed to provide to
AICL .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 have enabled the Company to become one of the first
providers of a fully integrated, turnkey semiconductor fabrication, packaging
and test service solution.
3
<PAGE> 6
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 to
consolidate the ownership of several affiliated entities in the same business
and under common 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.
4
<PAGE> 7
THE COMMON STOCK OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company
U.S. Offering.................................... 24,000,000 shares
International Offering........................... 6,000,000 shares
-------------------
Total.................................... 30,000,000 shares
Common Stock offered by Selling Stockholders
U.S. Offering.................................... 4,000,000 shares
International Offering........................... 1,000,000 shares
-------------------
Total.................................... 5,000,000 shares
Common Stock to be outstanding after the
Offerings(1)..................................... 112,610,000 shares
Proposed Nasdaq National Market symbol............. "AMKR"
</TABLE>
- ---------------
(1) Excludes 2,730,000 shares of Common Stock issuable upon exercise of options
to be granted immediately prior to the Offerings under the Company's 1998
Stock Plan and 1998 Director Option Plan. Also excludes an aggregate of
shares reserved for future issuance upon conversion of the
Convertible Notes and 3,570,000 additional shares reserved for future
issuance under the Company's 1998 Stock Plan, 1998 Director Option Plan and
1998 Employee Stock Purchase Plan. See "Management" and "Description of
Capital Stock" and Notes 1 and 16 of Notes to Combined Financial Statements.
THE CONVERTIBLE NOTES OFFERINGS
Convertible Notes offered by the Company
U.S. Offering............ $120,000,000 aggregate principal amount
International Offering... $ 30,000,000 aggregate principal amount
------------------------------------------------------------------------
Total............ $150,000,000 aggregate principal amount
Maturity................... The Convertible Notes will mature on ,
2003, unless earlier redeemed or converted.
Payment of Interest........ Interest on the Convertible Notes at the rate
of % per annum is payable semi-annually on
and of each year, commencing
, 1998.
Conversion Rights.......... The Convertible Notes are convertible into Common
Stock of the Company at the option of the holder at
any time on or before the close of business on the
last trading day prior to maturity, unless
previously redeemed, at a conversion price of
$ per share, subject to adjustment in
certain events. The initial conversion price will
be determined on the basis of the initial public
offering price per share. See "Description of
Convertible Notes -- Conversion."
Redemption at the Option of
the Company................ The Convertible Notes are not redeemable by the
Company prior to , 2001. On or after
, 2001, the Company may, upon at least
15 days' notice, redeem the Convertible Notes at
the redemption prices set forth herein, together
with accrued and unpaid interest thereon, if the
closing price of the Common Stock is at least 125%
of the conversion price for at least 20 trading
days within a period of 30 consecutive trading days
ending on the fifth trading day prior to the notice
of redemption. See "Description of Convertible
Notes -- Optional Redemption."
Repurchase Upon Designated
Event.................... The Convertible Notes are required to be
repurchased at 101% of their principal amount
together with accrued and unpaid interest thereon,
at
5
<PAGE> 8
the option of the holder, upon the occurrence of a
Designated Event (i.e., a Change of Control or a
Termination of Trading (each as defined)). See
"Risk Factors -- Limitations on Repurchase of
Convertible Notes" and "Description of Convertible
Notes -- Repurchase at Option of Holders Upon a
Designated Event."
Subordination.............. The Convertible Notes will be unsecured obligations
of the Company and will be subordinated in right of
payment to all existing and future Senior Debt of
the Company and effectively subordinated to all
existing and future liabilities and obligations of
the Company's subsidiaries. As of December 31, 1997
(after giving effect to the Reorganization (as
defined)), the Company had approximately $32
million of outstanding indebtedness that would have
constituted Senior Debt, and the indebtedness and
other liabilities of the Company's subsidiaries
(excluding intercompany liabilities and obligations
of a type not required to be reflected on the
balance sheet of such subsidiary in accordance with
GAAP) that would effectively have been senior to
the Convertible Notes were approximately $642
million. After giving effect to planned debt
repayments by the Company prior to the Offerings
and the application of the estimated net proceeds
to the Company of the Offerings (assuming an
initial public offering price of $11.00 per share
of Common Stock), such amounts will be
approximately $32 million and $217 million,
respectively. See "Risk Factors -- Subordination of
Convertible Notes," "Use of Proceeds" and
"Description of Convertible Notes --
Subordination."
Proposed Nasdaq Stock
Market Symbol............ "AMKRG"
Securities Lending
Arrangement.............. In connection with market-making activities in the
Convertible Notes, Smith Barney Inc. may from time
to time borrow, return and reborrow up to 7,000,000
shares of Common Stock from certain stockholders of
the Company. The Underwriters are not obligated,
however, to make a market in the Convertible Notes
and any such market-making may be discontinued at
any time at the sole discretion of the
Underwriters. See "Underwriting."
USE OF PROCEEDS
The net proceeds to the Company of the Offerings, estimated to be
approximately $450 million (assuming an initial public offering price of $11.00
per share of Common Stock), will be used primarily to repay approximately $331
million of short-term and long-term debt, including $106 million of amounts due
to Anam USA, Inc., a wholly-owned subsidiary of AICL ("AUSA"), and to repurchase
AICL's minority interest in one of the Company's Philippine manufacturing
subsidiaries for approximately $34 million. The remaining $85 million of such
net proceeds will be used for capital expenditures and working capital. See "Use
of Proceeds."
RISK FACTORS
See "Risk Factors" beginning on page 9 for a discussion of certain factors
that should be considered by potential investors.
6
<PAGE> 9
SUMMARY COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............................. $442,101 $572,918 $932,382 $1,171,001 $1,455,761
Gross profit............................. 70,778 58,270 149,047 148,923 213,092
Operating income......................... 26,374 13,843 84,855 71,368 100,841
Net income(1)............................ 17,236 11,574 61,932 32,922 43,281
Pro forma adjustment for income
taxes(2)............................... 2,900 200 10,400 2,900 3,613
Pro forma net income(2).................. 14,336 11,374 51,532 30,022 39,668
Basic and diluted pro forma net income
per common share....................... .17 .14 .62 .36 .48
Shares used in per share calculation..... 82,610 82,610 82,610 82,610 82,610
OTHER DATA:
EBITDA(3)................................ $ 37,437 $ 34,197 $103,434 $ 123,082 $ 175,111
Ratio of earnings to fixed charges(4)
Actual................................. 3.7x 2.0x 4.6x 2.4x 2.5x
Supplemental pro forma................. 3.1x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------
DECEMBER 31, 1996 ACTUAL PRO FORMA(5) AS ADJUSTED(6)
----------------- --------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 49,644 $ 90,917 $ 63,217 $ 68,191
Working capital (deficit)..................... 36,785 (196,870) (224,570) 52,704
Total assets.................................. 804,864 855,592 827,892 864,197
Short-term borrowings and current portion of
long-term debt.............................. 191,813 325,968 325,968 53,668
% Convertible Subordinated Notes due 2003... -- -- -- 150,000
Due to AUSA (non-current)..................... 234,894 149,776 149,776 --
Other long-term debt.......................... 167,444 38,283 38,283 35,283
Stockholders' equity.......................... 45,812 90,875 61,075 367,838
</TABLE>
- ---------------
(1) Net income for 1997 reflects a $17.3 million loss related primarily to the
impairment of value of the Company's equity interest in AICL. This
investment was sold in 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 6 of Notes to
Combined Financial Statements.
(2) Prior to the reorganization of the Company, Amkor Electronics, Inc. ("AEI"),
a predecessor 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 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 Combined
Financial Statements.
(3) EBITDA is defined as earnings before interest, taxes on income, depreciation
and amortization. EBITDA is presented here to provide additional information
about the Company's ability to meet its future debt service, capital
expenditure, and working capital requirements and should not be construed as
a substitute for or a better indicator of results of operations or liquidity
than net income or cash flow from operating activities computed in
accordance with generally accepted accounting principles.
(4) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income before income taxes less undistributed earnings in less
than 50%-owned subsidiaries, plus fixed charges. Fixed charges consist of
interest expense incurred and one-third of rental expense which amount is
deemed by the Company to be representative of the interest factor of rental
payments under operating leases. The supplemental pro forma ratio of
earnings to fixed charges reflects the effect on the ratio of earnings to
fixed charges if the Offerings had been completed and the estimated net
proceeds to the Company applied as described in "Use of Proceeds" at the
beginning of the period presented.
(5) 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 $2.1 million and (ii) a distribution by the Company of
undistributed earnings of AEI through December 31, 1997 of $27.7 million to
stockholders of AEI prior to the reorganization of the Company. The amount
actually distributed by the Company to such stockholders of AEI will
increase to reflect any undistributed net income earned by AEI following
December 31, 1997 and prior to such reorganization. See
"Reorganization -- Termination of S Corporation Status and Distributions"
and Notes 1, 16 and 17 of Notes to Combined Financial Statements.
(6) 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 $11.00 per share of Common Stock, including the purchase from AICL
of its 40% interest in Amkor/Anam Pilipinas, Inc. for approximately $34
million and the related elimination of minority interest and recording of
goodwill. The acquisition of the minority interest will result in additional
amortization of approximately $2.5 million per year. Also reflects
repayments made after December 31, 1997 and prior to the Offerings of $50.3
million of short-term borrowings and current portion of long-term debt and
$30 million of amounts due to AUSA (non-current), as well as the assumption
by an affiliate of the Company of $13.9 million of amounts due to AUSA
(non-current), in February 1998. See "Reorganization," "Use of Proceeds" and
Notes 1, 6 and 16 of Notes to Combined Financial Statements.
7
<PAGE> 10
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. Prior to the Reorganization (as defined
under "Reorganization"), such subsidiaries were under common management and were
in the same business. As a result, the financial statements presented herein
have been prepared on a combined basis. Unless otherwise indicated, all
information in this Prospectus (i) gives effect to the Reorganization, including
the issuance of 82,610,000 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 Combined 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. The won has depreciated
significantly against the U.S. dollar and other foreign currencies in recent
months. On March 24, 1998, 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"), was W1,415 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. Financial information for AICL
contained in this Prospectus has been prepared 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 Combined Financial Statements at the
end of this Prospectus.
8
<PAGE> 11
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 or the
Convertible Notes 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 capacity utilization rates, 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 herein and in "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
The Company's operating results have varied significantly from period to
period. 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 and the Company is not able to
decrease its expenses, the Company's business, financial condition and operating
results would be materially and adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Beginning in the third quarter of 1996, intense competition in the
semiconductor industry worldwide resulted in decreases in the average selling
prices of many of the Company's lead frame packages. The Company expects that
average selling prices for its services will continue to 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 downturns character-
9
<PAGE> 12
ized 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. The Company's operating results for 1996 and 1997 were adversely
affected by a 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
The Company has historically operated with significant amounts of debt
relative to its equity. At December 31, 1997, the Company had outstanding $514.0
million in principal amount of indebtedness, including non-current amounts due
to Anam USA, Inc. ("AUSA"), a wholly-owned subsidiary of AICL, and the Company
intends to incur additional bank debt prior to and following the Offerings in
addition to the Convertible Notes issued as part of the Offerings. In 1996 and
1997, the Company's payments under long-term debt agreements (excluding payments
to AUSA as described in Note 11 of Notes to Combined Financial Statements) were
$3.1 million and $43.5 million, respectively. Following the expected application
of the estimated net proceeds to the Company of the Offerings and planned
repayments of debt after December 31, 1997 and prior to the Offerings, the
Company will continue to have at least $239 million in principal amount of
indebtedness outstanding, including $54 million of short-term borrowings and
current portions of long-term debt.
The Company is not in compliance with certain covenants with respect to
certain of its loans, the aggregate outstanding amount of which was $176 million
at December 31, 1997 (the "Non-Compliant Loans"). Such non-compliance in turn
triggered cross-defaults with respect to an additional $10 million of the
Company's loans. These loan covenants include restrictions on the ability of one
of the Company's subsidiaries to enter into transactions with affiliates,
requirements that the subsidiary maintain certain debt-to-equity ratios and
requirements that the subsidiary comply with certain notice requirements. The
Company's obligation to repay these loans (including the cross-defaulted loans)
may be accelerated by the lenders at any time. As a result of such
non-compliance, these loans have been classified as current liabilities in the
Company's financial statements included herein, and the report of the Company's
independent public accountants with respect to such financial statements
contains a paragraph stating that there is substantial doubt as to the ability
of the Company to continue as a going concern. The Company will eliminate such
non-compliance and cross-defaults by repaying such loans using part of the net
proceeds to the Company from the Offerings, as well as working capital. See "Use
of Proceeds."
At December 31, 1997, the Company had also guaranteed borrowing facilities
available to companies affiliated with James Kim and other stockholders of the
Company totalling $55.7 million, of which $38.2 million was outstanding at
December 31, 1997. At December 31, 1997, the Company had $90.9 million of
stockholders' equity and a working capital deficit of $196.9 million (which
amounts were $61.1 million and $224.6 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 of AEI through December 31, 1997).
See "Reorganization -- Termination of S Corporation Status and Distributions."
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
10
<PAGE> 13
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. Due to the
deterioration of the Korean economy in recent months and the resulting liquidity
crisis in Korea, banks in Korea and their overseas branches have been
experiencing financial difficulties and are reducing their lending, in
particular to companies which have significant amounts of debt relative to their
equity. See "-- Dependence on International Operations and Sales; Concentration
of Operations in the Philippines and Korea.
DEPENDENCE ON RELATIONSHIP WITH AICL; POTENTIAL CONFLICTS OF INTEREST
AICL was founded in 1956 by Mr. H. S. 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 H. S. Kim, which, together with the Company, collectively owned approximately
40.7% of the outstanding common stock of AICL as of December 31, 1997. A
significant portion of the shares owned by the Kim family are leveraged and as a
result of this, or for other reasons, the family's ownership could be
substantially reduced. James Kim, the founder of the Company and currently its
Chairman and Chief Executive Officer, is the eldest son of H. S. 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. In addition, four other members of Mr. Kim's family
are on the 13-member Board of Directors of AICL. After the Offerings, James Kim
and members of his family will beneficially own approximately 68.9% of the
outstanding Common Stock of the Company, and Mr. Kim and other 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 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 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 assumption from AICL in
January 1998 of substantially all of the marketing rights for the Japanese
market. In the event the ability of AICL to supply the Company were disrupted
for any reason, the Company's facilities in the Philippines would be able to
fill only a small portion of the resulting shortfall in capacity. In addition,
there are currently no significant third party suppliers of packaging and test
services from which the Company could fill its orders. 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 and its guarantees of affiliate debt, labor disruptions, fluctuations
in foreign exchange rates, changes in governmental policies, economic or
political conditions in Korea or any other change, could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company has recently entered into new supply agreements with AICL (the
"Supply Agreements"). Under the Supply Agreements, AICL has granted to the
Company a first right to substantially all of the packaging and test services
capacity of AICL and the exclusive right to all of the wafer output of its new
wafer foundry. The Company expects to continue to purchase substantially all of
AICL's packaging and test services, and to purchase all of AICL's wafer output,
under the Supply Agreements. Under the Supply Agreements, pricing arrangements
relating to packaging and test services provided by AICL to the Company are
subject to quarterly review and adjustment, and such arrangements relating to
the wafer output provided by AICL to the Company are 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, 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
11
<PAGE> 14
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 Agreements, 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 Agreements also provide 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 Agreements have a five-year
term and may be terminated by any party thereto upon five years' written notice
at any time after the expiration of such initial five-year term. There can be no
assurance that AICL will not terminate either Supply Agreement upon the
expiration of such initial term or, if it does terminate a Supply Agreement,
that the Company will be able to obtain a new agreement with AICL on terms that
are favorable to the Company or at all.
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. The Company is advised that
AICL, as a public company in Korea, has published its most recent consolidated
financial statements as of and for the year ended December 31, 1996, and that
AICL has prepared preliminary consolidated financial statements as of and for
the year ended December 31, 1997. These consolidated financial statements are
prepared on the basis of Korean GAAP, which differs significantly from U.S.
GAAP. U.S. GAAP financial statements are not available.
The following is a summary of 1996 and 1997 consolidated financial
information pertaining to AICL prepared in accordance with Korean GAAP which
differs from U.S. GAAP in certain significant respects. See Note 6 of Notes to
Combined Financial Statements.
<TABLE>
<CAPTION>
1996 1997
---------- --------------
(IN MILLIONS)
<S> <C> <C>
SUMMARY INCOME STATEMENT DATA:
Sales.................................................. W1,338,718 W1,786,457
Gross profit........................................... 242,601 279,186
Operating income....................................... 164,846 176,028
Net foreign exchange loss.............................. 29,372 216,697
Net loss............................................... (9,385) (305,414)
========== ==========
SUMMARY BALANCE SHEET DATA:
Cash and bank deposits................................. W 324,139 W 215,024
Accounts and notes receivable, net..................... 368,975 393,261
Inventory.............................................. 214,494 260,302
Other current assets................................... 145,301 490,544
---------- ----------
Total current assets................................ 1,052,909 1,359,131
---------- ----------
Property, plant and equipment, net..................... 994,931 2,159,466
Investments............................................ 83,715 122,366
Other long-term assets................................. 93,733 295,554
---------- ----------
Total long-term assets.............................. 1,172,379 2,577,386
---------- ----------
Total assets................................... W2,225,288 W3,936,517
========== ==========
Short-term borrowings.................................. 935,463 1,591,280
Current maturities of long-term debt................... 85,252 120,913
Other current liabilities.............................. 305,931 412,289
---------- ----------
Total current liabilities........................... 1,326,646 2,124,482
---------- ----------
Long-term debt, net of current maturities.............. 475,045 736,784
Long-term capital lease obligations.................... 106,068 861,813
Other long-term liabilities and minority interest...... 89,272 138,305
---------- ----------
Total long-term liabilities......................... 670,385 1,736,902
---------- ----------
Total liabilities.............................. 1,997,031 3,861,384
---------- ----------
Stockholders' equity................................... 228,257 75,133
---------- ----------
Total liabilities and stockholders' equity..... W2,225,288 W3,936,517
========== ==========
</TABLE>
12
<PAGE> 15
A significant amount of the current and long-term liabilities of AICL are
denominated in U.S. dollars and other foreign currencies. At December 31, 1997,
the amount of U.S. dollar and other foreign currency denominated short-term
borrowings, current maturities of long-term debt, long-term debt (net of current
maturities) and long-term capital lease obligations were W1,092 billion, W59
billion, W159 billion and W834 billion, respectively. Due in part to the
significant depreciation of the won (for example, from a Market Average Exchange
Rate of W884 to $1.00 on December 31, 1996 to W1,415 to $1.00 on December 31,
1997 and W1,415 to $1.00 on March 24, 1998) resulting from the recent economic
crisis in Korea, AICL's liabilities in won terms and its leverage calculated in
won have significantly increased in 1997. The effect of this depreciation on
AICL, however, has been mitigated by the fact that substantial amounts of AICL's
revenues are denominated in U.S. dollars. The increase in AICL's liabilities was
also attributable in part to additional financing obtained in connection with
the construction of its new wafer foundry. See "-- Risks Associated with New
Wafer Fabrication Business" and Note 6 of Notes to Combined Financial
Statements.
The recent economic crisis in Korea has also led to sharply higher interest
rates in Korea and reduced opportunities for refinancing or refunding maturing
debts as financial institutions in Korea, which are experiencing financial
difficulties, are increasingly looking to limit their lending, particularly to
highly leveraged companies, and to increase their reserves and provisions for
non-performing assets. These developments will result in higher interest rates
on loans to AICL and have otherwise made it more difficult for AICL to obtain
new financing. Therefore, there can be no assurance that AICL will be able to
refinance its existing loans or obtain new loans, or 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 December 31, 1997, AICL and its consolidated subsidiaries were
contingently liable under guarantees in respect of debt of AICL's
non-consolidated subsidiaries and affiliates in the Anam Group in the aggregate
amount of approximately W857 billion. As of such date, AICL had provided
guarantees for all of AUSA's debt of $319 million, the Non-Compliant Loans of
$176 million 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 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. In addition, as an overseas
subsidiary of AICL, AUSA was formed with the approval of the Bank of Korea. If
the Bank of Korea were to withdraw such approval, or if AUSA otherwise ceased
operations for any reason, the Company and AICL would be required to meet their
financing needs through alternative arrangements. Although the Company believes
that after the Offerings alternative financing arrangements will be available,
there can be no assurance that the Company or AICL will be able to obtain
alternative financing on acceptable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 11 of Notes to Combined
Financial Statements. In addition, if any relevant subsidiaries or affiliates of
AICL, certain of which may have greater exposure to domestic Korean economic
conditions than 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 Agreements
generally provide 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, as a result of the recent deterioration
of the Korean economy, there can be no assurance that AICL will be able to
13
<PAGE> 16
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
Agreements generally provide 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 members of his family, and Mr. 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 Agreements, 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,
such transactions generally will not require approval of the disinterested
members of the Board of Directors and 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. The Company currently
has four directors, two of whom are disinterested. Under Delaware corporate law,
each director owes a duty of loyalty and care to the Company, which if breached
can result in personal liability for the directors. 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.
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 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 and 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 Notes 10 and 15 of Notes to
Combined Financial Statements.
Philippines
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.
Because the functional currency of the Company's Philippine operations is
14
<PAGE> 17
the U.S. dollar, the Company has recently benefitted from cost reductions
relating to peso denominated expenditures, primarily payroll costs. The Company
believes that such devaluation of the Philippine peso will eventually lead to
inflation in the Philippines, which could offset any savings achieved to date.
Korea
In 1996 and 1997, approximately 72% and 68%, respectively, of the Company's
revenues were derived from sales of services performed for the Company by AICL.
The operations of AICL are subject to certain 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.
Since the beginning of 1997, Korea has experienced a significant increase
in the number and size of companies filing for corporate reorganization and
protection from their creditors. Such failures were caused by, among other
factors, excessive investments, high levels of indebtedness, weak export prices
and the Korean government's greater willingness to allow troubled corporations
to fail. As a result of such corporate failures, Korea's financial institutions
have experienced a sharp increase in non-performing loans. In addition, declines
in domestic stock prices have reduced the value of Korean banks' assets. These
developments have led international credit rating agencies to downgrade the
credit ratings of Korea, as well as various companies (including AICL) and
financial institutions in Korea.
During the same period, the value of the won relative to the U.S. dollar
has depreciated significantly. The Market Average Exchange Rate as of March 24,
1998, was W1,415 to $1.00, or approximately 60% lower than on December 31, 1996,
when the Market Average Exchange Rate was W884 to $1.00. Such depreciation of
the won relative to the U.S. dollar has increased the cost of imported goods and
services, and the value in won of Korea's public and private sector debt
denominated in U.S. dollars and other foreign currencies has also increased
significantly. Korea's foreign currency reserves also have declined
significantly. Such developments have also led to sharply higher domestic
interest rates and reduced opportunities for refinancing or refunding maturing
debts as financial institutions in Korea, which are experiencing financial
difficulties, are increasingly looking to limit their lending, in particular to
highly leveraged companies, and to increase their reserves and provisions for
non-performing assets.
In order to address the liquidity crisis and the deteriorating economic
situation in Korea, the Korean government concluded an agreement with the
International Monetary Fund on December 3, 1997 pursuant to which Korea is
eligible to receive loans and other financial support reported to amount to an
aggregate of approximately $58 billion (the "IMF Financial Aid Package").
Because there are conditions on the availability of loans and other financial
support under the IMF Financial Aid Package, there can be no assurance that such
conditions will be satisfied or that such loans and other financial support will
be available. In connection with the IMF Financial Aid Package, the Korean
government announced a comprehensive policy package (the "Reform Policy")
intended to address the structural weaknesses in the Korean economy and the
financial sector. While the Reform Policy is intended to alleviate the current
economic crisis in Korea and improve the Korean economy over time, the immediate
effects could include, among others, slower economic growth, a reduction in the
availability of credit to Korean companies, an increase in interest rates, an
increase in taxes, an increased rate of inflation due to the depreciation of the
won, an increase in the number of bankruptcies of Korean companies, labor unrest
and labor strikes resulting from a possible increase in unemployment, and
political unrest. These events could have a material adverse effect on the
Korean economy. Moreover, there can be no assurance that either the IMF
Financial Aid Package or the Reform Policy will be successful. In addition,
there can be no assurance that political pressure will not force the Korean
government to retreat from some or all of its announced Reform Policy or that
the Reform Policy will be implemented as currently contemplated.
The Korean government has stated that as of December 31, 1997 the total
amount of Korea's private and governmental external liabilities was $154.4
billion under IMF standards. As of December 31, 1997, the total
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<PAGE> 18
amount of foreign currency reserves held by Korea was $20.4 billion, of which
the usable portion (the total less amounts on deposit with overseas branches of
Korean financial institutions and swap positions between the Korean central bank
and other central banks) was $8.9 billion. Pursuant to an exchange offer
concluded in March 1998, the Korean government received tenders from
international creditor banks to extend the maturity of up to approximately $21.8
billion of short-term foreign currency debt incurred by Korean financial
institutions. In addition, the Korean government announced in March 1998 that it
intends to raise approximately $3 billion through an international offering of
its debt securities. Korean financial institutions and the Korean corporate and
public sectors continue to carry substantial amounts of debt denominated in
currencies other than the won, including short-term debt, and there can be no
assurance that there will be sufficient foreign currency reserves to repay this
debt or that this debt can be extended or refinanced.
Such recent and potential future developments relating to Korea, including
the continued deterioration of the Korean economy, could have a material adverse
effect on AICL's and the Company's business, financial condition and results of
operations. See "-- Dependence on Relationship with AICL; Potential Conflicts of
Interest," "Business -- Marketing and Sales" and "-- Facilities and
Manufacturing" and Note 11 of Notes to Combined Financial Statements.
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 1997, 34.1%, 39.2% and
40.1%, respectively, of the Company's net revenues were derived from sales to
the Company's top five customers, with 13.3%, 23.5% and 23.4% 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. The reduction, delay, or cancellation of orders from one of the
Company's significant customers, including Intel for packaging and test services
or TI for wafer fabrication services, could materially and adversely affect the
Company's business, financial condition and results of operations. Although the
Company has received forecasts from TI which indicate that TI will meet its
minimum purchase obligation during the second half of 1998, during the first
quarter of 1998 TI's orders were below such minimum purchase commitment due to
market conditions and issues encountered by TI in the transition of its products
to .18 micron technology. 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" and "-- Risks Associated with
New Wafer Fabrication Business."
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's packaging
and test business does not typically operate with any material backlog, and the
Company expects that in the future the Company's packaging and test revenues in
any quarter will continue to 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."
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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 expects to
continue 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, 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 following the application of the net
proceeds from the sale of the Common Stock and the Convertible Notes in the
Offerings, its existing cash balances, cash flow from operations, available
equipment lease financing, bank borrowings and financing obtained through 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 additional financing
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. In addition, if the Company obtains such
financing by selling equity securities of the Company, the Company's
stockholders may experience significant dilution. See "-- Risks Associated with
Leverage," "Dilution" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
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<PAGE> 20
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 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 recently began providing wafer fabrication services, with
delivery of the first products from AICL's new foundry in January 1998. Neither
the Company nor AICL has significant 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 would 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 technology agreements
with TI (the "TI Technology Agreements") only cover .25 micron and .18 micron
CMOS technology and TI is not under any obligation to transfer any
next-generation 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.
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<PAGE> 21
The Company's right to the supply of wafers from AICL's foundry is subject
to an agreement (the "TI Manufacturing and Purchasing Agreement") among AICL,
the Company and TI, pursuant to which TI has agreed to purchase from the Company
at least 40% of the capacity of this foundry and under certain circumstances has
the right to purchase up to 70% of this capacity. 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 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. Although the Company has received forecasts
from TI which indicate that TI will meet its minimum purchase obligation during
the second half of 1998, during the first quarter of 1998 TI's orders were below
such minimum purchase commitment due to market conditions and issues encountered
by TI in the transition of its products to .18 micron technology. Accordingly,
there can be no assurance that TI will place orders representing at least 40% of
the capacity of this foundry during this period or in the future. A failure by
TI to comply with its minimum purchase obligations or the cancellation of a
significant wafer fabrication order by TI or any other customer could have a
material adverse effect on AICL's and the Company's business, financial
condition and results of operations. The TI Manufacturing and Purchasing
Agreement terminates on December 31, 2007, unless terminated sooner. The TI
Manufacturing and Purchasing Agreement may be terminated upon two years' prior
notice by either AICL or TI if AICL and TI are unable to successfully negotiate
prior to June 30, 2000 an amendment to the TI Technology Agreements or a new
agreement with respect to AICL's use of TI's next-generation CMOS technology.
During such two-year period, TI would be obligated to purchase a minimum of only
20% of the capacity of AICL's wafer fabrication facility. In addition, the TI
Manufacturing and Purchasing Agreement may be terminated sooner upon, among
other events, mutual written consent, material breach of the agreement by either
party, the inability of either party to obtain any necessary government
approvals, the failure of AICL to protect TI's intellectual property and a
change of control, bankruptcy, liquidation or dissolution of AICL. 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."
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
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<PAGE> 22
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
scope and complexity of its operations and in the number of its employees. 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 Bhd. (Malaysia), ChipPAC Incorporated (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., Ltd., Hitachi, Ltd., Toshiba Corp. and Winbond Electronics Corporation,
which 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."
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<PAGE> 23
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 and 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.
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 Agreements between the Company and AICL. Such Supply Agreements also
provide 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.
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<PAGE> 24
Although the Company is not currently a party to any material litigation,
the semiconductor industry is characterized by frequent claims regarding patent
and 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, the Company or AICL
could be required to discontinue the use of certain processes or cease the
manufacture, use, import and sale of infringing products, to pay substantial
damages and to develop non-infringing technologies or to acquire licenses to the
alleged infringed technology. The Company's business, financial condition and
results of operations could be materially and adversely affected by such
developments. 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, AICL has obtained intellectual property for wafer
manufacturing primarily from TI. The licenses granted to AICL by TI under the TI
Technology Agreements are very limited. Although TI has granted to AICL a
license under TI's trade secret rights to use TI's technology in connection with
AICL's provision of wafer fabrication services, TI has not granted AICL a
license under its patents, copyrights and mask works to manufacture
semiconductors for third parties. Although TI has agreed that TI will not assert
a claim for patent, copyright or mask work right infringement against AICL or
the Company in connection with AICL's manufacture of semiconductor products for
third parties, TI has reserved the right to bring such infringement claims
against AICL's or the Company's customers with respect to semiconductor products
purchased from AICL or the Company. As a result, AICL's and the Company's
customers could be subject to patent litigation by TI and others, and AICL and
the Company could in turn be subject to litigation by such customers and others,
in connection with the 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.
SUBORDINATION OF CONVERTIBLE NOTES
The Convertible Notes will be unsecured and subordinated in right of
payment in full to all existing and future Senior Debt (as defined) of the
Company. As a result of such subordination, in the event of bankruptcy,
liquidation or reorganization of the Company, or upon the acceleration of any
Senior Debt, the assets of the Company will be available to pay obligations on
the Convertible Notes only after all Senior Debt has been paid in full, and
there may not be sufficient assets remaining to pay amounts due on any or all of
the Convertible Notes then outstanding. The Convertible Notes are also
effectively subordinated to the liabilities, including trade payables, of the
Company's subsidiaries. The Indenture relating to the Convertible Notes does not
prohibit or limit the incurrence of additional indebtedness, including Senior
Debt, by the Company or its subsidiaries. The incurrence of additional
indebtedness by the Company or its subsidiaries could adversely affect the
Company's ability to pay its obligations on the Convertible Notes. As of
December 31, 1997 (after giving effect to the Reorganization), the Company had
approximately $32 million of outstanding indebtedness that would have
constituted Senior Debt, and the indebtedness and other liabilities of the
Company's subsidiaries (excluding intercompany liabilities and obligations of a
type not required to be reflected on the balance sheet of such subsidiaries in
accordance with GAAP) that would effectively have been senior to the Convertible
Notes were approximately $642 million. The incurrence of additional indebtedness
by the Company or its subsidiaries could adversely affect the Company's ability
to pay its obligations on the Convertible Notes. The Indenture relating to the
Convertible Notes will not limit the amount of additional indebtedness,
including Senior Debt, that the Company can create, incur, assume or guarantee,
nor will the Indenture limit the amount of indebtedness and other liabilities
that any subsidiary of the Company can create, incur, assume or guarantee. The
Company anticipates that from time to time it will incur additional indebtedness
and other liabilities, including Senior Debt, and that from time to time the
Company's subsidiaries will incur additional indebtedness and other liabilities.
The Convertible Notes are obligations exclusively of the Company. However,
since the operations of the Company are primarily conducted through its
subsidiaries, the cash flow and the consequent ability of the
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<PAGE> 25
Company to service its debt, including the Convertible Notes, are primarily
dependent upon the earnings of its subsidiaries and the distribution of those
earnings to, or upon loans or other payments of funds by those subsidiaries to,
the Company. The payment of dividends and the making of loans and advances to
the Company by its subsidiaries may be subject to statutory or contractual
restrictions, are dependent upon the earnings of those subsidiaries and are
subject to various business considerations.
The Indenture does not contain any financial performance covenants.
Consequently, the Company is not required under the Indenture to meet any
financial tests such as those that measure the Company's working capital,
interest coverage, fixed charge coverage or net worth in order to maintain
compliance with the terms of the Indenture. See "Description of Convertible
Notes -- Subordination."
LIMITATIONS ON REPURCHASE OF CONVERTIBLE NOTES
Upon a Designated Event, which includes a Change of Control and a
Termination of Trading (each as defined), each holder of Convertible Notes will
have certain rights, at the holder's option, to require the Company to
repurchase all or a portion of such holder's Convertible Notes. If a Designated
Event were to occur, there can be no assurance that the Company would have
sufficient funds to pay the repurchase price for all Convertible Notes tendered
by the holders thereof. In addition, the terms of the Company's existing or
future credit or other agreements relating to indebtedness (including Senior
Debt) may prohibit the Company from purchasing any Convertible Notes and may
also provide that a Designated Event, as well as certain other change-of-control
events with respect to the Company, would constitute an event of default
thereunder. In the event a Designated Event occurs at a time when the Company is
prohibited from purchasing Convertible Notes, the Company could seek the consent
of its lenders to the purchase of Convertible Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company would remain
prohibited from purchasing Convertible Notes. In such case, the Company's
failure to purchase tendered Convertible Notes would constitute an Event of
Default under the Indenture, which may, in turn, constitute a further default
under the terms of other indebtedness that the Company has entered into or may
enter into from time to time. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
Convertible Notes. See "Description of Convertible Notes -- Repurchase at Option
of Holders Upon a Designated Event."
NO PRIOR MARKET; LIQUIDITY; STOCK PRICE VOLATILITY; DILUTION
Prior to the Offerings, there has been no public market for the Common
Stock or the Convertible Notes. Consequently, the initial public offering price
will be determined by negotiations among the Company and the representatives of
the Underwriters. Although the Underwriters have advised the Company that they
currently intend to make a market in the Common Stock and Convertible Notes,
they are not obligated to do so and may discontinue such market-making at any
time without notice. There can be no assurance that an active public market for
the Common Stock or the Convertible Notes will develop or be sustained after the
Offerings or that the market price of the Common Stock or the Convertible Notes
will not decline below the initial public offering price. The trading price of
the Common Stock and Convertible Notes 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
Common Stock and Convertible Notes. Moreover, purchasers of Common Stock in the
Offerings will incur immediate, substantial book value dilution. See "Dilution"
and "Underwriting."
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<PAGE> 26
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 date hereof, James Kim and members of his family will, in
the aggregate, beneficially own 77,610,000 shares of Common Stock, which shares
represent all of the outstanding Common Stock not offered hereby and
approximately 68.9% of the total number of shares of Common Stock outstanding
following the Offerings. The Offerings will create a public market for the
resale of shares held by these existing stockholders. 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 35,000,000 shares of Common Stock offered hereby
(assuming no exercise of the Underwriters' over-allotment options), upon the
closing of the Offerings, there will be shares issuable upon
conversion of the Convertible Notes, all of which shares will be freely
tradeable. In addition, up to 7,000,000 shares of Common Stock may be borrowed
from James Kim and his wife Agnes Kim ("Mr. and Mrs. Kim") and resold in the
public market in connection with the Underwriters' market-making activities with
respect to the Convertible Notes. Excluding the shares described above, there
will be approximately 70,610,000 additional 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, all such 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."
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<PAGE> 27
REORGANIZATION
In March 1970, Amkor Electronics, Inc. ("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 (the founder of AEI) and members of his family 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 (the "Amkor
Companies"). Prior to the reorganization described below, the Amkor Companies
consisted of:
- AEI and its subsidiaries Amkor Receivables Corp., which purchases the
Company's accounts receivable under an accounts receivable financing
arrangement, and Amkor Wafer Fabrication Services SARL, which provides
various technical support for CIL's wafer fabrication services customers
in Europe and Asia;
- T.L. Limited ("TLL") and its subsidiary C.I.L. Limited ("CIL"), which
markets the Company's services to semiconductor companies in Europe and
Asia;
- Amkor/Anam EuroServices S.A.R.L. ("AAES"), which provides various
technical and support services for CIL's packaging and test customers;
- Amkor/Anam Advanced Packaging, Inc. ("AAAP"), Amkor/Anam Pilipinas, Inc.
("AAP") and AAP's subsidiary Automated MicroElectronics Inc. ("AMI"),
each of which provides manufacturing services; and
- AK Industries, Inc. ("AKI") and its subsidiary, Amkor-Anam, Inc., which
provides raw material purchasing and inventory management services.
All of the Amkor Companies are substantially wholly owned beneficially by
Mr. and Mrs. Kim or entities beneficially owned by members of Mr. James Kim's
immediate family (the "Founding Stockholders"), except for 40% of AAP owned by
AICL and one-third of AEI and all of AKI which are owned by certain trusts
established for the benefit of other members of Mr. Kim's family (the "Kim
Family Trusts"). The Company (Amkor Technology, Inc.) was formed in September
1997 to consolidate the ownership of the Amkor Companies. Prior to the
reorganization described below, Amkor Technology, Inc. will conduct no business
and hold no assets or liabilities.
Prior to the Offerings, the following transactions will be effected to
consolidate the operations of the Amkor Companies under the Company, (such
transactions are referred to collectively as the "Reorganization"):
- AEI will be merged into Amkor Technology, Inc.
- Amkor International Holdings ("AIH"), a newly formed Cayman Islands
holding company, will become a wholly-owned subsidiary of Amkor
Technology, Inc. and will hold the following entities:
- First Amkor Cayman Islands, Ltd., a newly formed Cayman Islands
holding company, and its subsidiaries AAAP, AAP and AMI;
- TLL and its subsidiary CIL; and
- AAES.
- In addition, the Company will acquire all of the stock of AKI from the
Kim Family Trusts for $3 million.
Except for the acquisition of AKI which will be accounted for as a purchase
transaction, the accounting for the Reorganization will be similar to the
accounting for a pooling of interests as it represents an exchange of equity
interests among companies under common control. Following the Reorganization,
all of the Amkor Companies will be wholly owned, directly or indirectly, by the
Company (except for AAP, which will be 40% owned by AICL). An aggregate of
82,610,000 shares of Common Stock will be issued by the Company in connection
with the Reorganization. The relative number of shares of Common Stock issued by
the Company in connection with each of the transactions comprising the
Reorganization is based upon relative amounts of stockholders' equity of each of
the Amkor Companies as of December 31, 1997. Accordingly, the Company
25
<PAGE> 28
will issue an aggregate of 14,620,149 shares of Common Stock in connection with
the merger of AEI into Amkor Technology, Inc., 9,746,766 of which shares will be
received by Mr. and Mrs. Kim and 4,873,383 shares will be received by the Kim
Family Trusts. In addition, the Company will issue an aggregate of 67,989,851
shares of Common Stock in exchange for all of the outstanding shares of AIH and
its subsidiaries. Of such shares, 19,328,234 shares, 36,376,617 shares and
8,200,000 shares will be gifted to Mr. and Mrs. Kim, the Kim Family Trusts and
other members of Mr. Kim's immediate family, respectively. Following the
Reorganization, the Founding Stockholders and such other members of Mr. Kim's
immediate family will beneficially own a majority of the outstanding shares of
Common Stock. Following the Offerings, the Founding Stockholders, such other
members of Mr. Kim's immediate family and the Kim Family Trusts will
beneficially own 77,610,000 shares of Common Stock, representing approximately
68.9% of the outstanding shares of Common Stock. See "Certain Transactions" and
"Principal and Selling Stockholders."
The Company has entered into an agreement with AICL pursuant to which the
Company will purchase, immediately following the Offerings, AICL's 40% interest
in AAP for approximately $34 million. See "Use of Proceeds."
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. and
Mrs. 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, Mr. and Mrs. Kim and the Kim Family Trusts will enter into tax
indemnification agreements providing that the Company 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 will indemnify Mr. and Mrs. Kim
and the Kim Family Trusts 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 such stockholders which
have enabled them to pay their income taxes on their allocable portions of the
income of AEI. Such distributions totaled approximately $19.8 million, $13.0
million and $5.0 million in 1995, 1996 and 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
December 31, 1997, the amount of such undistributed net earnings was $27.7
million. See Notes 1, 10 and 17 of Notes to Combined Financial Statements.
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<PAGE> 29
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. In
addition, AICL manufactures and sells electric wiring devices and watches. AICL
operates four semiconductor packaging and test facilities in Korea, and has
recently qualified a new deep submicron CMOS wafer foundry in Korea which is
currently capable of producing 15,000 8" wafers per month. In March 1998, AICL
changed its name to Anam Semiconductor, Inc.
AICL was founded in 1956 by Mr. H. S. 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 H. S. Kim, which, together
with the Company, collectively owned approximately 40.7% of the outstanding
common stock of AICL as of December 31, 1997. A significant portion of the
shares owned by the Kim family are leveraged and as a result of this, or for
other reasons, the family's ownership could be substantially reduced. James Kim,
the founder of the Company and currently its Chairman and Chief Executive
Officer, is the eldest son of H. S. 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. In
addition, four other members of Mr. Kim's family are on the 13 member Board of
Directors of AICL. After the Offerings, James Kim and members of his family will
beneficially own approximately 68.9% of the outstanding Common Stock of the
Company, and Mr. Kim and other members of his family will continue to exercise
significant control over the Company. See "Risk Factors -- 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 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 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 assumption from AICL in
January 1998 of substantially all of the marketing rights for the Japanese
market. In the event the ability of AICL to supply the Company were disrupted
for any reason, the Company's facilities in the Philippines would be able to
fill only a small portion of the resulting shortfall in capacity. In addition,
there are currently no significant third party suppliers of packaging and test
services from which the Company could fill its orders. 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 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. 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
and its guarantees of affiliate debt, labor disruptions, fluctuations in foreign
exchange rates, changes in governmental policies, economic or political
conditions in Korea or any other change, 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 Agreements with AICL.
Under the Supply Agreements, AICL has granted to the Company a first right to
substantially all of the packaging and test services of AICL and the exclusive
right to all of the wafer output of its new wafer foundry. The Company expects
to continue to purchase substantially all of AICL's packaging and test services,
and to purchase all of AICL's wafer output, under the Supply Agreements. Under
the Supply Agreements, pricing arrangements relating to packaging and test
services provided by AICL to the Company are subject to quarterly review and
adjustment, and such arrangements relating to the wafer output provided by AICL
to the Company are
27
<PAGE> 30
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 Agreements, 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 Agreements also provide 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 Agreements have a five-year
term, and may be terminated by any party thereto upon five years' written notice
at any time after the expiration of such initial five-year term. There can be no
assurance that AICL will not terminate either Supply Agreement upon the
expiration of such initial term or that if it does terminate a Supply Agreement,
that the Company will be able to obtain a new agreement with AICL on terms that
are favorable to the Company or at all.
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. The Company is advised that
AICL, as a public company in Korea, has published its most recent consolidated
financial statements as of and for the year ended December 31, 1996, and that
AICL has prepared preliminary consolidated financial statements as of and for
the year ended December 31, 1997. These consolidated financial statements are
prepared on the basis of Korean GAAP, which differs significantly from U.S.
GAAP. U.S. GAAP financial statements are not available.
28
<PAGE> 31
The following is a summary of 1996 and 1997 consolidated financial
information pertaining to AICL prepared in accordance with Korean GAAP which
differs from U.S. GAAP. See Note 6 of Notes to Combined Financial Statements.
<TABLE>
<CAPTION>
1996 1997
----------- --------------
(IN MILLIONS)
<S> <C> <C>
SUMMARY INCOME STATEMENT DATA:
Sales................................................. W1,338,718 W1,786,457
Gross profit.......................................... 242,601 279,186
Operating income...................................... 164,846 176,028
Net foreign exchange loss............................. 29,372 216,697
Net loss.............................................. (9,385) (305,414)
SUMMARY BALANCE SHEET DATA:
Cash and bank deposits................................ W 324,139 W 215,024
Accounts and notes receivable, net.................... 368,975 393,261
Inventory............................................. 214,494 260,302
Other current assets.................................. 145,301 490,544
----------- -----------
Total current assets............................... 1,052,909 1,359,131
----------- -----------
Property, plant and equipment, net.................... 994,931 2,159,466
Investments........................................... 83,715 122,366
Other long-term assets................................ 93,733 295,554
----------- -----------
Total long-term assets............................. 1,172,379 2,577,386
----------- -----------
Total assets.................................. W2,225,288 W3,936,517
=========== ===========
Short-term borrowings................................. 935,463 1,591,280
Current maturities of long-term debt.................. 85,252 120,913
Other current liabilities............................. 305,931 412,289
----------- -----------
Total current liabilities.......................... 1,326,646 2,124,482
----------- -----------
Long-term debt, net of current maturities............. 475,045 736,784
Long-term capital lease obligations................... 106,068 861,813
Other long-term liabilities and minority interest..... 89,272 138,305
----------- -----------
Total long-term liabilities................... 670,385 1,736,902
----------- -----------
Total liabilities............................. 1,997,031 3,861,384
----------- -----------
Stockholders' equity.................................. 228,257 75,133
----------- -----------
Total liabilities and stockholders' equity.... W2,225,288 W3,936,517
=========== ===========
</TABLE>
A significant amount of the current and long-term liabilities of AICL are
denominated in U.S. dollars and other foreign currencies. At December 31, 1997,
the amount of U.S. dollar and other foreign currency denominated short-term
borrowings, current maturities of long-term debt, long-term debt (net of current
maturities) and long-term capital lease obligations were W1,092 billion, W59
billion, W159 billion and W834 billion, respectively. Due in part to the
significant depreciation of the won (for example, from a Market Average Exchange
Rate of W884 to $1.00 on December 31, 1996 to W1,415 to $1.00 on December 31,
1997 and W1,415 to $1.00 on March 24, 1998) resulting from the recent economic
crisis in Korea, AICL's liabilities in won terms and its leverage calculated in
won have significantly increased in 1997. The effect of this depreciation on
AICL, however, has been mitigated by the fact that substantial amounts of AICL's
revenues are denominated in U.S. dollars. The increase in AICL's liabilities was
also attributable in part to additional financing obtained in connection with
the constitution of its new wafer foundry. See "-- Risks Associated with New
Wafer Fabrication Business" and Note 6 of Notes to Combined Financial
Statements.
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<PAGE> 32
The recent economic crisis in Korea has also led to sharply higher domestic
interest rates in Korea and reduced opportunities for refinancing or refunding
maturing debts as financial institutions in Korea, which are experiencing
financial difficulties, are increasingly looking to limit their lending,
particularly to highly leveraged companies, and to increase their reserves and
provisions for non-performing assets. These developments will result in higher
interest rates on loans to AICL and have otherwise made it more difficult for
AICL to obtain new financing. Therefore, there can be no assurance that AICL
will be able to refinance its existing loans or obtain new loans, or 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
"Risk Factors -- Risks Associated With Leverage" and " -- Dependence On
International Operations and Sales; Concentration of Operations in the
Philippines and Korea."
As of December 31, 1997, AICL and its consolidated subsidiaries were
contingently liable under guarantees in respect of debt of AICL's
non-consolidated subsidiaries and affiliates in the Anam Group in the aggregate
amount of approximately W857 billion. As of such date, AICL had provided
guarantees for all of AUSA's debt of $319 million, the Non-Compliant Loans of
$176 million 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 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. In addition, as an overseas
subsidiary of AICL, AUSA was formed with the approval of the Bank of Korea. If
the Bank of Korea were to withdraw such approval, or if AUSA otherwise ceased
operations for any reason, the Company and AICL would be required to meet their
financing needs through alternative arrangements. Although the Company believes
that after the Offerings alternative financing arrangements will be available,
there can be no assurance that the Company or AICL will be able to obtain
alternative financing on acceptable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 11 of Notes to Combined
Fianacial Statements. In addition, if any relevant subsidiaries or affiliates of
AICL, certain of which may have greater exposure to domestic Korean economic
conditions than 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 Agreements
generally provide 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, as a result of the recent deterioration
of the Korean economy, 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
Agreements generally provide 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 members of his family, and Mr. Kim and other
members of his family will continue to exercise significant
30
<PAGE> 33
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 Agreements, 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, such transactions generally will not require
approval of the disinterested members of the Board of Directors and 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. The Company currently has four directors, two of whom are
disinterested. Under Delaware corporate law, each director owes a duty of
loyalty and care to the Company, which if breached can result in personal
liability for the directors. 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.
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<PAGE> 34
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 30,000,000 shares of
Common Stock and the $150,000,000 principal amount of the Convertible Notes
offered by the Company hereby are estimated to be approximately $449,950,000
(approximately $525,452,500 if the Underwriters' over-allotment options are
exercised in full), assuming an initial public offering price of $11.00 per
share of Common Stock and after deducting the estimated underwriting discounts
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 $154 million of the net proceeds to the Company from the
Offerings will be used to repay the Non-Compliant Loans, which, following
planned repayments of portions thereof prior to the Offerings, will have
outstanding balances of $43 million, $50 million and $61 million. These loans
are due May 1998, October 2000 and April 2001, respectively, and accrue interest
annually at rates equal to 7.16%, 6.78% and 6.68%, respectively, at December 31,
1997, which rates represent LIBOR plus a spread. The $43 million loan was
incurred in August 1997 in order to redeem $40 million of Floating Rate Notes
issued by AAP and to repay certain short-term debt. The Company is not in
compliance with certain covenants under the above-described loans and, as a
result, the Company's obligation to repay these loans may be accelerated by the
lenders at any time. These loan covenants include restrictions on the ability of
one of the Company's subsidiaries to enter into transactions with affiliates,
requirements that the subsidiary maintain certain debt-to-equity ratios and
requirements that the subsidiary comply with certain notice requirements. As a
result of such non-compliance, these loans have been classified as current
liabilities in the Company's financial statements included herein, and the
report of the Company's independent public accountants with respect to such
financial statements contains a paragraph stating that there is substantial
doubt as to the ability of the Company to continue as a going concern. Repayment
of such loans from the proceeds of the Offerings will eliminate these events of
non-compliance.
Approximately $63 million of the net proceeds to the Company from the
Offerings will be used to repay numerous short-term bank loans incurred
primarily to finance capital expenditures for the Company's P1 factory in the
Philippines and for working capital. All of these loans are due within 12 months
of December 31, 1997 and bear interest at rates ranging from 8.0% to 12.2%. In
addition, approximately $8 million of the net proceeds will be used to repay two
term loans of approximately $3 million and $5 million. These loans are due
September 1999 and January 2001, respectively, and accrue interest annually at
rates equal to 9.09% and 11.88%, respectively, at December 31, 1997, which rates
represent LIBOR plus a spread.
An additional approximately $34 million of the net proceeds to the Company
will be used to purchase AICL's 40% interest in AAP. Approximately $106 million
of the net proceeds will be used to repay all of the amounts that will remain
due to AUSA following planned repayments of portions thereof prior to the
Offerings. The remaining $85 million of such net proceeds ($160 million if the
Underwriters' over-allotment options are exercised in full) will be used for
capital expenditures and working capital. 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."
32
<PAGE> 35
CAPITALIZATION
The following table sets forth as of December 31, 1997 (i) the actual
capitalization of the Company derived from the Combined Financial Statements
after giving effect to the Reorganization, (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 principally to reflect the sale by the
Company, pursuant to the Offerings, of 30,000,000 shares of Common Stock at an
assumed initial public offering price of $11.00 per share and $150.0 million of
the Convertible Notes, and the receipt and application by the Company of the
estimated net proceeds to it therefrom (after deducting the estimated
underwriting discounts and estimated offering expenses), as well as planned debt
repayments by the Company after December 31, 1997 and prior to the Offerings.
The capitalization information set forth in the table below is qualified by the
more detailed Combined Financial Statements and Notes thereto included elsewhere
in this Prospectus and should be read in conjunction with such Combined
Financial Statements and the Notes thereto.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short term borrowings and current portion of
long-term debt.............................. $325,968 $325,968 $ 53,668
Long-term debt:
% Convertible Subordinated Notes due
2003..................................... -- -- 150,000
Due to AUSA (non-current)(3)................ 149,776 149,776 --
Other long-term debt........................ 38,283 38,283 35,283
-------- -------- --------
Total long-term debt..................... 188,059 188,059 185,283
-------- -------- --------
Stockholders' equity:
Common Stock, $.001 par value; 500,000,000
shares authorized; 82,610,000 shares
issued and outstanding, actual and pro
forma; 112,610,000 shares issued and
outstanding, pro forma as adjusted(4).... 46 46 76
Additional paid-in capital.................. 20,871 20,871 327,604
Retained earnings........................... 70,621 40,821 40,821
Cumulative translation adjustment........... (663) (663) (663)
-------- -------- --------
Total stockholders' equity............... 90,875 61,075 367,838
-------- -------- --------
Total capitalization................ $278,934 $249,134 $553,121
======== ======== ========
</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 $2.1 million and (ii) a distribution by the Company of
undistributed earnings of AEI through December 31, 1997 of $27.7 million to
stockholders of AEI prior to the Reorganization. The amount actually
distributed by the Company to such stockholders of AEI will increase to
reflect any undistributed net income earned by AEI following December 31,
1997 and prior to the Reorganization. See "Reorganization -- Termination of
S Corporation Status and Distributions" and Notes 1, 16 and 17 of Notes to
Combined Financial Statements.
(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 $11.00 per share of Common Stock, including the purchase from AICL
of its 40% interest in AAP for approximately $34 million and the related
elimination of minority interest and recording of goodwill. The acquisition
of the minority interest will result in additional amortization of
approximately $2.5 million per year. Also reflects repayments made after
December 31, 1997 and prior to the Offerings of $50.3 million of short-term
borrowings and current portion of long-term debt and $30 million of amounts
due to AUSA (non-current), as well as the assumption by an affiliate of the
Company of $13.9 million of amounts due to AUSA (non-current) in
33
<PAGE> 36
February 1998. See "Reorganization," "Use of Proceeds" and Notes 1, 6 and 16
of Notes to Combined Financial Statements.
(3) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources."
(4) Excludes 2,730,000 shares of Common Stock issuable upon exercise of options
to be granted immediately prior to the Offerings under the Company's 1998
Stock Plan and 1998 Director Option Plan. Also excludes an aggregate of
shares reserved for issuance upon conversion of the Convertible
Notes and an additional 3,570,000 shares reserved for issuance under the
Company's 1998 Stock Plan, 1998 Director Option Plan and 1998 Employee Stock
Purchase Plan. See "Management" and "Description of Capital Stock" and Notes
1 and 16 of Notes to Combined Financial Statements.
34
<PAGE> 37
DILUTION
The pro forma net tangible book value of the Company as of December 31,
1997 was approximately $58 million or $.71 per share of Common Stock, after
giving effect to the distribution of accumulated previously taxed earnings of
$27.7 million, the recording of deferred tax liabilities of $2.1 million and the
Reorganization. Pro forma net tangible book value per share represents the
Company's total pro forma tangible assets less total liabilities as reflected in
the Combined Financial Statements, divided by the number of outstanding shares
of Common Stock. After giving effect to the sale by the Company of 30,000,000
shares of Common Stock and $150.0 million of Convertible Notes offered hereby
(assuming no exercise of the Underwriters' over-allotment options) at an assumed
initial public offering price of $11.00 per share of Common Stock and the use by
the Company of the estimated net proceeds therefrom (after deducting the
estimated underwriting discounts and offering expenses payable by the Company),
as described in "Use of Proceeds," the Company's net tangible book value at
December 31, 1997 would have been $341 million or $3.03 per share of Common
Stock. This represents an immediate increase in net tangible book value of $2.32
per share to existing stockholders and an immediate dilution in net tangible
book value of $7.97 per share to new public stockholders. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........ $ 11.00
--------
Net tangible book value per share before the
Offerings....................................... $ .71
--------
Increase in net tangible book value per share
attributable to new public stockholders......... 2.32
--------
Net tangible book value per share after the
Offerings............................................ 3.03
--------
Dilution per share to new public stockholders.......... $ 7.97
========
</TABLE>
The following table summarizes, as of December 31, 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 public stockholders purchasing
shares in the Offerings (at an assumed initial public offering price of $11.00
per share and before deducting the estimated underwriting discounts and 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)......... 82,610,000 73.4% $ 20,917,000 6.0% $ .25
New public stockholders(1)....... 30,000,000 26.6 330,000,000 94.0 $ 11.00
----------- ----- ------------ -----
Total.................. 112,610,000 100.0% $350,917,000 100.0%
=========== ===== ============ =====
</TABLE>
- ---------------
(1) Sales by the Selling Stockholders will reduce the number of shares of Common
Stock held by existing stockholders to 77,610,000 shares or 68.9% of the
total number of shares of Common Stock outstanding after the Offerings
(65.8% assuming the Underwriters' over-allotment options are exercised in
full), and will increase the number of shares of Common Stock held by new
public stockholders to 35,000,000 shares or 31.1% of the total number of
shares of Common Stock outstanding after the Offerings (40,250,000 shares or
34.2% assuming the Underwriters' over-allotment options are exercised in
full). See "Principal and Selling Stockholders."
35
<PAGE> 38
SELECTED COMBINED FINANCIAL DATA
The selected combined financial data presented below for, and as of the end
of, each of the years in the five-year period ended December 31, 1997 are
derived from the combined financial statements of Amkor. The combined financial
statements as of December 31, 1995, 1996 and 1997 and for each of the years in
the three-year period ended December 31, 1997 have been audited by Arthur
Andersen LLP, independent public accountants, and their report thereon, together
with such combined financial statements, are included elsewhere in this
Prospectus. Reference is made to said report which includes an explanatory
paragraph with respect to the ability of the Company to continue as a going
concern as discussed in Note 1 of the Notes to the Combined Financial
Statements. Reference is made to said reports which include an explanatory
paragraph with respect to the ability of the Company to continue as a going
concern as discussed in Note 1 of Notes to the Combined Financial Statements.
The selected combined financial data presented below as of and for the year
ended December 31, 1994 are derived from audited financial statements which are
not presented herein. The selected combined financial data presented below as of
and for the year ended December 31, 1993 are derived from unaudited combined
financial statements. In the opinion of management, the unaudited combined
financial statements have been prepared on the same basis as the audited
combined 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 period and financial condition at such date. The
selected combined 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 Combined
Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues.............................................. $ 442,101 $ 572,918 $ 932,382 $ 1,171,001 $ 1,455,761
Cost of revenues.......................................... 371,323 514,648 783,335 1,022,078 1,242,669
--------- --------- --------- ----------- -----------
Gross profit....................................... 70,778 58,270 149,047 148,923 213,092
--------- --------- --------- ----------- -----------
Operating expenses:
Selling, general and administrative..................... 42,649 41,337 55,459 66,625 103,726
Research and development................................ 1,755 3,090 8,733 10,930 8,525
--------- --------- --------- ----------- -----------
Total operating expenses........................... 44,404 44,427 64,192 77,555 112,251
--------- --------- --------- ----------- -----------
Operating income.......................................... 26,374 13,843 84,855 71,368 100,841
--------- --------- --------- ----------- -----------
Other (income) expense:
Interest expense, net................................... 5,116 5,752 9,797 22,245 32,241
Foreign currency (gain) loss............................ 2,809 (4,865) 1,512 2,961 (835)
Other (income) expense, net............................. (1,725) (877) 6,523 3,150 8,429
--------- --------- --------- ----------- -----------
Total other expense................................ 6,200 10 17,832 28,356 39,835
--------- --------- --------- ----------- -----------
Income before income taxes, equity in income (loss) of
AICL and minority interest.............................. 20,174 13,833 67,023 43,012 61,006
Provision for income taxes................................ 2,445 2,977 6,384 7,876 7,078
Equity in income (loss) of AICL........................... 1,776 1,762 2,808 (1,266) (17,291)
Minority interest......................................... 2,269 1,044 1,515 948 (6,644)
--------- --------- --------- ----------- -----------
Net income................................................ $ 17,236 $ 11,574 $ 61,932 $ 32,922 $ 43,281
========= ========= ========= =========== ===========
PRO FORMA DATA (UNAUDITED):
Historical income before income taxes, equity in income
(loss) of AICL and minority interest.................... $ 20,174 $ 13,833 $ 67,023 $ 43,012 $ 61,006
Pro forma provision for income taxes(1)................... 5,345 3,177 16,784 10,776 10,691
--------- --------- --------- ----------- -----------
Pro forma income before equity in income (loss) of AICL
and minority interest(1)................................ 14,829 10,656 50,239 32,236 50,315
Historical equity in income (loss) of AICL................ 1,776 1,762 2,808 (1,266) (17,291)
Historical minority interest.............................. 2,269 1,044 1,515 948 (6,644)
--------- --------- --------- ----------- -----------
Pro forma net income (1).................................. $ 14,336 $ 11,374 $ 51,532 $ 30,022 $ 39,668
========= ========= ========= =========== ===========
Basic and diluted pro forma net income per common
share(1)................................................ $ .17 $ .14 $ .62 $ .36 $ .48
========= ========= ========= =========== ===========
Shares used in computing pro forma net income per common
share................................................... 82,610 82,610 82,610 82,610 82,610
========= ========= ========= =========== ===========
OTHER DATA:
EBITDA(2)................................................. $ 37,437 $ 34,197 $ 103,434 $ 123,082 $ 175,111
========= ========= ========= =========== ===========
Ratio of earnings to fixed charges(3):
Actual.................................................. 3.7x 2.0x 4.6x 2.4x 2.5x
Supplemental pro forma.................................. 3.1x
</TABLE>
36
<PAGE> 39
- ---------------
(1) Prior to the Reorganization, AEI, a predecessor 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 Combined
Financial Statements.
(2) EBITDA is defined as earnings before interest income, interest expense,
taxes on income, depreciation and amortization. EBITDA is presented here to
provide additional information about the Company's ability to meet its
future debt service, capital expenditure, and working capital requirements
and should not be construed as a substitute for or a better indicator of
results of operations or liquidity than net income or cash flow from
operating activities computed in accordance with generally accepted
accounting principles.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes less undistributed earnings in less
than 50%-owned subsidiaries, plus fixed charges. Fixed charges consist of
interest expense incurred and one-third of rental expense which amount is
deemed by the Company to be representative of the interest factor of rental
payments under operating leases. The supplemental pro forma ratio of
earnings to fixed charges reflects the effect on the ratio of earnings to
fixed charges if the Offerings had been completed and the estimated net
proceeds to the Company applied as described in "Use of Proceeds" at the
beginning of the period presented.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, 1997
--------------------------------------- -----------------------------------------
1993 1994 1995 1996 ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- -------- ------- ------- --------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents... $ 8,929 $114,930 $91,151 $49,664 $ 90,917 $ 63,217 $ 68,191
Working capital (deficit)... (13,073) 134,798 111,192 36,785 (196,870) (224,570) 52,704
Total assets................ 191,754 426,522 626,379 804,864 855,592 827,892 864,197
Short-term borrowings and
current portion of
long-term debt............ 76,051 52,526 85,120 191,813 325,968 325,968 53,668
% Convertible
Subordinated Notes due
2003.................... -- -- -- -- -- -- 150,000
Due to AUSA (non-current)... 18,823 211,693 219,037 234,894 149,776 149,776 --
Other long-term debt........ 29,917 62,215 107,385 167,444 38,283 38,283 35,283
Stockholders' equity........ 8,070 9,617 45,289 45,812 90,875 61,075 367,838
</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 $2.1 million and (ii) a distribution by the Company of
undistributed earnings of AEI through December 31, 1997 of $27.7 million to
stockholders of AEI prior to the Reorganization. The amount actually
distributed by the Company to such stockholders of AEI will increase to
reflect any undistributed net income earned by AEI following December 31,
1997 and prior to the Reorganization. See "Reorganization -- Termination of
S Corporation Status and Distributions" and Notes 1, 16 and 17 of Notes to
Combined Financial Statements.
(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 $11.00 per share of common stock, including the purchase from AICL
of its 40% interest in AAP for approximately $34 million and the related
elimination of minority interest and recording of goodwill. The acquisition
of the minority interest will result in additional amortization of
approximately $2.5 million per year. Also reflects repayments made after
December 31, 1997 and prior to the Offerings of $50.3 million of short-term
borrowings and current portion of long-term debt and $30 million of amounts
due to AUSA (non-current), as well as the assumption by an affiliate of the
Company of $13.9 million of amounts due to AUSA (non-current) in February
1998. See "Reorganization," "Use of Proceeds" and Notes 1, 6 and 16 of Notes
to Combined Financial Statements.
37
<PAGE> 40
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
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 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 1995 through 1997 and its
liquidity and capital resources and should be read in conjunction with the
Combined Financial Statements and Notes thereto and the selected combined
financial data included elsewhere in this Prospectus. The operating results for
interim periods are not necessarily indicative of results for any subsequent
period.
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 recently began offering
wafer fabrication services. The Company provides packaging and test services
through its three factories in the Philippines (P1, P2 and P3) as well as the
four factories of AICL in Korea, and wafer fabrication services through AICL's
new wafer foundry, pursuant to the Supply Agreements between the Company and
AICL. As of December 31, 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 to consolidate the operations of
the Amkor Companies, including AEI which was incorporated in 1970. These
companies were under common management and in the same business prior to the
Company's formation. As a result of the Reorganization, the financial statements
included in this Prospectus are presented on a combined basis. See
"Reorganization" and "Certain Transactions" and Notes 1 and 16 of Notes to
Combined Financial Statements. 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 Combined Financial
Statements. The Combined 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, 10 and 17 of Notes to Combined Financial Statements.
General. From 1995 to 1997, the Company's revenues increased from
approximately $932.4 million to $1.456 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, which were offset in part by decreasing average selling
prices. 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 significantly increased utilization of P3 during the last six months of
1997 and expects to operate the facility with positive gross margins during
1998. See "Risk Factors -- Expansion of Manufacturing Capacity; Profitability
Affected by Capacity Utilization Rates" and "Business -- Facilities and
Manufacturing."
38
<PAGE> 41
The Company's results of operations are generally affected by the
capital-intensive nature of its business. In 1995, 1996 and 1997, the Company
invested $123.6 million, $185.1 million and $179.0 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 service charges paid to AICL pursuant to the Supply
Agreements. Pricing arrangements relating to packaging and test services
provided by AICL to the Company are subject to quarterly review and adjustment,
and pricing arrangements relating to wafer fabrication services provided by AICL
are 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 interest of the Company and AICL. 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 1995, 1996 and 1997, 34.1%, 39.2% and
40.1%, respectively, of the Company's net revenues were derived from sales to
the Company's top five customers, with 13.3%, 23.5% and 23.4%, respectively,
derived from sales to Intel. See "Risk Factors -- Customer Concentration;
Absence of Backlog."
Relationship with AICL. In 1996 and 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 1997 were derived from services sold by the
Company. Historically, AICL has directly sold packaging and test services in
Japan and Korea. The Company assumed substantially all of the marketing rights
for services in Japan in January 1998. Also, the Company recently began offering
wafer fabrication services through AICL's new deep submicron CMOS foundry which
is capable of producing up to 15,000 8" wafers per month. 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 assumption
from AICL of substantially all of the marketing rights for Japan. The Company
has a first right to substantially all of the packaging and test service
capacity of AICL and the exclusive right to all of the wafer output of AICL's
new wafer foundry.
The Supply Agreements between the Company and AICL generally provide, 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 Agreements have a five year
initial term and thereafter may be terminated upon five years' notice. There can
be no assurance that AICL will not terminate either Supply Agreement upon the
expiration of such initial term, or that if it does terminate a Supply
Agreement, that the Company will be able to enter into a new agreement with AICL
on terms favorable to the Company or at all. 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,
overlaps and 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 controlled to a
significant degree by James Kim and members of his family, and Mr. Kim and other
39
<PAGE> 42
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, such transactions will generally not require
approval of the disinterested members of the Board of Directors and 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. The Company currently has four directors, two of whom are
disinterested. Under Delaware corporate law, each director owes a duty of
loyalty and care to the Company, which if breached can result in personal
liability for the directors. 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>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Net revenues........................................ 100.0% 100.0% 100.0%
Cost of revenues.................................... 84.0 87.3 85.4
----- ----- -----
Gross profit...................................... 16.0 12.7 14.6
Operating expenses:
Selling, general and administrative .............. 6.0 5.7 7.1
Research and development.......................... 0.9 0.9 0.6
----- ----- -----
Total operating expenses....................... 6.9 6.6 7.7
----- ----- -----
Operating income.................................... 9.1 6.1 6.9
----- ----- -----
Other (income) expense:
Interest expense, net............................. 1.0 1.9 2.2
Foreign currency (gain) loss...................... 0.2 0.2 (0.1)
Other expense, net................................ 0.7 0.3 0.6
----- ----- -----
Total other expense............................ 1.9 2.4 2.7
----- ----- -----
Income before income taxes, equity in income (loss)
of AICL and minority interest..................... 7.2 3.7 4.2
Provision for income taxes.......................... 0.7 0.7 0.5
Equity in income (loss) of AICL..................... 0.3 (0.1) (1.2)
Minority interest................................... 0.2 0.1 (0.5)
----- ----- -----
Net income.......................................... 6.6 2.8 3.0
Pro forma provision for income taxes ............... 1.1 0.2 0.3
----- ----- -----
Pro forma net income................................ 5.5% 2.6% 2.7%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 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 1997 increased 24.3% to $1,455.8 million from
$1,171.0 million for 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
40
<PAGE> 43
Company's leadframe products. In addition, the opening of P3, the Company's
newest factory, and K4, AICL's newest factory, in September 1996 enabled the
Company to begin to expand sales of BGA packages in 1997.
Gross Profit. Gross profit increased 43.1% to $213.1 million in 1997 from
$148.9 million in 1996, resulting in a gross margin of 14.6% for 1997 as
compared to 12.7% for 1996. 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. Gross margin increased primarily due to improved operating results at
P1 and P2 during the second half of 1997, which more than offset initial
operating losses and start-up costs incurred in connection with P3 during the
first half of 1997. Product mix changes toward more profitable product lines and
decreased labor costs from the devaluation of the Philippine peso were the
primary factors resulting in improved margins at the P1 and P2 factories.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 55.7% to $103.7 million, or 7.1% of net
revenues, in 1997 from $66.6 million, or 5.7% of net revenues, in 1996 primarily
due to increases in personnel in marketing and support to sustain the Company's
growth. The number of employees in the Company's marketing and sales support
groups increased during 1997 by approximately 21% over 1996. Such increase
resulted in an overall increase in personnel-related costs including salaries,
benefits and payroll taxes. The Company also incurred increased costs for office
rental, depreciation and other occupancy-related expenses. The Company does not
expect this level of growth in employees to continue in 1998. In addition to the
increased costs from its marketing and sales support groups, the Company
incurred approximately $8.0 million and $3.6 million in general and
administrative expenses in connection with its P3 operations and wafer
fabrication services group, respectively, during 1997. No similar costs were
incurred in 1996 as these groups represented start-up operations in 1997.
Research and Development Expenses. Research and development expenses
decreased 22.0% to $8.5 million, or 0.6% of net revenues, in 1997, from $10.9
million, or 0.9% of net revenues, in 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 (gain) loss and other (income) expense, net.
Other expense increased 40.5% to $39.8 million in 1997 from $28.4 million in
1996 primarily as a result of increased interest expense and increased other
expenses. Interest expense for 1997 increased to $38.6 million from $27.7
million in 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 $6.4 million and
$5.5 million, respectively. Other expenses increased primarily due to $2.4
million in costs relating to the Company's trade receivables securitization
transactions. See "-- Liquidity and Capital Resources" and Note 2 of Notes to
Combined Financial Statements.
Income Taxes. The Company's effective tax rate (after giving effect to the
pro forma adjustment for income taxes) for 1997 was 18% as compared to 25% for
1996. The decrease in the Company's effective tax rate in 1997 compared to 1996
was primarily attributable to income not taxed due to a tax holiday and foreign
exchange effects described below. The Company's subsidiary that owns P3 operates
under a tax holiday from Philippine income taxes until the end of 2002. To the
extent P3 is 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%. Additionally, the Company recognized deferred tax
benefits for unrealized foreign exchange losses in 1997 which are recognized in
the Philippines for tax reporting purposes and relate to unrecognized net
foreign exchange losses on U.S. dollar denominated monetary assets and
liabilities. See Note 10 of Notes to Combined Financial Statements. These losses
are not recognized for financial reporting purposes as the U.S. dollar is the
functional currency. These losses will be realized for Philippine tax reporting
purposes upon settlement of the related asset or liability. The benefit derived
from unrealized foreign exchange losses was partially offset by an increase in
the valuation allowance as the Company concluded that it was more likely than
not that their tax benefits could be realized in the Philippines within the
three year loss carryforward period. The Company has structured its global
operations to take advantage of lower tax rates in certain
41
<PAGE> 44
countries and tax incentives extended to encourage investment. The recorded
provisions for income taxes are subject to changes upon examination of the
Company's tax returns by tax authorities in the United States, the Philippines
and elsewhere. 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.
Equity in Income (Loss) of AICL. Equity in income (loss) of AICL represents
the Company's ownership interest in AICL during the periods presented. In 1997,
the Company recognized a loss of $17.3 million resulting principally from the
impairment of value in its investment in AICL. In February 1998, the Company
disposed of its investment in AICL's common stock. See "Certain Transactions"
and Note 6 of Notes to Combined Financial Statements.
Minority Interest. Minority interest represents AICL's ownership interest
in the consolidated net income of AAP. During 1997, as a result of a settlement
of an intercompany loan, which otherwise had no effect on the combined pretax
income of the Company, AAP reported a net loss as a separate entity.
Accordingly, the Company recorded a minority interest benefit in its combined
financial statements relating to the minority interest in the net loss.
Following the Offerings, the Company intends to purchase AICL's 40% interest in
AAP and, as a result, the Company will own substantially all of the common stock
of AAP. See "Use of Proceeds." The acquisition of the minority interest will
result in the elimination of the minority interest liability and additional
amortization of approximately $2.5 million per year.
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 Combined
Financial Statements.
42
<PAGE> 45
QUARTERLY RESULTS
The following table sets forth certain unaudited combined financial
information, including as a percentage of net revenues, for the eight fiscal
quarters ended December 31, 1997. The Company disposed of its investment in AICL
common stock in February 1998. Also, the Company has entered into an agreement
with AICL pursuant to which the Company will purchase, immediately following the
Offerings, AICL's 40% interest in AAP. After the Offerings, there will be no
equity in income (loss) of AICL and minority interest related to AAP.
Consequently, this information is not presented below. The amounts of equity in
income (loss) of AICL and minority interest have historically varied
significantly by quarter depending on the income (loss) of AICL and AAP. See
"Reorganization" and Note 6 of Notes to Combined Financial Statements. 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
Combined 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
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues.......................... $270,327 $272,262 $285,784 $342,628 $313,019 $350,471 $380,130 $412,141
Cost of revenues...................... 230,387 231,959 250,898 308,834 287,449 299,093 314,246 341,881
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit........................ 39,940 40,303 34,886 33,794 25,570 51,378 65,884 70,260
Operating expenses:
Selling, general and
administrative.................... 13,752 15,948 16,716 20,209 20,608 26,657 26,829 29,632
Research and development............ 2,100 2,757 3,071 3,002 1,485 2,030 2,236 2,774
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses.......... 15,852 18,705 19,787 23,211 22,093 28,687 29,065 32,406
-------- -------- -------- -------- -------- -------- -------- --------
Operating income...................... 24,088 21,598 15,099 10,583 3,477 22,691 36,819 37,854
Total other expense, net.............. 3,316 6,052 9,853 9,135 8,165 9,577 11,242 10,851
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes, equity in
income (loss) of AICL and minority
interest............................ 20,772 15,546 5,246 1,448 (4,688) 13,114 25,577 27,003
Provision for income taxes............ 3,803 2,847 961 265 (1,497) 4,186 842 3,547
-------- -------- -------- -------- -------- -------- -------- --------
Income before equity in income (loss)
of AICL and minority interest....... $ 16,969 $ 12,699 $ 4,285 $ 1,183 $ (3,191) $ 8,928 $ 24,735 $ 23,456
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 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
Total other expense, net.............. 1.2 2.2 3.5 2.7 2.6 2.8
----- ----- ----- ----- ----- -----
Income before income taxes, equity in
income (loss) of AICL 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 equity in income (loss)
of AICL and minority interest....... 6.3% 4.7% 1.5% 0.3% (1.0)% 2.5%
===== ===== ===== ===== ===== =====
<CAPTION>
QUARTER ENDED
------------------------
SEPT. 30, DEC. 31,
1997 1997
----------- ----------
<S> <C> <C>
Net revenues.......................... 100.0% 100.0%
Cost of revenues...................... 82.7 83.0
----- -----
Gross profit........................ 17.3 17.0
----- -----
Operating expenses:
Selling, general and
administrative.................... 7.1 7.2
Research and development............ 0.5 0.6
----- -----
Total operating expenses.......... 7.6 7.8
----- -----
Operating income...................... 9.7 9.2
Total other expense, net.............. 3.0 2.6
----- -----
Income before income taxes, equity in
income (loss) of AICL and minority
interest............................ 6.7 6.6
Provision for income taxes............ 0.2 0.9
----- -----
Income before equity in income (loss)
of AICL and minority interest....... 6.5% 5.7%
===== =====
</TABLE>
43
<PAGE> 46
The Company's revenues, gross profit and operating profit 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. The Company currently anticipates that its
operating results for the first quarter of 1998 will follow its historical
seasonality, with revenues, gross profit and operating profit declining as
compared to the fourth quarter of 1997.
Beginning in the third quarter of 1996, intense competition in the
semiconductor industry worldwide led to decreases in the average selling prices
of many of the Company's leadframe packages. These decreases were partially
offset by increases 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 $2.2 million
write-off for custom laminate raw materials which were purchased to meet
customer orders which were subsequently cancelled. The combined effect of these
factors was to decrease the levels of profitability in the third and fourth
quarters of 1996 and the first quarter of 1997.
Selling, general and administrative expenses increased during the second,
third and fourth quarters of 1997 primarily due to increased staffing levels at
the Company's marketing and sales support groups, as well as at its P3 factory
and wafer fabrication services group, which resulted in increased
employee-related costs. See "-- Results of Operations -- Year Ended December 31,
1997 Compared to Year Ended December 31, 1996 -- Selling, General and
Administrative Expenses."
Income tax rates in the third quarter of 1997 were lower compared to prior
periods as the Company recognized deferred tax benefits for unrealized foreign
exchange losses during the quarter, which are recognized for Philippine tax
reporting purposes but are not recognized for financial reporting purposes since
the U.S. dollar is the functional currency. Although similar circumstances
during the fourth quarter of 1997 resulted in the recognition of additional
deferred tax assets, their effect on the overall tax rates were mitigated by a
valuation allowance also recorded during the fourth quarter of approximately $22
million. See "-- Results of Operations -- Year End December 31, 1997 Compared to
Year Ended December 31, 1996 -- Income Taxes." As the majority of these tax
assets relate to fluctuations in the value of the Philippine peso, management is
unable to determine the impact to the effective tax rates which may occur as a
result of future exchange rate fluctuations.
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 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."
44
<PAGE> 47
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had cash and cash equivalents of $90.9
million and a working capital deficit of $196.9 million ($63.2 and $224.6
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 December 31, 1997). The Company's working capital deficit
resulted primarily from the significant amount of its short-term debt, primarily
incurred in connection with the expansion of its Philippine operations, together
with approximately $105 million of term loans which have been reclassified as
current liabilities as a result of the non-compliance by the Company with
certain covenants thereunder. The Company's non-compliance with certain
covenants with respect to the Non-Compliant Loans, the aggregate outstanding
amount of which was $176 million as of December 31, 1997, triggered
cross-defaults with respect to an additional $10 million of the Company's loans.
These loan covenants include restrictions on the ability of one of the Company's
subsidiaries to enter into transactions with affiliates, requirements that the
subsidiary maintain certain debt-to-equity ratios and requirements that the
subsidiary comply with certain notice requirements. The Company's obligation to
repay these loans (including the cross-defaulted loans) may be accelerated by
the lenders at any time. As a result of such non-compliance, the report of the
Company's independent public accountants with respect to the Company's financial
statements included herein contains a paragraph stating that there is
substantial doubt as to the ability of the Company to continue as a going
concern. The Company will eliminate such non-compliance and cross-defaults by
repaying such loans using part of the net proceeds to the Company from the
Offerings as well as working capital. See "Use of Proceeds" and "Risk
Factors -- Risks Associated with Leverage."
The Company will use the net proceeds received from the Offerings primarily
to repay an aggregate of approximately $331 million of short-term and long-term
debt, including the Non-Compliant Loans (which, following planned repayments of
portions thereof prior to the Offerings, will have an aggregate outstanding
balance of $154 million), $63 million of short-term loans, $8 million of term
loans and $106 million of amounts due to AUSA. In addition, the Company will use
approximately $34 million of such net proceeds to repurchase AICL's 40% interest
in AAP. See "Use of Proceeds." Following the expected application of the
estimated net proceeds of the Offerings to the Company together with planned
repayments of debt prior to the Offerings, the Company will have $54 million of
short-term borrowing and current portion of long-term debt, $185 million of
long-term debt and no amounts then due to AUSA. In addition, the remaining $85
million of such net proceeds will be available for capital expenditures and
working capital.
The Company has been investing significant amounts of capital to increase
its packaging and test services capacity, including 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. Advanced
packaging processes are being developed at the U.S. facility and full scale
operations are expected to begin in 1999. In 1995, 1996, and 1997, the Company
made capital expenditures of $123.6 million, $185.1 million and $179.0 million,
respectively. Because the Company and AICL have added a significant amount of
packaging and test capacity in recent years, the Company intends to decrease its
level of capital expenditures in 1998. The Company currently intends to spend
approximately $60 million in capital expenditures in 1998, including for the new
factory in the U.S. and moderate capacity expansion at the Company's existing
facilities in the Philippines to meet expected demand. The Company believes that
expenditure levels could increase substantially in 1999 to provide the Company
with adequate capacity.
The Company believes that following the application of the net proceeds
from the Offerings, its existing cash balances, cash flow from operations,
available equipment lease financing, bank borrowings and financing obtained
through AUSA will be sufficient to meet its anticipated cash requirements
including working capital and capital expenditures, for at least the next 12
months. In addition, the Company intends to seek out strategic long-term
financing arrangements to fund part of its capital expansion plans in 1998.
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 to seek 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, fluctua-
45
<PAGE> 48
tions in foreign currency exchange rates, changes in semiconductor industry
conditions and competitive factors. There can be no assurance that such
additional financing 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. In addition, if the Company obtains
such financing by selling equity securities of the Company, the Company's
stockholders may experience significant dilution.
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, as well as financing from a trade receivables
securitization agreement. Cash provided by operating activities in 1995, 1996
and 1997 was $53.3 million, $8.6 million, and $250.1 million, respectively. Cash
provided (used) by financing activities was $71.2 million, $148.0 million and
$(16.0) million for 1995, 1996 and 1997, respectively.
At December 31, 1997, the Company's debt consisted of $326.0 million of
borrowings classified as current liabilities, $38.3 million of long-term debt
and capital lease obligations and $149.8 million of amounts due to AUSA. The
Company plans to repay prior to the Offerings approximately $50.3 million of its
short-term debt and $30 million of amounts due to AUSA. In addition, $13.9
million of amounts due to AUSA was assumed by AK Investments, Inc., an affiliate
of the Company, in February 1998. As of December 31, 1997, the Company had
extended guarantees in respect of bank debt of affiliates in the amount of $31
million and in respect of vendor obligations of an affiliate in the amount of
$24.7 million, which amount may vary over time. At December 31, 1997, the
Company had $223.9 million in borrowing facilities with a number of domestic and
foreign banks, of which $36.2 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 7.2% to 13%. Long-term
debt and capital lease obligations outstanding at December 31, 1997 have various
expiration dates through April 2004, and accrue interest at rates ranging from
6.7% to 12.5%. See Note 11 of Notes to Combined Financial Statements.
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 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 December 31, 1997, the
Company had fully utilized $149.8 million of the credit facilities available to
the Company through AUSA. These credit facilities are with U.S. branches of a
number of banks located in Korea and have interest rates ranging from
approximately 6.9% to prime plus 8.5% (17% at December 31, 1997). Because of the
recent deterioration of the Korean economy, Korean banks have begun to raise
interest rates applicable to their lending. See "Risk Factors -- Dependence on
International Operations and Sales; Concentration of Operations in the
Philippines and Korea -- Korea." As its credit lines have been renewed, AUSA has
experienced a significant increase in interest rates, and there can be no
assurance that such increases will not continue. The Company reimburses AUSA for
certain of the interest charges incurred by AUSA under these credit facilities.
As an overseas subsidiary of AICL, AUSA was formed with the approval of the Bank
of Korea. If the Bank of Korea were to withdraw such approval, or if AUSA
otherwise ceased operations for any reason, the Company and AICL would be
required to meet their financing needs through alternative arrangements.
Although the Company believes that after the Offerings alternative financing
arrangements will be available, there can be no assurance that the Company or
AICL will be able to obtain alternative financing on acceptable terms or at all.
AUSA has received commitments from its banks indicating that they intend to
renew the facilities when they expire through at least April 1, 1999. 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 non-current
liabilities on the Company's balance sheet at December 31, 1997. See Notes 2 and
6 of Notes to Combined Financial Statements.
46
<PAGE> 49
At December 31, 1997, all of AUSA's debt of $319 million, the Non-Compliant
Loans of $176 million and the Company's obligations under the Receivables Sale
(as defined below) were guaranteed by AICL. AICL currently has a significant
amount of debt relative to its equity and is contingently liable under
guarantees in respect of debt of its subsidiaries and affiliates, including
AUSA. As of December 31, 1997, AICL and its consolidated subsidiaries had
guarantees outstanding in respect of debt of its non-consolidated subsidiaries
and affiliates in the Anam Group in the aggregate amount of approximately W857
billion, including the guarantees of the Company'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 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 reflect a discount of LIBOR plus 0.375% from accounts
receivable sold. The Company applied approximately $83.4 million of the initial
Receivables Sale proceeds together with approximately $17 million of working
capital to reduce the Company's indebtedness to AUSA, which amounts were
advanced by AUSA to entities controlled by members of James Kim's family. See
Note 2 of Notes to Combined Financial Statements.
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 laws. As a result, AEI did not
recognize U.S. federal corporate income taxes. Instead, up until the Termination
Date, Mr. and Mrs. 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, Mr. and Mrs. Kim and the Kim Family Trusts will enter into
tax indemnification agreements providing that the Company 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 will indemnify Mr. and Mrs. Kim
and the Kim Family Trusts 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. and Mrs. 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 $19.8 million, $13.0 million and $5.0 million in 1995, 1996 and
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 December 31, 1997, the amount of such
undistributed net earnings was $27.7 million. See "Reorganization" and Notes 1,
10 and 17 of Notes to Combined 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.
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<PAGE> 50
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
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 herein, in "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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 December 31, 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.
The Company recently began offering wafer fabrication services through
AICL's new deep submicron CMOS foundry. This foundry is currently capable of
producing up to 15,000 8" wafers per month. Through a strategic relationship
with TI, the Company and AICL have qualified .25 micron CMOS process technology,
and TI has agreed to provide to AICL .18 micron CMOS process technology during
1998. This foundry will primarily manufacture digital signal processors
("DSPs"), application specific integrated circuits ("ASICs") and other logic
devices. By leveraging the Company's leading position in semiconductor packaging
and test services, the new wafer fabrication services have enabled 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 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.
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<PAGE> 51
[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 in
the
49
<PAGE> 52
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. According to industry estimates, independent packaging revenues are
expected to grow at a compound annual rate of approximately 16% over a period of
five years from $5.6 billion in 1997 to $11.6 billion in 2002. 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.
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<PAGE> 53
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 is able to offer 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(R), SuperBGA(R), fleXBGA(TM) and
ChipArray(TM) 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.
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
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<PAGE> 54
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 450 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
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. The Company recently began providing wafer fabrication services
through AICL's new deep submicron CMOS foundry. With the addition of wafer
fabrication, the Company is 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.
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<PAGE> 55
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
shown in the following tables.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
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>
================================================================================
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<PAGE> 56
<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 Package) 8-80 Designed for gate drivers,
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>
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<PAGE> 57
<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(TM) 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>
================================================================================
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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.
Although test services accounted for only 3.5% of the Company's total 1997
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
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<PAGE> 59
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>
1994 1995 1996 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% $ 801 55.0%
Advanced Leadframe................. 53 9.2 157 16.8 220 18.8 312 21.5
Laminate........................... 3 0.5 15 1.6 90 7.7 248 17.0
Testing and Other.................. 30 5.2 61 6.6 69 5.9 95 6.5
------- ----- ------- ----- ------- ----- ------- -----
Total.......................... $ 573 100.0% $ 932 100.0% $ 1,171 100.0% $ 1,456 100.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Wafer Fabrication
The Company recently began offering wafer fabrication services through
AICL's new deep submicron CMOS foundry. This foundry is currently capable of
producing up to 15,000 8" wafers per month. Through a strategic relationship
with TI, the Company and AICL have qualified .25 micron CMOS process technology,
and TI has agreed to provide to AICL .18 micron CMOS process technology during
1998. The Company's right to the supply of wafers from the foundry is subject to
the TI Manufacturing and Purchasing Agreement, pursuant to which 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.
Although the Company has received forecasts from TI which indicate that TI will
meet its minimum purchase obligation during the second half of 1998, during the
first quarter of 1998 TI's orders were below such minimum purchase commitment
due to market conditions and issues encountered by TI in the transition of its
products to .18 micron technology. There can be no assurance that TI will place
orders representing at least 40% of the capacity of this foundry during this
period or in the future. A failure by TI to comply with its minimum purchase
obligations or the cancellation of a significant wafer fabrication order by TI
or any other customer could have a material adverse effect on AICL's and the
Company's business, financial condition and results of operations. See "Risk
Factors -- Risks Associated with New Wafer Fabrication Business" and
" -- Intellectual Property."
The new 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 is 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.
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<PAGE> 60
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 Integrated Circuit Systems, Inc. Plessey Semiconductors
Altera Corporation Integrated Device Technology, Inc. Philips Electronics N.V.
Adaptec, Inc. Intel Corporation Robert Bosch GmbH
Advanced Micro Devices, Inc. Lattice Semiconductor Rockwell Corp.
Alcatel Mietec Corporation S3 Incorporated
American Micro Systems, Inc. Level One Communications, Inc. SGS-THOMSON
Analog Devices, Inc. LSI Logic Corporation Microelectronics N.V.
Atmel Corporation Lucent Technologies Inc. Siemens AG
Cirrus Logic Macronix International Co., Ltd. SMC Corporation
Cypress Semiconductor Corp. Matra Harris Semiconductors Silicon Storage
Dallas Semiconductor Maxim Integrated Circuits Technology, Inc.
Delco Electronics Corporation Microchip Technology Inc. Symbios Logic
Digital Equipment Corp. Microlinear TEMIC Semiconductors
Harris Corporation Motorola, Inc. Texas Instruments
Hewlett-Packard Company National Semiconductor Incorporated
International Business Machines Corporation VLSI Technology, Inc.
Corporation NeoMagic Corporation VTC Inc.
IC Works Inc. Northern Telecom Waferscale Integration, Inc.
Xilinx, Inc.
</TABLE>
The Company's five largest customers collectively accounted for approximately
34.1%, 39.2%, and 40.1% of the Company's total revenues in 1995, 1996 and 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 (Austin,
Texas; Boise, Idaho; Chandler, Arizona; Dallas, Texas; Santa Clara, California
and 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 15 of Notes to Combined 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.
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 being equipped at the Company's Chandler, Arizona site with
expected start-up in 1999. In addition, the Company provides packaging and test
services
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<PAGE> 61
through AICL's four factories in Korea, which provide such services to the
Company pursuant to a Supply Agreement. In 1996 and 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. The Company recently began offering wafer fabrication
services through AICL's new state-of-the-art .25 micron wafer foundry in Korea
pursuant to a 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 (1999) 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 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
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<PAGE> 62
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. ISO9002 is a worldwide manufacturing
quality certification program administered by an independent standards
organization. QS9000 is similarly an independently administered manufacturing
quality certification used by United States automotive manufacturers. The
Company believes that many of its customers prefer to purchase from suppliers
who are ISO9002 and QS9000 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 Bhd. (Malaysia), ChipPAC Incorporated (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, 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 Microelectronics
Corporation, as well as with device manufacturers such as LG Semicon Co., Ltd.,
Hitachi, Ltd., Toshiba Corp. and Winbond Electronics Corporation, which 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."
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
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<PAGE> 63
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 December 31, 1997, the Company employed approximately 95 persons in
research and development activities. In addition, other management and
operational personnel are involved in research and development activities. In
1995, 1996 and 1997, the Company's research and development expenses were
approximately $8.7 million, $10.9 million and $8.5 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
Agreements between the Company and AICL. The Supply Agreements also provide 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.
Although the Company is not currently a party to any material litigation,
the semiconductor industry is characterized by frequent claims regarding patent
and 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, the Company or AICL
could be required to discontinue the use of certain processes or cease the
manufacture, use, import and sale of infringing products to pay substantial
damages and to develop non-infringing technologies or to acquire licenses to the
alleged infringed technology. The Company's business, financial condition and
results of operations could be materially and adversely affected by such
developments. 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, AICL has obtained intellectual property for wafer
manufacturing primarily from TI. The licenses granted to AICL by TI under the TI
Technology Agreements are very limited. Although TI has granted to AICL a
license under TI's trade secret rights to use TI's technology in connection with
AICL's provision of wafer fabrication services, TI has not granted AICL a
license under its patents, copyrights and mask works to manufacture
semiconductors for third parties. Although TI has agreed that TI will not assert
a claim for patent, copyright or mask work right infringement against AICL or
the Company in connection with AICL's manufacture of semiconductor products for
third parties, TI has reserved the right to bring such infringement claims
against AICL's or the Company's customers with respect to semiconductor products
purchased from AICL or the Company. As a result, AICL's and the Company's
customers could be subject to patent litigation by TI and others, and AICL and
the Company could in turn be subject to litigation by such customers and
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<PAGE> 64
others, in connection with the 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 Philippines, 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 December 31, 1997, the Company had approximately 9,100 full-time
employees, 7,450 of whom were engaged in manufacturing, 1,150 in manufacturing
support, 95 in research and development, 210 in marketing and sales, and 195 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."
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<PAGE> 65
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
December 31, 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
Thomas D. George(1)(2).................... 57 Director
Gregory K. Hinckley(1)(2)................. 51 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
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 of The Electronics Boutique, Inc., an
electronics retail chain, and Forte Systems, Inc., an information technology,
consulting and outsourcing 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 Manager of 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.
Thomas D. George. Mr. George has been a director of the Company since
November 1997. Mr. George was Executive Vice President, and President and
General Manager, Semiconductor Products Sector ("SPS") of Motorola from April
1993 to May 1997. Prior to that, he held several positions with Motorola,
including Executive Vice President and Assistant General Manager, SPS from
November 1992 to April 1993 and Senior Vice President and Assistant General
Manager, SPS from July 1986 to November 1992. Mr. George is currently retired.
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Gregory K. Hinckley. Mr. Hinckley has been a director of the Company since
November 1997. Mr. Hinckley serves as Executive Vice President, Chief Operating
Officer and Chief Financial Officer of Mentor Graphics Corporation since January
1997. From November 1995 until December 1996 he held the position of Senior Vice
President with VLSI, a manufacturer of complex ASICs. From August 1992 until
December 1996, Mr. Hinckley held the position of Vice President, Finance and
Chief Financial Officer with VLSI. From December 1991 until August 1992, he was
an independent consultant. Mr. Hinckley is a director of OEC Medical Systems,
Inc., a manufacturer of medical imaging equipment.
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.
1998 Director Option Plan. The Company's 1998 Director Option Plan (the
"Director Plan") was adopted by the Board of Directors in January 1998 and is
expected to be approved by the Company's stockholders immediately following the
Reorganization. The Director Plan will become effective immediately prior to the
Offerings. A total of 300,000 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. The Director Plan provides for an initial grant
of options to purchase 15,000 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 5,000 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 exercise price of the options is 100% of
the fair market value of the Common Stock on the grant date, except that with
respect to initial grants to directors on the effective date of the Director
Plan the exercise price will be equal 94% of the initial public offering price
per share of Common Stock in the Offerings. The term of each option is ten
years. Each option granted to an Outside Director vests as to 33 1/3% of the
optioned stock one year after the date of grant, and as to an additional 33 1/3%
of the optioned stock on each anniversary of the date of grant, provided that
the optionee continues to serve as an Outside Director on such date so that 100%
of the optioned stock may be exercisable three 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
assumed or substituted 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 January 2008 unless
sooner terminated by the Board of Directors.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee is comprised of Messrs. George and Hinckley. The
functions of the Compensation Committee are to review and approve annual
salaries, bonuses, and grants of stock options pursuant to the Company's 1998
Stock Plan and to review and approve the terms and conditions of all employee
benefit plans or changes thereto. The Audit Committee is comprised of Messrs.
George and Hinckley. The functions of the Audit Committee are 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 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.
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EXECUTIVE COMPENSATION
Summary Compensation. The following table sets forth compensation earned
during the fiscal year ended December 31, 1997, by the Company's Chief Executive
Officer and the four 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(1)
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION
---------------------------- --------- --------- ------------
<S> <C> <C> <C>
James J. Kim, Chief Executive Officer and
Chairman(2).......................................... $500,000 $ -- $ 6,000
John N. Boruch, President(3)........................... 415,000 375,000 6,000
Frank J. Marcucci, Chief Financial Officer(4).......... 254,000 100,000 245,000
Eric R. Larson, Vice President......................... 220,000 -- --
Michael D. O'Brien, Vice President..................... 249,000 100,000 --
</TABLE>
- ---------------
(1) At the time of the Offerings, Messrs. Boruch, Marcucci, Larson and O'Brien
will receive option grants of 300,000 shares, 100,000 shares, 85,000 shares
and 85,000 shares, respectively, of Common Stock under the Company's 1998
Stock Plan, in each case with an exercise price per share equal to the
initial public offering price per share.
(2) All other compensation for Mr. Kim represents the amount of insurance
premium paid by the Company on Mr. Kim's behalf for a life insurance
policy. Effective January 1, 1998, Mr. Kim is compensated at an annual
salary of $750,000 and he may earn an annual bonus of up to $500,000 if the
Company achieves its annual operating plan, as approved by the Company's
Board of Directors.
(3) All other compensation for Mr. Boruch represents the amount of insurance
premium paid by the Company on Mr. Boruch's behalf for a life insurance
policy.
(4) All other compensation for Mr. Marcucci represents the amount of insurance
premium paid by the Company on Mr. Marcucci's behalf for a life insurance
policy together with a bonus paid to Mr. Marcucci to cover the income taxes
owed by Mr. Marcucci as a result of the payment of such insurance premium.
STOCK PLANS
1998 Stock Plan. The Company's 1998 Stock Plan (the "1998 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 1998 Plan was adopted by the Board of Directors in January
1998 and is expected to be approved by the Company's stockholders immediately
following the Reorganization. Unless terminated sooner, the 1998 Plan will
terminate automatically in January 2008. The maximum aggregate number of shares
which may be optioned and sold under the 1998 Plan is 5,000,000, plus an annual
increase to be added on each anniversary date of the adoption of the 1998 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 1998 to 5,000,000, or (ii) a lesser amount
determined by the Board of Directors.
The 1998 Plan may be administered by the Board of Directors or 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 Board
of Directors or the Committee, as applicable, has the power to determine the
terms of options granted, including the exercise price and the fair market
value, 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, the number of shares
subject to the option or stock purchase right, and the exercisability thereof
and the form of consideration payable upon such exercise. In addition, the Board
of Directors has the
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authority to amend, suspend or terminate the 1998 Plan, provided that no such
action may affect any share of Common Stock previously issued and sold or any
option previously granted under the 1998 Plan.
Unless determined otherwise by the administrators, options and stock
purchase rights granted under the 1998 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 1998 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 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 1998 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 1998 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 1998 Plan may not exceed
ten years.
The 1998 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.
1998 Employee Stock Purchase Plan. The Company's 1998 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
January 1998 and is expected to be approved by the stockholders immediately
following the Reorganization. The Company does not intend to implement the
Purchase Plan until after the Offerings. A total of 1,000,000 shares of Common
Stock have been made available for sale under the Purchase Plan and an annual
increase is to be added on each anniversary date of the adoption of the Purchase
Plan equal to the lesser of (i) the number of shares needed to restore the
maximum aggregate number of shares available for sale under the Purchase Plan to
1,000,000, or (ii) a lesser amount determined by the Board of Directors. The
Purchase Plan, which is intended to qualify under Section 423 of the Code is
administered by the Board of Directors or by a committee appointed by the Board.
Employees (including officers and employee directors of the Company but
excluding 5% or greater stockholders) are eligible to participate if they are
customarily employed for at least 20 hours per week and for more than five
months in any calendar year. The Purchase Plan permits eligible employees to
purchase Common Stock through payroll deductions, which may not exceed 15% of
the compensation an employee receives on each pay day. The Purchase Plan will be
implemented by consecutive six-month offering periods. The initial offering
period and the date of subsequent offering periods under the Purchase Plan will
be determined by the Board of Directors after the effective date of the
Offerings. Each participant will be granted an option on the first day of an
offering period, and shares of Common Stock will be automatically purchased on
the last date of each purchase period within the offering period. If the fair
market value of the Common Stock on any purchase date (other than the final
purchase date of the offering period) is lower than such fair market value on
the start date of that offering period, then all participants in that offering
period will be automatically withdrawn from such offering period and re-enrolled
in the immediately following offering period. The purchase price of the Common
Stock under the Purchase Plan will be equal to 85% of the lesser of
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<PAGE> 69
the fair market value per share of Common Stock on the start date of the
offering period or on the purchase date. Employees may end their participation
in an offering period at any time, and participation ends automatically on
termination of employment with the Company. In the event of a proposed
dissolution or liquidation of the Company, the offering periods then in progress
will be shortened by setting a new exercise date that is before the dissolution
or liquidation, and will terminate immediately prior to the consummation of the
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the Company's assets or the merger
of the Company with or into another corporation, each outstanding option will be
assumed or substituted for by the successor corporation. In the event the
successor corporation refuses to assume or substitute for the options, the
offering periods then in progress will be shortened by setting a new exercise
date that is before the sale or merger and the offering periods then in progress
will end on the new exercise date. Each participant will be notified at least
ten business days prior to the new exercise date, and unless such participant
ends his or her participation, the option will be exercised automatically on the
new exercise date. The Purchase Plan will terminate in January 2008, unless
sooner terminated by the Board of Directors.
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 employees who are
at least 21 years of age. Pursuant to the 401(k) Plan, employees may elect to
reduce their current eligible compensation by up to 13% of eligible 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 eligible
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 "Phillipine 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
Phillipine 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 Phillipine Plan are held in trust.
The Phillipine Plan is presently underfunded by $3.8 million. The amount by
which the Phillipine Plan is underfunded decreased from $7.2 million at
September 30, 1997 primarily as a result of payments made by the Company as
required under the plan and the effect of the recent devaluation of the
Phillipine peso to the U.S. dollar. See Note 9 of Notes to Combined Financial
Statements.
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
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<PAGE> 70
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.
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CERTAIN TRANSACTIONS
AICL was founded in 1956 by Mr. H. S. Kim, who currently serves as the
honorary Chairman and a Representative Director of AICL. AICL is a member of the
Anam Group of companies, 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 H. S. Kim,
which, together with the Company, collectively owned approximately 40.7% of the
outstanding common stock of AICL as of December 31, 1997. A significant portion
of the shares owned by the Kim family are leveraged and as a result of this, or
for other reasons, the family's ownership could be substantially reduced. James
Kim, the founder of the Company and currently its Chairman and Chief Executive
Officer, is the eldest son of H. S. 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. In
addition, four other members of Mr. Kim's family are on the 13-member Board of
Directors of AICL. In connection with the Reorganization, Mr. James Kim and
members of his family will exchange their interests in the Amkor Companies in
return for shares of Common Stock. After the Offerings, James Kim and members of
his family will beneficially own approximately 68.9% of the outstanding Common
Stock, and Mr. Kim and other 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 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 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,
overlaps and 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." and "Reorganization."
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 to them expenses incurred as a result of any proceeding against them as
to which they could be indemnified.
In connection with the Reorganization, the Company proposes to enter into
tax indemnification agreements with Mr. and Mrs. Kim and the Kim Family Trusts
pursuant to which the Company 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 will indemnify Mr. and Mrs. Kim and the Kim Family
Trusts 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 such stockholders 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
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 December 31, 1997, the amount of such
undistributed net earnings was $27.7 million. See "Reorganization" and Notes 1,
10 and 17 of Notes to Combined Financial Statements.
In February 1998 the Company sold its investment in AICL common stock to AK
Investments, Inc. ("AK Investments"), a company owned by Mr. Kim, for $13.9
million, the market value determined by the closing price of AICL shares on the
Korea Stock Exchange on the date of the sale. In exchange for such
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shares, AK Investments assumed $13.9 million of the Company's long-term
borrowing from AUSA. See Note 6 of Notes to Combined Financial Statements.
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 equalled approximately $87.0
million as of December 31, 1997. See Note 11 of Notes to Combined Financial
Statements.
The Company and Mr. Kim currently are parties to a loan agreement under
which Mr. Kim may borrow funds from the Company, subject to the Company's
consent. Mr. Kim has recognized compensation in 1996 and 1997 in the amount of
$101,716 and $3,000, respectively 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. All amounts due from Mr.
Kim have been repaid in full subsequent to December 31, 1997.
In 1996, Mr. Kim sold his interest in Amkor Anam Test Services, Inc.,
representing half of its outstanding capital stock, to AEI for $910,350. See
Note 14 of Notes to Combined Financial Statements.
AK Investments purchased certain securities held by AEI for $49.7 million,
which consideration was paid by assuming from AEI certain non-current payables
from AUSA. Subsequent to the sale of investments to AK Investments, AEI loaned
AK Investments an additional $12.8 million. The amount outstanding on this loan
as of December 31, 1997 was $4.4 million. See Notes 6 and 11 of Notes to
Combined Financial Statements. AK Investments repaid such amount in full during
March 1998.
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 Combined Financial Statements.
Members of the Kim family own all the outstanding shares of Forte Systems,
Inc. ("Forte"). The Company and Forte currently are parties to a loan agreement
under which Forte may borrow funds at market interest rates from the Company,
subject to the Company's consent. Since the beginning of the 1996 fiscal year,
the maximum amount outstanding under such agreement has been $3.8 million. See
Note 11 of Notes to Combined Financial Statements.
Members of the Kim family own all the outstanding shares of The Electronics
Boutique, Inc. (the "Electronics Boutique"). The Company and the Electronics
Boutique currently are parties to a loan agreement under which the Electronics
Boutique may borrow funds at market rates from the Company, subject to the
Company'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 $3.0 million. In addition, in 1996,
the Electronics Boutique borrowed $50 million from AEI in connection with a
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, the Company has guaranteed certain
vendor obligations and a line of credit of the Electronics Boutique, which total
approximately $24.7 million and $14.3 million, respectively as of December 31,
1997. See Note 11 of Notes to Combined Financial Statements.
In addition, in each of the last three years, various Electronics Boutique
expenses were paid by the Company on behalf of Electronics Boutique and various
Company expenses were paid by Electronics Boutique on behalf of the Company.
These expenses include insurance premiums, employee medical claims, interest,
rent and other miscellaneous expenses. In 1995, 1996 and 1997, the Company made
net advancements on behalf of Electronics Boutique of $604,000, $128,000 and
$147,000. In 1997, Electronics Boutique repaid to the Company $2.4 million of
current and prior year advancements.
The Company has executed a surety and guarantee agreement on behalf of
Electronics Boutique. The Company has unconditionally guaranteed Electronics
Boutique's obligation under a $17 million line of credit
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and a $9 million term loan note. As of December 31, 1997, there was $750,000
outstanding under the line of credit and $9 million outstanding under the term
loan note. The Company has also unconditionally guaranteed obligations of EB
Canada, a subsidiary of Electronics Boutique, under a $4 million term loan
agreement and a $1 million line of credit. As of December 31, 1997, there was
$3.8 million outstanding under the term loan and no amounts outstanding under
the line of credit.
The Company leases office space in West Chester, Pennsylvania from the Kim
Family Trusts. The lease expires in 2006. The Company has the option to extend
the lease for an additional 10 years. The monthly rent pursuant to such lease is
$92,000. 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 Combined Financial
Statements.
At December 31, 1996 and 1997, the Company had advances and notes
receivable from affiliates other than AICL and AUSA of $23.0 million and $36.5
million, respectively. See Note 11 of Notes to Combined Financial Statements.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock outstanding as of the date of this Prospectus, 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 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
PRIOR TO OFFERING NUMBER OF AFTER OFFERING(1)
-------------------- SHARES --------------------
NAME AND ADDRESS NUMBER PERCENT OFFERED NUMBER PERCENT
---------------- ---------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
James J. and Agnes C. Kim(2)(3).............. 29,075,000 35.2% 3,500,000 25,575,000 22.7%
1345 Enterprise Drive
West Chester, PA 19380
David D. Kim Trust of December 31,
1987(3)(4)................................. 13,750,000 16.6 500,000 13,250,000 11.8
1500 E. Lancaster Avenue
Paoli, PA 19301
John T. Kim Trust of December 31,
1987(3)(4)................................. 13,750,000 16.6 500,000 13,250,000 11.8
1500 E. Lancaster Avenue
Paoli, PA 19301
Susan Y. Kim Trust of December 31,
1987(3)(4)(5).............................. 13,750,000 16.6 500,000 13,250,000 11.8
1500 E. Lancaster Avenue
Paoli, PA 19301
Thomas D. George............................. -- -- -- -- --
Gregory K. Hinckley.......................... -- -- -- -- --
John N. Boruch............................... -- -- -- -- --
Eric R. Larson............................... -- -- -- -- --
Frank J. Marcucci............................ -- -- -- -- --
Michael D. O'Brien........................... -- -- -- -- --
All directors and executive officers as a
group (7 persons).......................... 29,075,000 35.2 3,500,000 25,575,000 22.7
</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 under 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) James J. and Agnes C. Kim are husband and wife. Accordingly, each may be
deemed to beneficially own shares of Common Stock held in the name of the
other.
(3) David D. Kim, John T. Kim and Susan Y. Kim are children of James J. and
Agnes C. Kim. Each of the David D. Kim Trust of December 31, 1987, John T.
Kim Trust of December 31, 1987 and Susan Y. Kim Trust of December 31, 1987
has in common Susan Y. Kim and John F.A. Earley as co-trustees, in addition
to a third trustee (John T. Kim in the case of the Susan Y. Kim Trust and
the John T. Kim Trust and David D. Kim in the case of the David D. Kim
Trust) (the trustees of each trust may be deemed to be the beneficial owners
of the shares held by such trust). In addition, the trust agreement for each
of these trusts encourages the trustees of the trusts to vote the shares of
Common Stock held by them, in their discretion, in concert with James Kim's
family. Accordingly, the trusts, together with their respective trustees and
James J. and Agnes C. Kim, may be considered a "group" under Section 13(d)
of the Exchange Act. This group may be deemed to have beneficial ownership
of 65,325,000 shares or 58.0% of the outstanding shares of Common Stock
after the Offerings.
(4) These three trusts together with the trusts described in note (5) below
comprise the Kim Family Trusts.
(5) Includes 8,200,000 shares held by a trust established for the benefit of
Susan Y. Kim's children.
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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
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 112,610,000 shares of Common
Stock outstanding, 2,730,000 shares of Common Stock will be issuable upon
exercise of outstanding options, 3,570,000 shares of Common Stock will be
reserved for issuance under the Company's 1998 Stock Plan, 1998 Director Option
Plan and 1998 Employee Stock Purchase Plan and shares of Common Stock
will be reserved for issuance upon conversion of the Convertible Notes.
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
additional shares of Preferred Stock. See "Risk Factors -- Anti-Takeover Effects
of Delaware Law and Certain Charter Provisions."
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EFFECT OF DELAWARE ANTI-TAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Anti-Takeover Law"), which regulates corporate acquisitions. The
Anti-Takeover Law prevents certain Delaware corporations, including those whose
securities are listed for trading on the Nasdaq National Market, 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 Anti-Takeover 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 10% of the
Company's assets. In general, the Anti-Takeover 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 Anti-Takeover 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 Anti-Takeover Law. See "Risk
Factors -- Anti-Takeover Effects of Delaware Law and Certain Charter
Provisions."
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.
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DESCRIPTION OF CONVERTIBLE NOTES
The Convertible Notes will be issued under an indenture to be dated as of
, 1998 (the "Indenture") between the Company and State Street Bank
and Trust Company, as trustee (the "Trustee"), a copy of which has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
The terms of the Convertible Notes will include those stated in the Indenture
and those made a part of the Indenture by reference to the Trust Indenture Act
of 1939, as amended (the "TIA"), as in effect on the date of the Indenture. The
Convertible Notes will be subject to all such terms, and holders of the
Convertible Notes are referred to the Indenture and the TIA for a statement of
such terms. The following is a summary of important terms of the Convertible
Notes and does not purport to be complete. Reference should be made to all
provisions of the Indenture, including the definitions therein of certain terms
and all terms made a part of the Indenture by reference to the TIA. Certain
definitions of terms used in the following summary are set forth under
"-- Certain Definitions" below. As used in this section, the "Company" means
Amkor Technology, Inc., but not any of its Subsidiaries, unless the context
requires otherwise.
GENERAL
The Convertible Notes will be general unsecured subordinated obligations of
the Company, will mature on , 2003 (the "Maturity Date"), and will
be limited to an aggregate principal amount of $150,000,000 ($172,500,000 if the
Underwriters' over-allotment option is exercised). The Convertible Notes will be
issued in denominations of $1,000 and integral multiples of $1,000 in fully
registered form. The Convertible Notes are exchangeable and transfers thereof
will be registrable without charge therefor, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge in connection
therewith.
The Convertible Notes will accrue interest at a rate of % per annum
from , 1998, or from the most recent interest payment date to which
interest has been paid or duly provided for, and accrued and unpaid interest
will be payable semi-annually in arrears on and of each year
beginning , 1998. Interest will be paid to the person in whose name
a Convertible Note is registered at the close of business on the or
immediately preceding the relevant interest payment date (other than
with respect to a Convertible Note or portion thereof called for redemption on a
redemption date, or repurchased in connection with a Designated Event on a
repurchase date, during the period from a record date to (but excluding) the
next succeeding interest payment date (in which case accrued interest shall be
payable (unless such Convertible Note of portion thereof is converted) to the
holder of the Convertible Note or portion thereof redeemed or repurchased)).
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Principal of, premium, if any, and interest on the Convertible Notes will
be payable at the office or agency of the Company maintained for such purpose
or, at the option of the Company, payment of interest may be made by check
mailed to the holders of the Convertible Notes at their respective addresses set
forth in the register of holders of Convertible Notes. Until otherwise
designated by the Company, the Company's office or agency maintained for such
purpose will be the principal corporate trust office of the Trustee.
CONVERSION
The holders of Convertible Notes will be entitled at any time on or before
the close of business on the last trading day prior to the Maturity Date of the
Convertible Notes, subject to prior redemption or repurchase, to convert any
Convertible Notes or portions thereof (in denominations of $1,000 or multiples
thereof) into Common Stock of the Company, at the conversion price of
$ per share of Common Stock, subject to adjustment as described below
(the "Conversion Price"). Except as described below, no adjustment will be made
on conversion of any Convertible Notes for interest accrued thereon or for
dividends on any Common Stock issued. If Convertible Notes not called for
redemption are converted after a record date for the payment of interest and
prior to the next succeeding interest payment date, such Convertible Notes must
be accompanied by funds equal to the interest payable on such succeeding
interest payment date on the principal amount so converted. The Company is not
required to issue fractional shares of Common Stock upon
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conversion of Convertible Notes and, in lieu thereof, will pay a cash adjustment
based upon the market price of the Common Stock on the last trading day prior to
the date of conversion. In the case of Convertible Notes called for redemption,
conversion rights will expire at the close of business on the trading day
preceding the date fixed for redemption, unless the Company defaults in payment
of the redemption price, in which case the conversion right will terminate at
the close of business on the date such default is cured. In the event any holder
exercises its right to require the Company to repurchase Notes upon a Designated
Event, such holder's conversion right will terminate on the close of business on
the Designated Event Offer Termination Date (as defined) unless the Company
defaults in the payment due upon repurchase or the holder elects to withdraw the
submission of election to repurchase. See "-- Repurchase at Option of Holders
Upon a Designated Event."
The right of conversion attaching to any Convertible Note may be exercised
by the holder by delivering the Convertible Note at the specified office of a
conversion agent, accompanied by a duly signed and completed notice of
conversion, together with any funds that may be required as described in the
preceding paragraph. Such notice of conversion can be obtained from the Trustee.
Beneficial owners of interests in a Global Note (as defined) may exercise their
right of conversion by delivering to The Depository Trust Company ("DTC") the
appropriate instruction form for conversion pursuant to DTC's conversion
program. The conversion date shall be the date on which the Convertible Note,
the duly signed and completed notice of conversion, and any funds that may be
required as described in the preceding paragraph shall have been so delivered. A
holder delivering a Convertible Note for conversion will not be required to pay
any taxes or duties payable in respect of the issue or delivery of Common Stock
on conversion, but will be required to pay any tax or duty which may be payable
in respect of any transfer involved in the issue or delivery of the Common Stock
in a name other than the holder of the Convertible Note. Certificates
representing shares of Common Stock will not be issued or delivered unless all
taxes and duties, if any, payable by the holder have been paid.
The Conversion Price is subject to adjustment (under formulae set forth in
the Indenture) in certain events, including: (i) the issuance of Common Stock as
a dividend or distribution on Common Stock; (ii) certain subdivisions and
combinations of the Common Stock; (iii) the issuance to all or substantially all
holders of Common Stock of certain rights or warrants to purchase Common Stock
at a price per share less than the Current Market Price (as defined); (iv) the
dividend or other distribution to all holders of Common Stock of shares of
capital stock of the Company (other than Common Stock) or evidences of
indebtedness of the Company or assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of Common Stock to the extent such distributions,
combined together with (A) all such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made plus (B) any
cash and the fair market value of other consideration payable in respect of any
tender offers by the Company or any of its Subsidiaries for Common Stock
concluded within the preceding 12 months in respect of which no adjustment has
been made, exceeds 15% of the Company's market capitalization (being the product
of the then current market price of the Common Stock times the number of shares
of Common Stock then outstanding) on the record date for such distribution; and
(vi) the purchase of Common Stock pursuant to a tender offer made by the Company
or any of its subsidiaries to the extent that the aggregate consideration,
together with (X) any cash and the fair market value of any other consideration
payable in any other tender offer expiring within 12 months preceding such
tender offer in respect of which no adjustment has been made plus (Y) the
aggregate amount of any such all-cash distributions referred to in clause (v)
above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 15% of the Company's market capitalization on the expiration of
such tender offer.
In the case of (i) any reclassification or change of the Common Stock or
(ii) a consolidation, merger or combination involving the Company or a sale or
conveyance to another corporation of the property and assets of the Company as
an entirety or substantially as an entirety, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, the holders of the Convertible Notes then outstanding will be
entitled thereafter to convert such Convertible Notes into the kind and amount
of shares of stock, other
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securities or other property or assets, which they would have owned or been
entitled to receive upon such reclassification, change, consolidation, merger,
combination, sale or conveyance had such Convertible Notes been converted into
Common Stock immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance (assuming, in a case in which the
Company's stockholders may exercise rights of election, that a holder of
Convertible Notes would not have exercised any rights of election as to the
stock, other securities or other property or assets receivable in connection
therewith and received per share the kind and amount received per share by a
plurality of non-electing shares). Certain of the foregoing events may also
constitute or result in a Designated Event requiring the Company to offer to
repurchase the Convertible Notes. See "-- Repurchase at Option of Holders Upon a
Designated Event."
In the event of a taxable distribution to holders of Common Stock (or other
transaction) that results in any adjustment of the Conversion Price, the holders
of Convertible Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Consequences to Holders of Common Stock and Convertible Notes."
The Company from time to time may, to the extent permitted by law, reduce
the Conversion Price of the Convertible Notes by any amount for any period of at
least 20 days, in which case the Company shall give at least 15 days' notice of
such decrease, if the Board of Directors has made a determination that such
decrease would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in the
Conversion Price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes. See
"Certain Federal Income Tax Consequences to Holders of Common Stock and
Convertible Notes."
No adjustment in the Conversion Price will be required unless such
adjustment would require a change of at least 1% of the Conversion Price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the Conversion Price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the
Convertible Notes will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full in cash or other payment satisfactory to
the Senior Debt of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter incurred. Upon any distribution to creditors of the
Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, an assignment for the benefit of creditors or any
marshaling of the Company's assets and liabilities, the holders of Senior Debt
will be entitled to receive payment in full in cash or other payment
satisfactory to the Senior Debt of all Senior Debt of all obligations in respect
of such Senior Debt before the holders of Convertible Notes will be entitled to
receive any payment with respect to the Convertible Notes.
In the event of any acceleration of the Convertible Notes because of an
Event of Default, the holders of any Senior Debt then outstanding will be
entitled to payment in full in cash or other payment satisfactory to the holders
of such Senior Debt of all obligations in respect of such Senior Debt before the
holders of the Convertible Notes are entitled to receive any payment or
distribution in respect thereof. If payment of the Convertible Notes is
accelerated because of an Event of Default, the Company or the Trustee shall
promptly notify the holders of Senior Debt or the trustee(s) for such Senior
Debt of the acceleration. The Company may not pay the Convertible Notes until
five business days after such holders or trustee(s) of Senior Debt receive
notice of such acceleration and, thereafter, may pay the Convertible Notes only
if the subordination provisions of the Indenture otherwise permit payment at
that time.
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The Company also may not make any payment upon or in respect of the
Convertible Notes if (i) a default in the payment of the principal of, premium,
if any, interest, rent or other obligations in respect of Senior Debt occurs and
is continuing beyond any applicable period of grace or (ii) a default, other
than a payment default, occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or other person
permitted to give such notice under the Indenture. Payments on the Convertible
Notes may and shall be resumed (a) in the case of a payment default, upon the
date on which such default is cured or waived or ceases to exist and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or ceases to exist or 179 days after the date on
which the applicable Payment Blockage Notice is received if the maturity of the
Senior Debt has not been accelerated. No new period of payment blockage may be
commenced unless and until 365 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
By reason of the subordination provisions described above, in the event of
the Company's liquidation or insolvency, holders of Senior Debt may receive
more, ratably, and holders of the Convertible Notes may receive less, ratably,
than the other creditors of the Company. Such subordination will not prevent the
occurrences of any Event of Default under the Indenture.
The Convertible Notes are obligations exclusively of the Company. However,
since the operations of the Company are primarily conducted through
Subsidiaries, the cash flow and the consequent ability of the Company to service
its debt, including the Convertible Notes, are primarily dependent upon the
earnings of its Subsidiaries and the distribution of those earnings to, or upon
loans or other payments of funds by those Subsidiaries to, the Company. The
payment of dividends and the making of loans and advances to the Company by its
Subsidiaries may be subject to statutory or contractual restrictions, are
dependent upon the earnings of those Subsidiaries and are subject to various
business considerations.
Any right of the Company to receive assets of any of its Subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Convertible Notes to participate in those assets) will be effectively
subordinated to the claims of that Subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such Subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such Subsidiary and
any indebtedness of such Subsidiary senior to that held by the Company.
As of December 31, 1997 (after giving effect to the Reorganization), the
Company had approximately $32 million of outstanding indebtedness that would
have constituted Senior Debt, and the indebtedness and other liabilities of the
Company's subsidiaries (excluding intercompany liabilities and obligations of a
type not required to be reflected on the balance sheet of such subsidiary in
accordance with GAAP) that would effectively have been senior to the Convertible
Notes were approximately $642 million. After giving effect to planned debt
repayments by the Company prior to the Offerings and the application of the
estimated net proceeds to the Company of the Offerings (assuming an initial
public offering price of $11.00 per share of Common Stock), such amounts will be
approximately $32 million and $217 million, respectively. The Indenture will not
limit the amount of additional indebtedness, including Senior Debt, that the
Company can create, incur, assume or guarantee, nor will the Indenture limit the
amount of indebtedness and other liabilities that any Subsidiary can create,
incur, assume or guarantee.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Convertible Notes receives any payment or distribution of assets of the
Company of any kind in contravention of any of the terms of the Indenture,
whether in cash, property or securities, including, without limitation by way of
set-off or otherwise, in respect of the Convertible Notes before all Senior Debt
is paid in full in cash or other payment satisfactory to the holders of Senior
Debt, then such payment or distribution will be held by the recipient in trust
for the benefit of holders of Senior Debt, and will be immediately paid over or
delivered to the holders of Senior Debt or their representative or
representatives to the extent necessary to make payment in full in cash or other
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payment satisfactory to such holders of all Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution, or provision therefor,
to or for the holders of Senior Debt.
OPTIONAL REDEMPTION
The Convertible Notes may not be redeemed by the Company prior to
, 2001. The Convertible Notes may be redeemed at the option of the
Company, in whole or from time to time in part, on not less than 15 nor more
than 60 days' prior written notice to the holders thereof by first class mail,
at the following redemption prices (expressed as percentages of principal
amount) if redeemed during the 12-month period beginning of each year
indicated ( with respect to 2001), plus accrued and unpaid interest to
the date fixed for redemption, if the closing price of the Common Stock on the
principal stock exchange or market on which the Common Stock is then quoted or
admitted to trading equals or exceeds 125% of the Conversion Price for at least
20 trading days within a period of 30 consecutive trading days ending on the
fifth trading day prior to the date the notice of redemption is first mailed to
the holders of the Convertible Notes:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001............................................
2002............................................
</TABLE>
If less than all the Convertible Notes are to be redeemed at any time,
selection of Convertible Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Convertible Notes are listed or, if the Convertible Notes
are not so listed, on a pro rata basis by lot or by any other method that the
Trustee considers fair and appropriate. The Trustee may select for redemption a
portion of the principal of any Convertible Note that has a denomination larger
than $1,000. Convertible Notes and portions thereof will be redeemed in the
amount of $1,000 or integral multiples of $1,000. The Trustee will make the
selection from Convertible Notes outstanding and not previously called for
redemption; provided that if a portion of a holder's Convertible Notes are
selected for partial redemption and such holder converts a portion of such
Convertible Notes, such converted portion shall be deemed to be taken from the
portion selected for redemption.
Provisions of the Indenture that apply to the Convertible Notes called for
redemption also apply to portions of the Convertible Notes called for
redemption. If any Convertible Note is to be redeemed in part, the notice of
redemption will state the portion of the principal amount to be redeemed. Upon
surrender of a Convertible Note that is redeemed in part only, the Company will
execute and the Trustee will authenticate and deliver to the holder a new
Convertible Note equal in principal amount to the unredeemed portion of the
Convertible Note surrendered.
On and after the redemption date, unless the Company shall default in the
payment of the redemption price, interest will cease to accrue on the principal
amount of the Convertible Notes or portions thereof called for redemption and
for which funds have been set apart for payment. In the case of Convertible
Notes or portions thereof redeemed on a redemption date which is also a
regularly scheduled interest payment date, the interest payment due on such date
shall be paid to the person in whose name the Note is registered at the close of
business on the relevant record date.
The Convertible Notes are not entitled to any sinking fund.
REPURCHASE AT OPTION OF HOLDERS UPON A DESIGNATED EVENT
Upon the occurrence of a Designated Event, each holder of Convertible Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such holder's Convertible Notes
pursuant to the offer described below (the "Designated Event Offer") at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest thereon to the date of purchase (the "Designated
Event Payment"). Within 20 days following any Designated Event, the Company will
mail a notice to each holder describing the transaction or transactions that
constitute the
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Designated Event and offering to repurchase Convertible Notes pursuant to the
procedures required by the Indenture and described in such notice.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Convertible Notes as a result of a Designated Event. Rule
13e-4 under the Exchange Act requires, among other things, the dissemination of
certain information to security holders in the event of an issuer tender offer
and may apply in the event that the repurchase option becomes available to
holders of the Convertible Notes. The Company will comply with this rule to the
extent applicable at that time.
On the date specified for termination of the Designated Event Offer, the
Company will, to the extent lawful, (1) accept for payment all Convertible Notes
or portions thereof properly tendered pursuant to the Designated Event Offer,
(2) deposit with the paying agent an amount equal to the Designated Event
Payment in respect of all Convertible Notes or portions thereof so tendered and
(3) deliver or cause to be delivered to the Trustee the Convertible Notes so
accepted together with an Officers' Certificate stating the aggregate principal
amount of Convertible Notes or portions thereof being purchased by the Company.
On the date specified for payment of the Designated Event Payment (the
"Designated Event Payment Date"), the paying agent will promptly mail to each
holder of Convertible Notes so accepted the Designated Event Payment for such
Convertible Notes, and the Trustee will promptly authenticate and mail (or cause
to be transferred by book entry) to each holder a new Convertible Note equal in
principal amount to any unpurchased portion of the Convertible Notes
surrendered, if any; provided that each such new Convertible Note will be in a
principal amount of $1,000 or an integral multiple thereof.
The foregoing provisions would not necessarily afford holders of the
Convertible Notes protection in the event of highly leveraged or other
transactions involving the Company that may adversely affect holders.
The right to require the Company to repurchase Convertible Notes as a
result of a Designated Event could have the effect of delaying, deferring or
preventing a Change of Control or other attempts to acquire control of the
Company unless arrangements have been made to enable the Company to repurchase
all the Convertible Notes at the Designated Event Payment Date. Consequently,
this right may render more difficult or discourage a merger, consolidation or
tender offer (even if such transaction is supported by the Company's Board of
Directors or is favorable to the stockholders), the assumption of control by a
holder of a large block of the Company's shares and the removal of incumbent
management.
Except as described above with respect to a Designated Event, the Indenture
does not contain provisions that permit the holders of the Convertible Notes to
require that the Company repurchase or redeem the Convertible Notes in the event
of a takeover, recapitalization or similar restructuring. Subject to the
limitation on mergers and consolidations described below, the Company, its
management or its Subsidiaries could in the future enter into certain
transactions, including refinancings, certain recapitalizations, acquisitions,
the sale of all or substantially all of its assets, the liquidation of the
Company or similar transactions, that would not constitute a Designated Event
under the Indenture, but that would increase the amount of Senior Debt (or any
other indebtedness) outstanding at such time or substantially reduce or
eliminate the Company's assets.
The terms of the Company's existing or future credit or other agreements
relating to indebtedness (including Senior Debt) may prohibit the Company from
purchasing any Convertible Notes and may also provide that a Designated Event,
as well as certain other change-of-control events with respect to the Company,
would constitute an event of default thereunder. In the event a Designated Event
occurs at a time when the Company is prohibited from purchasing Convertible
Notes, the Company could seek the consent of its then-existing lenders to the
purchase of Convertible Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company would remain prohibited from purchasing Convertible
Notes. In such case, the Company's failure to purchase tendered Convertible
Notes would constitute an Event of Default under the Indenture, which may, in
turn, constitute a further default under the terms of other indebtedness that
the Company has entered into or may enter into from time to time. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of Convertible Notes.
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A "Designated Event" will be deemed to have occurred upon a Change of
Control or a Termination of Trading.
A "Change of Control" will be deemed to have occurred when: (i) any person
has become an Acquiring Person, (ii) the Company consolidates with or merges
into any other corporation, or conveys, transfers, or leases all or
substantially all of its assets to any person, or any other corporation merges
into the Company, and, in the case of any such transaction, the outstanding
Common Stock of the Company is changed or exchanged as a result, unless the
stockholders of the Company immediately before such transaction own, directly or
indirectly immediately following such transaction, at least a majority of the
combined voting power of the outstanding voting securities of the corporation
resulting from such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction, or (iii) any
time the Continuing Directors do not constitute a majority of the Board of
Directors of the Company (or, if applicable, a successor corporation to the
Company); provided that a Change of Control shall not be deemed to have occurred
if either (x) the last sale price of the Common Stock for any five trading days
during the ten trading days immediately preceding the Change of Control is at
least equal to 105% of the Conversion Price in effect on the date of such Change
of Control or (y) at least 90% of the consideration (excluding cash payments for
fractional shares) in the transaction or transactions constituting the Change of
Control consists of shares of common stock that are, or upon issuance will be,
traded on a United States national securities exchange or approved for trading
on an established automated over-the-counter trading market in the United
States.
The definition of Change of Control includes a phrase relating to the
lease, transfer or conveyance of "all or substantially all" of the assets of the
Company. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of Convertible Notes
to require the Company to repurchase such Convertible Notes as a result of a
lease, transfer or conveyance of less than all of the assets of the Company to
another person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
A "Termination of Trading" will be deemed to have occurred if the Common
Stock (or other common stock into which the Convertible Notes are then
convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established automated
over-the-counter trading market in the United States.
MERGER AND CONSOLIDATION
The Indenture will provide that the Company may not, in a single
transaction or a series of related transactions, consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another
corporation, person or entity as an entirety or substantially as an entirety
unless either (a)(i) the Company shall be the surviving or continuing
corporation or (ii) the entity or person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or person
which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company substantially as an
entirety (x) is a corporation organized and validly existing under the laws of
the United States, any State thereof or the District of Columbia and (y) assumes
the due and punctual payment of the principal of, and premium, if any, and
interest on all the Convertible Notes and the performance of every covenant of
the Company under the Convertible Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (b)
immediately after such transaction no Default or Event of Default exists; and
(c) the Company or such person shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that such transaction and
the supplemental indenture comply with the Indenture and that all conditions
precedent in the Indenture relating to such transaction have been satisfied.
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For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company, the capital stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
Upon any such consolidation, merger, sale, assignment, conveyance, lease,
transfer or other disposition in accordance with the foregoing, the successor
person formed by such consolidation or into which the Company is merged or to
which such sale, assignment, conveyance, lease, transfer or other disposition is
made will succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture with the same effect as if such
successor had been named as the Company therein, and thereafter (except in the
case of a sale, assignment, transfer, lease, conveyance or other disposition)
the predecessor corporation will be relieved of all further obligations and
covenants under the Indenture and the Convertible Notes.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being (i) default in
payment of the principal of, or premium, if any, on the Convertible Notes,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; (ii) default for 30 days in payment of any installment of interest on
the Convertible Notes, whether or not such payment is prohibited by the
subordination provisions of the Indenture; (iii) default by the Company for 60
days after notice in the observance or performance of any other covenants in the
Indenture; (iv) default in the payment of the Designated Event Payment in
respect of the Convertible Notes on the date therefor, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (v)
failure to provide timely notice of a Designated Event; (vi) failure of the
Company or any Material Subsidiary to make any payment at maturity, including
any applicable grace period, in respect of indebtedness for borrowed money of,
or guaranteed or assumed by, the Company or any Material Subsidiary, which
payment is in an amount in excess of $20,000,000, and continuance of such
failure for 30 days after notice; (vii) default by the Company or any Material
Subsidiary with respect to any such indebtedness, which default results in the
acceleration of any such indebtedness of an amount in excess of $20,000,000
without such indebtedness having been paid or discharged or such acceleration
having been cured, waived, rescinded or annulled for 30 days after notice; or
(viii) certain events involving bankruptcy, insolvency or reorganization of the
Company or any Material Subsidiary.
If an Event of Default (other than an Event of Default specified in clause
(viii) above with respect to the Company) occurs and is continuing, then and in
every such case the Trustee, by written notice to the Company, or the holders of
not less than 25% in aggregate principal amount of the then outstanding
Convertible Notes, by written notice to the Company and the Trustee, may declare
the unpaid principal of, premium, if any, and accrued and unpaid interest on all
the Convertible Notes then outstanding to be due and payable. Upon such
declaration, such principal amount, premium, if any, and accrued and unpaid
interest will become immediately due and payable, notwithstanding anything
contained in the Indenture or the Convertible Notes to the contrary, but subject
to the provisions limiting payment described in "-- Subordination." If any Event
of Default specified in clause (viii) above occurs with respect to the Company,
all unpaid principal of, and premium, if any, and accrued and unpaid interest on
the Convertible Notes then outstanding will automatically become due and
payable, subject to the provisions described in "-- Subordination," without any
declaration or other act on the part of the Trustee or any holder of Convertible
Notes.
Holders of the Convertible Notes may not enforce the Indenture or the
Convertible Notes except as provided in the Indenture. Subject to the provisions
of the Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the holders, unless such holders have
offered to the Trustee a security or an indemnity satisfactory to it against any
cost, expense or liability. Subject to all provisions of the Indenture and
applicable law, the holders of a majority in aggregate principal amount of the
then outstanding Convertible Notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. If a Default or Event of
Default occurs and
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is continuing and is known to the Trustee, the Indenture requires the Trustee to
mail a notice of Default or Event of Default to each holder within 60 days of
the occurrence of such Default or Event of Default, provided, however, that the
Trustee may withhold from the holders notice of any continuing Default or Event
of Default (except a Default or Event of Default in the payment of principal of,
premium, if any or interest on the Convertible Notes) if it determines in good
faith that withholding notice is in their interest. The holders of a majority in
aggregate principal amount of the Convertible Notes then outstanding by notice
to the Trustee may rescind any acceleration of the Convertible Notes and its
consequences if all existing Events of Default (other than the nonpayment of
principal of, premium, if any, and interest on the Convertible Notes that has
become due solely by virtue of such acceleration) have been cured or waived and
if the rescission would not conflict with any judgment or decree of any court of
competent jurisdiction. No such rescission shall affect any subsequent Default
or Event of Default or impair any right consequent thereto.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Convertible Notes pursuant
to the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the Convertible Notes. If an Event of Default
occurs prior to any date on which the Company is prohibited from redeeming the
Convertible Notes by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Convertible Notes prior to such date, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Convertible Notes.
The holders of a majority in aggregate principal amount of the Convertible
Notes then outstanding may, on behalf of the holders of all the Convertible
Notes, waive any past Default or Event of Default under the Indenture and its
consequences, except Default in the payment of principal of, premium, if any, or
interest on the Convertible Notes (other than the non-payment of principal of,
premium, if any, and interest on the Convertible Notes that has become due
solely by virtue of an acceleration that has been duly rescinded as provided
above) or in respect of a covenant or provision of the Indenture that cannot be
modified or amended without the consent of all holders of Convertible Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
BOOK-ENTRY; DELIVERY AND FORM
The Convertible Notes will be issued in the form of one or more global
notes (the "Global Note") deposited with, or on behalf of, DTC and registered in
the name of Cede & Co. as DTC's nominees, or will remain in the custody of the
Trustee pursuant to a FAST Balance Certificate Agreement between DTC and the
Trustee. Owners of beneficial interests in the Convertible Notes represented by
the Global Note will hold such interests pursuant to the procedures and
practices of DTC and must exercise any rights in respect of their interests
(including any right to convert or require repurchase of their interests) in
accordance with those procedures and practices. Such beneficial owners will not
be holders for purposes of the Indenture, and will not be entitled to any rights
under the Global Note or the Indenture, with respect to the Global Note, and the
Company and the Trustee, and any of their respective agents, may treat DTC as
the sole holder and owner of the Global Note for all purposes under the
Indenture.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities for its participants
and facilitates the clearance and settlement of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in participants' accounts, thereby eliminating the need for
physical movement of securities
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certificates. Direct participants include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is
owned by a number of its direct participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a direct participant, either
directly or indirectly. The rules applicable to DTC and its participants are on
file with the Commission.
Unless and until they are exchanged in whole or in part for certificated
Convertible Notes in definitive form as set forth below, the Global Note may not
be transferred except as a whole by DTC to a nominee of DTC, or by a nominee of
DTC to DTC or another nominee of DTC.
The Convertible Notes represented by the Global Note will not be
exchangeable for certificated Convertible Notes, provided that if DTC is at any
time unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Company within 90 days, the Company will
issue individual Convertible Notes in definitive form in exchange for the Global
Note. In addition, the Company may at any time in its sole discretion determine
not to have a Global Note, and, in such event, will issue individual Convertible
Notes in definitive form in exchange for the Global Note previously representing
all such Convertible Notes. In either instance, an owner of a beneficial
interest in a Global Note will be entitled to physical delivery of Convertible
Notes in definitive form equal in principal amount to such beneficial interest
and to have such Convertible Notes registered in its name. Individual
Convertible Notes so issued in definitive form will be issued in denominations
of $1,000 and any larger amount that is an integral multiple of $1,000 and will
be issued in registered form only, without coupons.
The laws of some states require that certain persons take physical delivery
in definite form of securities that they own and that security interests in
negotiable instruments can only be perfected by delivery of certificates
representing the instruments. Consequently, the ability to transfer Convertible
Notes evidenced by the Global Note will be limited to such extent.
Payments of principal of and interest on the Convertible Notes will be made
by the Company through the Trustee to DTC or its nominee, as the case may be, as
the registered owner of the Global Note. Neither the Company nor the Trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of the Global
Note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. The Company expects that DTC, upon receipt of
any payment of principal or interest in respect of the Global Note, will credit
the accounts of the related participants with payment in amounts proportionate
to their respective holdings in principal amount of beneficial interest in the
Global Note as shown on the records of DTC. The Company also expects that
payments by participants to owners of beneficial interests in the Global Note
will be covered by standing customer instructions and customary practices, as is
now the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
participants.
So long as the Convertible Notes are represented by a Global Note, DTC or
its nominee will be the only entity that can exercise a right to repayment
pursuant to the holder's option to elect repayment of its Convertible Notes or
the right of conversion of the Convertible Notes. Notice by participants or by
owners of beneficial interests in a Global Note held through such participants
of the exercise of the option to elect repayment, or the right of conversion, of
beneficial interests in Convertible Notes represented by the Global Note must be
transmitted to DTC in accordance with its procedures on a form required by DTC
and provided to participants. In order to ensure that DTC's nominee will timely
exercise a right to repayment, or the right of conversion, with respect to a
particular Convertible Note, the beneficial owner of such Convertible Notes must
instruct the broker or other participant through which it holds an interest in
such Convertible Notes to notify DTC of its desire to exercise a right to
repayment, or the right of conversion. Different firms have different cut-off
times for accepting instructions from their customers and, accordingly, each
beneficial owner should consult the broker or other participant through which it
holds an interest in a Convertible Note in order to ascertain the cut-off time
by which such an instruction must be given in order for timely notice to be
delivered to DTC. The Company will not be liable for any delay in delivery of
such notice to DTC.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable. The
Company will have no responsibility for the performance by DTC or its
participants of their respective obligations as described hereunder or under the
rules and procedures governing their respective operations.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any participant or indirect participant in DTC in identifying the beneficial
owners of the Convertible Notes, and the Company and the Trustee may
conclusively rely on, and shall be protected in relying on, instructions from
DTC for all purposes (including with respect to the registration and delivery,
and the respective principal amounts, of the Convertible Notes to be issued).
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Convertible Notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the Convertible Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Convertible Notes), and any existing default or compliance
with any provision of the Indenture or the Convertible Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Convertible Notes (including consents obtained in connection with a
tender offer or exchange offer for Convertible Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Convertible Notes held by a non-consenting holder): (a)
reduce the principal amount of Convertible Notes whose holders must consent to
an amendment, supplement or waiver, (b) reduce the principal of or change the
fixed maturity of any Convertible Note or, other than as set forth in the next
paragraph, alter the provisions with respect to the redemption of the
Convertible Notes, (c) reduce the rate of or change the time for payment of
interest on any Convertible Notes, (d) waive a Default or Event of Default in
the payment of principal of or premium, if any, or interest on the Convertible
Notes (except a rescission of acceleration of the Convertible Notes by the
holders of at least a majority in aggregate principal amount of the Convertible
Notes and a waiver of the payment default that resulted from such acceleration),
(e) make any Convertible Note payable in money other than that stated in the
Indenture and the Convertible Notes, (f) make any change in the provisions of
the Indenture relating to waivers of past Defaults or the rights of holders of
Convertible Notes to receive payments of principal of, premium, if any, or
interest on the Convertible Notes, (g) waive a redemption payment with respect
to any Convertible Note, (h) except as permitted by the Indenture, increase the
Conversion Price or, other than as set forth in the next paragraph, modify the
provisions of the Indenture relating to conversion of the Convertible Notes in a
manner adverse to the holders thereof or (i) make any change to the abilities of
holders of Convertible Notes to enforce their rights under the Indenture or the
provisions of clause (a) through (i) hereof. In addition, any amendment to the
provisions of Article 11 of the Indenture (which relate to subordination) will
require the consent of the holders of at least 75% in aggregate principal amount
of the Convertible Notes then outstanding if such amendment would adversely
affect the rights of holders of Convertible Notes.
Notwithstanding the foregoing, without the consent of any holder of
Convertible Notes, the Company and the Trustee may amend or supplement the
Indenture or the Convertible Notes to (a) cure any ambiguity, defect or
inconsistency or make any other changes in the provisions of the Indenture which
the Company and the Trustee may deem necessary or desirable, provided such
amendment does not materially and adversely affect the Convertible Notes, (b)
provide for uncertificated Convertible Notes in addition to or in place of
certificated Convertible Notes, (c) provide for the assumption of the Company's
obligations to holders of Convertible Notes in the circumstances required under
the Indenture as described under "-- Merger and Consolidation," (d) provide for
conversion rights of holders of Convertible Notes in certain events such as a
consolidation, merger or sale of all or substantially all of the assets of the
Company, (e) reduce the Conversion Price, (f) make any change that would provide
any additional rights or benefits to the holders of Convertible Notes or that
does not adversely affect the legal rights under the Indenture of any such
holder, or (g) comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the TIA.
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SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while
Convertible Notes remain outstanding if (i) all outstanding Convertible Notes
will become due and payable at their scheduled maturity within one year or (ii)
all outstanding Convertible Notes are scheduled for redemption within one year,
and, in either case, the Company has (a) deposited with the Trustee an amount
sufficient to pay and discharge all outstanding Convertible Notes on the date of
their scheduled maturity or the scheduled date of redemption and (b) paid all
other sums then payable by the Company under the Indenture.
GOVERNING LAW
The Indenture will provide that the Convertible Notes will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Convertible Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Convertible Note selected for redemption or repurchase. Also, the Company is
not required to transfer or exchange any Convertible Note for a period of 15
days before a selection of Convertible Notes to be redeemed.
The registered holder of a Convertible Note will be treated as the owner of
it for all purposes.
THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. In case an Event of Default shall occur (and shall not
be cured) and holders of the Convertible Notes have notified the Trustee, the
Trustee will be required to exercise its powers with the degree of care and
skill of a prudent person in the conduct of such person's own affairs. Subject
to such provisions, the Trustee is under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of
Convertible Notes, unless they shall have offered to the Trustee security and
indemnity satisfactory to it.
The Indenture and the TIA will contain certain limitations on the rights of
the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received in respect of
any such claim as security or otherwise. Subject to the TIA, the Trustee will be
permitted to engage in other transactions, provided, however, that if it
acquires any conflicting interest (as described in the TIA), it must eliminate
such conflict or resign.
CERTAIN DEFINITIONS
"Acquiring Person" means any person (as defined in Section 13(d)(3) of the
Exchange Act) who or which, together with all affiliates and associates (each as
defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act and as further defined
below) of shares of Common Stock or other voting securities of the Company
having more than 50% of the total voting power of the Voting Stock of the
Company; provided, however, that an Acquiring Person shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any Permitted Holder, (iv) an
underwriter engaged in a firm commitment underwriting in connection with a
public offering of the Voting Stock of the Company or (v) any current or future
employee or director benefit plan of the Company or any Subsidiary of the
Company or any entity holding Common Stock of the Company for or pursuant to the
terms of any such plan. For purposes hereof, a person shall not be deemed to be
the beneficial owner of (A) any securities tendered pursuant to a tender or
exchange offer made by or on behalf of such person or any of such person's
affiliates until such tendered securities are accepted for purchase or exchange
thereunder, or (B) any securities if such beneficial ownership (1) arises solely
as a result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to the applicable rules and regulations under the
Exchange Act, and (2) is not also then reportable on Schedule 13D (or any
successor schedule) under the Exchange Act.
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"Capital Stock" of any person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, but excluding any debt
securities convertible into such equity.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Debt" means any particular Senior Debt if the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Indebtedness shall be "Designated Senior Debt" for purposes
of the Indenture (provided that such instrument, agreement or other document may
place limitations and conditions on the right of such Senior Debt to exercise
the rights of Designated Senior Debt).
"Event of Default" has the meaning set forth under "-- Events of Default
and Remedies" herein.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i) (a) for borrowed money (including, but not
limited to, any indebtedness secured by a security interest, mortgage or other
lien on the assets of the Company that is (1) given to secure all or part of the
purchase price of property subject thereto, whether given to the vendor of such
property or to another, or (2) existing on property at the time of acquisition
thereof), (b) evidenced by a note, debenture, bond or other written instrument,
(c) under a lease required to be capitalized on the balance sheet of the lessee
under GAAP or under any lease or related document (including a purchase
agreement) that provides that the Company is contractually obligated to purchase
or cause a third party to purchase and thereby guarantee a minimum residual
value of the lease property to the lessor and the obligations of the Company
under such lease or related document to purchase or to cause a third party to
purchase such leased property, (d) in respect of letters of credit, bank
guarantees or bankers' acceptances (including reimbursement obligations with
respect to any of the foregoing), (e) with respect to Indebtedness secured by a
mortgage, pledge, lien, encumbrance, charge or adverse claim affecting title or
resulting in an encumbrance to which the property or assets of such person are
subject, whether or not the obligation secured thereby shall have been assumed
by or shall otherwise be such person's legal liability, (f) in respect of the
balance of deferred and unpaid purchase price of any property or assets, (g)
under interest rate or currency swap agreements, cap, floor and collar
agreements, spot and forward contracts and similar agreements and arrangements;
(ii) with respect to any obligation of others of the type described in the
preceding clause (i) or under clause (iii) below assumed by or guaranteed in any
manner by such person or in effect guaranteed by such person through an
agreement to purchase (including, without limitation, "take or pay" and similar
arrangements), contingent or otherwise (and the obligations of such person under
any such assumptions, guarantees or other such arrangements); and (iii) any and
all deferrals, renewals, extensions, refinancings and refundings of, or
amendments, modifications or supplements to, any of the foregoing.
"Issue Date" means the date on which the Convertible Notes are first issued
and authenticated under the Indenture.
"Material Subsidiary" means any Subsidiary of the Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act.
"Maturity Date" means , 2003.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Holders" means James Kim and his estates, spouses, ancestors and
lineal descendants (and spouses thereof), the legal representatives of any of
the foregoing, and the trustee of any bona fide trust of which one or more of
the foregoing are the sole beneficiaries or the grantors, or any person of which
any of the
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foregoing, individually or collectively, beneficially own (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) voting securities representing at least
a majority of the total voting power of all classes of Capital Stock of such
person (exclusive of any matters as to which class voting rights exist).
"Person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization, limited liability company or
government or any agency or political subdivision thereof.
"Senior Debt" means the principal of, premium, if any, and interest on,
rent under, and any other amounts payable on or in or in respect of any
Indebtedness of the Company (including, without limitation, any Obligations in
respect of such Indebtedness and, in the case of Designated Senior Debt, any
interest accruing after the filing of a petition by or against the Company under
any bankruptcy law, whether or not allowed as a claim after such filing in any
proceeding under such bankruptcy law), whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to the foregoing);
provided, however, that Senior Debt does not include (v) Indebtedness evidenced
by the Convertible Notes, (w) any liability for federal, state, local or other
taxes owed or owing by the Company, (x) Indebtedness of the Company to any
Subsidiary of the Company except to the extent such Indebtedness is of a type
described in clause (ii) of the definition of Indebtedness, (y) trade payables
of the Company for goods, services or materials purchased in the ordinary course
of business (other than, to the extent they may otherwise constitute such trade
payables, any obligations of the type described in clause (ii) of the definition
of Indebtedness), and (z) any particular Indebtedness in which the instrument
creating or evidencing the same expressly provides that such Indebtedness shall
not be senior in right of payment to, or is pari passu with, or is subordinated
or junior to, the Convertible Notes.
"Subsidiary" means, with respect to any person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
person or one or more of the other Subsidiaries of that person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such person or a Subsidiary of such person or (b)
the only general partners of which are such person or of one or more
Subsidiaries of such person (or any combination thereof).
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
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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
112,610,000 shares of Common Stock. In addition to the 35,000,000 shares of
Common Stock offered hereby (40,250,000 if the Underwriters' over-allotment
options are exercised in full), upon the closing of the Offerings, there will be
approximately shares of Common Stock issuable upon conversion of the
Convertible Notes, all of which will be freely tradeable. In addition, in
connection with market-making activities in the Convertible Notes, Smith Barney
Inc. may from time to time until the maturity date or redemption date of the
Convertible Notes borrow, return and reborrow up to 7,000,000 shares of Common
Stock from Mr. and Mrs. Kim pursuant to a securities loan agreement (the
"Securities Loan Agreement"), which shares may from time to time be sold in the
market in connection with such market-making activities pursuant to a Form S-1
registration statement (No. 333- ) (the "Securities Loan Registration
Statement") filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act"). At the end of such period, the shares of Common Stock
borrowed and returned to Mr. and Mrs. Kim (the "Control Shares") may be resold
from time to time by Mr. and Mrs. Kim subject to certain volume, manner of sale
and other restrictions described below under Rule 144 under the Securities Act.
Excluding all such freely tradeable shares and Control Shares, approximately
70,610,000 additional shares of Common Stock will be outstanding upon the
closing of the Offerings (excluding 2,730,000 shares issuable upon the exercise
of outstanding options), all of which are "restricted" shares (the "Restricted
Shares") under 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 Restricted
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
Restricted Shares that does not exceed the greater of (i) one percent of the
then outstanding number of shares of Common Stock (1,126,100 shares of Common
Stock immediately after the consummation of the Offerings) or (ii) the average
weekly trading volume of the shares of Common Stock 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 Restricted
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 Restricted Shares by affiliates will continue to be subject
to such volume limitations, and manner of sale, notice and public information
requirements.
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 (other than the Convertible Notes) for a period of 180
days following the date hereof without the prior written consent of Smith Barney
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 other than pursuant to
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the Securities Loan Agreement or with the prior written consent of Smith Barney
Inc., subject to certain limited exceptions. See "Underwriting."
Beginning one year from the date of the Reorganization, approximately
70,610,000 Restricted Shares 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 2,730,000 shares of Common
Stock immediately prior to the Offerings under the 1998 Stock Plan and the 1998
Director Option Plan. See "Management -- Stock Plans." The Company intends to
file, within 30 days after the date of this Prospectus, a Form S-8 registration
statement under the Securities Act to register shares of Common Stock reserved
for issuance under the 1998 Stock Plan, 1998 Director Option Plan and 1998
Employee Stock Purchase Plan, and shares of Common Stock 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 to lock-up agreements.
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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO HOLDERS OF COMMON STOCK AND CONVERTIBLE NOTES
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 and Convertible Notes by a holder who acquires and owns such
Common Stock or a Convertible Note as a capital asset within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This
discussion does not consider specific facts and circumstances that may be
relevant to a particular 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 holders in light of their personal circumstances. Further, it
does not discuss the rules applicable to 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 or a Convertible Note). In
addition, this discussion is limited to original purchasers of Convertible
Notes, who acquire their Convertible Notes at their original issue price within
the meaning of Section 1273 of the Code, and 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 or
Convertible Notes is advised to consult a tax advisor with respect to current
and possible future tax consequences of acquiring, holding, and disposing of
Common Stock or Convertible Notes.
U.S. HOLDERS
The following discussion is limited to a holder of Common Stock or a
Convertible Note that for United States federal income tax purposes is (i) a
citizen or resident (within the meaning of Section 7701(b) 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(a)(30) of the Code (a "U.S. Holder").
Interest
Stated interest on the Convertible Notes will generally be includable in a
U.S. Holder's gross income and taxable as ordinary income for U.S. federal
income tax purposes at the time it is paid or accrued in accordance with the
U.S. Holder's regular method of accounting.
Conversion of Convertible Notes Into Common Stock
A U.S. Holder generally will not recognize any income, gain or loss upon
conversion of a Note into Common Stock except to the extent the Common Stock is
considered attributable to accrued interest not previously included in income
(which is taxable as ordinary income) or with respect to cash received in lieu
of a fractional share of Common Stock. The adjusted basis of shares of Common
Stock received on conversion will equal the adjusted basis of the Convertible
Note converted (reduced by the portion of adjusted basis allocated to any
fractional share of Common Stock exchanged for cash), and the holding period of
the Common Stock received on conversion will generally include the period during
which the converted Convertible Notes were held. However, a U.S. Holder's tax
basis in shares of Common Stock considered attributable to accrued interest as
described above generally will equal the amount of such accrued interest
included in income, and the holding period for such shares shall begin as of the
date of conversion.
The conversion price of the Convertible Notes is subject to adjustment
under certain circumstances. Section 305 of the Code and the Treasury
Regulations issued thereunder may treat the holders of the
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Convertible Notes as having received a constructive distribution, resulting in
ordinary income (subject to a possible dividends received deduction in the case
of corporate holders) to the extent of the Company's current or accumulated
earnings and profits, if, and to the extent that, certain adjustments in the
conversion price that may occur in limited circumstances (particularly an
adjustment to reflect a taxable dividend to holders of Common Stock) increase
the proportionate interest of a holder of Convertible Notes in the fully diluted
Common Stock, whether or not such holder ever exercises its conversion
privilege. Moreover, if there is not a full adjustment to the conversion ratio
of the Convertible Notes to reflect a stock dividend or other event increasing
the proportionate interest of the holders of outstanding Common Stock in the
assets or earnings and profits of the Company, then such increase in the
proportionate interest of the holders of the Common Stock generally will be
treated as a distribution to such holders, taxable as ordinary income (subject
to a possible dividends received deduction in the case of corporate holders) to
the extent of the Company's current or accumulated earnings and profits..
Sale, Exchange or Retirement of a Convertible Note
Each U.S. Holder generally will recognize gain or loss upon the sale,
exchange, redemption, retirement or other disposition of a Convertible Note
measured by the difference (if any) between (i) the amount of cash and the fair
market value of any property received (except to the extent that such cash or
other property is attributable to the payment of accrued interest not previously
included in income, which amount will be taxable as ordinary income) and (ii)
such holder's adjusted tax basis in the Convertible Note. Any such gain or loss
recognized on the sale, exchange, redemption, retirement or other disposition of
a Convertible Note will be capital gain or loss. Gain on most capital assets
held or deemed held by an individual for more than 18 months is subject to a
maximum rate of tax of 20%, and gain on most capital assets held or deemed held
by an individual more than one year and up to 18 months is subject to tax at a
maximum rate of 28%. A U.S. Holder's initial basis in a Convertible Note will be
the amount paid therefor.
The Common Stock
In general, dividends paid from current or accumulated earnings and profits
of the Company, as determined for U.S. federal income tax purposes, will be
included in a U.S. Holder's income as ordinary income (subject to a possible
dividends received deduction in the case of corporate holders) as they are paid.
Gain or loss realized on the sale or exchange of Common Stock will equal the
difference between the amount realized on such sale or exchange and the U.S.
Holder's adjusted tax basis in such Common Stock. Gain on most capital assets
held by an individual for more than 18 months is subject to tax at a maximum
rate of 20% and gain on most capital assets held by an individual for more than
one year and up to 18 months is subject to tax at a maximum rate of 28%.
Information Reporting and Backup Withholding
A U.S. Holder of Common Stock or a Convertible Note may be subject to
"backup withholding" at a rate of 31% with respect to certain "reportable
payments," including dividend payments, interest payments, and, under certain
circumstances, principal payments on the Convertible Notes. These backup
withholding rules apply if the holder, among other things, (i) fails to furnish
a social security number or other taxpayer identification number ("TIN")
certified under penalties of perjury within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly
interest or dividends, or (iv) under certain circumstances, fails to provide a
certified statement, signed under penalties of perjury, that the TIN furnished
is the correct number and that such holder is not subject to backup withholding.
A holder who does not provide the Company with its correct TIN also may be
subject to penalties imposed by the IRS. Any amount withheld from a payment to a
U.S. Holder under the backup withholding rules is creditable against the
holder's federal income tax liability, provided that the required information is
furnished to the IRS. Backup withholding will not apply, however, with respect
to payments made to certain U.S. Holders, including corporations and tax-exempt
organizations, provided their exemptions from backup withholding are properly
established.
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The Company will report to the U.S. Holders of Convertible Notes and Common
Stock and to the IRS the amount of any "reportable payments" for each calendar
year and the amount of tax withheld, if any, with respect to such payments.
NON U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a Non-U.S. Holder. As used herein, the term "Non-U.S.
Holder" means any holder other than a U.S. Holder. For purposes of withholding
tax on interest and dividends discussed below, a Non-U.S. Holder includes a non-
resident fiduciary of an estate or trust. For purposes of the following
discussion, interest, dividends and gain on the sale, exchange or other
disposition of a Convertible Note or Common Stock will generally be considered
to be "U.S. trade or business income" if such income or gain is (i) effectively
connected with the conduct of a U.S. trade or business or (ii) in the case of
most treaty residents, attributable to a permanent establishment (or, in the
case of an individual, a fixed base) in the United States.
Interest
Generally, any interest paid to a Non-U.S. Holder of a Convertible Note
that is not U.S. trade or business income will not be subject to U.S. tax if the
interest qualifies as "portfolio interest." Interest on the Convertible Notes
will generally qualify as portfolio interest if (i) the Non-U.S. Holder does not
actually or constructively own 10% or more of the total voting power of all
voting stock of the Company and is not a "controlled foreign corporation" with
respect to which the Company is a "related person" within the meaning of the
Code, and (ii) the beneficial owner, under penalty of perjury, certifies that
the beneficial owner is not a U.S. person and such certificate provides the
beneficial owner's name and address.
The gross amount of payments of interest to a Non-U.S. Holder that do not
qualify for the portfolio interest exemption and that are not U.S. trade or
business income will be subject to withholding of U.S. federal income tax at a
30% rate, unless a U.S. income tax treaty applies to reduce or eliminate the
rate of withholding. Interest that is U.S. trade or business income will 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. In the case of a Non-U.S. Holder that is a
corporation, interest that is U.S. trade or business income 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. To claim
the benefit of a tax treaty or to claim an exemption from withholding for
interest that is U.S. trade or business income, the Non-U.S. Holder must provide
a properly executed Form 1001 or Form 4224 (or such successor form as the IRS
designates), as applicable, prior to the payment of interest. Under recently
adopted Treasury Regulations that will generally be effective after December 31,
1998 (the "New Regulations"), a Non-U.S. Holder, subject to certain transition
rules, will instead be required to provide a properly executed Form W-8,
certifying to such U.S. Holder's entitlement to treaty benefits or exemption
from withholding for U.S. trade or business income. Special procedures are
provided in the New Regulations for payments through qualified intermediaries.
Other recently adopted Treasury Regulations that will be effective with respect
to payments made after December 31, 1997 (the "Treaty Regulations") provide
special rules applicable to certain entities that are treated as partnerships
for U.S. purposes but as corporations for foreign tax purposes, for purposes of
determining the applicability of a tax treaty. Prospective investors should
consult their tax advisors regarding the effect, if any, of the New Regulations
and the Treaty Regulations on an investment in a Convertible Note or Common
Stock. Prospective investors should consult their tax advisors regarding the
effect, if any, of the New Regulations and the Treaty Regulations on an
investment in the Common Stock or a Convertible Note.
Conversion of Convertible Notes into Common Stock
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
on the conversion of Convertible Notes into Common Stock, except with respect to
cash (if any) received in lieu of a fractional share or interest not previously
included in income. Cash received in lieu of a fractional share may give rise to
gain that would be subject to the rules described below for the sale of
Convertible Notes. Cash or Common Stock treated as issued for accrued interest
would be treated as interest under the rules described above.
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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 U.S. trade or business income. If the dividend is U.S. 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 U.S. trade or business income received by a foreign
corporation may, under certain circumstances, be subject to the 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 U.S.
trade or business income exemption discussed above (which requirements have been
modified by the New Regulations).
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), including for purposes of determining
the applicability of a tax treaty rate. Under the New 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 (or suitable substitute
form) certifying such Non-U.S. Holder's entitlement to benefits under a treaty.
These certification requirements may be relaxed somewhat in the case of a
Non-U.S. Holder who holds Common Stock through an account maintained at a
non-U.S. office of a financial institution. Certain other special rules may be
applicable to a Non-U.S. Holder under the New Regulation or the Treaty
Regulations. See "-- Non-U.S. Holders -- Interest".
A Non-U.S. Holder of Common Stock that is 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 that 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 or a Convertible Note
A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain realized on a sale or other disposition of
Common Stock or a Convertible Note unless (i) the gain is U.S. trade or business
income, (ii) in the case of a Non-U.S. Holder who is a nonresident alien
individual and holds Common Stock or a Convertible Note 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, in
the case of disposition of Common Stock 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. A Convertible Note 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 will not be subject to U.S. federal estate tax provided that the interest
thereon qualifies as portfolio interest and was not U.S. trade or business
income.
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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 or interest paid to such holder and any tax withheld
with respect to such dividends or interest. These information reporting
requirements apply regardless of whether withholding is required. Copies of the
information returns reporting such dividends and interest and withholding with
respect thereof may also be made available under the provisions of an applicable
treaty or agreement, to the tax authorities in the country in which such
Non-U.S. Holder resides.
Treasury Regulations provide that backup withholding and additional
information reporting will not apply to payments of principal on the Convertible
Notes by the Company to a Non-U.S. Holder if the holder certifies as to its
Non-U.S. status under penalties of perjury or otherwise establishes an exemption
(provided that neither the Company nor its paying agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemption
are not, in fact, satisfied). 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 that with regard to payments made after December 31, 1998,
a Non-U.S. Holder will be entitled to such an exemption only if it provides a
Form W-8 (or satisfies certain documentary evidence requirements for
establishing that it is a non-United States person) or otherwise establishes an
exemption. 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 or Convertible Notes 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,
(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, or (iii) with
respect to payments made after December 31, 1998, a foreign partnership that, at
any time during its taxable year is 50% or more (by income or capital interest)
owned by U.S. persons or is engaged in the conduct of a U.S. trade or business.
The payment of the proceeds of a sale of shares of Common Stock or of a
Convertible Note 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 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 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 AND CONVERTIBLE
NOTES, INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL,
FOREIGN, OR OTHER TAXING JURISDICTION.
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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
Smith Barney Inc., BancAmerica Robertson Stephens and Cowen & Company are acting
as representatives (the "U.S. Representatives"), (i) 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 and (ii) the Company has agreed to sell to certain of the
U.S. Underwriters and each such U.S. Underwriter has severally agreed to
purchase from the Company the principal amount of the Convertible Notes set
forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
NUMBER OF OF CONVERTIBLE
U.S. UNDERWRITERS SHARES NOTES
----------------- ---------- --------------
<S> <C> <C>
Smith Barney Inc. ..........................
BancAmerica Robertson Stephens..............
Cowen & Company.............................
---------- ------------
Total............................. 28,000,000 $120,000,000
========== ============
</TABLE>
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters to purchase the Shares and Convertible Notes listed above are
subject to certain conditions set forth therein. The U.S. Underwriters are
committed to purchase all of the Shares and Convertible Notes agreed to be
purchased by the U.S. Underwriters pursuant to the U.S. Underwriting Agreement
(other than those covered by the over-allotment options described below), if any
Shares or Convertible Notes 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 thereof 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 initial public offering of the
Shares, the public offering price and such discounts may be changed.
The U.S. Representatives have also advised the Company that the relevant
U.S. Underwriters propose initially to offer such Convertible Notes to the
public at the initial public offering price thereof set forth on the cover page
of this Prospectus, and to certain dealers at such price less a concession not
in excess of % of the principal amount of such Convertible Notes. The relevant
U.S. Underwriters may allow, and such dealers may reallow, a discount not in
excess of % of the principal amount of the Convertible Notes on sales to
certain other dealers. After the initial public offering of the Convertible
Notes, the public offering price and such concessions 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 Smith Barney Inc.,
BancAmerica Robertson Stephens International Limited and Cowen International
L.P. are acting as representatives (the "International Representatives" and,
together with the U.S. Representatives, the "Representatives"), providing for
the concurrent offer and sale of 7,000,000 of the Shares and $30,000,000
principal amount of the Convertible Notes outside the United States and Canada.
The closing with respect to the sale of the Shares and the Convertible
Notes pursuant to the U.S. Underwriting Agreement is a condition to the closing
with respect to the sale of the Shares and the Convertible Notes pursuant to the
International Underwriting Agreement, and the closing with respect to the sale
of the Shares and the Convertible Notes pursuant to the International
Underwriting Agreement is a
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condition to the closing with respect to the sale of the Shares and the
Convertible Notes pursuant to the U.S. Underwriting Agreement. The initial
public offering price and underwriting discounts per Share and per Convertible
Note 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 28,000,000 Shares and $120,000,000 principal amount of the
Convertible Notes by the U.S. Underwriters, (i) it is not purchasing any Shares
or Convertible Notes 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 Convertible Notes 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 or Convertible Notes 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 or Convertible Notes 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.
Each International Underwriter has severally agreed that, as part of the
distribution of the 7,000,000 Shares and $30,000,000 principal amount of the
Convertible Notes by the International Underwriters, (i) it is not purchasing
any Shares or Convertible Notes 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 Convertible Notes 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 or Convertible Notes
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 or Convertible Notes 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 or Convertible Notes
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 and such principal amount of
the Convertible Notes as may be mutually agreed. The price of any Shares or
Convertible Notes so sold shall be the initial public offering price thereof 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 and the principal amount of the Convertible Notes 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 Shares or
Convertible Notes 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 1986 with respect to anything done by
it in relation to the Shares or the Convertible Notes in, from or otherwise
involving the
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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 Shares or the Convertible Notes 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 4,200,000 and 1,050,000
Shares, respectively, and an additional $18,000,000 and $4,500,000 principal
amount of the Convertible Notes, respectively, in each case at the applicable
price to the public less the applicable 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 or such additional principal amount of
Convertible Notes 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 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 (other than the Convertible Notes) for a period of 180
days following the date hereof without the prior written consent of Smith Barney
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 unless pursuant to the Securities Loan Agreement (as described
below) or with the prior written consent of Smith Barney Inc., subject to
certain limited exceptions. Smith Barney 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 certain 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.
BancAmerica Robertson Stephens is an affiliate of Bank of America, which
will be repaid approximately $43 million of short-term loans to the Company from
the net proceeds of the Offerings. See "Use of Proceeds." Because more than 10%
of the net proceeds of the Offerings may be paid to Bank of America, the
Offerings are being conducted in accordance with Rule 2710(c)(8) and Rule 2720
("Rule 2720") of the Conduct Rules of the National Association of Securities
Dealers, Inc., Smith Barney Inc. will serve as a "qualified independent
underwriter" in the Offerings and, in such capacity, will recommend a price in
compliance with Rule 2720 and has performed due diligence investigations in
accordance with Rule 2720.
Affiliates of Smith Barney Inc., Mr. James Kim and AICL are among the
principal shareholders of 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.
98
<PAGE> 101
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 or
the Convertible Notes. 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 or Convertible Notes for the
purpose of stabilizing their market price. The Underwriters also may create a
short position for the account of the Underwriters by selling more Common Stock
or Convertible Notes 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 or Convertible Notes 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
5,250,000 shares of Common Stock and $22,500,000 principal amount of the
Convertible Notes, 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 or Convertible Notes that are
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 and the
Convertible Notes 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.
In connection with the Offerings, Mr. and Mrs. Kim (referred to herein as
the "Lenders") and Smith Barney Inc. intend to enter into a Securities Loan
Agreement (the "Securities Loan Agreement") which provides that, subject to
certain restrictions and with the agreement of the Lenders, Smith Barney Inc.
may from time to time until the maturity date or redemption date of the
Convertible Notes borrow, return and reborrow shares of Common Stock from the
Lenders (the "Borrowed Securities"): provided, however, that the number of
Borrowed Securities at any time may not exceed 7,000,000 shares of Common Stock,
subject to adjustment for certain dilutive events. The Securities Loan Agreement
is intended to facilitate market-making activity in the Convertible Notes by
Smith Barney Inc. Smith Barney Inc. may from time to time borrow shares of
Common Stock under the Securities Loan Agreement to settle short sales of Common
Stock entered into by Smith Barney Inc. to hedge any long position in the
Convertible Notes resulting from its market-making activities. Such sales will
be made on the Nasdaq National Market or in the over-the-counter market at
market prices prevailing at the time of sale or at prices related to such market
prices. Market conditions will dictate the extent and timing of Smith Barney
Inc.'s market-making transactions in the Convertible Notes and the consequent
need to borrow and sell shares of Common Stock. The availability of shares of
Common Stock under the Securities Loan Agreement at any time is not assured and
any such availability does not assure market-making activity with respect to the
Convertible Notes. Any market-making engaged in by Smith Barney Inc. or any
other Underwriter may cease at any time. The foregoing description of the
Securities Loan Agreement does not purport to be complete and is qualified in
its entirety by reference to such agreement, which is an exhibit to the
Securities Loan Registration Statement.
The Underwriters do not intend to confirm sales in the Offerings 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 Shares will be
determined by negotiation among the Company, the Selling Stockholders and the
Representatives. Among the factors considered in determining the initial 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.
99
<PAGE> 102
LEGAL MATTERS
The validity of the Shares and the Convertible Notes 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 and the Convertible Notes offered
hereby.
EXPERTS
The combined financial statements and schedule of the Company as of
December 31, 1995, 1996 and 1997, and for each of the years in the three-year
period ended December 31, 1997, included in this Registration Statement (as
defined below) have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports dated February 3, 1998 (except with
respect to the sale of the investment in AICL's common stock discussed in Note 6
to the Combined Financial Statements, as to which the date is February 16, 1998)
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
Reference is made to said reports which include an explanatory paragraph
with respect to the ability of the Company to continue as a going concern as
discussed in Note 1 of Notes to the Combined Financial Statements.
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, the Common Stock and the Convertible
Notes, 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.
100
<PAGE> 103
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.
101
<PAGE> 104
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.
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.
102
<PAGE> 105
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Combined Statements of Income -- Years ended December 31,
1995, 1996 and 1997....................................... F-3
Combined Balance Sheets -- December 31, 1996 and 1997....... F-4
Combined Statements of Stockholders' Equity -- Years ended
December 31, 1995, 1996 and 1997.......................... F-5
Combined Statements of Cash Flows -- Years ended December
31, 1995, 1996 and 1997................................... F-6
Notes to Combined Financial Statements...................... F-7
</TABLE>
F-1
<PAGE> 106
After the Reorganization transaction discussed in Note 1 to the Amkor
Technology, Inc. and AK Industries, Inc. Combined Financial Statements is
effected, we expect to be in position to render the following report.
ARTHUR ANDERSEN LLP
February 3, 1998 (except with respect to the sale of the investment in Anam
Industrial Co., Ltd. common stock discussed in Note 6, as to which the date is
February 16, 1998)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amkor Technology, Inc. and AK Industries, Inc.:
We have audited the accompanying combined balance sheets of Amkor
Technology, Inc. and AK Industries, Inc. and subsidiaries (see Note 1) as of
December 31, 1996 and 1997, and the related combined statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 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 combined financial position of Amkor Technology,
Inc. and AK Industries, Inc. and subsidiaries as of December 31, 1996 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the combined
financial statements, the Company is not in compliance with certain debt
agreements and has a net working capital deficiency at December 31, 1997. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to this matter are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Philadelphia, Pa.
F-2
<PAGE> 107
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------------
1995 1996 1997
-------- ---------- ----------
<S> <C> <C> <C>
NET REVENUES................................................ $932,382 $1,171,001 $1,455,761
COST OF REVENUES -- including purchases from AICL (Note
11)....................................................... 783,335 1,022,078 1,242,669
-------- ---------- ----------
GROSS PROFIT................................................ 149,047 148,923 213,092
-------- ---------- ----------
OPERATING EXPENSES:
Selling, general and administrative....................... 55,459 66,625 103,726
Research and development.................................. 8,733 10,930 8,525
-------- ---------- ----------
Total operating expenses............................... 64,192 77,555 112,251
-------- ---------- ----------
OPERATING INCOME............................................ 84,855 71,368 100,841
-------- ---------- ----------
OTHER (INCOME) EXPENSE:
Interest expense, net..................................... 9,797 22,245 32,241
Foreign currency (gain) loss.............................. 1,512 2,961 (835)
Other expense, net........................................ 6,523 3,150 8,429
-------- ---------- ----------
Total other expense.................................... 17,832 28,356 39,835
-------- ---------- ----------
INCOME BEFORE INCOME TAXES, EQUITY IN INCOME (LOSS) OF AICL
AND MINORITY INTEREST..................................... 67,023 43,012 61,006
PROVISION FOR INCOME TAXES.................................. 6,384 7,876 7,078
EQUITY IN INCOME (LOSS) OF AICL............................. 2,808 (1,266) (17,291)
MINORITY INTEREST........................................... 1,515 948 (6,644)
-------- ---------- ----------
NET INCOME.................................................. $ 61,932 $ 32,922 $ 43,281
======== ========== ==========
PRO FORMA DATA (UNAUDITED):
Historical income before income taxes, equity in income
(loss) of AICL and minority interest................... $ 67,023 $ 43,012 $ 61,006
Pro forma provision for income taxes...................... 16,784 10,776 10,691
-------- ---------- ----------
Pro forma income before equity in income (loss) of AICL
and minority interest.................................. 50,239 32,236 50,315
Historical equity in income (loss) of AICL................ 2,808 (1,266) (17,291)
Historical minority interest.............................. 1,515 948 (6,644)
-------- ---------- ----------
Pro forma net income...................................... $ 51,532 $ 30,022 $ 39,668
======== ========== ==========
Basic and diluted pro forma net income per common share... $ .62 $ .36 $ .48
======== ========== ==========
Shares used in computing pro forma net income per common
share..................................................... 82,610 82,610 82,610
======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 108
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1997
1996 ACTUAL PRO FORMA
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................... $ 49,664 $ 90,917 $ 63,217
Short-term investments.................................. 881 2,524 2,524
Accounts receivable --
Trade, net of allowance for doubtful accounts of
$1,179, $4,234 and $4,234.......................... 170,892 102,804 102,804
Due from affiliates.................................. 26,886 14,431 14,431
Other................................................ 6,426 4,879 4,879
Inventories............................................. 101,920 115,870 115,870
Other current assets.................................... 8,618 26,997 26,997
-------- -------- --------
Total current assets............................ 365,287 358,422 330,722
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, net........................ 324,895 427,061 427,061
-------- -------- --------
INVESTMENTS:
AICL at equity.......................................... 31,154 13,863 13,863
Other................................................... 38,090 5,958 5,958
-------- -------- --------
Total investments............................... 69,244 19,821 19,821
-------- -------- --------
OTHER ASSETS:
Due from affiliates..................................... 20,699 29,186 29,186
Other................................................... 24,739 21,102 21,102
-------- -------- --------
45,438 50,288 50,288
-------- -------- --------
Total assets.................................... $804,864 $855,592 $827,892
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term
debt................................................. $191,813 $325,968 $325,968
Trade accounts payable.................................. 45,798 113,037 113,037
Due to affiliates....................................... 33,379 15,581 15,581
Bank overdraft.......................................... 14,518 29,765 29,765
Accrued expenses........................................ 30,156 43,973 43,973
Accrued income taxes.................................... 12,838 26,968 26,968
-------- -------- --------
Total current liabilities....................... 328,502 555,292 555,292
-------- -------- --------
LONG-TERM DEBT............................................ 167,444 38,283 38,283
-------- -------- --------
DUE TO ANAM USA, INC. (Note 11)........................... 234,894 149,776 149,776
-------- -------- --------
OTHER NONCURRENT LIABILITIES.............................. 12,286 12,084 14,184
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 13)
MINORITY INTEREST......................................... 15,926 9,282 9,282
-------- -------- --------
STOCKHOLDERS' EQUITY:
Amkor Technology, Inc. -- common stock.................. 45 45 45
AK Industries, Inc. -- common stock..................... 1 1 1
Additional paid-in capital.............................. 16,770 20,871 20,871
Retained earnings....................................... 32,340 70,621 40,821
Unrealized losses on investments........................ (1,586) -- --
Cumulative translation adjustment....................... (1,758) (663) (663)
-------- -------- --------
Total stockholders' equity...................... 45,812 90,875 61,075
-------- -------- --------
Total liabilities and stockholders' equity...... $804,864 $855,592 $827,892
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 109
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMKOR AK UNREALIZED
TECHNOLOY, INDUSTRIES, GAINS
INC. INC. ADDITIONAL (LOSSES) CUMULATIVE
COMMON COMMON PAID-IN RETAINED ON TRANSLATION
STOCK STOCK CAPITAL EARNINGS INVESTMENTS ADJUSTMENT TOTAL
---------- ----------- ---------- --------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995..... $45 $ 1 $16,494 $ (6,359) $ (35) $ (529) $ 9,617
Net income................... -- -- -- 61,932 -- -- 61,932
Distributions................ -- -- -- (19,922) -- -- (19,922)
Change in division equity
account.................... -- -- -- (4,505) -- -- (4,505)
Unrealized gains (losses) on
investments................ -- -- -- -- (2,015) -- (2,015)
Currency translation
adjustments................ -- -- -- -- -- 182 182
--- --- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1995... 45 1 16,494 31,146 (2,050) (347) 45,289
Net income................... -- -- -- 32,922 -- -- 32,922
Distributions................ -- -- -- (15,123) -- -- (15,123)
Change in division equity
account.................... -- -- -- (16,605) -- -- (16,605)
Unrealized gains (losses) on
investments................ -- -- -- -- 464 -- 464
Currency translation
adjustments................ -- -- -- -- -- (1,411) (1,411)
Acquisition of AATS (Note
14)........................ -- -- 276 -- -- -- 276
--- --- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1996... 45 1 16,770 32,340 (1,586) (1,758) 45,812
Net income................... -- -- -- 43,281 -- -- 43,281
Distributions................ -- -- -- (5,000) -- -- (5,000)
Change in division equity
account.................... -- -- 4,101 -- -- -- 4,101
Unrealized gains (losses) on
investments................ -- -- -- -- 1,586 -- 1,586
Currency translation
adjustments................ -- -- -- -- -- 1,095 1,095
--- --- ------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997... $45 $ 1 $20,871 $ 70,621 $ 0 $ (663) $ 90,875
=== === ======= ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 110
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 61,932 $ 32,922 $ 43,281
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization........................... 26,614 57,825 81,864
Provision for accounts receivable....................... 444 1,271 3,490
Provision for excess and obsolete inventory............. 1,000 500 12,659
Deferred income taxes................................... (1,147) (324) (11,715)
Equity (gain) loss of investees......................... (2,713) 605 16,779
(Gain) loss on sale of investments...................... 126 (139) (239)
Minority interest....................................... 1,515 948 (6,644)
Changes in assets and liabilities excluding effects of
acquisitions --
Accounts receivable..................................... (53,264) (36,695) (19,802)
Proceeds from accounts receivable sale.................. -- -- 90,700
Other receivables....................................... (2,565) (925) 1,547
Inventories............................................. (32,668) (16,380) (26,609)
Due to/from affiliates, net............................. (3,001) (8,203) (19,138)
Other current assets.................................... (4,764) 1,694 (7,239)
Other non-current assets................................ (326) (6,108) 3,322
Accounts payable........................................ 35,017 (16,852) 60,939
Accrued expenses........................................ 17,687 (12,658) 13,817
Accrued taxes........................................... 404 7,433 14,130
Other long-term liabilities............................. 9,034 (108) (1,089)
Other, net.............................................. -- 3,750 --
----------- ----------- -----------
Net cash provided by operating activities.......... 53,325 8,556 250,053
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, including
purchase of AATS........................................ (123,645) (185,112) (178,990)
Sale of property, plant and equipment..................... 110 2,228 1,413
Purchases of investments and issuances of notes
receivable.............................................. (25,123) (15,633) (15,187)
Proceeds from sale of investments......................... 351 520 --
----------- ----------- -----------
Net cash used in investing activities.............. (148,307) (197,997) (192,764)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank overdrafts and short-term borrowings... 41,308 64,852 52,393
Proceeds from issuance of Anam USA, Inc. debt............. 1,059,759 1,205,174 1,408,086
Payments of Anam USA, Inc. debt........................... (1,052,415) (1,189,317) (1,443,464)
Proceeds from issuance of long-term debt.................. 50,080 102,193 11,389
Payments of long-term debt................................ (3,021) (3,138) (43,541)
Distributions to stockholders............................. (20,003) (15,205) (5,000)
Change in division equity account......................... (4,505) (16,605) 4,101
----------- ----------- -----------
Net cash provided by (used in) financing
activities....................................... 71,203 147,954 (16,036)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (23,779) (41,487) 41,253
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 114,930 91,151 49,664
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 91,151 $ 49,664 $ 90,917
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................ $ 12,594 $ 24,125 $ 37,070
Income taxes............................................ 495 2,256 3,022
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 111
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The combined financial statements of Amkor Technology, Inc. ("ATI") and its
subsidiaries and AK Industries, Inc. and its subsidiary ("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 and its wholly
owned subsidiaries Amkor Receivables Corp and Amkor Wafer Fabrication
Services SARL (a French Limited Company).
- T.L. Limited ("TLL") (a British Cayman Island Corporation) and its
Philippine subsidiaries, Amkor Anam Advanced Packaging, Inc. ("AAAP")
(wholly owned) and Amkor/Anam Pilipinas, Inc. ("AAP") (which is currently
owned 60% by TLL and 40% by Anam Industrial Co., Ltd. ("AICL"-- see Notes
11 and 16) and its wholly-owned subsidiary Automated MicroElectronics,
Inc. ("AMI");
- C.I.L., Limited ("CIL") (a British Cayman Islands Corporation) and its
wholly-owned subsidiary Amkor/Anam Euroservices S.A.R.L. ("AAES") (a
French Corporation);
- Amkor Anam Test Services, Inc. (a U.S. Corporation) (see Note 14); and
- The semiconductor packaging and test business unit of Chamterry
Enterprises, Ltd. ("Chamterry"). During the third quarter of 1997
Chamterry transferred its customers to AEI and CIL and ceased operations
of its semiconductor and test business unit.
- AK Industries, Inc. ("AKI") (a U.S. Corporation) and its wholly-owned
subsidiary, Amkor-Anam, Inc. (a U.S. Corporation);
All of the Amkor Companies are substantially wholly owned by Mr. and Mrs.
James Kim or entities controlled by members of Mr. James Kim's immediate family
(the "Founding Stockholders"), except for AAP which is 40% owned by AICL and one
third of AEI and all of AKI which are owned by trusts established for the
benefit of other members of Mr. James Kim's family ("Kim Family Trusts"). The
Amkor Companies are an interdependent group of companies involved in the same
business under the direction of common management. ATI was formed in September
1997 to facilitate the Reorganization and consolidate the ownership of the Amkor
Companies. In connection with the Reorganization, AEI will be merged into ATI.
Amkor International Holdings ("AIH") a newly formed Cayman Islands holding
company will become a wholly owned subsidiary of ATI. AIH will hold the
following entities: First Amkor Caymans, Inc. ("FACI"), a newly formed holding
company, and its subsidiaries AAAP and AAP and AAP's subsidiary AMI, TLL and its
subsidiary CIL and CIL's subsidiary AAES. The relative number of shares of
common stock issued by the Company in connection with each of the transactions
comprising the Reorganization is based upon the relative amounts of
stockholders' equity at December 31, 1997. In exchange for their interests in
AEI, Mr. and Mrs. James Kim and the Kim Family Trusts will receive 9,746,766
shares and 4,873,383 shares of ATI common stock, respectively. ATI will issue
67,989,851 shares of common stock in exchange for all of the outstanding shares
of AIH and its subsidiaries. Of such shares, 19,328,234 shares, 36,376,617
shares and 8,200,000 shares will be gifted to Mr. and Mrs. James Kim, the Kim
Family Trusts and other members of Mr. Kim's immediate family, respectively.
Following such transactions the Founding Stockholders and such other members of
Mr. Kim's immediate family will beneficially own a majority of the outstanding
shares of ATI common stock. In addition, ATI will acquire all of the stock of
AKI from the Kim Family Trusts for $3,000. The merger of AEI and ATI, the
creation of AIH and FACI, the issuance of ATI common stock for AIH and the
acquisition of AKI are collectively referred to as the Reorganization.
F-7
<PAGE> 112
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Included within the Amkor Companies following the Reorganization are ATI,
AIH and its subsidiaries and AKI and its subsidiary. All of the subsidiaries
will be wholly owned except for 40% of the common stock of AAP which is owned by
AICL (see Note 16), and a small number of shares of each of AAP, AAAP and AMI
which are required to be owned by directors of these companies pursuant to
Philippine law.
Except for the acquisition of the shares of AKI which will be accounted for
as a purchase transaction, the Reorganization described above will be treated
similar to a pooling of interests as it represents an exchange of equity
interests among companies under common control. The purchase price for the AKI
stock, which represents the fair value of these shares, approximates the book
value of AKI. The financial statements are presented on a combined basis as a
result of the common ownership and business operations of all of the Amkor
Companies, including AKI. As a result of the acquisition of AKI, AKI will become
a wholly owned subsidiary of ATI; accordingly, future financial statements will
be presented for ATI and its subsidiaries on a consolidated basis.
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 combined financial statements using the equity method of
accounting.
Basis of Presentation
The accompanying financial statements have been prepared on a going concern
basis which contemplates realization of assets and liquidation of liabilities in
the ordinary course of business. At December 31, 1997 the Company was not in
compliance with certain restrictive covenants of its principal long-term debt
agreements and, as a result, amounts due under these agreements are required to
be classified as current liabilities in the combined balance sheet.
Consequently, at December 31, 1997, current liabilities exceeded current assets
by $196,870. To date, the Company has not received any notification that the
Company's repayment obligations with respect to these loans have been
accelerated as a result of such covenant violations. However, there is no
assurance that the Company could generate sufficient cash flow from operations
or other sources to satisfy these liabilities should they become due before
maturity. If the planned public offering of common stock and convertible debt is
successful (see Note 16), the Company will use part of the net proceeds to the
Company to repay these bank loans. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
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 79%, 72% and 68% of the Company's
packaging and test revenues in 1995, 1996 and 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. The Company has mitigated this risk by
selling primarily to well established companies, performing ongoing credit
evaluations and making frequent contact with customers.
At December 31, 1996 and 1997, the Company maintained $34,330 and $53,071,
respectively, in deposits at one U.S. financial institution and $1,861 and
$2,548, respectively, in deposits at U.S. banks which exceeded federally insured
limits.
F-8
<PAGE> 113
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Additionally, at December 31, 1996 and 1997, the Company maintained
deposits and certificates of deposits totaling approximately $14,649 and
$34,622, respectively, at foreign owned banks.
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
approximately 13.3%, 23.5% and 23.4% of net revenues in 1995, 1996 and 1997,
respectively. The Company's five largest customers collectively accounted for
34.1%, 39.2% and 40.1% of net revenues in 1995, 1996 and 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 and the financial support provided by 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
Substantially all of the Company's foreign subsidiaries use the U.S. dollar
as their functional currency. Accordingly, monetary assets and liabilities which
were originally denominated in a foreign currency are translated into U.S.
dollars at month-end exchange rates. Non-monetary items which were originally
denominated in foreign currencies are translated at historical rates. Gains and
losses from such transactions and from transactions denominated in foreign
currencies are included in other (income) expense, net. The cumulative
translation adjustment reflected in stockholders' equity in the combined balance
sheets relates primarily 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.
Accounts Receivable
At December 31, 1997, trade accounts receivable represent the Company's
interest in receivables sold in excess of amounts purchased by banks under an
accounts receivable sale agreement (see Note 2). Of the total net trade accounts
receivable amount at December 31, 1997, $19,905 relates to the trade accounts
receivable of CIL which were not sold under the Agreement.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally by using a moving average method.
F-9
<PAGE> 114
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
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 and improvements............................. 10 to 30 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 $27,381, $58,497 and $81,159 for 1995, 1996
and 1997, respectively.
Other Noncurrent Assets
Other noncurrent assets consist principally of security deposits, deferred
income taxes and the cash surrender value of life insurance policies.
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 combined
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, the use of accelerated methods of depreciation for income
tax purposes and unrecognized foreign exchange gains and losses.
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 AEI's taxable
income. Accordingly, no provision for U.S. federal income taxes was recorded for
AEI. Given the pending Offerings (see Note 16), for informational purposes, the
accompanying combined 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 17).
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 Reorganization (see Note
16).
In the fourth quarter of 1997, the Company adopted SFAS No. 128, "Earnings
Per Share," which requires dual presentation of basic and diluted earnings per
share on the face of the income statement. Basic
F-10
<PAGE> 115
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
EPS is computed using only the weighted average number of common shares
outstanding for the period while diluted EPS is computed assuming conversion of
all dilutive securities, such as options. In accordance with the statement, all
prior period per share amounts have been revised to reflect the new
presentation. The Company's basic and diluted per share amounts are the same for
all periods presented. There have been no changes to historical per share
amounts.
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 combined
statements of income.
Research and Development Costs
Research and development costs are charged to expense as incurred.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") 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 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement establishes standards
for reporting and display of income and its components in financial statements.
The Company will be required to adopt this statement in 1998.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." Under this statement, reporting
standards were established for the way that public business enterprises report
information about operating segments in annual financial statements and selected
information about operating segments in interim financial reports issued to
shareholders. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments. This statement is effective for financial
statements for periods beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years presented is to be
restated. This statement need not be applied to interim financial statements in
the initial year of its application, but comparative information for interim
periods in the initial year of application is to be reported in financial
statements for interim periods in the second year of application. The Company
will adopt this statement prospectively for the year ended December 31, 1998.
Reclassifications
Certain previously reported amounts have been reclassified to conform with
the current presentation.
2. ACCOUNTS RECEIVABLE SALE AGREEMENT
Effective July 7, 1997, the Company entered into an agreement to sell
receivables (the "Agreement") with certain banks (the "Purchasers"). The
transaction qualifies as a sale under the provisions of SFAS
F-11
<PAGE> 116
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
No. 125 "Accounting For Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." Under the Agreement, the Purchasers have
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. AICL has guaranteed AEI's obligations under the Agreement (see Note
11). The Agreement is structured as a three year facility subject to annual
renewals based upon the mutual consent of the Company and purchasers. The first
such renewal date is June 18, 1998. The Company and AICL did not comply with
certain financial covenants under the Agreement as of December 31, 1997. The
Purchasers have agreed to waive compliance with these covenants through January
2, 1999. The Company applied approximately $83.4 million of the Receivables Sale
proceeds together with approximately $17 million of working capital to reduce
the Company's indebtedness to AUSA which amounts were advanced by AUSA to
entities controlled by members of James Kim's family.
Proceeds from the sale of receivables were $84,400 in 1997. Losses on
receivables sold under the Agreement were approximately $2,414 in 1997 and are
included in other expense, net. As of December 31, 1997, approximately $6,300 is
included in current liabilities for amounts to be refunded to the Purchasers as
a result of a reduction in selected accounts receivable.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Land........................................... $ -- $ 2,346
Building and improvements...................... 81,602 109,528
Machinery and equipment........................ 333,188 448,032
Furniture, fixtures and other equipment........ 31,330 33,050
Construction in progress....................... 5,240 31,964
-------- --------
451,360 624,920
Less -- Accumulated depreciation and
amortization................................. 126,465 197,859
-------- --------
$324,895 $427,061
======== ========
</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
Reorganization, the Company authorized 500,000,000 shares of $.001 par value
common stock, of which 82,610,000 shares will be issued and outstanding to the
stockholders of the Amkor Companies in exchange for their interests in these
Companies.
In addition, the Company authorized 10,000,000 shares of $.001 par value
preferred stock, designated as Series A.
Changes in the division equity account reflected in the combined statement
of stockholders' equity represent the net cash flows resulting from the
operations of the Chamterry semiconductor packaging and test business for the
periods indicated. Such cash flows have been presented as distributions or
capital contributions since these amounts were retained in Chamterry
Enterprises, Ltd. for the benefit of the owners.
F-12
<PAGE> 117
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT 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,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Raw materials and purchased components......... $ 93,112 $105,748
Work-in-process................................ 8,808 10,122
-------- --------
$101,920 $115,870
======== ========
</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,
------------------
1996 1997
------- -------
<S> <C> <C>
Equity Investment in AICL (10.2% and 8.1% at
December 31, 1996 and 1997, respectively)...... $31,154 $13,863
------- -------
Other Equity Investments (20%-50% owned)
Anam Semiconductor & Technology Co., Ltd....... 10,700 --
Datacom International, Inc..................... 1,335 --
Sunrise Capital Fund........................... 1,328 --
Other.......................................... 1,373 738
------- -------
Total other equity investments......... 14,736 738
------- -------
Available for Sale (cost based investments)...... 23,354 5,220
------- -------
$69,244 $19,821
======= =======
</TABLE>
The Company had net unamortized investment costs in excess of the
proportionate share of the investee companies' net assets of approximately
$1,284 and $0 at December 31, 1996 and 1997, respectively.
On August 1, 1997, the Company sold its equity investment in Anam
Semiconductor & Technology Co., Ltd. ("Anam S&T") and certain investments and
notes receivable from companies unrelated to the semiconductor packaging and
test business to AK Investments, Inc., an entity 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 approximated the carrying value at August 1,
1997. Subsequent to the sale on August 1, 1997 the Company loaned AK
Investments, Inc. $12,800 for the purchase of additional investments. The amount
outstanding on this loan at December 31, 1997 was $4,350.
The Company's investment in AICL is accounted for using the equity method
of accounting. Although the Company does not own in excess of 20% of the
outstanding common stock of AICL, the Company through its common ownership with
the Kim family and entities controlled by the Kim family owns 40.7% of the
outstanding common stock of AICL and may exercise a significant influence over
AICL. Accordingly the Company applies the equity method based on its ownership
interest. A significant portion of the shares owned by the Kim family are
leveraged and as a result of this, or for other reasons, the family's ownership
could be substantially reduced.
F-13
<PAGE> 118
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
In 1997, the Company recognized a loss of $17,291, resulting principally
from the impairment of value of its investment in AICL as well as the current
year equity in income (loss) of AICL. The amount of the loss was determined
based upon the market value of the AICL shares on the Korean Stock Exchange on
February 16, 1998, the date that the Company sold its investment in AICL common
stock to AK Investments, Inc. In exchange for the shares, AK Investments, Inc.
assumed $13,863 of the Company's long-term borrowings from Anam USA, Inc.
The Company is advised that AICL, as a public company in Korea, has
published its most recent consolidated financial statements as of December 31,
1996, and that AICL has prepared preliminary consolidated financial statements
as of December 31, 1997. The Company's auditors do not audit AICL.
The Korean economy is undergoing changes as evidenced by the agreement
between the Korean government and the International Monetary Fund. Among other
things, this agreement includes a restructuring plan of the banking industry as
a whole which will most likely have a material effect on AICL's operations. The
overall impact of these economic changes on AICL is uncertain at this time.
AICL's financial statements are prepared on the basis of Korean GAAP, which
differs from U.S. GAAP in certain significant respects. The Company's equity in
income (loss) of AICL is based upon the Korean GAAP information noted above and
AICL's estimate of significant U.S. GAAP adjustments. These adjustments were not
significant in 1995 and 1996. In 1997, AICL recognized a W305 billion loss
principally as a result of foreign exchange losses on U.S. dollar denominated
liabilities due to the significant depreciation of the won relative to the U.S.
dollar. For purposes of determining the Company's equity in income (loss) of
AICL under U.S. GAAP, losses on remeasuring U.S. dollar denominated liabilities
are not recognized as the U.S. dollar is the functional currency for AICL. Such
U.S. dollar denominated liabilities were W2,144 billion at December 31, 1997.
Also, at December 31, 1997, the carrying value of the investment in AICL,
adjusted for the loss on the 1998 disposition discussed above, is less than the
Company's portion of AICL's net assets after consideration of the estimated U.S.
GAAP adjustments. The most significant such adjustment affecting net assets is
the remeasurement of property, plant and equipment to historical costs as
required as the U.S. dollar is the functional currency.
The following summary of consolidated financial information pertaining to
AICL was derived from the consolidated financial statements referred to above.
All amounts are in millions of Korean Won:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
SUMMARY INCOME STATEMENT INFORMATION:
Sales........................................ W1,105,273 W1,338,718 W1,786,457
Net income (loss)............................ 18,333 (9,385) (305,414)
SUMMARY BALANCE SHEET INFORMATION:
Total assets................................. 2,225,288 3,936,517
Total liabilities............................ 1,975,431 3,861,384
</TABLE>
7. SHORT-TERM CREDIT FACILITIES
At December 31, 1996 and 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 appropriate for the country in which the
borrowing is made (ranging from 7.2% to 13.0% at December 31, 1997). For 1996
and 1997, the weighted average interest rate on these borrowings was 7.8% and
8.6%, respectively. Included in cash and cash equivalents is $1,200 of
certificates of
F-14
<PAGE> 119
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
deposit pledged as collateral for certain of these lines. The unused portion of
lines of credit total $36,169 at December 31, 1997.
8. DEBT
Following is a summary of the Company's short-term borrowings and long-term
debt:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Short-term borrowings (see Note 7).......................... $ 150,513 $ 187,659
Bank loan, interest at LIBOR plus annual spread (6.78% at
December 31, 1997), due October, 2000..................... 50,000 50,000
Bank loan, interest at LIBOR plus annual spread (6.68% at
December 31, 1997), due in installments beginning March,
1998 through April, 2001.................................. 71,250 71,250
Floating rate notes (FRNs), interest at LIBOR plus annual
spread (7.38% at August 20, 1997, date of redemption)..... 40,000 --
Bank debt, interest at LIBOR plus annual spread (9.37% at
December 31, 1997), due December, 2001.................... 20,000 20,000
Bank debt, interest at LIBOR plus annual spread (12.22% at
December 31, 1997,) due October, 1998..................... 5,000 5,000
Bank debt, interest at LIBOR plus annual spread (9.09% at
December 31, 1997), due in installments with balance due
September, 1999........................................... 4,000 3,500
Bank debt, interest at LIBOR plus annual spread (11.88% at
December 31, 1997), due in equal installments through
January, 2001............................................. 5,926 5,502
Note payable, interest at prime (8.50% at December 31,
1997), due in semiannual installments beginning November
1999 through April, 2004.................................. -- 9,530
Note payable, interest at LIBOR plus annual spread (12.48%
at December 31, 1997), due in installments with balance
due November, 1999........................................ 11,000 9,000
Other, primarily capital lease obligations and other debt... 1,568 2,810
--------- ---------
359,257 364,251
Less -- Short-term borrowings and current portion of
long-term debt............................................ (191,813) (325,968)
--------- ---------
$ 167,444 $ 38,283
========= =========
</TABLE>
The Bank 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. These Bank loans are unconditionally
and irrevocably guaranteed by AICL. The Bank loans contain provisions pertaining
to the maintenance of specified debt-to-equity ratios, restrictions with respect
to corporate reorganization, acquisition of capital stock or substantially all
of the assets of any other corporations and advances and dispositions of all or
a substantial portion of the borrower's assets, except in the ordinary course of
business. AAP has not been in compliance with covenants regarding the
maintenance of certain debt-to-equity ratios and advances to affiliates.
Consequently, amounts due under these agreements and certain other agreements
with cross-default clauses have been classified as current liabilities in the
accompanying combined balance sheet.
Other bank debt instruments have interest rates based on Singapore
interbank rates and LIBOR plus an annual spread. The loans are secured by assets
of the Company and assets acquired through proceeds from the loans.
F-15
<PAGE> 120
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
Principal payments required under long-term debt borrowings at December 31,
1997 are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
1998.............................................. $138,309
1999.............................................. 9,153
2000.............................................. 2,360
2001.............................................. 22,003
2002.............................................. 1,905
Thereafter........................................ 2,862
--------
Total............................................. $176,592
========
</TABLE>
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 $483, $776 and $959 in 1995, 1996 and 1997,
respectively. The pension plan assets are invested primarily in equity and fixed
income securities.
Philippine Pension Plans
AAAP, AAP and AMI sponsor several defined benefit plans that cover
substantially all employees who are not covered by statutory plans. Charges to
expense are based upon costs computed by independent actuaries.
The components of net periodic pension cost for the defined benefit plans
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Service cost of current period................... $ 974 $1,542 $1,274
Interest cost on projected benefit obligation.... 811 1,228 957
Actual return on plan assets..................... (609) (677) (585)
Net amortization and deferrals................... 100 98 132
------ ------ ------
Total pension expense.................. $1,276 $2,191 $1,778
====== ====== ======
</TABLE>
It is the Company's policy to make contributions sufficient to meet the
minimum contributions required by law and regulation.
F-16
<PAGE> 121
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth the funded status and the amounts recognized
in the combined balance sheets for the defined benefit pension plans:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation.............................. $ 1,696 $ 1,546
======= =======
Accumulated benefit obligation......................... $ 2,848 $ 2,669
======= =======
Actuarial present value of projected benefit
obligation............................................. $12,699 10,428
Plan assets at fair value................................ 6,077 6,614
------- -------
Plan assets less than projected benefit obligation....... (6,622) (3,814)
Prior service cost....................................... 1,125 967
Unrecognized net loss.................................... 1,800 953
------- -------
Accrued pension cost..................................... $(3,697) $(1,894)
======= =======
</TABLE>
The weighted average interest rate used in determining the projected
benefit obligation was 12% as of December 31, 1996 and 1997. The rates of
increase in future compensation levels was 11% as of December 31, 1996 and 1997.
The expected long-term rate of return on plan assets was 12% as of December 31,
1996 and 1997.
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 YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C>
Current:
Federal....................................... $6,125 $5,880 $16,126
State......................................... 908 60 2,639
Foreign....................................... 498 2,260 28
------ ------ -------
7,531 8,200 18,793
------ ------ -------
Deferred:
Federal....................................... (173) (226) (4,991)
Foreign....................................... (974) (98) (6,724)
------ ------ -------
(1,147) (324) (11,715)
------ ------ -------
Total provision....................... $6,384 $7,876 $ 7,078
====== ====== =======
</TABLE>
F-17
<PAGE> 122
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The reconciliation between the tax payable based upon the U.S. federal
statutory income tax rate and the recorded provision follow:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
-------- ------- --------
<S> <C> <C> <C>
Federal statutory rate...................... $ 23,458 $15,054 $ 21,352
State taxes, net of federal benefit......... 908 60 1,285
S Corp. status of AEI....................... (10,400) (2,900) (3,613)
(Income) losses of foreign subsidiaries
subject to tax holiday.................... -- 4,957 (5,106)
Foreign exchange losses recognized for
income taxes.............................. (1,649) -- (21,147)
Valuation allowance......................... 22,000
Difference in rates on foreign
subsidiaries.............................. (5,933) (9,295) (7,693)
-------- ------- --------
Total............................. $ 6,384 $ 7,876 $ 7,078
======== ======= ========
</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. AAP 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. Foreign
exchange losses recognized for income taxes relate to unrecognized net foreign
exchange losses on U.S. dollar denominated monetary assets and liabilities.
These losses, which are not recognized for financial reporting purposes as the
U.S. dollar is the functional currency (see Note 1), result in deferred tax
assets that will be realized, for Philippine tax reporting purposes, upon
settlement of the related asset or liability. The deferred tax asset related to
these losses increased in 1997 as a result of the dramatic devaluation of the
Philippine peso relative to the U.S. dollar. The Company's ability to utilize
these assets depends on the timing of the settlement of the related assets or
liabilities and the amount of taxable income recognized within the Philippine
statutory carryforward limit of three years. Accordingly, a valuation allowance
has been established in 1997 for a portion of the related deferred tax assets.
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------ --------
<S> <C> <C>
Deferred tax assets (liabilities):
Retirement benefits.................................... $ 888 $ 816
Receivables............................................ 344 227
Inventories............................................ 1,057 6,509
Unrealized foreign exchange losses..................... 398 37,447
Unrealized foreign exchange gains...................... (614) (9,084)
Other.................................................. 225 98
------ --------
Net deferred tax asset................................. 2,298 36,013
Valuation allowance.................................... -- (22,000)
------ --------
Net deferred tax asset................................. $2,298 $ 14,013
====== ========
</TABLE>
Non-U.S. income before taxes and minority interest of the Company was
$23,800, $20,420 and $32,920 in 1995, 1996 and 1997, respectively.
F-18
<PAGE> 123
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
At December 31, 1996 and 1997 current deferred tax assets of $1,919 and
$13,439, respectively, are included in other current assets and noncurrent
deferred tax assets of $379 and $574, respectively, are included in other assets
in the combined balance sheet. The Company's net deferred tax assets include
amounts which management believes are realizable through future taxable income.
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.
At December 31, 1997, the financial reporting basis of AEI's net assets
were greater than the tax basis of the net assets by approximately $5,200. 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 December 31, 1997, the Company owned 8.1% of the outstanding stock of
AICL (see Note 6), and AICL owned 40% of AAP. After the Offerings (see Note 16)
the Company intends to purchase AICL's interest in AAP for approximately
$34,000. In 1996 and 1997, approximately 72% and 68%, respectively, 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 certain customers in 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 five-year
supply agreements with AICL giving the Company the first right to market and
sell substantially all of AICL's packaging and test services and the exclusive
right to market and sell all of 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 and its guarantees of
affiliate debt, labor disruptions, fluctuations in foreign exchange rates,
changes in governmental policies, economic or political conditions in Korea or
any other change could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company has obtained a significant portion of its financing from
financing arrangements provided by Anam USA, Inc. ("AUSA"), AICL's wholly-owned
financing subsidiary. A majority of the amount due to AUSA 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.
Purchases from AICL through AUSA were $354,062, $460,282 and
F-19
<PAGE> 124
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
$527,858 for 1995, 1996 and 1997, respectively. Charges from AUSA for interest
and bank charges were $4,484, $7,074 and $6,002 for 1995, 1996 and 1997,
respectively. Amounts payable to AICL and AUSA were $252,221, and $156,350 at
December 31, 1996 and 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. The Company is advised that
AICL, as a public company in Korea, has published its most recent annual
consolidated financial statements as of December 31, 1996, and that AICL has
prepared preliminary consolidated financial statements as of December 31, 1997.
These consolidated financial statements are prepared on the basis of Korean
GAAP, which differs from U.S. GAAP. U.S. GAAP financial statements are not
available (See Note 6). As of December 31, 1997, AICL, on a consolidated basis,
had current liabilities of approximately W2,124 billion, including approximately
W1,591 billion of short-term borrowings and approximately W121 billion of
current maturities of long-term debt, and had long-term liabilities of
approximately W1,737 billion, including approximately W737 billion of long-term
debt and approximately W862 billion of long-term capital lease obligations. As
of such date, the total shareholders' equity of AICL amounted to approximately
W75 billion. The deterioration of the Korean economy in recent months and the
resulting liquidity crisis in Korea have led to sharply higher domestic interest
rates and reduced opportunities for refinancing or refunding maturing debts as
financial institutions in Korea, which are experiencing financial difficulties,
are increasingly looking to limit their lending, particularly to highly
leveraged companies, and to increase their reserves and provisions for non-
performing assets. Therefore, there can be no assurance that AICL will be able
to refinance its existing loans or obtain new loans, or 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 December 31, 1997, AICL and its consolidated subsidiaries were
contingently liable under guarantees in respect of debt of its non-consolidated
subsidiaries and affiliates in the aggregate amount of approximately W857
billion. As of December 31, 1997, such guarantees included those in respect of
all of AUSA's debt totaling $319,200, $176,250 of the Company's debt to banks
and the Company's obligations under a receivables sales arrangement (see Note
2). 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. In addition, as an overseas subsidiary of
AICL, AUSA was formed with the approval of the Bank of Korea. If the Bank of
Korea were to withdraw such approval, or if AUSA otherwise ceased operations for
any reason, the Company and AICL would be required to meet their financing needs
through alternative arrangements. There can be no assurance that the Company or
AICL will be able to obtain alternative financing on acceptable terms or at all.
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 AAAP in the Philippines. Payments to Anam Engineering and
Construction were $22,167 and $3,844 in 1996 and 1997, respectively. Anam
Precision Equipment and Anam Instruments manufacture certain equipment used by
the Philippine operations. Payments to Anam Precision Equipment and Anam
Instruments were $6,652 and
F-20
<PAGE> 125
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
$4,211 in 1996 and 1997, respectively. The Company purchases direct materials
from Anam S&T. Payments to Anam S&T were approximately $16,400, $27,300 and
$26,000 during 1995, 1996 and 1997, respectively.
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 1997 were $25,100 and $24,655 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 $9,000 term loan note. As of December 31,
1997, there was $750 outstanding under the line of credit and $9,000 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 December 31, 1997, there was $3,800 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 $87,000 at December 31, 1997. Also in 1997, a
company controlled by this stockholder purchased investments in the amount of
$49,740 (see Note 6).
The Company leases office space in West Chester, PA from certain
stockholders of the Company. The lease expires in 2006. The Company has the
option to extend the lease for an additional 10 years through 2016. On September
11, 1997, the office previously 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. Amounts
paid for these leases in 1996 and 1997 were $1,343 and $1,458, respectively.
At December 31, 1996 and 1997, the Company had advances and notes
receivable from affiliates other than AICL and AUSA of $22,988 and $36,501,
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.
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-21
<PAGE> 126
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
13. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims incidental to the conduct of its
business. Based on consultation with legal counsel, management does not believe
that any claims 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 December 31, 1997,
are:
<TABLE>
<S> <C>
1998............................................... $ 7,805
1999............................................... 7,230
2000............................................... 6,463
2001............................................... 5,689
2002............................................... 2,338
Thereafter......................................... 36,404
-------
Total.................................... $65,929
=======
</TABLE>
Rent expense amounted to $3,692, $5,520 and $6,709 for 1995, 1996 and 1997,
respectively.
The Company has various purchase commitments for materials, supplies and
capital equipment incidental to the ordinary conduct of business. As of December
31, 1997 the Company had commitments for capital equipment of approximately
$27,000. In the aggregate, such commitments are not at prices in excess of
current market.
14. 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. Subsequent to September 30, 1996, AEI purchased the 50% interest owned
by a principal stockholder at the stockholder's original cost. The acquisition
was accounted for using the purchase method of accounting and the results of
AATS' operations are included in the Company's combined statements of income
effective October 1, 1996. Accordingly, the total purchase price has been
allocated to the combined 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.
F-22
<PAGE> 127
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
15. 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 COMBINED
---------- -------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Net revenues from unaffiliated
customers.................. $1,258,110 $197,651 $ -- $ -- $1,455,761
Net revenues from
affiliates................. -- -- 256,895 (256,895) --
---------- -------- -------- --------- ----------
Total net revenues............ 1,258,110 197,651 256,895 (256,895) 1,455,761
Income before income taxes and
minority interest.......... 28,086 23,522 9,398 -- 61,006
Identifiable assets........... 352,503 21,873 506,397 (176,134) 704,639
Corporate assets.............. 146,299
----------
Total assets.......... $ 850,938
==========
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........... 245,781 19,422 424,653 (91,552) 598,304
Corporate assets.............. 199,309
----------
Total assets.......... $ 797,613
==========
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........... 235,707 18,699 270,185 (100,385) 424,206
Corporate assets.............. 211,662
----------
Total assets.......... $ 635,868
==========
</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
$208,062 of revenues from unaffiliated foreign customers for 1995, 1996 and
1997, respectively. 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.
F-23
<PAGE> 128
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
16. SUBSEQUENT EVENTS
On , 1998, Mr. and Mrs. James Kim and the Kim Family Trusts
exchanged their interests in AEI for 9,746,766 shares and 4,873,383 shares of
ATI common stock, respectively. ATI issued 67,989,851 shares of common stock in
exchange for all of the outstanding shares of AIH and its subsidiaries. Of such
shares, 19,328,234 shares, 36,376,617 shares and 8,200,000 shares were gifted to
Mr. and Mrs. James Kim, the Kim Family Trusts and other members of Mr. Kim's
immediate family, respectively. In addition, ATI acquired all of the stock of
AKI from the Kim Family Trusts for $3,000.
Except for the acquisition of the shares of AKI which will be accounted for
as a purchase transaction, the Reorganization described above was treated
similar to a pooling of interests as it represents an exchange of equity
interests among companies under common control. The purchase price for the AKI
stock, which represents the fair value of these shares, approximates the book
value of AKI. ATI filed an amended registration statement on , 1998
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 $449,950 (after deducting the underwriting discount and
estimated offering expenses) from the sale of shares of common stock and
convertible notes (the "Offerings"). The convertible notes will be 1)
convertible into ATI common stock at a premium over the initial public offering
price; 2) callable in certain circumstances after three years; 3) unsecured and
subordinate to senior debt; 4) carry a coupon rate of approximately %; and
5) have a maturity of five years. Approximately $225,000 of the proceeds will be
used to reduce short-term and long-term borrowings. Approximately $105,000 of
the proceeds will be used to reduce amounts due to AUSA. In connection with the
Offerings, certain existing stockholders intend to sell approximately 5,000,000
of their shares.
The Company established stock option plans in 1998 pursuant to which
6,300,000 shares of common stock were 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.
After the Offerings, the Company intends to purchase AICL's 40% interest in
AAP for approximately $34,000. The Company will account for this transaction as
a purchase which will result in the elimination of the minority interest
liability reflected on the combined balance sheet and result in additional
amortization of approximately $2,500 per year.
17. 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 Exchange 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 $2,100
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 December 31, 1997, AEI would have declared a
distribution of $27,700 of previously taxed income. The pro forma balance sheet
is presented to reflect these changes as if they occurred on December 31, 1997.
F-24
<PAGE> 129
======================================================
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........................... 9
Reorganization......................... 25
Relationship with Anam Industrial Co.,
Ltd.................................. 27
Use of Proceeds........................ 32
Dividend Policy........................ 32
Capitalization......................... 33
Dilution............................... 35
Selected Combined Financial Data....... 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 38
Business............................... 48
Management............................. 63
Certain Transactions................... 69
Principal and Selling Stockholders..... 72
Description of Capital Stock........... 73
Description of Convertible Notes....... 75
Shares Eligible for Future Sale........ 89
Certain United States Federal Tax
Consequences to Holders of Common
Stock and Convertible Notes.......... 91
Underwriting........................... 96
Legal Matters.......................... 100
Experts................................ 100
Additional Information................. 100
Glossary............................... 101
Index to Combined Financial
Statements........................... F-1
</TABLE>
------------------
Until , 1998 (25 days after the commencement of the Offerings), all
dealers effecting transactions in the Common Stock and Convertible Notes,
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.
======================================================
======================================================
35,000,000 SHARES
COMMON STOCK
$150,000,000
% CONVERTIBLE
SUBORDINATED NOTES
DUE 2003
AMKOR
TECHNOLOGY, INC.
[AMKOR LOGO]
------------
PROSPECTUS
, 1998
------------
SALOMON SMITH BARNEY
BANCAMERICA
ROBERTSON STEPHENS
COWEN & COMPANY
======================================================
<PAGE> 130
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.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED MARCH 31, 1998
PROSPECTUS
35,000,000 SHARES
COMMON STOCK
[AMKOR LOGO] $150,000,000
% CONVERTIBLE SUBORDINATED NOTES DUE 2003
AMKOR TECHNOLOGY, INC.
------------------
Amkor Technology, Inc. ("Amkor" or the "Company") hereby offers 30,000,000
shares of Common Stock, par value $.001 per share ("Common Stock"), and
$150,000,000 aggregate principal amount of % Convertible Subordinated Notes
due 2003 (the "Convertible Notes"). In addition, certain stockholders of the
Company (the "Selling Stockholders") are hereby offering 5,000,000 shares of
Common Stock. The Convertible Notes will mature on , 2003. Interest on
the Convertible Notes is payable on and of each year, commencing
, 1998. The Convertible Notes are convertible into shares of Common
Stock at any time on or before the close of business on the last trading day
prior to maturity, unless previously redeemed, at a conversion price of
$ per share, subject to adjustment in certain events as described herein.
The Convertible Notes are subordinated in right of payment to all existing
and future Senior Debt (as defined) of the Company and effectively subordinated
to all existing and future liabilities and obligations of the Company's
subsidiaries. The Convertible Notes are not redeemable by the Company prior to
, 2001. On or after , 2001, the Convertible Notes are
redeemable, in whole or from time to time in part, at the option of the Company,
at the redemption prices set forth herein plus accrued interest, if the closing
price of the Common Stock is at least 125% of the conversion price for at least
20 trading days within a period of 30 consecutive trading days ending on the
fifth trading day prior to the notice of redemption. No sinking fund is provided
for the Convertible Notes. In addition, following the occurrence of a Designated
Event (i.e., a Change of Control or Termination of Trading (each as defined)),
each holder has the right to cause the Company to purchase the Convertible Notes
at 101% of their principal amount together with accrued and unpaid interest. See
"Description of Convertible Notes."
Of the 35,000,000 shares of Common Stock (the "Shares") and $150,000,000
aggregate principal amount of Convertible Notes offered hereby, 7,000,000 Shares
and $30,000,000 principal amount of Convertible Notes are being offered by the
International Underwriters (as defined) outside the United States and Canada
(the "International Offering") and 28,000,000 Shares and $120,000,000 principal
amount of Convertible Notes are being offered by the U.S. Underwriters (as
defined) in a concurrent offering in the United States and Canada (the "U.S.
Offering" and, together with the International Offering, the "Offerings"),
subject to transfers between the International Underwriters and the U.S.
Underwriters (collectively, the "Underwriters"). The Price to the Public and
Underwriting Discount per Share and per Convertible Note will be identical for
the International Offering and the U.S. Offering. See "Underwriting." The
closing of the International Offering and U.S. Offering are conditioned upon
each other. Following the Offerings, certain members of management and their
family will beneficially own approximately 68.9% of the Company's outstanding
Common Stock. See "Principal and Selling Stockholders."
Prior to the Offerings, there has not been a public market for the Common
Stock or the Convertible Notes. It is currently estimated that the initial
public offering price per share of the Common Stock will be between $10.00 and
$12.00 per share. See "Underwriting" for a discussion of factors to be
considered in determining the initial public offering price. The Common Stock
has been approved for listing on the Nasdaq National Market under the symbol
"AMKR," subject to official notice of issuance. The Company has applied for
quotation of the Convertible Notes on the Nasdaq Stock Market under the symbol
"AMKRG."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES AND THE
CONVERTIBLE NOTES.
------------------
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>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
THE PUBLIC COMMISSIONS(1) THE COMPANY(2) STOCKHOLDERS(2)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Per Share..................... $ $ $ $
Per Convertible Note.......... % % % --
Total Shares.................. $ $ $ $
Total Convertible Notes....... $ $ $ --
Total(3)...................... $ $ $ $
======================================================================================================================
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $5,000,000.
(3) The Company has granted the International Underwriters and the U.S.
Underwriters 30-day options to purchase up to 1,050,000 and 4,200,000
additional shares of Common Stock, respectively, and $4,500,000 and
$18,000,000 additional principal amount of Convertible Notes, respectively,
solely to cover over-allotments, if any. If such options are exercised in
full, the total Price to the Public, Underwriting Discounts and Proceeds to
the Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------
The Shares and the Convertible Notes 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 and the Convertible
Notes will be made at the office of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001 or through the facilities of The Depository Trust Company,
on or about , 1998.
------------------
SALOMON SMITH BARNEY INTERNATIONAL
BA ROBERTSON STEPHENS INTERNATIONAL LIMITED
COWEN INTERNATIONAL L.P.
, 1998
<PAGE> 131
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "International Underwriting Agreement") among the Company, the Selling
Stockholders and each of the underwriters named below (the "International
Underwriters"), for whom Smith Barney Inc., BancAmerica Robertson Stephens
International Limited and Cowen International L.P. are acting as representatives
(the "International Representatives"), (i) the Company and the Selling
Stockholders have agreed to sell to each of the International Underwriters and
each of the International 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 and (ii) the Company has agreed to sell to
certain of the International Underwriters and each such International
Underwriter has severally agreed to purchase from the Company the principal
amount of the Convertible Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NUMBER OF CONVERTIBLE
INTERNATIONAL UNDERWRITERS SHARES NOTES
-------------------------- --------- ------------
<S> <C> <C>
Smith Barney Inc. ...........................
BancAmerica Robertson Stephens International
Limited....................................
Cowen International L.P......................
--------- ----------
Total.............................. 7,000,000 30,000,000
========= ==========
</TABLE>
The International Underwriting Agreement provides that the obligations of
the International Underwriters to purchase the Shares and Convertible Notes
listed above are subject to certain conditions set forth therein. The
International Underwriters are committed to purchase all of the Shares and
Convertible Notes agreed to be purchased by the International Underwriters
pursuant to the International Underwriting Agreement (other than those covered
by the over-allotment options described below), if any Shares or Convertible
Notes are purchased. In the event of default by any International Underwriter,
the International Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the non-defaulting International
Underwriters may be increased or the International Underwriting Agreement may be
terminated.
The International Representatives have advised the Company and the Selling
Stockholders that the International Underwriters propose initially to offer such
Shares to the public at the initial public offering price thereof 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 International Underwriters
may allow, and such dealers may reallow, a discount not in excess of $
per share on sales to certain other dealers. After the initial public offering
of the Shares, the public offering price and such discounts may be changed.
The International Representatives have also advised the Company that the
relevant International Underwriters propose initially to offer such Convertible
Notes to the public at the initial public offering price thereof set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of % of the principal amount of such Convertible
Notes. The relevant International Underwriters may allow, and such dealers may
reallow, a discount not in excess of % of the principal amount of the
Convertible Notes on sales to certain other dealers. After the initial public
offering of the Convertible Notes, the public offering price and such
concessions may be changed.
Purchasers of the Shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the initial public offering price set forth on the cover
page hereof.
The Company and the Selling Stockholders also have entered into an
underwriting agreement (the "U.S. Underwriting Agreement") with the U.S.
Underwriters named therein, for whom Smith Barney Inc., BancAmerica Robertson
Stephens and Cowen & Company are acting as representatives (the
96
<PAGE> 132
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
"U.S. Representatives" and, together with the International Representatives, the
"Representatives"), providing for the concurrent offer and sale of 28,000,000 of
the Shares and $120,000,000 principal amount of the Convertible Notes in the
United States and Canada.
The closing with respect to the sale of the Shares and the Convertible
Notes pursuant to the International Underwriting Agreement is a condition to the
closing with respect to the sale of the Shares and the Convertible Notes
pursuant to the U.S. Underwriting Agreement, and the closing with respect to the
sale of the Shares and the Convertible Notes pursuant to the U.S. Underwriting
Agreement is a condition to the closing with respect to the sale of the Shares
and the Convertible Notes pursuant to the International Underwriting Agreement.
The initial public offering price and underwriting discount per Share and per
Convertible Note for the International Offering and the U.S. Offering will be
identical.
Each International Underwriter has severally agreed that, as part of the
distribution of the 7,000,000 Shares and $30,000,000 principal amount of the
Convertible Notes by the International Underwriters, (i) it is not purchasing
any Shares or Convertible Notes 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 Convertible Notes 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 or Convertible Notes
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 or Convertible Notes 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.
Each U.S. Underwriter has severally agreed that, as part of the
distribution of the 28,000,000 Shares and $120,000,000 principal amount of the
Convertible Notes by the U.S. Underwriters, (i) it is not purchasing any Shares
or Convertible Notes 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 Convertible Notes 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 or Convertible Notes 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 or Convertible Notes 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.
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.
Pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, sales may be made between the International Underwriters and the
U.S. Underwriters of such number of Shares and such principal amount of the
Convertible Notes as may be mutually agreed. The price of any Shares or
Convertible Notes so sold shall be the initial public offering price thereof 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 and the principal amount of the Convertible Notes initially
available for sale by the International Underwriters or by the U.S. 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
97
<PAGE> 133
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
any Shares or Convertible Notes 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 1986 with respect to
anything done by it in relation to the Shares or the Convertible Notes 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 Shares or the Convertible
Notes 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 International Underwriters and the U.S.
Underwriters options to purchase up to an additional 1,050,000 and 4,200,000
Shares, respectively, and an additional $4,500,000 and $18,000,000 principal
amount of the Convertible Notes, respectively, in each case at the applicable
price to the public less the applicable 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 International
Underwriters and the U.S. Underwriters will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares of Common Stock or such additional principal amount of Convertible Notes
as the percentage it was obligated to purchase pursuant to the International
Underwriting Agreement or the U.S. 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 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 (other
than the Convertible Notes) 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 Smith Barney
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 unless pursuant to the Securities Loan Agreement (as described
below) or with the prior written consent of Smith Barney Inc., subject to
certain limited exceptions. Smith Barney 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 International Underwriting Agreement and the U.S. Underwriting
Agreement provide that the Company and certain Selling Stockholders will
indemnify the several International Underwriters and U.S. Underwriters against
certain liabilities under the Securities Act, or contribute to payments the
International Underwriters and the U.S. Underwriters may be required to make in
respect thereof.
BancAmerica Robertson Stephens International Limited is an affiliate of
Bank of America, which will be repaid approximately $43 million of short-term
loans to the Company from the net proceeds of the Offerings. See "Use of
Proceeds." Because more than 10% of the net proceeds of the Offerings may be
paid to Bank of America, the Offerings are being conducted in accordance with
Rule 2710(c)(8) and Rule 2720 ("Rule 2720") of the Conduct Rules of the National
Association of Securities Dealers, Inc. Smith Barney Inc. will serve as a
"qualified independent underwriter" in the Offerings and, in such capacity, will
recommend
98
<PAGE> 134
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
a price in compliance with Rule 2720 and has performed due diligence
investigations in accordance with Rule 2720.
Affiliates of Smith Barney Inc., Mr. James Kim and AICL are among the
principal shareholders of 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 or
the Convertible Notes. 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 or Convertible Notes for the
purpose of stabilizing their market price. The Underwriters also may create a
short position for the account of the Underwriters by selling more Common Stock
or Convertible Notes 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 or Convertible Notes 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
5,250,000 shares of Common Stock and $22,500,000 principal amount of the
Convertible Notes, 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 or Convertible Notes 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 and the Convertible
Notes 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.
In connection with the Offerings, Mr. and Mrs. Kim (referred to herein as
the "Lenders") and Smith Barney Inc. intend to enter into a securities loan
agreement (the "Securities Loan Agreement") which provides that, subject to
certain restrictions and with the agreement of the Lenders, Smith Barney Inc.
may from time to time until the maturity date or redemption date of the
Convertible Notes borrow, return and reborrow shares of Common Stock from the
Lenders (the "Borrowed Securities"); provided, however, that the number of
Borrowed Securities at any time may not exceed 7,000,000 shares of Common Stock,
subject to adjustment for certain dilutive events. The Securities Loan Agreement
is intended to facilitate market-making activity in the Convertible Notes by
Smith Barney Inc. Smith Barney Inc. may from time to time borrow shares of
Common Stock under the Securities Loan Agreement to settle short sales of Common
Stock entered into by Smith Barney Inc. to hedge any long position in the
Convertible Notes resulting from its market-making activities. Such sales will
be made on the Nasdaq National Market or in the over-the-counter market at
market prices prevailing at the time of sale or at prices related to such market
prices. Market conditions will dictate the extent and timing of Smith Barney
Inc.'s market-making transactions in the Convertible Notes and the consequent
need to borrow and sell shares of Common Stock. The availability of shares of
Common Stock under the Securities Loan Agreement at any time is not assured and
any such availability does not assure market-making activity with respect to the
Convertible Notes. Any market-making engaged in by Smith Barney Inc. or any
other Underwriter may cease at any time. The foregoing description of the
Securities Loan Agreement does not purport to be complete and is qualified in
its entirety by reference to such agreement, which is an exhibit to the
Securities Loan Registration Statement.
The Underwriters do not intend to confirm sales in the Offerings to any
accounts over which they exercise discretionary authority.
99
<PAGE> 135
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Prior to the Offerings, there has been no public market for the Common
Stock. Accordingly, the initial public offering price for the Shares will be
determined by negotiation among the Company, the Selling Stockholders and the
Representatives. Among the factors considered in determining the initial 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 Shares and the Convertible Notes 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 and the Convertible Notes offered
hereby.
EXPERTS
The combined financial statements and schedule of the Company as of
December 31, 1995, 1996 and 1997, and for each of the years in the three-year
period ended December 31, 1997, included in this Registration Statement (as
defined below) have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports dated February 3, 1998 (except with
respect to the sale of the investment in AICL's common stock discussed in Note 6
to the Combined Financial Statements as to which the date is February 16, 1998)
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
Reference is made to said reports which include an explanatory paragraph
with respect to the ability of the Company to continue as a going concern as
discussed in Note 1 of Notes to the Combined Financial Statements.
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, the Common Stock and the Convertible
Notes, 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.
100
<PAGE> 136
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
======================================================
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........................... 9
Reorganization......................... 25
Relationship with Anam Industrial Co.,
Ltd.................................. 27
Use of Proceeds........................ 32
Dividend Policy........................ 32
Capitalization......................... 33
Dilution............................... 35
Selected Combined Financial Data....... 36
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 38
Business............................... 48
Management............................. 63
Certain Transactions................... 69
Principal and Selling Stockholders..... 72
Description of Capital Stock........... 73
Description of Convertible Notes....... 75
Shares Eligible for Future Sale........ 89
Certain United States Federal Tax
Consequences to Holders of Common
Stock and Convertible Notes.......... 91
Underwriting........................... 96
Legal Matters.......................... 100
Experts................................ 100
Additional Information................. 100
Glossary............................... 101
Index to Combined Financial
Statements........................... F-1
</TABLE>
------------------
Until , 1998 (25 days after the commencement of the Offerings), all
dealers effecting transactions in the Common Stock and Convertible Notes,
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.
======================================================
======================================================
35,000,000 SHARES
COMMON STOCK
$150,000,000
% CONVERTIBLE
SUBORDINATED NOTES
DUE 2003
AMKOR
TECHNOLOGY, INC.
[AMKOR LOGO]
------------
PROSPECTUS
, 1998
------------
SALOMON SMITH BARNEY
INTERNATIONAL
BA ROBERTSON STEPHENS
INTERNATIONAL LIMITED
COWEN INTERNATIONAL L.P.
======================================================
<PAGE> 137
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 and Convertible Notes
being registered. All amounts are estimates except the SEC registration fee and
the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 193,373
NASD Filing Fee............................................. 30,500
Nasdaq National Market System Listing Fee................... 95,000
Printing Fees and Expenses.................................. 350,000
Legal Fees and Expenses..................................... 1,750,000
Accounting Fees and Expenses................................ 2,200,000
Blue Sky Fees and Expenses.................................. 5,000
Transfer Agent and Registrar Fees........................... 50,000
Miscellaneous............................................... 326,127
----------
Total............................................. $5,000,000
==========
</TABLE>
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 Company's Certificate of Incorporation provides for the indemnification
of directors to the fullest extent permissible under Delaware law.
The Company'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 Company, and, with respect to any criminal action or
proceeding, the indemnified party had no reason to believe his conduct was
unlawful.
The Company has entered into indemnification agreements with its directors
and executive officers, in addition to indemnification provided for in the
Company's Bylaws, and intends to enter into indemnification agreements with any
new directors and executive officers in the future.
The form of U.S. Underwriting Agreement filed as Exhibit 1.1 hereto and the
form of International Underwriting Agreement filed as Exhibit 1.2 hereto provide
for the indemnification of the Company's directors and officers in certain
circumstances as provided therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Prior to the Offerings, in 1998, 82,610,000 shares of Common Stock were
issued to Mr. James Kim and members of his family in exchange for their
outstanding interests in the Amkor Companies. 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 issued in such transactions. All recipients had adequate access,
through their relationships with the Company, to information about the Company.
II-1
<PAGE> 138
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
2.1 Agreement and Plan of Reorganization dated , 1998
between Amkor Technology, Inc. and Amkor Electronics, Inc.*
2.2 Stock Purchase Agreement dated , 1998 between Amkor
Electronics, Inc. and the shareholders of AK Industries,
Inc. *
3.1 Certificate of Incorporation.**
3.2 Bylaws.**
4.1 Specimen Common Stock Certificate.
4.2 Form of Indenture dated , 1998.
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 1998 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 , 1998
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 AAP 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 1998 Director Option Plan and form of agreement thereunder.
10.17 1998 Employee Stock Purchase Plan.
</TABLE>
II-2
<PAGE> 139
<TABLE>
<C> <S>
10.18 Performance Undertaking between Amkor Receivables Corp. and Anam Industrial Co., Ltd., dated June 20,
1997.**
10.19 Packaging and Test Services Agreement by and among Amkor Technology, Inc., Amkor Electronics, Inc.,
C.I.L. Limited, Anam USA, Inc. and Anam Industrial Co., Ltd. dated January 1, 1998.+
10.20 Foundry Services Agreement by and among Amkor Electronics, Inc., C.I.L. Limited, Anam Industries Co.,
Ltd. and Anam USA dated as of January 1, 1998.+
10.21 Amendment to Technical Assistance Agreement dated as of September 29, 1997 between Texas Instruments
Incorporated and Anam Industrial Co., Ltd. and related portions of Technical Assistance Agreement
dated as of January 28, 1997.+**
10.22 Registration Rights Agreement between Amkor Technology, Inc. and Smith Barney Inc. in consideration
of the Master Securities Loan Agreement dated , 1998.
10.23 Manufacturing and Purchase Agreement between Texas Instruments Incorporated, Anam Industrial Co., Ltd
and Amkor Electronics, Inc., dated as of January 1, 1998.+
10.24 Stock Purchase Agreement dated , 1998 between Amkor Technology, Inc. and Anam Industrial Co.,
Ltd. (with respect to the purchase of stock of AAPI).*
12.1 Ratio of Earnings to Fixed Charges.*
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).*
24.1 Power of Attorney.**
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously Filed.
+ Confidential Treatment requested as to certain portions of this exhibit.
SCHEDULE II -- 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.
II-3
<PAGE> 140
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-4
<PAGE> 141
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 30th day of March 1998.
AMKOR TECHNOLOGY, INC.
By: /s/ JAMES J. KIM
------------------------------------
James J. Kim
Chief Executive Officer
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 March 30, 1998
- --------------------------------------------------- Chairman
James J. Kim
/s/ FRANK J. MARCUCCI Chief Financial Officer and March 30, 1998
- --------------------------------------------------- Secretary (Principal Financial
Frank J. Marcucci and Accounting Officer)
/s/ JOHN N. BORUCH President and Director March 30, 1998
- ---------------------------------------------------
John N. Boruch
/s/ THOMAS D. GEORGE Director March 30, 1998
- ---------------------------------------------------
Thomas D. George
/s/ GREGORY K. HINCKLEY Director March 30, 1998
- ---------------------------------------------------
Gregory K. Hinckley
</TABLE>
II-5
<PAGE> 142
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
II 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
notes.
S-1
<PAGE> 143
After the Reorganization transaction discussed in Note 1 to the Amkor
Technology, Inc. and AK Industries, Inc. Combined Financial Statements is
effected, we expect to be in position to render the following audit report.
ARTHUR ANDERSEN LLP
February 3, 1998 (except with respect to the sale of the investment in Anam
Industrial Co., Ltd. common stock discussed in Note 6 to the Combined Financial
Statements as to which the date is February 16, 1998)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amkor Technology, Inc.:
We have audited in accordance with generally accepted auditing standards,
the Combined Financial Statements of Amkor Technology, Inc. and AK Investments,
Inc. and subsidiaries (See Note 1 to the Combined Financial Statements) included
in this registration statement 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. Our report on the
financial statements includes an explanatory paragraph with respect to the
ability of the Company to continue as a going concern as discussed in Note 1 to
the Combined Financial Statements. The schedule listed in the index above is
presented for the purpose of complying with the Securities and Exchange
Commissions rules and is not 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.
ARTHUR ANDERSEN LLP
S-2
<PAGE> 144
SCHEDULE II
AMKOR TECHNOLOGY, INC. AND AK INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED BALANCE AT
BEGINNING TO END
OF PERIOD EXPENSE WRITE-OFFS OTHER OF PERIOD
---------- --------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C>
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
Year ended December 31, 1997:
Allowance for doubtful accounts................. $1,179 $3,490 $(435) -- $4,234
</TABLE>
S-3
<PAGE> 145
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
2.1 Agreement and Plan of Reorganization dated , 1998
between Amkor Technology, Inc. and Amkor Electronics, Inc.*
2.2 Stock Purchase Agreement dated , 1998 between Amkor
Electronics, Inc. and the shareholders of AK Industries,
Inc. *
3.1 Certificate of Incorporation.**
3.2 Bylaws.**
4.1 Specimen Common Stock Certificate.
4.2 Form of Indenture dated , 1998.
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 1998 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 AAP 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 1998 Director Option Plan and form of agreement thereunder.
10.17 1998 Employee Stock Purchase Plan.
10.18 Performance Undertaking between Amkor Receivables Corp. and
Anam Industrial Co., Ltd., dated June 20, 1997.**
10.19 Packaging and Test Services Agreement by and among Amkor
Technology, Inc., Amkor Electronics, Inc., C.I.L. Limited,
Anam USA, Inc. and Anam Industrial Co., Ltd. dated January
1, 1998.+
10.20 Foundry Services Agreement by and among Amkor Electronics,
Inc., C.I.L. Limited, Anam Industries Co., Ltd. and Anam USA
dated as of January 1, 1998.+
</TABLE>
<PAGE> 146
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.21 Amendment to Technical Assistance Agreement dated as of
September 30, 1997 between Texas Instruments Incorporated
and Anam Industrial Co., Ltd.+**
10.22 Registration Rights Agreement between Amkor Technology, Inc.
and Smith Barney Inc. in consideration of the Master
Securities Loan Agreement dated , 1998.
10.23 Manufacturing and Purchase Agreement between Texas
Instruments Incorporated, Anam Industrial Co., Ltd and Amkor
Electronics, Inc., dated as of January 1, 1998.+
10.24 Stock Purchase Agreement dated , 1998 between Amkor
Technology, Inc. and Anam Industrial Co., Ltd. (with respect
to the purchase of stock of AAPI).*
12.1 Ratio of Earnings to Fixed Charges.*
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).*
24.1 Power of Attorney (see page II-4).**
25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously Filed.
+ Confidential Treatment requested as to certain portions of this exhibit.
<PAGE> 1
EXHIBIT 1.1
CGS&H DRAFT/ U.S. Version
3/24/98
AMKOR TECHNOLOGY, INC.
28,000,000 Shares*
Common Stock
($.001 par value)
$120,000,000**
___ % Convertible Subordinated Notes Due 2003
U.S. Underwriting Agreement
New York, New York
April ___, 1998
Smith Barney Inc.
BancAmerica Robertson Stephens
Cowen & Company
As U.S. Representatives of the several U.S. Underwriters,
c/o Smith Barney Inc.
333 West 34th Street
New York, New York 10001
Ladies and Gentlemen:
Amkor Technology, Inc., a Delaware corporation (the "Company"),
proposes to sell to the underwriters named in Schedule I hereto (the "U.S.
Underwriters"), for whom you (the "U.S. Representatives") are acting as
representatives, 24,000,000 shares of common stock, $.001 par value ("Common
Stock"), of the Company, and the persons named in Schedule II hereto (the
"Selling Stockholders") propose to sell to the U.S. Underwriters 4,000,000
shares of Common Stock (said shares to be issued and sold by the Company and
shares to be sold by the Selling Stockholders collectively being hereinafter
called the "U.S. Underwritten Shares"). The Company also proposes to grant to
the U.S. Underwriters an option to purchase up to 4,200,000 additional shares of
Common Stock (the "U.S. Option Shares"; the U.S. Option Shares, together with
the U.S. Underwritten Shares, being hereinafter called the "U.S. Shares"). The
Company
- --------
* Plus an option to purchase from Amkor Technology, Inc. up to 4,200,000
additional shares to cover over-allotments.
** Plus an option to purchase from Amkor Technology, Inc. up to $18,000,000
additional principal amount of its ___% Convertible Subordinated Notes due
2003 to cover over-allotments.
<PAGE> 2
also proposes to sell to certain of the U.S. Underwriters $120,000,000
principal amount of its ___% Convertible Subordinated Notes due 2003 (the "U.S.
Underwritten Notes"), to be issued under an indenture (the "Indenture") to be
dated as of April __, 1998, between the Company and State Street Bank and Trust
Company, as trustee (the "Trustee"). The Company also proposes to grant to such
U.S. Underwriters an option to purchase up to $18,000,000 additional principal
amount of its ___% Convertible Subordinated Notes due 2003 (the "U.S. Option
Notes"; the U.S. Option Notes, together with the U.S. Underwritten Notes, being
hereinafter called the "U.S. Notes"; and the U.S. Notes, together with the U.S.
Shares, being hereinafter called the "U.S. Securities"). The U.S. Notes are
convertible into shares of Common Stock.
It is understood that the Company and the Selling Stockholders are
concurrently entering into an International Underwriting Agreement dated the
date hereof (the "International Underwriting Agreement") providing for (i) the
sale by the Company and the Selling Stockholders of an aggregate of 7,000,000
shares of Common Stock (said shares to be sold by the Company and the Selling
Stockholders pursuant to the International Underwriting Agreement being
hereinafter called the "International Underwritten Shares"), and providing for
the grant to the underwriters named in Schedule I thereto (the "International
Underwriters") of an option to purchase from the Company up to 1,050,000
additional shares of Common Stock (the "International Option Shares"; the
International Option Shares, together with the International Underwritten
Shares, being hereinafter called the "International Shares"; and the U.S.
Shares, together with the International Shares, being hereinafter called the
"Shares") and (ii) the sale by the Company of $30,000,000 principal amount of
its ___% Convertible Subordinated Notes due 2003 (the "International
Underwritten Notes"), and providing for the grant to certain International
Underwriters of an option to purchase from the Company up to $4,500,000
additional principal amount of its ____% Convertible Subordinated Notes due 2003
(the "International Option Notes"; the International Option Notes, together with
the International Underwritten Notes, being hereinafter called the
"International Notes"; and the International Notes, together with the
International Shares, being hereinafter called the "International Securities";
and the International Notes, together with the U.S. Notes, being hereinafter
called the "Notes"; and the Notes, together with the Shares, being hereinafter
called the "Securities").
It is further understood and agreed that the International
Underwriters and the U.S. Underwriters have entered into an Agreement Between
U.S. Underwriters and International Underwriters dated the date hereof (the
"Agreement Between U.S. Underwriters and International Underwriters"), pursuant
to which, among other things, the International Underwriters may purchase from
the U.S. Underwriters a portion of the U.S. Securities to be sold pursuant to
the U.S. Underwriting Agreement and the U.S. Underwriters may purchase from the
International Underwriters a portion of the International Securities to be sold
pursuant to the International Underwriting Agreement. To the extent there are no
additional U.S. Underwriters listed on Schedule I other than you, the term U.S.
Representatives as used herein shall mean you, as U.S. Underwriters, and the
terms U.S. Representatives and U.S. Underwriters shall mean either the singular
or plural as the context requires.
It is understood by the parties hereto that Mr. James J. Kim and
Mrs. Agnes C. Kim ("Mr. and Mrs. James J. Kim"), Selling Stockholders, are
concurrently entering into a
2
<PAGE> 3
securities loan agreement dated the date hereof (the "Securities Loan
Agreement") with Smith Barney Inc. ("SBI") which provides that, subject to
certain restrictions and with the agreement of Mr. and Mrs. James J. Kim, SBI
may from time to time borrow, return and reborrow from Mr. and Mrs. James J. Kim
certain shares of Common Stock (the "Borrowed Shares") for the purpose of
facilitating market-making activity in the Notes by SBI.
Certain terms used in this Agreement are defined in Section 17
hereof.
1. Representations and Warranties.
A. The Company and Mr. James J. Kim, a Selling Stockholder,
jointly and severally represent and warrant to, and agree with, each U.S.
Underwriter as set forth below in this Section 1A.
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (file number
333-37235) on Form S-1, including the related Offering Preliminary
Prospectuses, for the registration under the Act of the offering and sale
of the Securities. The Company may have filed one or more amendments
thereto, including the related Offering Preliminary Prospectuses, each of
which has previously been furnished to you. The Company will next file
with the Commission either (i) prior to effectiveness of the Offering
Registration Statement, a further amendment to the Offering Registration
Statement (including the form of Offering Prospectuses) or (ii) after
effectiveness of the Offering Registration Statement, the Offering
Prospectuses in accordance with Rules 430A and 424(b)(1) or (4). In the
case of clause (ii), the Company has included in the Offering Registration
Statement all information (other than Rule 430A Information) required by
the Act and the rules thereunder to be included in the Offering
Registration Statement and the Offering Prospectuses. As filed, such
amendment and form of Offering Prospectuses, or such Offering
Prospectuses, shall contain all Rule 430A Information, together with all
other such required information, and, except to the extent the U.S.
Representatives shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the Execution
Time or, to the extent not completed at the Execution Time, shall contain
only such specific additional information and other changes (beyond that
contained in the latest Offering U.S. Preliminary Prospectus) as the
Company has advised you, prior to the Execution Time, will be included or
made therein.
It is understood that two forms of prospectus are to be used
in connection with the offering and sale of the Securities: one form of
prospectus relating to the U.S. Securities, which are to be offered and
sold to United States and Canadian Persons, and one form of prospectus
relating to the International Securities, which are to be offered and sold
to persons other than United States and Canadian Persons. The two forms of
prospectus are identical except for the outside front cover page, the
inside front cover page, the discussion under the heading "Underwriting"
and the outside back cover page. Such form of prospectus relating to the
U.S. Securities as first filed pursuant to Rule 424(b) after the Execution
Time or, if no filing pursuant to Rule 424(b) is made,
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<PAGE> 4
such form of prospectus included in the Offering Registration Statement at
the Effective Date, is hereinafter called the "Offering U.S. Prospectus";
such form of prospectus relating to the International Securities as first
filed pursuant to Rule 424(b) after the Execution Time or, if no filing
pursuant to Rule 424(b) is made, such form of prospectus included in the
Offering Registration Statement at the Effective Date, in either case,
exclusive of any supplement thereto, is hereinafter called the "Offering
International Prospectus"; and the Offering U.S. Prospectus and the
Offering International Prospectus are hereinafter collectively called the
"Offering Prospectuses".
(b) On the Effective Date, the Offering Registration Statement
did or will, and when the Offering Prospectuses are first filed (if
required) in accordance with Rule 424(b) and on the Closing Date (as
defined herein) and on any date on which the U.S. Option Shares or U.S.
Option Notes are purchased, if such date is not the Closing Date (a
"settlement date"), each Offering Prospectus (and any supplement thereto)
will, comply in all material respects with the applicable requirements of
the Act and the rules thereunder; on the Effective Date and at the
Execution Time, the Offering Registration Statement did not or will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, on the Effective Date, each
Offering Prospectus, if not filed pursuant to Rule 424(b), did not or will
not, and on the date of any filing pursuant to Rule 424(b) and on the
Closing Date and any settlement date, each Offering Prospectus (together
with any supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company and Mr.
James J. Kim make no representations or warranties as to the information
contained in or omitted from the Offering Registration Statement or the
Offering Prospectuses (or any supplement thereto) in reliance upon and in
conformity with information furnished herein or in writing to the Company
by or on behalf of any U.S. Underwriter through the U.S. Representatives
specifically for inclusion in the Offering Registration Statement or the
Offering Prospectuses (or any supplement thereto).
(c) The Company has filed with the Commission a registration
statement (file number 333-_________) on Form S-1, including the related
Borrowing Preliminary Prospectus, for the registration under the Act of
the offering and sale of the Borrowed Shares. The Company may have filed
one or more amendments thereto, including the related Borrowing
Preliminary Prospectus, each of which has previously been furnished to
you. The Company will next file with the Commission either (i) prior to
the effectiveness of the Borrowing Registration Statement, a further
amendment to the Borrowing Registration Statement (including the form of
Borrowing Prospectus) or (ii) after the effectiveness of the Borrowing
Registration Statement , the Borrowing Prospectus in accordance with Rules
430A and 424(b)(1) or (4). In the case of clause (ii), the Company has
included in the Borrowing Registration Statement all information (other
than Rule 430A Information) required by the Act and the rules thereunder
to be included in the Borrowing Registration Statement and the Borrowing
Prospectus. As filed, such
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<PAGE> 5
amendment and form of Borrowing Prospectus, or such Borrowing Prospectus,
shall contain all Rule 430A Information, together with all other such
required information, and, except to the extent the U.S. Representatives
shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time or, to
the extent not completed at the Execution Time, shall contain only such
specific additional information and other changes (beyond that contained
in the latest Borrowing Preliminary Prospectus) as the Company has advised
you, prior to the Execution Time, will be included or made therein.
(d) On the Effective Date, the Borrowing Registration Statement
did or will, and when the Borrowing Prospectus is first filed (if
required) in accordance with Rule 424(b) and on the Closing Date, the
Borrowing Prospectus (and any supplements thereto) will, comply in all
material respects with the applicable requirements of the Act and the
rules thereunder; on the Borrowing Effective Date and at the Execution
Time, the Borrowing Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; and, on the Borrowing Effective Date, the
Borrowing Prospectus, if not filed pursuant to Rule 424(b), will not, and
on the date of any filing pursuant to Rule 424(b) and on the Closing Date,
the Borrowing Prospectus (together with any supplemental thereto) will
not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the Company and Mr. James J. Kim make no
representations or warranties as to the information contained in or
omitted from the Borrowing Registration Statement, or the Borrowing
Prospectus (or any supplemental thereto) in reliance upon and in
conformity with information furnished herein or in writing to the Company
by or on behalf of any U.S. Underwriter through the U.S. Representatives
specifically for inclusion in the Borrowing Registration Statement or the
Borrowing Prospectus (or any supplement thereto).
(e) The combined financial statements and schedules of the
Company and A.K. Industries, Inc., Amkor Electronics, Inc., Amkor Anam
Test Services, Inc., T.L. Limited, Amkor Anam Advanced Packaging, Inc.
("AAAP"), Amkor/Anam Pilipinas, Inc. ("AAP"), C.I.L. Limited, Amkor/Anam
Euroservices S.A.R.L., and Automated MicroElectronics, Inc. ("AMI") (each
a "Subsidiary" and collectively the "Subsidiaries") included in the
Prospectuses and the Registration Statements present fairly in all
material respects the financial condition, results of operations and cash
flows of the Company and the Subsidiaries, on a combined basis, as of the
dates and for the periods indicated, comply as to form with the applicable
accounting requirements of the Act and the rules and regulations
thereunder and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as otherwise noted therein).
(f) Each of the Company, the Subsidiaries and , to the knowledge
of the Company and Mr. James J. Kim, Anam Industrial Co., Ltd. ("AICL")
has been duly
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<PAGE> 6
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized
with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectuses; each
of the Company and the Subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification, except where the failure
to be so qualified would not have a Material Adverse Effect; and no
proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power
and authority or qualification except such proceedings which, if
successful, would not individually or in the aggregate have a Material
Adverse Effect.
(g) All the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except (i) such shares of AAP owned by AICL,
which shares do not exceed 40.1% of the outstanding voting shares of AAP,
(ii) such shares of AAP, AMI and AAAP owned by directors thereof, which
shares in each case do not exceed 0.1% of the outstanding shares of such
Subsidiary, (iii) 3,446,476 shares of preferred stock of AAP, which shares
are owned by Integrated Microelectronics, Inc., and (iv) as otherwise set
forth in the Prospectuses, all outstanding shares of capital stock of the
Subsidiaries are owned by the Company either directly or through wholly
owned subsidiaries free and clear of any perfected security interest and
any other security interests, claims, liens or encumbrances.
(h) The Company's authorized equity capitalization is as set
forth in the Prospectuses; the capital stock of the Company conforms in
all material respects to the description thereof contained in the
Prospectuses; the outstanding shares of Common Stock have been duly and
validly authorized and issued and are fully paid and nonassessable; the
U.S. Shares being sold hereunder have been duly and validly authorized,
and, when issued and delivered to and paid for by the U.S. Underwriters
pursuant to this Agreement, will be fully paid and nonassessable; the U.S.
Shares have been duly authorized for listing, subject to official notice
of issuance, on the Nasdaq National Market; the certificates for the U.S.
Shares are in valid and sufficient form; the holders of outstanding shares
of capital stock of the Company are not entitled to preemptive or other
rights to subscribe for the U.S. Shares; and, except as set forth in the
Prospectuses, no options, warrants or other rights to purchase, agreements
or other obligations to issue, or rights to convert any obligations into
or exchange any securities for, shares of capital stock of or ownership
interests in the Company are outstanding.
(i) The Indenture will be, as of the Closing Date, duly
authorized, executed and delivered; the Indenture has been duly qualified
under the Trust Indenture Act and as of the Closing Date will constitute a
valid, binding and enforceable obligation of the Company; the U.S. Notes
have been duly authorized by the Company and, when authenticated by the
Trustee in accordance with the terms of the Indenture and delivered to and
paid for by the U.S. Underwriters pursuant to this Agreement, will have
been duly executed, authenticated, issued and delivered and will
constitute valid, binding and enforceable obligations of the Company
entitled to the benefits provided by the
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<PAGE> 7
Indenture; the shares of Common Stock issuable upon conversion of the U.S.
Notes have been duly authorized for listing, subject to official notice of
issuance, on the Nasdaq National Market; the holders of the outstanding
shares of capital stock of the Company are not entitled to any preemptive
or other rights to subscribe for the U.S. Notes or the shares of Common
Stock issuable upon the conversion thereof; the shares of Common Stock
initially issuable upon conversion of the U.S. Notes have been duly and
validly authorized and reserved for issuance upon such conversion and,
when issued upon conversion, will be validly issued, fully paid and
nonassessable; and the U.S. Notes and the Indenture will conform in all
material respects to the descriptions thereof contained in the Offering
Prospectuses.
(j) There is no franchise, contract or other document of a
character required to be described in the Registration Statements or
Prospectuses, or to be filed as an exhibit thereto, which is not described
or filed as required.
(k) This Agreement has been duly authorized, executed and
delivered by the Company and is a valid, binding and enforceable agreement
of the Company.
(l) The Company is not and, after giving effect to the offering
and sale of the U.S. Securities and the application of the proceeds
thereof as described in the Prospectuses, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended (the
"1940 Act").
(m) No consent, approval, authorization, filing with or order of
any court or governmental agency or body is required in connection with
the transactions contemplated herein, except such as have been obtained
under the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the U.S.
Securities by the U.S. Underwriters in the manner contemplated herein and
in the Prospectuses.
(n) Neither the issue and sale of the U.S. Securities nor the
consummation of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, or result in a breach
or violation of or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries pursuant to,
(i) the charter or bylaws of the Company or any of the Subsidiaries or
(ii) the terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement to which the Company or
any of the Subsidiaries is a party or bound or to which its or their
property is subject or (iii) any statute, law, rule, regulation, judgment,
order or decree applicable to the Company or any of the Subsidiaries of
any court, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of the Subsidiaries or any of its or
their properties.
(o) No holders of securities of the Company have rights to the
registration of such securities under the Registration Statements.
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<PAGE> 8
(p) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of the Subsidiaries or its or their property is pending or,
to the knowledge of the Company and Mr. James J. Kim, threatened that (i)
could reasonably be expected to have a material adverse effect on the
performance of this Agreement or the consummation of any of the
transactions contemplated hereby or (ii) could reasonably be expected to
have a Material Adverse Effect, except as set forth in or contemplated in
the Prospectuses.
(q) The Reorganization (as defined in the Prospectuses) has
been completed as described in the Prospectuses.
(r) Each of the Packaging and Test Services Agreement dated as
of November 1, 1997 and the Foundry Services Agreement dated as of January
1, 1998 (collectively, the "AICL Agreements") has been duly authorized,
executed and delivered by the Company, the Subsidiaries that are parties
thereto (the "Subsidiary Parties") and AICL and is a valid, binding and
enforceable agreement of the Company, the Subsidiary Parties and, to the
knowledge of the Company and Mr. James J. Kim, AICL; neither the
consummation of the transactions contemplated in any of the AICL
Agreements nor the fulfillment of the terms thereof will conflict with, or
result in a breach or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of the Company, any of the
Subsidiary Parties or AICL pursuant to, (i) the charter or bylaws of the
Company, any Subsidiary Party or, to the knowledge of the Company and Mr.
James J. Kim, AICL or (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement
to which the Company, any Subsidiary Party or, to the knowledge of the
Company and Mr. James J. Kim, AICL is a party or bound or to which their
respective property is subject (except for such breaches or violations
which would not, individually or in the aggregate, have a Material Adverse
Effect or a material adverse effect on the ability of AICL to perform any
of the AICL Agreements) or (iii) any statute, law, rule, regulation,
judgment, order or decree applicable to the Company, any Subsidiary Party
or, to the knowledge of the Company and Mr. James J. Kim, AICL of any
court, governmental body, arbitrator or other authority having
jurisdiction over the Company, such Subsidiary Party or AICL or any of
their respective properties; no consent, approval, authorization, filing
with or order of any court or governmental agency or body is currently
required in connection with the transactions contemplated in any of the
AICL Agreements, except those of which have been obtained or which, if not
obtained, would not individually or in the aggregate have a material
adverse effect on the performance of any of the AICL Agreements or the
consummation of the transactions contemplated thereby; and no action, suit
or proceeding by or before any court or governmental body or any
arbitrator involving the Company, any Subsidiary Party or, to the
knowledge of the Company and Mr. James J. Kim, AICL or their respective
properties is pending or, to the knowledge of the Company and Mr. James J.
Kim, threatened that could reasonably be expected to have a material
adverse effect on the performance of any of the AICL Agreements or the
consummation of the transactions contemplated thereby.
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<PAGE> 9
(s) Each of the Company, the Subsidiaries and, to the knowledge
of the Company and Mr. James J. Kim, AICL owns or leases all such
properties as are necessary to the conduct of its operations as presently
conducted; neither the Company nor any Subsidiary nor, to the knowledge of
the Company and Mr. James J. Kim, AICL is in violation of any law, rule or
regulation of any Federal, state, local or other governmental or
regulatory authority applicable to it or is in non-compliance with any
term or condition of, or has failed to obtain and maintain in effect, any
license, certificate, permit or other governmental authorization required
for the ownership or lease of its property or the conduct of its business,
which violation, non-compliance or failure would individually or in the
aggregate have a Material Adverse Effect or a material adverse effect on
the ability of AICL to perform any of the AICL Agreements, except as set
forth in or contemplated in the Prospectuses; and the Company has not
received notice of any proceedings relating to the revocation or material
modification of any such license, certificate, permit or other
authorization (other than such proceedings which, if the subject of an
unfavorable decision, would not individually or in the aggregate have a
Material Adverse Effect), except as set forth in or contemplated in the
Prospectuses.
(t) Neither the Company nor any Subsidiary nor, to the knowledge
of the Company and Mr. James J. Kim, AICL is in violation or default of
(i) any provision of its charter or bylaws, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement to which it is a party or bound or to which
its property is subject, or (iii) any statute, law, rule, regulation,
judgment, order or decree of any court, governmental body, arbitrator or
other authority having jurisdiction over the Company, or such Subsidiary
or AICL or any of their respective properties, as applicable, in each case
(x) other than such violations or defaults which would not, individually
or in the aggregate, have a Material Adverse Effect or a material adverse
effect on the ability of AICL to perform its obligations under the AICL
Agreements and (y) except as set forth in or contemplated in the
Prospectuses.
(u) Arthur Andersen LLP, who have certified certain financial
statements of the Company and the Subsidiaries and delivered their report
with respect to the audited combined financial statements and schedules
included in the Prospectuses, are independent public accountants with
respect to the Company within the meaning of the Act and the applicable
published rules and regulations thereunder.
(v) There are no transfer taxes or other similar fees or charges
under Federal law or the laws of any state, or any political subdivision
thereof, required to be paid in connection with the execution and delivery
of this Agreement or the issuance by the Company or sale by the Company of
the U.S. Securities.
(w) The Company has filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions
thereof (except in any case in which the failure so to file would not have
a Material Adverse Effect), except as set forth in or contemplated in the
Prospectuses and has paid all taxes shown as payable on such tax returns
and any other assessment, fine or penalty levied against it, to the extent
that
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<PAGE> 10
any of the foregoing is due and payable, except for any such assessment,
fine or penalty that is currently being contested in good faith or as
would not have a Material Adverse Effect, except as set forth in or
contemplated in the Prospectuses.
(x) No labor dispute with the employees of the Company or any of
the Subsidiaries exists or, to the knowledge of the Company and Mr. James
J. Kim, is threatened that could reasonably be expected to have a Material
Adverse Effect, except as set forth in or contemplated in the
Prospectuses.
(y) The Company and each of the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent for the businesses in which they
are engaged; neither the Company nor any such Subsidiary has been refused
any insurance coverage sought or applied for; and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect, except as set forth in or contemplated in the Prospectuses.
(z) No Subsidiary is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any
other distribution on such Subsidiary's capital stock, from repaying to
the Company any loans or advances to such Subsidiary from the Company or
from transferring any of such Subsidiary's property or assets to the
Company or any other Subsidiary of the Company, except as described in or
contemplated in the Prospectuses.
(aa) The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses (except in any case in which the failure so to possess any such
certificate, authorization or permit would not, individually or in the
aggregate, have a Material Adverse Effect), and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could reasonably be expected to have a
Material Adverse Effect, except as set forth in or contemplated in the
Prospectuses.
(bb) Neither the Company nor any of the Subsidiaries is in
violation of any federal or state law or regulation relating to
occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials and the Company and the
Subsidiaries have received all permits, licenses or other approvals
required of them under applicable federal and state occupational safety
and health and environmental laws and regulations to conduct their
respective businesses, and the Company and each such Subsidiary is in
compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to
receive required
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<PAGE> 11
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, have a Material Adverse Effect, except as set
forth in or contemplated in the Prospectuses.
(cc) The Company and each of the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(dd) Each of the Company, the Subsidiaries and, to the knowledge
of the Company and Mr. James J. Kim, AICL owns or has obtained licenses
for the patents, patent applications, trade and service marks, trade
secrets and other intellectual properties referenced or described in the
Prospectuses as being owned by or licensed to it (collectively, the
"Intellectual Property"). Except as set forth in the Prospectuses under
the caption "Business --Intellectual Property," (a) to the knowledge of
the Company and Mr. James J. Kim, there are no rights of third parties to
any such Intellectual Property owned by the Company or any of the
Subsidiaries; (b) to the knowledge of the Company and Mr. James J. Kim,
there is no material infringement by third parties of any such
Intellectual Property (other than with respect to the "Gold Gate" patent
of the Company); (c) there is no pending or, to the knowledge of the
Company and Mr. James J. Kim, threatened action, suit, proceeding or claim
by others challenging the rights of the Company, any Subsidiary or AICL in
or to any such Intellectual Property, and the Company is unaware of any
facts which would form a reasonable basis for any such claim; (d) there is
no pending or, to the knowledge of the Company and Mr. James J. Kim,
threatened action, suit, proceeding or claim by others challenging the
validity or scope of any such Intellectual Property; (e) there is no
pending or, to the knowledge of the Company and Mr. James J. Kim,
threatened action, suit, proceeding or claim by others that the Company,
any Subsidiary or AICL infringes or otherwise violates any patent,
trademark, copyright, trade secret or other proprietary rights of others;
(f) to the knowledge of the Company and Mr. James J. Kim, there is no U.S.
patent or published U.S. patent application which contains claims that
dominate or may dominate any Intellectual Property described in the
Prospectuses as being owned by or licensed to the Company, any Subsidiary
or AICL or that interferes with the issued or pending claims of any such
Intellectual Property; and (g) there is no prior art of which the Company
is aware that may render any U.S. patent held by the Company, any
Subsidiary or AICL invalid or any U.S. patent application held by the
Company, any Subsidiary or AICL unpatentable which has not been disclosed
to the U.S. Patent and Trademark Office. Each of the Company, the
Subsidiaries and, to the knowledge of the Company and Mr. James J. Kim,
AICL owns the Intellectual Property or has the rights to the Intellectual
Property that is necessary, in the case of the Company and the
Subsidiaries, to conduct
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<PAGE> 12
the Company's business as described in the Prospectuses or, in the case of
AICL, to perform its obligations under the AICL Agreements.
(ee) Neither the Company nor any of the Subsidiaries has
distributed nor will it distribute prior to the later of (i) the Closing
Date, or any date on which U.S. Option Shares or U.S. Option Notes are to
be purchased, as the case may be, and (ii) completion of the distribution
of the U.S. Securities, any offering material in connection with the
offering and sale of the U.S. Securities other than any Offering
Preliminary Prospectuses, the Offering Prospectuses, the Offering
Registration Statement and other materials, if any, permitted by the Act.
(ff) Neither the Company nor its affiliated purchasers, as
defined in Rule 100 of Regulation M ("Regulation M") under the Exchange
Act, either alone or with one or more other persons, (i) has taken, either
directly or indirectly, any action which was designed to cause or result
in, or which has constituted, or which might reasonably be expected to
cause or result in, stabilization or manipulation of the price of any
security of the Company ("Subject Securities") in connection with the
offering of the Securities or (ii) will bid for or purchase any Subject
Securities of the Company or any other covered securities (within the
meaning of Regulation M) relating to the Subject Securities (together with
Subject Securities, "Covered Securities"), or attempt to induce any person
to bid for or purchase any Covered Securities, in either case, for the
purpose of creating actual or apparent active trading in, or raising the
price of the Securities.
(gg) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company or any of the Subsidiaries to or
for the benefit of any of the officers or directors of the Company or any
Subsidiary or any of the members of the families of any of them, which
loans, advances or guarantees are required to be, and are not, disclosed
in the Registration Statements and Prospectuses.
(hh) There have not been, and there are not proposed, any
transactions or agreements between the Company or any of the Subsidiaries
on the one hand and the officers, directors or stockholders of the Company
or any of the Subsidiaries on the other, which transactions or agreements
are required to be, and are not, disclosed in the Registration Statements
and Prospectuses.
(ii) No officer or director of the Company is in breach or
violation of any employment agreement, non-competition agreement,
confidentiality agreement, or other agreement restricting the nature or
scope of employment to which such officer or director is a party, other
than such breaches or violations which would not, individually or in the
aggregate, have a Material Adverse Effect; neither the current conduct nor
the proposed conduct of the Company's business, as described in the
Registration Statements and Prospectuses, will result in a breach or
violation of any such agreement.
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<PAGE> 13
(jj) There are no outstanding options to acquire shares of
capital stock of the Company that are vested and exercisable, and there
are no outstanding options to acquire shares of capital stock of the
Company that can, by their terms, become exercisable within 180 days of
the date hereof.
Any certificate signed by any officer of the Company and delivered
to the U.S. Representatives or counsel for the U.S. Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by the Company, as to matters covered thereby, to each U.S.
Underwriter.
B. Each Selling Stockholder represents and warrants to, and agrees
with, each U.S. Underwriter that:
(a) Such Selling Stockholder has full legal right, capacity,
power and authority to enter into and perform this Agreement and the
Custody Agreement (as defined below) and to sell, transfer, assign and
deliver in the manner provided in this Agreement and the Custody Agreement
the U.S. Shares to be sold by such Selling Stockholder hereunder.
(b) Such Selling Stockholder is the lawful owner of the U.S.
Shares to be sold by such Selling Stockholder hereunder and upon sale and
delivery of, and payment for, such U.S. Shares, as provided herein, such
Selling Stockholder will convey good and valid title to such U.S. Shares,
free and clear of all liens, encumbrances, equities and claims whatsoever.
(c) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result, under the Exchange
Act or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the U.S.
Shares and has not effected any sales of shares of Common Stock which, if
effected by the issuer, would be required to be disclosed in response to
Item 701 of Regulation S-K under the Act.
(d) Certificates in negotiable form for such Selling
Stockholder's U.S. Shares have been placed in custody, for delivery
pursuant to the terms of this Agreement, under a Custody Agreement duly
executed and delivered by such Selling Stockholder, in the form heretofore
furnished to you (the "Custody Agreement") with ___________ of
___________, as Custodian (the "Custodian"); the U.S. Shares represented
by the certificates so held in custody for each Selling Stockholder are
subject to the interests hereunder of the U.S. Underwriters, the Company
and the other Selling Stockholders; the arrangements for custody and
delivery of such certificates, made by such Selling Stockholder hereunder
and under the Custody Agreement, are not subject to termination by any
acts of such Selling Stockholder, or by operation of law, whether by the
death or incapacity of such Selling Stockholder or the occurrence of any
other event; and if any such death, incapacity or any other such event
shall occur before the delivery of such U.S.
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Shares hereunder, certificates for the U.S. Shares will be delivered by
the Custodian in accordance with the terms and conditions of this
Agreement and the Custody Agreement as if such death, incapacity or other
event had not occurred, regardless of whether or not the Custodian shall
have received notice of such death, incapacity or other event.
(e) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by such
Selling Stockholder of the transactions contemplated herein, except such
as may have been obtained under the Act and such as may be required under
the blue sky laws of any jurisdiction in connection with the purchase and
distribution of the U.S. Shares by the U.S. Underwriters and such other
approvals as have been obtained.
(f) Neither the sale of the U.S. Shares being sold by such
Selling Stockholder nor the consummation of any other of the transactions
herein contemplated by such Selling Stockholder or the fulfillment of the
terms hereof by such Selling Stockholder will conflict with, result in a
breach or violation of, or constitute a default under any law or the terms
of any indenture or other agreement or instrument to which such Selling
Stockholder is a party or bound, or any judgment, order or decree
applicable to such Selling Stockholder of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over such Selling Stockholder.
2. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
and the Selling Stockholders agree to sell to each U.S. Underwriter, and each
U.S. Underwriter agrees, severally and not jointly, to purchase from the Company
and the Selling Stockholders, at a purchase price of $________ per share, the
amount of the U.S. Underwritten Shares set forth opposite such U.S.
Underwriter's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several U.S. Underwriters to purchase, severally and not jointly,
up to 4,200,000 shares of the U.S. Option Shares at the same purchase price per
share as the U.S. Underwriters shall pay for the U.S. Underwritten Shares. Said
option may be exercised only to cover over-allotments in the sale of the U.S.
Underwritten Shares by the U.S. Underwriters. Said option may be exercised in
whole or in part at any time (but not more than once) on or before the 30th day
after the date of the Offering U.S. Prospectus upon written or telegraphic
notice by the U.S. Representatives to the Company setting forth the number of
shares of the U.S. Option Shares as to which the several U.S. Underwriters are
exercising the option and the settlement date; provided, however, that to the
extent that both the option provided for in this Section 2(b) and the option
provided for in Section 2(b) of the International Underwriting Agreement are
exercised, (i) such exercises shall occur on the same date and (ii) the
settlement dates in respect thereof shall be the same date. Delivery of the U.S.
Option Shares, and payment therefor, shall be made as provided in Section 3
hereof. The number of shares of the U.S. Option Shares to be purchased by each
U.S. Underwriter shall be the same percentage of the total number of shares of
the U.S. Option Shares to be purchased by the several U.S. Underwriters as such
U.S. Underwriter is purchasing of the
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<PAGE> 15
U.S. Underwritten Shares, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional shares.
(c) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to sell to
each U.S. Underwriter, and each U.S. Underwriter agrees, severally and not
jointly, to purchase from the Company, at a purchase price of ___% of the
principal amount thereof, plus accrued interest, if any, on the U.S.
Underwritten Notes from April __, 1998, to the Closing Date, the principal
amount of the U.S. Underwritten Notes set forth opposite such U.S.
Underwriter's name in Schedule I hereto.
(d) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several U.S. Underwriters to purchase, severally and not jointly,
the U.S. Option Notes at a purchase price of _____% of the principal amount
thereof, plus accrued interest, if any, from April __, 1998, to the settlement
date for the U.S. Option Notes. Said option may be exercised only to cover
over-allotments in the sale of the U.S. Underwritten Notes by the U.S.
Underwriters. Said option may be exercised in whole or in part at any time (but
not more than once) on or before the 30th day after the date of the Offering
U.S. Prospectus upon written or telegraphic notice by the U.S. Representatives
to the Company setting forth the principal amount of U.S. Option Notes as to
which the several U.S. Underwriters are exercising the option and the settlement
date; provided, however, that to the extent that both the option provided for in
this Section 2(d) and the option provided for in Section 2(d) of the
International Underwriting Agreement are exercised, (i) such exercises shall
occur on the same date and (ii) the settlement dates in respect thereof shall be
the same date. Delivery of certificates for the U.S. Option Notes, and payment
therefor, shall be made as provided in Section 3 hereof. The principal amount of
U.S. Option Notes to be purchased by each U.S. Underwriter shall be the same
percentage of the total principal amount of U.S. Option Notes to be purchased by
the U.S. Underwriters as such U.S. Underwriter is purchasing of the U.S.
Underwritten Notes, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional principal amounts.
3. Delivery and Payment. Delivery of and payment for the U.S.
Underwritten Shares, the U.S. Underwritten Notes, and the U.S. Option Shares (if
the option provided for in Section 2(b) hereof shall have been exercised on or
before the third Business Day prior to the Closing Date) and the U.S. Option
Notes (if the option provided for in Section 2(d) hereof shall have been
exercised on or before the third Business Day prior to the Closing Date) shall
be made at 10:00 AM, New York City time, on ___________, 1998, or at such time
on such later date not more than three Business Days after the foregoing date as
the U.S. Representatives shall designate, which date and time may be postponed
by agreement among the U.S. Representatives, the Company and the Selling
Stockholders or as provided in Section 9 hereof (such date and time of delivery
and payment for the U.S. Securities being herein called the "Closing Date").
Delivery of the U.S. Securities shall be made to the U.S. Representatives for
the respective accounts of the several U.S. Underwriters against payment by the
several U.S. Underwriters through the U.S. Representatives of (i) $_____ by wire
transfer payable in same-day funds to an account of the Korea Development Bank
specified by the Company and (ii) the balance of the respective aggregate
purchase prices of the U.S. Securities being sold by the Company and each
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<PAGE> 16
of the Selling Stockholders to or upon the order of the Company and each of the
Selling Stockholders by wire transfer payable in same-day funds to the accounts
specified by the Company and each of the Selling Stockholders or by such other
method as shall be agreed upon by the U.S. Representatives and the Company and
such Selling Stockholders. Delivery of the U.S. Securities shall be made through
the facilities of the Depository Trust Company unless the U.S. Representatives
shall otherwise instruct.
It is understood and agreed that the Closing Date shall occur
simultaneously with the "Closing Date" under the International Underwriting
Agreement.
Each Selling Stockholder will pay all applicable state transfer
taxes, if any, involved in the transfer to the several U.S. Underwriters of the
U.S. Shares to be purchased by them from such Selling Stockholders and the
respective U.S. Underwriters will pay any additional stock transfer taxes
involved in further transfers.
If the option provided for in Section 2(b) and/or Section 2(d)
hereof is exercised on or after the second Business Day prior to the Closing
Date, the Company will deliver (at the expense of the Company) to the U.S.
Representatives, on the date(s) specified by the U.S. Representatives (which
shall be within three Business Days after exercise of said option(s)), the U.S.
Option Shares and/or U.S. Option Notes against payment by the several U.S.
Underwriters through the U.S. Representatives of the purchase price thereof to
or upon the order of the Company by wire transfer payable in same-day funds to
an account specified by the Company or by such other method as shall be agreed
upon by the U.S. Representatives and the Company. Delivery of the U.S. Option
Shares and/or U.S. Option Notes shall be made through the facilities of the
Depository Trust Company unless the U.S. Representatives shall otherwise
instruct. If settlement for the U.S. Option Shares and/or U.S. Option Notes
occurs after the Closing Date, the Company will deliver to the U.S.
Representatives on the settlement date(s), and the obligation of the U.S.
Underwriters to purchase the U.S. Option Shares and/or U.S. Option Notes, as the
case may be, shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date(s) the opinions,
certificates and letters delivered on the Closing Date pursuant to Section 6
hereof.
4. Offering by Underwriters. It is understood that the several U.S.
Underwriters propose to offer the U.S. Securities for sale to the public as set
forth in the Offering Prospectuses.
5. Other Agreements.
A. The Company agrees with the several U.S. Underwriters that:
(a) The Company will use its best efforts to cause the Offering
Registration Statement, if not effective at the Execution Time, and any
amendment thereof to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of the
Offering Registration Statement or supplement to the Offering Prospectuses
or any Rule 462(b) Registration Statement unless the Company has furnished
you a copy for your review prior to filing and will not
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<PAGE> 17
file any such proposed amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, if the Offering Registration
Statement has become or becomes effective pursuant to Rule 430A, or filing
of the Offering Prospectuses is otherwise required under Rule 424(b), the
Company will cause the Offering Prospectuses, properly completed, and any
supplement thereto to be filed with the Commission pursuant to the
applicable paragraph of Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to the U.S. Representatives of such
timely filing. The Company will promptly advise the U.S. Representatives
(i) when the Offering Registration Statement, if not effective at the
Execution Time, shall have become effective, (ii) when the Offering
Prospectuses, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b) or when any Rule
462(b) Registration Statement shall have been filed with the Commission,
(iii) when, prior to termination of the offering of the Securities, any
amendment to the Offering Registration Statement shall have been filed or
become effective, (iv) of any request by the Commission for any amendment
of the Offering Registration Statement or any Rule 462(b) Registration
Statement, or for any supplement to the Offering Prospectuses or for any
additional information, (v) of the issuance by the Commission of any stop
order suspending the effectiveness of the Offering Registration Statement
or the institution or threatening of any proceeding for that purpose and
(vi) of the receipt by the Company of any notification in writing with
respect to the suspension of the qualification of the Securities for sale
in any jurisdiction or with respect to the initiation or threatening of
any proceeding for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when a prospectus relating to the Securities
is required to be delivered under the Act, any event occurs as a result of
which either of the Offering Prospectuses as then supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall be
necessary to amend the Offering Registration Statement or supplement
either of the Offering Prospectuses to comply with the Act or the rules
thereunder, the Company promptly will (i) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this
Section 5, an amendment or supplement which will correct such statement or
omission or effect such compliance and (ii) supply any supplemented
Offering Prospectuses to you in such quantities as you may reasonably
request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the U.S. Representatives an
earnings statement or statements of the Company and the Subsidiaries which
will satisfy the provisions of Section 11(a) of the Act and Rule 158 under
the Act.
(d) The Company will furnish to the U.S. Representatives and
counsel for the U.S. Underwriters, without charge, signed copies of the
Offering Registration Statement (including exhibits thereto) and to each
other U.S. Underwriter a copy of the
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<PAGE> 18
Offering Registration Statement (without exhibits thereto) and, so long as
delivery of a prospectus by a U.S. Underwriter or dealer may be required
by the Act, as many copies of each U.S. Offering Preliminary Prospectus
and the Offering U.S. Prospectus and any supplement thereto as the U.S.
Representatives may reasonably request; provided, that, without limiting
the foregoing, the Company will furnish to each U.S. Underwriter such
number of copies of the Offering U.S. Prospectus as the U.S.
Representatives shall request for purposes of confirming orders for the
U.S. Securities, which copies shall be delivered to the U.S. Underwriters
by (i) if the public offering price is determined after 12:00 noon, New
York City time, on the date of determination of the public offering price,
5:00 PM, New York City time, on the Business Day immediately following
such date and (ii) if the public offering price is determined at or prior
to 12:00 noon, New York City time, on the date of determination of the
public offering price, 9:00 AM, New York City time, on the Business Day
immediately following such date. The Company will pay the expenses of
printing or other production of all documents relating to the offering.
(e) The Company will arrange, if necessary, for the
qualification of the Securities for sale under the laws of such
jurisdictions as the U.S. Representatives may designate, will maintain
such qualifications in effect so long as required for the distribution of
the U.S. Securities and will pay any fee of the NASD, in connection with
its review of the offering; provided, however, that the Company shall not
be required in connection therewith, as a condition thereof, to qualify as
a foreign corporation or to execute a general consent to service of
process in any jurisdiction or subject itself to taxation as doing
business in any jurisdiction.
(f) The Company will not, for a period of 180 days following the
Execution Time, without the prior written consent of SBI, offer, pledge,
sell or 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 (other than the Notes); provided, however, that the Company may
grant options and may issue and sell shares of Common Stock pursuant to
any employee stock option plan, stock ownership plan or dividend
reinvestment plan of the Company that was approved by the Board of
Directors of the Company prior to the Execution Time and the Company may
issue shares of Common Stock issuable upon the conversion of securities or
the exercise of warrants outstanding at the Execution Time.
(g) The Company will use the net proceeds to the Company of the
offering of the Securities as described under the heading "Use of
Proceeds" in the Offering Prospectuses.
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(h) The Company will use its best efforts to have the Notes
approved for quotation on the Nasdaq Stock Market.
(i) The Company will use its best efforts to have Arthur
Andersen LLP issue, on or prior to May 15, 1998 (or, to the extent such
date is prior to the Closing Date, within _____ Business Days after the
Closing Date), a revised audit report with respect to the combined
financial statements of the Company contained in the Offering
Prospectuses, which audit report shall not contain any qualification as to
the Company's ability to continue as a going concern.
(j) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of Doing Business with Cuba, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Offering Registration Statement becomes or has become
effective with the Commission or with the Florida Department of Banking
and Finance (the "Department"), whichever date is later, or if the
information reported in the Offering Prospectuses, if any, concerning the
Company's business with Cuba or with any person or affiliate located in
Cuba changes in any material way, the Company will provide the Department
notice of such business or change, as appropriate, in a form acceptable to
the Department.
B. Each Selling Stockholder agrees with the several U.S.
Underwriters that it will not during the period of 180 days following the
Execution Time, without the prior written consent of SBI or unless pursuant to
the Securities Loan Agreement, offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce the offering of, any other
shares of Common Stock beneficially owned by such person, or any securities
convertible into, or exchangeable for, shares of Common Stock other than shares
of Common Stock disposed of as bona fide gifts.
C. Each U.S. Underwriter agrees that (i) it is not purchasing any of
the U.S. Securities 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 of the U.S. Securities or distribute any Offering
U.S. Prospectus to any person outside 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 of the U.S. Securities 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 of the U.S.
Securities outside 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; provided, however, that the foregoing shall not restrict (i) purchases
and sales between the International Underwriters on the one hand and the U.S.
Underwriters on the other hand pursuant to the Agreement Between U.S.
Underwriters and International Underwriters, (ii) stabilization transactions
contemplated under the Agreement Between U.S. Underwriters and International
Underwriters, conducted through SBI (or through the U.S. Representatives and
International Representatives) as part of the distribution of the Securities,
and (iii) sales to or through (or
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<PAGE> 20
distributions of Offering U.S. Prospectuses or Offering U.S. Preliminary
Prospectuses to) United States or Canadian Persons who are investment advisors,
or who otherwise exercise investment discretion, and who are purchasing for the
account of anyone other than a United States or Canadian Person.
The agreement of the U.S. Underwriters set forth in the above
paragraph shall terminate upon the earlier of the following events:
(i) a mutual agreement of the U.S. Representatives and the
International Representatives to terminate the selling restrictions set forth
in such paragraph and in Section 5C(a) of the International Underwriting
Agreement; or
(ii) the expiration of a period of 30 days after the Closing Date,
unless (A) the International Representatives shall have given notice to the
Company and the U.S. Representatives that the distribution of the International
Securities by the International Underwriters has not yet been completed, or (B)
the U.S. Representatives shall have given notice to the Company and the
International Underwriters that the distribution of the U.S. Securities by the
U.S. Underwriters has not yet been completed. If such notice by the U.S.
Representatives or the International Representatives is given, the agreements
set forth in such paragraph shall survive until the earlier of (1) the event
referred to in clause (i) above or (2) the expiration of an additional period of
30 days from the date of any such notice.
6. Conditions to the Obligations of the U.S. Underwriters. The
obligations of the U.S. Underwriters to purchase (i) the U.S. Underwritten
Shares and the U.S. Underwritten Notes and (ii) the U.S. Option Shares and the
U.S. Option Notes, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company and the Selling Stockholders made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations under this Agreement and to the
following additional conditions:
(a) If any Registration Statement has not become effective
prior to the Execution Time, unless the U.S. Representatives agree in
writing to a later time, such Registration Statement will become effective
not later than (i) 6:00 PM, New York City time, on the date of
determination of the public offering price of the Securities, if such
determination occurred at or prior to 3:00 PM, New York City time, on such
date or (ii) 9:30 AM, New York City time, on the Business Day following
the day on which the public offering price of the Securities was
determined, if such determination occurred after 3:00 PM, New York City
time, on such date; if filing of any of the Prospectuses, or any
supplement thereto, is required pursuant to Rule 424(b), the Prospectuses,
and any such supplement, will be filed in the manner and within the time
period required by Rule 424(b); and no stop order suspending the
effectiveness of any Registration Statement
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shall have been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Company shall have furnished to the U.S.
Representatives the opinion of Wilson Sonsini Goodrich & Rosati, counsel
for the Company, dated the Closing Date, to the effect that:
(i) each of the Company and the Subsidiaries chartered or
organized under the laws of any state of the United States (the
"U.S. Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full
corporate power and authority to own its properties and conduct its
business as described in the Prospectuses;
(ii) all the outstanding shares of capital stock of each
U.S. Subsidiary have been duly and validly authorized and issued and
are fully paid and nonassessable, and, except as otherwise set forth
in the Prospectuses, all outstanding shares of capital stock of the
U.S. Subsidiaries are owned by the Company, either directly or
through wholly owned Subsidiaries, free and clear of any perfected
security interest and, to the knowledge of such counsel, any other
security interests, claims, liens or encumbrances;
(iii) the capital stock of the Company conforms as to legal
matters in all material respects to the description thereof
contained in the Prospectuses; the outstanding shares of Common
Stock (including the Shares being sold hereunder by the Selling
Stockholders) have been duly and validly authorized and issued and
are fully paid and nonassessable; the Shares have been duly and
validly authorized and, when issued and delivered to and paid for by
the U.S. Underwriters pursuant to this Agreement and by the
International Underwriters pursuant to the International
Underwriting Agreement, will be fully paid and nonassessable; the
Shares have been duly authorized for listing, subject to official
notice of issuance, on the Nasdaq National Market; the certificates
for the Shares are in valid and sufficient form; the holders of
outstanding shares of capital stock of the Company are not entitled
to preemptive or other rights to subscribe for the Shares under the
Articles of Incorporation or bylaws of the Company or under the laws
of the State of Delaware; and, to the knowledge of such counsel,
except as set forth in the Prospectuses, no options, warrants or
other rights to purchase, agreements or other obligations to issue,
or rights to convert any obligations into or exchange any securities
for, shares of capital stock of or ownership interests in the
Company are outstanding;
(iv) The Indenture has been duly authorized, executed and
delivered; the Indenture has been duly qualified under the Trust
Indenture Act and constitutes a valid and binding obligation of the
Company; the Notes have been duly authorized and, when executed by
the Company and authenticated in
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<PAGE> 22
accordance with the terms of the Indenture and paid for by the
holders thereof, will constitute valid, binding and enforceable
obligations of the Company entitled to the benefits provided by the
Indenture, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principles
of equity; the shares of Common Stock issuable upon conversion of
the Notes have been duly authorized for listing, subject to official
notice of issuance, on the Nasdaq National Market; the holders of
the outstanding shares of capital stock of the Company are not
entitled, under the Articles of Incorporation or bylaws of the
Company or under the laws of the State of Delaware, to any
preemptive or other rights to subscribe for the Notes or the shares
of Common Stock issuable upon the conversion thereof; the shares of
Common Stock initially issuable upon conversion of the Notes have
been duly and validly authorized and reserved for issuance upon such
conversion and, when issued upon conversion, will be validly issued,
fully paid and nonassessable; and the Notes and the Indenture
conform in all material respects to the descriptions thereof
contained in the Offering Prospectuses.
(v) to the knowledge of such counsel, there is no pending
action, suit or proceeding, or any written threat thereof, by or
before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of the Subsidiaries of a
character required to be disclosed in any Registration Statement
which is not adequately disclosed in the Prospectuses, and there is
no franchise, contract or other document of a character required to
be described in any Registration Statement or Prospectus, or to be
filed as an exhibit, which is not described or filed as required;
and the statements in the Prospectuses under the headings
"Reorganization," "Description of Capital Stock," "Description of
the Convertible Notes," "Shares Eligible for Future Sale" and
"Certain United States Federal Tax Consequences to Non-United States
Holders of Common Stock and Convertible Notes," insofar as such
statements constitute a summary of legal matters referred to
therein, fairly summarize the information called for with respect to
such legal matters;
(vi) the Registration Statements have become effective under
the Act; any required filing of the Prospectuses, and of any
supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to the
knowledge of such counsel, no stop order suspending the
effectiveness of any Registration Statement has been issued, no
proceedings for that purpose have been instituted or threatened and
the Registration Statements and the Prospectuses (other than the
financial statements and other financial and statistical information
contained therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable
requirements of the Act and the rules thereunder; and such counsel
has no reason to believe that on the Effective Date or at the
Execution Time the Registration Statements contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make
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<PAGE> 23
the statements therein not misleading or that the Prospectuses as of
its date and on the Closing Date included or includes any untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in each
case, other than the financial statements and other financial
information contained therein, as to which such counsel need express
no opinion);
(vii) each of this Agreement and the International
Underwriting Agreement has been duly authorized, executed and
delivered by the Company;
(viii) no consent, approval, authorization, filing with or
order of any court or governmental agency or body is required in
connection with the transactions contemplated herein or in the
International Underwriting Agreement, except such as have been
obtained under the Act and such as may be required under the blue
sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the U.S. Underwriters and the
International Underwriters in the manner contemplated in this
Agreement and the International Underwriting Agreement and in the
Offering Prospectuses and such other approvals (specified in such
opinion) as have been obtained;
(ix) neither the issue and sale of the Securities nor the
performance of the Company's obligations hereunder or under the
International Underwriting Agreement nor the fulfillment of the
terms hereof or thereof will conflict with, or result in a breach or
violation of or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of the U.S.
Subsidiaries pursuant to, (i) the charter or bylaws of the Company
or any U.S. Subsidiary or (ii) any U.S., California or Delaware
statute, law, rule, regulation, judgment, order or decree known to
such counsel applicable to the Company or any U.S. Subsidiary of any
U.S., California or Delaware court, governmental body, arbitrator or
other authority having jurisdiction over the Company or any U.S.
Subsidiary or any of their respective properties;
(x) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statements;
(xi) each of the AICL Agreements has been duly authorized,
executed and delivered by the Company and the U.S. Subsidiaries that
are parties thereto (the "U.S. Subsidiary Parties") and is a valid,
binding and enforceable agreement of the Company and the U.S.
Subsidiary Parties, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general
principles of equity; neither the consummation of the transactions
contemplated in any of the AICL Agreements nor the fulfillment of
the terms thereof will conflict with, or result in a breach or
violation of or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any
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<PAGE> 24
of the U.S. Subsidiary Parties pursuant to, the charter or bylaws of
the Company or any U.S. Subsidiary Party; and
(xii) the Company is not and, after giving effect to the
offering and sale of the Securities and application of the proceeds
thereof as described in the Prospectuses under the caption "Use of
Proceeds," will not be an "investment company" within the meaning of
the 1940 Act.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than
the State of California, the United States or the corporate laws of the
State of Delaware or, with respect to the opinion referred to in
sub-paragraph (iv) above, the laws of the State of New York (to the extent
such opinion relates to the validity and binding effect of the Indenture),
to the extent they deem proper and specify in such opinion, upon the
opinion of other counsel of good standing whom they believe to be reliable
and who are satisfactory to counsel for the U.S. Underwriters and (B) as
to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Such opinion may
also contain customary qualifications and limitations. References to the
Prospectuses in this paragraph (b) include any supplements thereto at the
Closing Date.
(c) The Company shall have furnished to the U.S.
Representatives the opinion of Kevin Herron, Esq., the General Counsel of
the Company, dated the Closing Date, to the effect that:
(i) neither the issue and sale of the Securities nor the
consummation of any other of the transactions contemplated herein or
in the International Underwriting Agreement nor the fulfillment of
the terms hereof or thereof will conflict with, or result in a
breach or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
U.S. Subsidiaries pursuant to, (i) the charter or bylaws of the
Company or any U.S. Subsidiary or (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement known to such counsel to which the
Company or any U.S. Subsidiary is a party or bound or to which its
property is subject (except for such breaches or violations which
would not, individually or in the aggregate, have a Material Adverse
Effect) or (iii) any Pennsylvania statute, law, rule, regulation,
judgment, order or decree applicable to the Company or any U.S.
Subsidiary of any Pennsylvania court, governmental body, arbitrator
or other authority having jurisdiction over the Company or any U.S.
Subsidiary or any of their respective properties; and
(ii) neither the consummation of the transactions
contemplated in any of the AICL Agreements nor the fulfillment of
the terms thereof will conflict with, or result in a breach or
violation of or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of the U.S. Subsidiary
Parties pursuant to, (i) the charter or bylaws of the Company or any
24
<PAGE> 25
U.S. Subsidiary Party or (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement known to such counsel to which the Company or any
U.S. Subsidiary Party is a party or bound or to which their
respective property is subject (except for such breaches or
violations which would not, individually or in the aggregate, have a
Material Adverse Effect) or (iii) any Pennsylvania statute, law,
rule, regulation, judgment, order or decree applicable to the
Company or any U.S. Subsidiary Party of any Pennsylvania court,
governmental body, arbitrator or other authority having jurisdiction
over the Company or any U.S. Subsidiary Party or any of their
respective properties; no consent, approval, authorization, filing
with or order of any U.S. court or governmental agency or body is
required in connection with the transactions contemplated in any of
the AICL Agreements, except ______________ [LIST APPROVALS (IF ANY)
REQUIRED], each of which has been obtained.
In rendering such opinion, such counsel may rely as to matters
involving the application of laws of any jurisdiction other than the State
of Pennsylvania, the United States or the corporate laws of the State of
Delaware, to the extent he deems proper and specifies in such opinion,
upon the opinion of other counsel of good standing whom he believes to be
reliable and who are satisfactory to counsel for the U.S. Underwriters.
Such opinion may also contain customary qualifications and limitations.
(d) The Company shall have furnished to the U.S.
Representatives the opinion of Orloge, Del Costello, Bacorro, Odulco,
Calma & Carobonell, Philippine counsel for the Company, dated the
Closing Date, to the effect that:
(i) each of AAP, AAAP and AMI (the "Philippine
Subsidiaries") has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the jurisdiction in
which it is chartered or organized, with full corporate power and
authority to own its properties and conduct its business, and is
duly qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction which requires
such qualification; and
(ii) all the outstanding shares of capital stock of each
Philippine Subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except (i) such
shares of AAP owed by AICL, which shares do not exceed 40.1% of the
outstanding shares of AAP, (ii) such shares of each Phillipine
Subsidiary owned by directors thereof, which shares in each case do
not exceed 0.1 % of the outstanding shares of such Philippine
Subsidiary, (iii) 3,446,476 shares of preferred stock of AAP, which
shares are owned by Integrated Microelectronics, Inc., and (iv) as
otherwise set forth in the Prospectuses, all outstanding shares of
capital stock of the Philippine Subsidiaries are owned by the
Company, either directly or through wholly owned Subsidiaries, free
and clear of
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<PAGE> 26
any perfected security interest and, to the knowledge of such
counsel, after due inquiry, any other security interests, claims,
liens or encumbrances.
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. Such opinion may also
contain customary qualifications and limitations. References to the
Prospectuses in this paragraph (d) include any supplements thereto at the
Closing Date.
(e) The Company shall have furnished to the U.S.
Representatives the opinion of Kim & Chang, Korean counsel for the
Company, dated the Closing Date, to the effect that:
(i) AICL has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the Republic of
Korea, with full corporate power and authority to own its properties
and conduct its business as described in the Prospectuses;
(ii) each of the AICL Agreements has been duly executed and
delivered by AICL and is a valid, binding and enforceable agreement
of AICL, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and to general principles
of equity;
(iii) no consent, approval, authorization, filing with or
order of any court or governmental agency or body in the Republic of
Korea is required in connection with the transactions contemplated
in the AICL Agreements, except _________________, each of which has
been obtained; and
(iv) neither the consummation of any of the transactions
contemplated in the AICL Agreements nor the fulfillment of the terms
thereof will conflict with or result in a breach or violation of the
Articles of Incorporation of AICL or any statute, law, rule or
regulation of any regulatory body, administrative agency,
governmental body or other authority in the Republic of Korea having
jurisdiction over AICL or any of its properties.
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent they deem proper, on certificates of responsible
officers of AICL and public officials. Such opinion may also contain
customary qualifications and limitations. References to the Prospectuses
in this paragraph (e) include any supplements thereto at the Closing Date.
(f) The Selling Stockholders shall have furnished to the U.S.
Representatives the opinion of Wilson, Sonsini, Goodrich & Rosati, counsel
for the Selling Stockholders, dated the Closing Date, to the effect that:
26
<PAGE> 27
(i) this Agreement, the International Underwriting Agreement
and the Custody Agreement have been duly executed and delivered by
the Selling Stockholders and each Selling Stockholder has full legal
right, capacity, power and authority to enter into and perform this
Agreement, the International Underwriting Agreement and the Custody
Agreement and to sell, transfer, assign and deliver in the manner
provided in this Agreement, the International Underwriting Agreement
and the Custody Agreement the Shares being sold by such Selling
Stockholder hereunder and thereunder;
(ii) upon the delivery by each Selling Stockholder to the
several U.S. Underwriters and the several International Underwriters
of certificates for the Shares being sold hereunder and under the
International Underwriting Agreement by such Selling Stockholder
against payment therefor as provided herein, the U.S. Underwriters
and the International Underwriters will have good and valid title to
such Shares, free and clear to the knowledge of such counsel of any
adverse claims;
(iii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation by any Selling Stockholder of the transactions
contemplated herein or in the International Underwriting Agreement,
except such as may have been obtained under the Act and such as may
be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Shares by the
U.S. Underwriters and the International Underwriters and such other
approvals (specified in such opinion) as have been obtained;
(iv) neither the sale of the Shares being sold by any Selling
Stockholder nor the consummation of any other of the transactions
contemplated herein or in the International Underwriting Agreement
by any Selling Stockholder or the fulfillment of the terms hereof or
thereof by any Selling Stockholder will conflict with, result in a
breach or violation of, or constitute a default under any law or the
charter or bylaws of such Selling Stockholder, or any judgment,
order or decree known to such counsel to be applicable to such
Selling Stockholder of any court, governmental body or arbitrator
having jurisdiction over such Selling Stockholder; and
(v) the Securities Loan Agreement has been duly executed
and delivered by Mr. and Mrs. James J. Kim; Mr. and Mrs. James J.
Kim have full legal right, capacity, power and authority to enter
into and perform the Securities Loan Agreement and to lend,
assign and deliver in the manner provided in the Securities Loan
Agreement the Borrowed Shares being lent by Mr. and Mrs. James J.
Kim thereunder; Mr. and Mrs. James J. Kim have good and valid
title to the Borrowed Shares, free and clear to the knowledge of
such counsel of any adverse claims; no consent, approval,
authorization or order of any court or governmental agency or
body is required for the consummation by Mr. and Mrs.
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<PAGE> 28
James J. Kim of the transactions contemplated in the Securities Loan
Agreement, except such as may have been obtained under the Act and
such as may be required under the blue sky laws of any jurisdiction
in connection with the borrowing and distribution of the Borrowed
Shares by SBI and such other approvals (specified in such opinion)
as have been obtained; and neither the lending of the Borrowed
Shares by Mr. and Mrs. James J. Kim nor the consummation of any
other of the transactions contemplated in the Securities Loan
Agreement by Mr. and Mrs. James J. Kim or the fulfillment of the
terms thereof by Mr. and Mrs. James J. Kim will conflict with,
result in a breach or violation of, or constitute a default under
any law or the terms of any indenture or other agreement or
instrument known to such counsel and to which Mr. and Mrs. James J.
Kim (or either of them) are a party or bound, or any judgment, order
or decree known to such counsel to be applicable to Mr. and Mrs.
James J. Kim (or either of them) of any court, governmental body or
arbitrator having jurisdiction over either of them.
In rendering such opinion, such counsel may (A) rely as to
matters involving the application of laws of any jurisdiction other than
the State of California or Delaware or the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the U.S. Underwriters, (B) rely as to matters
of fact, to the extent they deem proper, on certificates of the Selling
Stockholders (including Mr. and Mrs. James J. Kim) and public officials
and (C) with respect to the opinion in clause (ii) above, may assume each
U.S. Underwriter and each International Underwriter takes delivery of the
Shares without notice of any adverse claim. Such opinion may also contain
customary qualifications and limitations.
(g) The U.S. Representatives shall have received from Cleary,
Gottlieb, Steen & Hamilton, counsel for the U.S. Underwriters, such
opinion or opinions, dated the Closing Date, with respect to the issuance
and sale of the U.S. Securities, the Registration Statements, the
Prospectuses (together with any supplement thereto) and other related
matters as the U.S. Representatives may reasonably require, and the
Company and each Selling Shareholder shall have furnished to such counsel
such documents as they request for the purpose of enabling them to pass
upon such matters.
(h) The Company shall have furnished to the U.S.
Representatives a certificate of the Company, signed by the Chairman of
the Board or the President and the principal financial or accounting
officer of the Company, dated the Closing Date, to the effect that the
signers of such certificate have carefully examined the Registration
Statements, the Prospectuses, any supplements to the Prospectuses, this
Agreement and the International Underwriting Agreement and that:
(i) the representations and warranties of the Company in
this Agreement and the International Underwriting Agreement are true
and correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date and the Company
has complied with all the agreements and
28
<PAGE> 29
satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectuses, there has been no material adverse
change in the condition (financial or other), prospects, earnings,
business or properties of the Company and the Subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the
Prospectuses.
(i) Each Selling Stockholder shall have furnished to the U.S.
Representatives a certificate, signed by or on behalf of such Selling
Stockholder, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Offering Registration Statement,
the Offering Prospectuses, any supplement to the Offering Prospectuses,
this Agreement and the International Underwriting Agreement and that the
representations and warranties of such Selling Stockholder in this
Agreement and the International Underwriting Agreement are true and
correct in all material respects on and as of the Closing Date to the same
effect as if made on the Closing Date.
(j) At the Execution Time and at the Closing Date, Arthur
Andersen LLP shall have furnished to the U.S. Representatives letters,
dated respectively as of the Execution Time and as of the Closing Date, in
form and substance satisfactory to the U.S. Representatives, confirming
that they are independent accountants within the meaning of the Act and
the applicable published rules and regulations thereunder and stating in
effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included in the Registration
Statements and the Prospectuses and reported on by them comply in
form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations;
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and the
Subsidiaries; carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter;
a reading of the minutes of the meetings of the stockholders,
directors and the audit and compensation committees of the Company
and the Subsidiaries; and inquiries of certain officials of the
Company who have responsibility for financial and accounting matters
of the Company and the Subsidiaries as to transactions and
29
<PAGE> 30
events subsequent to December 31, 1997, nothing came to their
attention which caused them to believe that:
(1) with respect to the period subsequent to
December 31, 1997, there were any changes, at a specified date
not more than five business days prior to the date of the
letter, in the long-term debt of the Company and the
Subsidiaries or capital stock of the Company or decreases in
the total stockholders' equity of the Company or decreases in
working capital of the Company and the Subsidiaries as
compared with the amounts shown on the December 31, 1997
combined balance sheet included in the Registration Statements
and the Prospectuses, or for the period from December 31, 1997
to such specified date there were any decreases, as compared
with the corresponding period in the preceding quarter, in
revenues, net operating income or interest expense or in total
or per share amounts of net income of the Company and the
Subsidiaries, except in all instances for changes or decreases
set forth in such letter, in which case the letter shall be
accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the U.S.
Representatives;
(2) the information included in the Registration
Statements and Prospectuses in response to Item 301 (Selected
Financial Data), Item 302 (Supplementary Financial
Information) and Item 402 (Executive Compensation) of
Regulation S-K under the Act is not in conformity with the
applicable disclosure requirements of Regulation S-K; and
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and the Subsidiaries) set
forth in the Registration Statements and the Prospectuses, including
the information set forth under the captions "Summary Financial
Data" and "Selected Financial Data" in the Prospectuses, agrees with
the accounting records of the Company and the Subsidiaries,
excluding any questions of legal interpretation.
References to the Prospectuses in this paragraph (j) include any
supplement thereto at the date of the letter.
(k) At the Execution Time and at the Closing Date, Samil
Accounting Corporation shall have furnished to the U.S. Representatives
and the Company a letter or letters, dated respectively as of the
Execution Time and as of the Closing Date, in form and substance
satisfactory to the U.S. Representatives and the Company, confirming that
they are independent accountants within the meaning of the standards
established for independent certified public accountants in the Republic
of Korea and stating in effect
30
<PAGE> 31
that they have performed certain specified procedures as a result of which
they determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of
AICL) set forth in the Registration Statements and the Prospectuses,
including the information set forth under the captions "Risk Factors --
Dependence on Relationship with AICL; Potential Conflicts of Interest" and
"Relationship with Anam Industrial Co., Ltd." in the Prospectuses, agrees
with the accounting records of AICL, excluding any questions of legal
interpretation. References to the Prospectuses in this paragraph (k)
include any supplement thereto at the date of the letter.
(l) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statements (exclusive
of any amendment thereof) and the Prospectuses, there shall not have been
(i) any change or decrease specified in the letter or letters referred to
in paragraph (j) of this Section 6 or (ii) any change, or any development
involving a prospective change, in or affecting the business or properties
of the Company and the Subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectuses the effect of which, in
any case referred to in clause (i) or (ii) above, is, in the sole judgment
of the U.S. Representatives, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or delivery of the
U.S. Securities as contemplated by the Registration Statements (exclusive
of any amendment thereof) and the Prospectuses.
(m) At the Execution Time, the Company shall have furnished to
the U.S. Representatives and the International Representatives a letter
substantially in the form of Exhibit A hereto from each officer, director
and shareholder (other than the Selling Stockholders) of the Company,
which persons are listed in Schedule III hereto, addressed to the U.S.
Representatives and the International Representatives.
(n) Prior to the Closing Date, the Company shall have furnished
to the U.S. Representatives such further information, certificates and
documents as the U.S. Representatives may reasonably request.
(o) The closing of the purchase of the International Securities
to be issued and sold by the Company pursuant to the International
Underwriting Agreement shall occur concurrently with the closing described
herein.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the U.S. Representatives and counsel for the U.S. Underwriters,
this Agreement and all obligations of the U.S. Underwriters hereunder may be
canceled at, or at any time prior to, the Closing Date by the U.S.
Representatives. Notice of
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<PAGE> 32
such cancellation shall be given to the Company and each Selling Stockholder in
writing or by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Cleary, Gottlieb, Steen & Hamilton, counsel for the
U.S. Underwriters, at 1 Liberty Plaza, New York, New York, on the Closing Date.
7. Reimbursement of U.S. Underwriters' Expenses. If the sale of the
U.S. Securities provided for herein is not consummated because any condition to
the obligations of the U.S. Underwriters set forth in Section 6 hereof is not
satisfied or because of any refusal, inability or failure on the part of the
Company or any Selling Stockholder to perform any agreement herein or comply
with any provision hereof other than by reason of a default by any of the U.S.
Underwriters, the Company will reimburse the U.S. Underwriters severally through
SBI on demand for all reasonable out-of-pocket expenses (including reasonable
fees and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the U.S. Securities. If the
Company is required to make any payments to the U.S. Underwriters under this
Section 7 because of any Selling Stockholder's refusal, inability or failure to
satisfy any condition to the obligations of the U.S. Underwriters set forth in
Section 6, the Selling Stockholders pro rata in proportion to the percentage of
U.S. Shares to be sold by each shall reimburse the Company on demand for all
amounts so paid.
8. Indemnification and Contribution. (a) The Company and Mr. James
J. Kim jointly and severally agree to indemnify and hold harmless each U.S.
Underwriter (including, without limitation, SBI (the "Market Maker") in its
capacity as a market maker for the Securities and SBI (the "Independent
Underwriter") in its capacity as "qualified independent underwriter" (within the
meaning of NASD Conduct Rule 2720)), the directors, officers, employees and
agents of each U.S. Underwriter, and each person who controls any U.S.
Underwriter within the meaning of either the Act or the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Offering Registration Statement or
in any amendment thereof, or in any Offering Preliminary Prospectus or in either
of the Offering Prospectuses, or in any amendment thereof or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company and Mr. James J. Kim
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any U.S. Underwriter through the U.S. Representatives
specifically for inclusion therein. This indemnity
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<PAGE> 33
agreement will be in addition to any liability which the Company or Mr. James J.
Kim may otherwise have.
(b) Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Offering Registration Statement, and each person who controls the Company within
the meaning of either the Act or the Exchange Act and Mr. James J. Kim, to the
same extent as the foregoing indemnity from the Company and Mr. James J. Kim to
each U.S. Underwriter, but only with reference to written information relating
to such U.S. Underwriter furnished to the Company by or on behalf of such U.S.
Underwriter through the U.S. Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any U.S. Underwriter may otherwise have.
The Company and Mr. James J. Kim acknowledge that the statements set forth in
the last paragraph of the front cover page, the last paragraph of the inside
front cover page and, under the heading "Underwriting", the paragraphs in the
Offering Registration Statement, any Offering Preliminary Prospectus and the
Offering Prospectuses and any amendment or supplement thereto constitute the
only information furnished in writing by or on behalf of the several U.S.
Underwriters for inclusion in any Offering Preliminary Prospectus or the
Offering Prospectuses and any amendment or supplement thereto.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from any liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ one separate counsel (and one local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate (and local) counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall
33
<PAGE> 34
authorize the indemnified party in writing to employ separate (and local)
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and Mr. James J. Kim, jointly and
severally, and the U.S. Underwriters agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, Mr. James J. Kim and one or more
of the U.S. Underwriters may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company and Mr. James J. Kim on
the one hand and by the U.S. Underwriters on the other from the offering of the
U.S. Securities; provided, however, that in no case shall any U.S. Underwriter
(except as may be provided in any agreement among underwriters relating to the
offering of the U.S. Securities) be responsible for any amount in excess of the
underwriting discount or commission applicable to the U.S. Securities purchased
by such U.S. Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
Mr. James J. Kim, jointly and severally, and the U.S. Underwriters shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and Mr. James J.
Kim on the one hand and of the U.S. Underwriters on the other in connection with
the statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company and Mr.
James J. Kim shall be deemed to be equal to the total net proceeds from the
offering (before deducting expenses) received by them, and benefits received by
the U.S. Underwriters shall be deemed to be equal to the total underwriting
discounts and commissions, in each case as set forth on the cover page of the
Offering U.S. Prospectus. Benefits received by the Independent Underwriter in
its capacity as "qualified independent underwriter" shall be deemed to be equal
to the compensation received by the Independent Underwriter for acting in such
capacity. Relative fault shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
provided by the Company or Mr. James J. Kim on the one hand or by the U.S.
Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, Mr. James J. Kim and the U.S.
Underwriters agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls a U.S. Underwriter within the meaning of either the Act or the Exchange
Act and each
34
<PAGE> 35
director, officer, employee and agent of a U.S. Underwriter shall have the same
rights to contribution as such U.S. Underwriter, and each person who controls
the Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Offering Registration Statement
and each director of the Company shall have the same rights to contribution as
the Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The liability of each Selling Stockholder under such Selling
Stockholder's representations and warranties contained in Section 1 hereof and
under the indemnity and contribution agreements contained in this Section 8
shall be limited to an amount equal to the initial public offering price of the
U.S. Shares sold by such Selling Stockholder to the U.S. Underwriters, less the
underwriting discounts and commissions paid thereon to the U.S. Underwriters.
The Company and the Selling Stockholders may agree, as among themselves and
without limiting the rights of the U.S. Underwriters under this Agreement, as to
the respective amounts of such liability for which they each shall be
responsible.
(f) The Company and Mr. James J. Kim shall not have any liability
under this Section 8 with respect to any losses, claims, damages or liabilities
of a U.S. Underwriter if copies of the Offering U.S. Prospectus, as then amended
or supplemented, were furnished by the Company to the U.S. Underwriters as
required by this Agreement, and such copies of the Offering U.S. Prospectus were
not sent or given by or on behalf of such U.S. Underwriter, as required by law,
to the purchasers of the U.S. Securities and if the Offering U.S. Prospectus, as
so amended or supplemented, would have cured the defect giving rise to such
losses, claims, damages or liabilities.
9. Default by a U.S. Underwriter. If any one or more U.S.
Underwriters shall fail to purchase and pay for any of the U.S. Shares or U.S.
Notes agreed to be purchased by such U.S. Underwriter or U.S. Underwriters
hereunder and such failure to purchase shall constitute a default in the
performance of its or their obligations under this Agreement, the remaining U.S.
Underwriters shall be obligated severally to take up and pay for (in the
respective proportions which the amount of U.S. Shares or U.S. Notes, as the
case may be, set forth opposite their names in Schedule I hereto bears to the
aggregate amount of U.S. Shares or U.S. Notes, as the case may be, set forth
opposite the names of all the remaining U.S. Underwriters) the U.S. Shares or
U.S. Notes which the defaulting U.S. Underwriter or U.S. Underwriters agreed but
failed to purchase; provided, however, that in the event that (x) the aggregate
amount of U.S. Shares which the defaulting U.S. Underwriter or U.S. Underwriters
agreed but failed to purchase shall exceed 10% of the aggregate amount of U.S.
Shares set forth in Schedule I hereto or (y) the aggregate principal amount of
U.S. Notes which the defaulting U.S. Underwriter or U.S. Underwriters agreed but
failed to purchase shall exceed 10% of the aggregate principal amount of U.S.
Notes set forth in Schedule I hereto, then the remaining U.S. Underwriters shall
have the right to purchase all, but shall not be under any obligation to
purchase any, of the U.S. Shares or U.S. Notes, as the case may be, and if such
nondefaulting U.S. Underwriters do not purchase all the U.S. Shares or U.S.
Notes, as the case may be, this Agreement will terminate without liability to
any nondefaulting U.S. Underwriter, the Selling Stockholders or the Company. In
the event of a default by any U.S. Underwriter as set forth in this Section 9,
the Closing Date shall be
35
<PAGE> 36
postponed for such period, not exceeding five Business Days, as the U.S.
Representatives shall determine in order that the required changes in the
Registration Statements and the Prospectuses or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting U.S. Underwriter of its liability, if any, to the Company, the
Selling Stockholders and any nondefaulting U.S. Underwriter for damages
occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the U.S. Representatives, by notice given to the
Company prior to delivery of and payment for the U.S. Securities, if prior to
such time (i) trading in the Company's Common Stock shall have been suspended by
the Commission or the Nasdaq National Market or trading in securities generally
on the New York Stock Exchange or the Nasdaq National Market shall have been
suspended or limited or minimum prices shall have been established on such
Exchange or National Market, (ii) a banking moratorium shall have been declared
by either Federal or New York State authorities or (iii) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war, or other calamity or crisis, the effect
of which on financial markets is such as to make it, in the sole judgment of the
U.S. Representatives, impracticable or inadvisable to proceed with the offering
or delivery of the U.S. Securities as contemplated in the Offering U.S.
Prospectus.
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, of each Selling Stockholder and of the U.S.
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
U.S. Underwriter, any Selling Stockholder or the Company or any of the officers,
directors or controlling persons referred to in Section 8 hereof, and will
survive delivery of and payment for the U.S. Securities. The provisions of
Sections 7 and 8 and the last sentence of Section 9 hereof shall survive the
termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the U.S. Representatives, will be
mailed, delivered or telefaxed to the SBI General Counsel (fax no.: (212)
________) and confirmed to the General Counsel, care of Smith Barney Inc., at
333 West 34th Street, New York, New York 10001, Attention: General Counsel; or,
if sent to the Company, will be mailed, delivered or telefaxed to James J. Kim
(fax no.: (610) 431-9600) and confirmed to it at 1345 Enterprise Drive, West
Chester, Pennsylvania 19380, attention of the Legal Department, with a copy to
Larry W. Sonsini (fax no.: (650) 493-6811) at Wilson Sonsini Goodrich & Rosati,
650 Page Mill Road, Palo Alto, California 94304; or, if sent to the Selling
Stockholders, will be mailed, delivered, or telefaxed to James J. Kim (fax no.:
(610) 431-9600) and confirmed to it at the address set forth in Schedule II
hereto.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
36
<PAGE> 37
14. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for convenience
only and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended.
"Borrowing Effective Date" shall mean each date and time that the
Borrowing Registration Statement, any post-effective amendment or
amendments thereto and any Rule 462(b) Registration Statement relating
thereto became or shall become effective.
"Borrowing Preliminary Prospectus" shall mean any preliminary
prospectus with respect to the offering of the Borrowed Shares referred to
in paragraph 1A(c) above and any preliminary prospectus included in the
Borrowing Registration Statement at the Borrowing Effective Date
that omits Rule 430A Information.
"Borrowing Prospectus" shall mean the prospectus relating to the
Borrowed Shares that is first filed pursuant to Rule 424(b) after the
Execution Time or, if not filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Borrowed Shares
included in the Borrowing Registration Statement at the Borrowing
Effective Date.
"Borrowing Registration Statement" shall mean the registration
statement referred to in paragraph 1A(c) above, including exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto or any
Rule 462(b) Registration Statement becomes effective at any time or from
time to time, shall also mean such registration statement as so amended or
such Rule 462(b) Registration Statement, as the case may be. Such term
shall include any Rule 430A Information deemed to be included therein at
the Borrowing Effective Date as provided by Rule 430A.
"Business Day" shall mean any day other than a Saturday, a Sunday or
a legal holiday or a day on which banking institutions or trust companies
are authorized or obligated by law to close in New York City or London.
37
<PAGE> 38
"Effective Date" shall mean each date and time that the Offering
Registration Statement, any post-effective amendment or amendments thereto
and any Rule 462(b) Registration Statement relating thereto became or
shall become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"Material Adverse Effect" shall mean a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and the Subsidiaries, taken as a whole, whether
or not arising in the ordinary course of business.
"Offering International Preliminary Prospectus" shall have the
meaning set forth under Offering U.S. Preliminary Prospectus".
" Offering Preliminary Prospectus" shall have the meaning set
forth under "Offering U.S. Preliminary Prospectus".
"Offering Registration Statement" shall mean the registration
statement referred to in paragraph 1A(a) above, including the exhibits
thereto and the financial statements included therein, as amended at the
Execution Time (or, if not effective at the Execution Time, in the form in
which it shall become effective) and, in the event any post-effective
amendment thereto or any Rule 462(b) Registration Statement becomes
effective prior to the Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective Date
as provided by Rule 430A.
"Offering U.S. Preliminary Prospectus" and the "Offering
International Preliminary Prospectus", respectively, shall mean any
preliminary prospectus with respect to the offering of the U.S. Securities
and the International Securities, as the case may be, referred to in
paragraph 1A(a) above and any preliminary prospectus with respect to the
offering of the U.S. Securities and the International Securities, as the
case may be, included in the Offering Registration Statement at the
Effective Date that omits Rule 430A Information; and the Offering U.S.
Preliminary Prospectus and the Offering International Preliminary
Prospectus are hereinafter collectively called the "Offering Preliminary
Prospectuses".
"Preliminary Prospectuses" shall mean, collectively, the Offering
Preliminary Prospectuses and the Borrowing Preliminary Prospectus.
"Prospectuses" shall mean, collectively, the Offering
Prospectuses and the Borrowing Prospectus.
38
<PAGE> 39
"Registration Statements" shall mean, collectively, the Offering
Registration Statement and the Borrowing Registration Statement.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the
Act.
"Rule 430A Information" shall mean information with respect to the
Securities or the Borrowed Shares, as the case may be, and the offering
thereof permitted to be omitted from the Offering Registration Statement
or the Borrowing Registration Statement, as the case may be, when it
becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the initial Registration Statement or
the initial Borrowing Registration Statement, as the case may be.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
amended.
"United States or Canadian Person" shall mean 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, or
any estate or trust the income of which is subject to United States or
Canadian Federal income taxation, regardless of its source (other than any
non-United States or non-Canadian branch of any United States or Canadian
Person), and shall include any United States or Canadian branch of a
person other than a United States or Canadian Person. "U.S." or "United
States" shall mean the United States of America (including the states
thereof and the District of Columbia), its territories, its possessions
and other areas subject to its jurisdiction.
39
<PAGE> 40
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, the Selling Stockholders and the several U.S. Underwriters.
Very truly yours,
Amkor Technology, Inc.
By: ____________________________
Name:
Title:
James J. Kim
____________________________
[Selling Stockholder]
By: ____________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Smith Barney Inc.
BancAmerica Robertson Stephens
Cowen & Company
By: Smith Barney Inc.
By:___________________________
Name:
Title:
For themselves and the other several U.S. Underwriters
named in Schedule I to the foregoing Agreement.
40
<PAGE> 41
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares
of U.S. Principal Amount
Underwritten of U.S.
Shares to Be Underwritten Notes
U.S. Underwriter Purchased to Be Purchased
- ---------------- ---------------- ------------------
<S> <C> <C>
Smith Barney Inc. .................. $
BancAmerica Robertson Stephens ..... $
Cowen & Company..................... $
[Other U.S. Underwriters]........... $
---------------- ------------------
Total.......................... $
================ ==================
</TABLE>
I-1
<PAGE> 42
SCHEDULE II
Selling Stockholders Number of Shares
- -------------------- ----------------
Address
[Address for notice]
II-1
<PAGE> 43
SCHEDULE III
List of Officers, Directors and Shareholders
(other than Selling Stockholders)
III-1
<PAGE> 44
EXHIBIT A
[LETTERHEAD OF OFFICER, DIRECTOR, STOCKHOLDER OR SHAREHOLDER OF
AMKOR TECHNOLOGY, INC.]
Amkor Technology, Inc.
Public Offering of Common Stock and Convertible Notes
_______________, 1998
Smith Barney Inc.
BancAmerica Robertson Stephens
Cowen & Company
as U.S. Representatives of the several U.S. Underwriters
c/o Smith Barney Inc.
333 West 34th Street
New York, New York 10001
Smith Barney Inc.
BancAmerica Robertson Stephens International Limited
Cowen International L.P.
as International Representatives of the several International Underwriters
c/o Smith Barney Inc.
333 West 34th Street
New York, New York 10001
Ladies and Gentlemen:
This letter is being delivered to you in connection with (i) the
proposed U.S. Underwriting Agreement (the "U.S. Underwriting Agreement") among
Amkor Technology, Inc., a Delaware corporation (the "Company"), certain selling
stockholders of the Company and a group of U.S. Underwriters named therein and
(ii) the proposed International Underwriting Agreement (the "International
Underwriting Agreement") among the Company, certain selling stockholders of the
Company and a group of International Underwriters named therein, relating to an
underwritten public offering of Common Stock, $.001 par value (the "Common
Stock"), of the Company, and the Company's ____% Convertible Subordinated Notes
due 2003.
In order to induce you and the other U.S. Underwriters and
International Underwriters to enter into the U.S. Underwriting Agreement and the
International Underwriting Agreement, the undersigned will not, without the
prior written consent of Smith Barney Inc.,
A-1
<PAGE> 45
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, with respect to, any shares of Common Stock of
the Company 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 of the U.S. Underwriting
Agreement and the International Underwriting Agreement, other than (i) upon the
exercise of any option or warrant, or the conversion of a security, outstanding
on the date of the U.S. Underwriting Agreement and the International
Underwriting Agreement and referred to in the Offering Prospectuses (as defined
in the U.S. Underwriting Agreement and the International Underwriting Agreement)
and (ii) shares of Common Stock disposed of as bona fide gifts approved by Smith
Barney Inc.
If for any reason the U.S. Underwriting Agreement and the
International Underwriting Agreement shall be terminated prior to the Closing
Date (as defined in the U.S. Underwriting Agreement and the International
Underwriting Agreement), the agreement set forth above shall likewise be
terminated.
Very truly yours,
_______________________________________
Signature
_______________________________________
Print Name
_______________________________________
Address
_______________________________________
A-2
<PAGE> 1
Exhibit 1.2
CGS&H DRAFT/ International Version
3/24/98
AMKOR TECHNOLOGY, INC.
7,000,000 Shares*
Common Stock
($.001 par value)
$30,000,000**
___% Convertible Subordinated Notes due 2003
International Underwriting Agreement
London, England
April __, 1998
Smith Barney Inc.
BancAmerica Robertson Stephens International Limited
Cowen International L.P.
As International Representatives of the several International Underwriters,
c/o Smith Barney Inc.
333 West 34th Street
New York, New York 10001
Ladies and Gentlemen:
Amkor Technology, Inc., a Delaware corporation (the
"Company"), proposes to sell to the underwriters named in Schedule I hereto (the
"International Underwriters"), for whom you (the "International
Representatives") are acting as representatives, 6,000,000 shares of common
stock, $.001 par value ("Common Stock"), of the Company, and the persons named
in Schedule II hereto (the "Selling Stockholders") propose to sell to the
International Underwriters 1,000,000 shares of Common Stock (said shares to be
issued and sold by the Company and shares to be sold by the Selling Stockholders
collectively being hereinafter called the "International Underwritten Shares").
The Company also proposes to grant to the International Underwriters an option
to purchase up to 1,050,000 additional shares of Common Stock (the
"International Option Shares"; the International Option Shares, together with
the International Underwritten Shares, being hereinafter called the
"International Shares"). The Company also
- --------
* Plus an option to purchase from Amkor Technology, Inc. up to 1,050,000
additional shares to cover over-allotments.
** Plus an option to purchase from Amkor Technology, Inc. up to $4,500,000
additional principal amount of its ___% Convertible Subordinated Notes
due 2003 to cover over-allotments.
<PAGE> 2
proposes to sell to certain of the International Underwriters $30,000,000
principal amount of its ___% Convertible Subordinated Notes due 2003 (the
"International Underwritten Notes"), to be issued under an indenture (the
"Indenture") to be dated as of April __, 1998, between the Company and State
Street Bank and Trust Company, as trustee (the "Trustee"). The Company also
proposes to grant to such International Underwriters an option to purchase up to
$4,500,000 additional principal amount of its ___% Convertible Subordinated
Notes due 2003 (the "International Option Notes"; the International Option
Notes, together with the International Underwritten Notes, being hereinafter
called the "International Notes"; and the International Notes, together with the
International Shares, being hereinafter called the "International Securities").
The International Notes are convertible into shares of Common Stock.
It is understood that the Company and the Selling Stockholders
are concurrently entering into a U.S. Underwriting Agreement dated the date
hereof (the "U.S. Underwriting Agreement") providing for (i) the sale by the
Company and the Selling Stockholders of an aggregate of 28,000,000 shares of
Common Stock (said shares to be sold by the Company and the Selling Stockholders
pursuant to the U.S. Underwriting Agreement being hereinafter called the "U.S.
Underwritten Shares"), and providing for the grant to the underwriters named in
Schedule I thereto (the "U.S. Underwriters") of an option to purchase from the
Company up to 4,200,000 additional shares of Common Stock (the "U.S. Option
Shares"; the U.S. Option Shares, together with the U.S. Underwritten Shares,
being hereinafter called the "U.S. Shares"; and the U.S. Shares, together with
the International Shares, being hereinafter called the "Shares") and (ii) the
sale by the Company of $120,000,000 principal amount of its ___% Convertible
Subordinated Notes due 2003 (the "U.S. Underwritten Notes"), and providing for
the grant to certain U.S. Underwriters of an option to purchase from the Company
up to $18,000,000 additional principal amount of its ____% Convertible
Subordinated Notes due 2003 (the "U.S. Option Notes"; the U.S. Option Notes,
together with the U.S. Underwritten Notes, being hereinafter called the "U.S.
Notes"; and the U.S. Notes, together with the U.S. Shares, being hereinafter
called the "U.S. Securities"; and the U.S. Notes, together with the
International Notes, being hereinafter called the "Notes"; and the Notes,
together with the Shares, being hereinafter called the "Securities").
It is further understood and agreed that the International
Underwriters and the U.S. Underwriters have entered into an Agreement Between
U.S. Underwriters and International Underwriters dated the date hereof (the
"Agreement Between U.S. Underwriters and International Underwriters"), pursuant
to which, among other things, the International Underwriters may purchase from
the U.S. Underwriters a portion of the U.S. Securities to be sold pursuant to
the U.S. Underwriting Agreement and the U.S. Underwriters may purchase from the
International Underwriters a portion of the International Securities to be sold
pursuant to the International Underwriting Agreement. To the extent there are no
additional International Underwriters listed on Schedule I other than you, the
term International Representatives as used herein shall mean you, as
International Underwriters, and the terms International Representatives and
International Underwriters shall mean either the singular or plural as the
context requires.
It is understood by the parties hereto that Mr. James J. Kim
and Mrs. Agnes C. Kim ("Mr. and Mrs. James J. Kim"), Selling Stockholders, are
concurrently entering into a
2
<PAGE> 3
securities loan agreement dated the date hereof (the "Securities Loan
Agreement") with Smith Barney Inc. ("SBI") which provides that, subject to
certain restrictions and with the agreement of Mr. and Mrs. James J. Kim, SBI
may from time to time borrow, return and reborrow from Mr. and Mrs. James J. Kim
certain shares of Common Stock (the "Borrowed Shares") for the purpose of
facilitating market-making activity in the Notes by SBI.
Certain terms used in this Agreement are defined in Section 17
hereof.
1. Representations and Warranties.
A. The Company and Mr. James J. Kim, a Selling
Stockholder, jointly and severally represent and warrant to, and agree
with, each International Underwriter as set forth below in this Section
1A.
(a) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (file
number 333-37235) on Form S-1, including the related Offering
Preliminary Prospectuses, for the registration under the Act of the
offering and sale of the Securities. The Company may have filed one or
more amendments thereto, including the related Offering Preliminary
Prospectuses, each of which has previously been furnished to you. The
Company will next file with the Commission either (i) prior to
effectiveness of the Offering Registration Statement, a further
amendment to the Offering Registration Statement (including the form of
Offering Prospectuses) or (ii) after effectiveness of the Offering
Registration Statement, the Offering Prospectuses in accordance with
Rules 430A and 424(b)(1) or (4). In the case of clause (ii), the
Company has included in the Offering Registration Statement all
information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in the Offering Registration
Statement and the Offering Prospectuses. As filed, such amendment and
form of Offering Prospectuses, or such Offering Prospectuses, shall
contain all Rule 430A Information, together with all other such
required information, and, except to the extent the International
Representatives shall agree in writing to a modification, shall be in
all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other
changes (beyond that contained in the latest Offering International
Preliminary Prospectus) as the Company has advised you, prior to the
Execution Time, will be included or made therein.
It is understood that two forms of prospectus are to
be used in connection with the offering and sale of the Securities: one
form of prospectus relating to the International Securities, which are
to be offered and sold to persons other than United States and Canadian
Persons, and one form of prospectus relating to the U.S. Securities,
which are to be offered and sold to United States and Canadian Persons.
The two forms of prospectus are identical except for the outside front
cover page, the inside front cover page, the discussion under the
headings "Underwriting" and the outside back cover page. Such form of
prospectus relating to the U.S. Securities as first filed pursuant to
3
<PAGE> 4
Rule 424(b) after the Execution Time or, if no filing pursuant to Rule
424(b) is made, such form of prospectus included in the Offering
Registration Statement at the Effective Date, is hereinafter called the
"Offering U.S. Prospectus"; such form of prospectus relating to the
International Securities as first filed pursuant to Rule 424(b) after
the Execution Time or, if no filing pursuant to Rule 424(b) is made,
such form of prospectus included in the Offering Registration Statement
at the Effective Date, in either case, exclusive of any supplement
thereto, is hereinafter called the "Offering International Prospectus";
and the Offering U.S. Prospectus and the Offering International
Prospectus are hereinafter collectively called the "Offering
Prospectuses".
(b) On the Effective Date, the Offering Registration
Statement did or will, and when the Offering Prospectuses are first
filed (if required) in accordance with Rule 424(b) and on the Closing
Date (as defined herein) and on any date on which the International
Option Shares or the International Option Notes are purchased, if such
date is not the Closing Date (a "settlement date"), each Offering
Prospectus (and any supplement thereto) will, comply in all material
respects with the applicable requirements of the Act and the rules
thereunder; on the Effective Date and at the Execution Time, the
Offering Registration Statement did not or will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date, each
Offering Prospectus, if not filed pursuant to Rule 424(b), did not or
will not, and on the date of any filing pursuant to Rule 424(b) and on
the Closing Date and any settlement date, each Offering Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Company and Mr. James J. Kim make no representations
or warranties as to the information contained in or omitted from the
Offering Registration Statement or the Offering Prospectuses (or any
supplement thereto) in reliance upon and in conformity with information
furnished herein or in writing to the Company by or on behalf of any
International Underwriter through the International Representatives
specifically for inclusion in the Offering Registration Statement or
the Offering Prospectuses (or any supplement thereto).
(c) The Company has filed with the Commission a
registration statement (file number 333-_________) on Form S-1,
including the related Borrowing Preliminary Prospectus, for the
registration under the Act of the offering and sale of the Borrowed
Shares. The Company may have filed one or more amendments thereto,
including the related Borrowing Preliminary Prospectus, each of which
has previously been furnished to you. The Company will next file with
the Commission either (i) prior to the effectiveness of the Borrowing
Registration Statement, a further amendment to the Borrowing
Registration Statement (including the form of Borrowing Prospectus) or
(ii) after the effectiveness of the Borrowing Registration Statement ,
the Borrowing Prospectus in accordance with Rules 430A and 424(b)(1) or
(4). In the case of clause (ii), the Company has included in the
Borrowing Registration Statement all information (other than Rule 430A
Information) required by the Act and the rules thereunder to be
included
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<PAGE> 5
in the Borrowing Registration Statement and the Borrowing Prospectus.
As filed, such amendment and form of Borrowing Prospectus, or such
Borrowing Prospectus, shall contain all Rule 430A Information, together
with all other such required information, and, except to the extent the
International Representatives shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to you prior
to the Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and other
changes (beyond that contained in the latest Borrowing Preliminary
Prospectus) as the Company has advised you, prior to the Execution
Time, will be included or made therein.
(d) On the Effective Date, the Borrowing Registration
Statement did or will, and when the Borrowing Prospectus is first filed
(if required) in accordance with Rule 424(b) and on the Closing Date,
the Borrowing Prospectus (and any supplements thereto) will, comply in
all material respects with the applicable requirements of the Act and
the rules thereunder; on the Borrowing Effective Date and at the
Execution Time, the Borrowing Registration Statement did not or will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order
to make the statements therein not misleading; and, on the Borrowing
Effective Date, the Borrowing Prospectus, if not filed pursuant to Rule
424(b), will not, and on the date of any filing pursuant to Rule 424(b)
and on the Closing Date, the Borrowing Prospectus (together with any
supplemental thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the
Company and Mr. James J. Kim make no representations or warranties as
to the information contained in or omitted from the Borrowing
Registration Statement, or the Borrowing Prospectus (or any
supplemental thereto) in reliance upon and in conformity with
information furnished herein or in writing to the Company by or on
behalf of any International Underwriter through the International
Representatives specifically for inclusion in the Borrowing
Registration Statement or the Borrowing Prospectus (or any supplement
thereto).
(e) The combined financial statements and schedules of
the Company and A.K. Industries, Inc., Amkor Electronics, Inc., Amkor
Anam Test Services, Inc., T.L. Limited, Amkor Anam Advanced Packaging,
Inc. ("AAAP"), Amkor/Anam Pilipinas, Inc. ("AAP"), C.I.L. Limited,
Amkor/Anam Euroservices S.A.R.L., and Automated MicroElectronics, Inc.
("AMI") (each a "Subsidiary" and collectively the "Subsidiaries")
included in the Prospectuses and the Registration Statements present
fairly in all material respects the financial condition, results of
operations and cash flows of the Company and the Subsidiaries, on a
combined basis, as of the dates and for the periods indicated, comply
as to form with the applicable accounting requirements of the Act and
the rules and regulations thereunder and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as otherwise
noted therein).
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<PAGE> 6
(f) Each of the Company, the Subsidiaries and, to the
knowledge of the Company and Mr. James J. Kim, Anam Industrial Co.,
Ltd. ("AICL") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in
which it is chartered or organized with full corporate power and
authority to own, lease and operate its properties and conduct its
business as described in the Prospectuses; each of the Company and the
Subsidiaries is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction which
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect; and no proceeding
has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification except such proceedings which, if
successful, would not individually or in the aggregate have a Material
Adverse Effect.
(g) All the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except (i) such shares of AAP owned
by AICL, which shares do not exceed 40.1% of the outstanding voting
shares of AAP, (ii) such shares of AAP, AMI and AAAP owned by directors
thereof, which shares in each case do not exceed 0.1% of the
outstanding shares of such Subsidiary, (iii) 3,446,476 shares of
preferred stock of AAP, which shares are owned by Integrated
Microelectronics, Inc., and (iv) as otherwise set forth in the
Prospectuses, all outstanding shares of capital stock of the
Subsidiaries are owned by the Company either directly or through wholly
owned subsidiaries free and clear of any perfected security interest
and any other security interests, claims, liens or encumbrances.
(h) The Company's authorized equity capitalization is
as set forth in the Prospectuses; the capital stock of the Company
conforms in all material respects to the description thereof contained
in the Prospectuses; the outstanding shares of Common Stock have been
duly and validly authorized and issued and are fully paid and
nonassessable; the International Shares being sold hereunder have been
duly and validly authorized, and, when issued and delivered to and paid
for by the International Underwriters pursuant to this Agreement, will
be fully paid and nonassessable; the International Shares have been
duly authorized for listing, subject to official notice of issuance, on
the Nasdaq National Market; the certificates for the International
Shares are in valid and sufficient form; the holders of outstanding
shares of capital stock of the Company are not entitled to preemptive
or other rights to subscribe for the International Shares; and, except
as set forth in the Prospectuses, no options, warrants or other rights
to purchase, agreements or other obligations to issue, or rights to
convert any obligations into or exchange any securities for, shares of
capital stock of or ownership interests in the Company are outstanding.
(i) The Indenture will be, as of the Closing Date, duly
authorized, executed and delivered; the Indenture has been duly
qualified under the Trust Indenture Act and as of the Closing Date will
constitute a valid, binding and enforceable obligation of the Company;
the International Notes have been duly authorized by the Company and,
when authenticated by the Trustee in accordance with the terms of the
Indenture and
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<PAGE> 7
delivered to and paid for by the International Underwriters pursuant to
this Agreement, will have been duly executed, authenticated, issued and
delivered and will constitute valid, binding and enforceable
obligations of the Company entitled to the benefits provided by the
Indenture; the shares of Common Stock issuable upon conversion of the
International Notes have been duly authorized for listing, subject to
official notice of issuance, on the Nasdaq National Market; the holders
of the outstanding shares of capital stock of the Company are not
entitled to any preemptive or other rights to subscribe for the
International Notes or the shares of Common Stock issuable upon the
conversion thereof; the shares of Common Stock initially issuable upon
conversion of the International Notes have been duly and validly
authorized and reserved for issuance upon such conversion and, when
issued upon conversion, will be validly issued, fully paid and
nonassessable; and the International Notes and the Indenture will
conform in all material respects to the descriptions thereof contained
in the Offering Prospectuses.
(j) There is no franchise, contract or other document
of a character required to be described in the Registration Statements
or Prospectuses, or to be filed as an exhibit thereto, which is not
described or filed as required.
(k) This Agreement has been duly authorized, executed
and delivered by the Company and is a valid, binding and enforceable
agreement of the Company.
(l) The Company is not and, after giving effect to the
offering and sale of the International Securities and the application
of the proceeds thereof as described in the Prospectuses, will not be
an "investment company" as defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(m) No consent, approval, authorization, filing with or
order of any court or governmental agency or body is required in
connection with the transactions contemplated herein, except such as
have been obtained under the Act and such as may be required under the
blue sky laws of any jurisdiction in connection with the purchase and
distribution of the International Securities by the International
Underwriters in the manner contemplated herein and in the Prospectuses.
(n) Neither the issue and sale of the International
Securities nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will conflict
with, or result in a breach or violation of or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
of the Subsidiaries pursuant to, (i) the charter or bylaws of the
Company or any of the Subsidiaries or (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement to which the Company or any of the
Subsidiaries is a party or bound or to which its or their property is
subject or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to the Company or any of the Subsidiaries of any
court, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of the Subsidiaries or any of its
or their properties.
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<PAGE> 8
(o) No holders of securities of the Company have rights
to the registration of such securities under the Registration
Statements.
(p) No action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator
involving the Company or any of the Subsidiaries or its or their
property is pending or, to the knowledge of the Company and Mr. James
J. Kim, threatened that (i) could reasonably be expected to have a
material adverse effect on the performance of this Agreement or the
consummation of any of the transactions contemplated hereby or (ii)
could reasonably be expected to have a Material Adverse Effect, except
as set forth in or contemplated in the Prospectuses.
(q) The Reorganization (as defined in the Prospectuses)
has been completed as described in the Prospectuses.
(r) Each of the Packaging and Test Services Agreement
dated November 1, 1997 and the Foundry Services Agreement dated January
1, 1998 (collectively, the "AICL Agreements") has been duly authorized,
executed and delivered by the Company, the Subsidiaries that are
parties thereto (the "Subsidiary Parties") and AICL and is a valid,
binding and enforceable agreement of the Company, the Subsidiary
Parties and, to the knowledge of the Company and Mr. James J. Kim,
AICL; neither the consummation of the transactions contemplated in any
of the AICL Agreements nor the fulfillment of the terms thereof will
conflict with, or result in a breach or violation of or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company, any of the Subsidiary Parties or AICL pursuant to, (i) the
charter or bylaws of the Company, any Subsidiary Party or, to the
knowledge of the Company and Mr. James J. Kim, AICL or (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement to which the Company, any
Subsidiary Party or, to the knowledge of the Company and Mr. James J.
Kim, AICL is a party or bound or to which their respective property is
subject (except for such breaches or violations which would not,
individually or in the aggregate, have a Material Adverse Effect or a
material adverse effect on the ability of AICL to perform any of the
AICL Agreements) or (iii) any statute, law, rule, regulation, judgment,
order or decree applicable to the Company, any Subsidiary Party or, to
the knowledge of the Company and Mr. James J. Kim, AICL of any court,
governmental body, arbitrator or other authority having jurisdiction
over the Company, such Subsidiary Party or AICL or any of their
respective properties; no consent, approval, authorization, filing with
or order of any court or governmental agency or body is currently
required in connection with the transactions contemplated in any of the
AICL Agreements, except those which have been obtained or which, if not
obtained, would not individually or in the aggregate have a material
adverse effect on the performance of any of the AICL Agreements or the
consummation of the transactions contemplated thereby; and no action,
suit or proceeding by or before any court or governmental body or any
arbitrator involving the Company, any Subsidiary Party or, to the
knowledge of the Company and Mr. James J. Kim, AICL or their respective
properties is pending or, to the knowledge of the Company and Mr. James
J. Kim, threatened that could reasonably be expected to have a material
adverse effect on the
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<PAGE> 9
performance of any of the AICL Agreements or the consummation of the
transactions contemplated thereby.
(s) Each of the Company, the Subsidiaries and, to the
knowledge of the Company and Mr. James J. Kim, AICL owns or leases all
such properties as are necessary to the conduct of its operations as
presently conducted; neither the Company nor any Subsidiary nor, to the
knowledge of the Company and Mr. James J. Kim, AICL is in violation of
any law, rule or regulation of any Federal, state, local or other
governmental or regulatory authority applicable to it or is in
non-compliance with any term or condition of, or has failed to obtain
and maintain in effect, any license, certificate, permit or other
governmental authorization required for the ownership or lease of its
property or the conduct of its business, which violation,
non-compliance or failure would individually or in the aggregate have a
Material Adverse Effect or a material adverse effect on the ability of
AICL to perform any of the AICL Agreements, except as set forth in or
contemplated in the Prospectuses; and the Company has not received
notice of any proceedings relating to the revocation or material
modification of any such license, certificate, permit or other
authorization (other than such proceedings which, if the subject of an
unfavorable decision, would not individually or in the aggregate have a
Material Adverse Effect), except as set forth in or contemplated in the
Prospectuses.
(t) Neither the Company nor any Subsidiary nor, to the
knowledge of the Company and Mr. James J. Kim, AICL is in violation or
default of (i) any provision of its charter or bylaws, (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement to which it is a party or
bound or to which its property is subject, or (iii) any statute, law,
rule, regulation, judgment, order or decree of any court, governmental
body, arbitrator or other authority having jurisdiction over the
Company, or such Subsidiary or AICL or any of their respective
properties, as applicable, in each case (x) other than such violations
or defaults which would not, individually or in the aggregate, have a
Material Adverse Effect or a material adverse effect on the ability of
AICL to perform its obligations under the AICL Agreements and (y)
except as set forth in or contemplated in the Prospectuses.
(u) Arthur Andersen LLP, who have certified certain
financial statements of the Company and the Subsidiaries and delivered
their report with respect to the audited combined financial statements
and schedules included in the Prospectuses, are independent public
accountants with respect to the Company within the meaning of the Act
and the applicable published rules and regulations thereunder.
(v) There are no transfer taxes or other similar fees
or charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance by the Company
or sale by the Company of the International Securities.
(w) The Company has filed all foreign, federal, state
and local tax returns that are required to be filed or has requested
extensions thereof (except in any case in
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<PAGE> 10
which the failure so to file would not have a Material Adverse Effect),
except as set forth in or contemplated in the Prospectuses and has paid
all taxes shown as payable on such tax returns and any other
assessment, fine or penalty levied against it, to the extent that any
of the foregoing is due and payable, except for any such assessment,
fine or penalty that is currently being contested in good faith or as
would not have a Material Adverse Effect, except as set forth in or
contemplated in the Prospectuses.
(x) No labor dispute with the employees of the Company
or any of the Subsidiaries exists or, to the knowledge of the Company
and Mr. James J. Kim, is threatened that could reasonably be expected
to have a Material Adverse Effect, except as set forth in or
contemplated in the Prospectuses.
(y) The Company and each of the Subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent for the businesses
in which they are engaged; neither the Company nor any such Subsidiary
has been refused any insurance coverage sought or applied for; and
neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost
that would not have a Material Adverse Effect, except as set forth in
or contemplated in the Prospectuses.
(z) No Subsidiary is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any
other distribution on such Subsidiary's capital stock, from repaying to
the Company any loans or advances to such Subsidiary from the Company
or from transferring any of such Subsidiary's property or assets to the
Company or any other Subsidiary of the Company, except as described in
or contemplated in the Prospectuses.
(aa) The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective businesses (except in any case in which the failure so
to possess any such certificate, authorization or permit would not,
individually or in the aggregate, have a Material Adverse Effect), and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, could
reasonably be expected to have a Material Adverse Effect, except as set
forth in or contemplated in the Prospectuses.
(bb) Neither the Company nor any of the Subsidiaries is
in violation of any federal or state law or regulation relating to
occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials and the Company and the
Subsidiaries have received all permits, licenses or other approvals
required of them under applicable federal and state occupational safety
and health and environmental laws
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<PAGE> 11
and regulations to conduct their respective businesses, and the Company
and each such Subsidiary is in compliance with all terms and conditions
of any such permit, license or approval, except any such violation of
law or regulation, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals which would not, singly or in the
aggregate, have a Material Adverse Effect, except as set forth in or
contemplated in the Prospectuses.
(cc) The Company and each of the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(dd) Each of the Company, the Subsidiaries and, to the
knowledge of the Company and Mr. James J. Kim, AICL owns or has
obtained licenses for the patents, patent applications, trade and
service marks, trade secrets and other intellectual properties
referenced or described in the Prospectuses as being owned by or
licensed to it (collectively, the "Intellectual Property"). Except as
set forth in the Prospectuses under the caption "Business --
Intellectual Property," (a) to the knowledge of the Company and Mr.
James J. Kim, there are no rights of third parties to any such
Intellectual Property owned by the Company or any of the Subsidiaries;
(b) to the knowledge of the Company and Mr. James J. Kim, there is no
material infringement by third parties of any such Intellectual
Property (other than with respect to the "Gold Gate" patent of the
Company); (c) there is no pending or, to the knowledge of the Company
and Mr. James J. Kim, threatened action, suit, proceeding or claim by
others challenging the rights of the Company, any Subsidiary or AICL in
or to any such Intellectual Property, and the Company is unaware of any
facts which would form a reasonable basis for any such claim; (d) there
is no pending or, to the knowledge of the Company and Mr. James J. Kim,
threatened action, suit, proceeding or claim by others challenging the
validity or scope of any such Intellectual Property; (e) there is no
pending or, to the knowledge of the Company and Mr. James J. Kim,
threatened action, suit, proceeding or claim by others that the
Company, any Subsidiary or AICL infringes or otherwise violates any
patent, trademark, copyright, trade secret or other proprietary rights
of others; (f) to the knowledge of the Company and Mr. James J. Kim,
there is no U.S. patent or published U.S. patent application which
contains claims that dominate or may dominate any Intellectual Property
described in the Prospectuses as being owned by or licensed to the
Company, any Subsidiary or AICL or that interferes with the issued or
pending claims of any such Intellectual Property; and (g) there is no
prior art of which the Company is aware that may render any U.S. patent
held by the Company, any Subsidiary or AICL invalid or any U.S. patent
application held by the Company, any Subsidiary or AICL unpatentable
which has not been disclosed to the U.S. Patent and Trademark Office.
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<PAGE> 12
Each of the Company, the Subsidiaries and, to the knowledge of the
Company and Mr. James J. Kim, AICL owns the Intellectual Property or
has the rights to the Intellectual Property that is necessary, in the
case of the Company and the Subsidiaries, to conduct the Company's
business as described in the Prospectuses or, in the case of AICL, to
perform its obligations under the AICL Agreements.
(ee) Neither the Company nor any of the Subsidiaries has
distributed nor will it distribute prior to the later of (i) the
Closing Date, or any date on which International Option Shares or
International Option Notes are to be purchased, as the case may be, and
(ii) completion of the distribution of the International Securities,
any offering material in connection with the offering and sale of the
International Securities other than any Offering Preliminary
Prospectuses, the Offering Prospectuses, the Offering Registration
Statement and other materials, if any, permitted by the Act.
(ff) Neither the Company nor its affiliated purchasers,
as defined in Rule 100 of Regulation M ("Regulation M") under the
Exchange Act, either alone or with one or more other persons, (i) has
taken, either directly or indirectly, any action which was designed to
cause or result in, or which has constituted, or which might reasonably
be expected to cause or result in, stabilization or manipulation of the
price of any security of the Company ("Subject Securities") in
connection with the offering of the Securities or (ii) will bid for or
purchase any Subject Securities of the Company or any other covered
securities (within the meaning of Regulation M) relating to the Subject
Securities (together with Subject Securities, "Covered Securities"), or
attempt to induce any person to bid for or purchase any Covered
Securities, in either case, for the purpose of creating actual or
apparent active trading in, or raising the price of the Securities.
(gg) There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company or any of the
Subsidiaries to or for the benefit of any of the officers or directors
of the Company or any Subsidiary or any of the members of the families
of any of them, which loans, advances or guarantees are required to be,
and are not, disclosed in the Registration Statements and Prospectuses.
(hh) There have not been, and there are not proposed,
any transactions or agreements between the Company or any of the
Subsidiaries on the one hand and the officers, directors or
stockholders of the Company or any of the Subsidiaries on the other,
which transactions or agreements are required to be, and are not,
disclosed in the Registration Statements and Prospectuses.
(ii) No officer or director of the Company is in breach
or violation of any employment agreement, non-competition agreement,
confidentiality agreement, or other agreement restricting the nature or
scope of employment to which such officer or director is a party, other
than such breaches or violations which would not, individually or in
the aggregate, have a Material Adverse Effect; neither the current
conduct nor the proposed
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<PAGE> 13
conduct of the Company's business, as described in the Registration
Statements and Prospectuses, will result in a breach or violation of
any such agreement.
(jj) There are no outstanding options to acquire shares
of capital stock of the Company that are vested and exercisable, and
there are no outstanding options to acquire shares of capital stock of
the Company that can, by their terms, become exercisable within 180
days of the date hereof.
Any certificate signed by any officer of the Company and
delivered to the International Representatives or counsel for the International
Underwriters in connection with the offering of the Securities shall be deemed a
representation and warranty by the Company, as to matters covered thereby, to
each International Underwriter.
B. Each Selling Stockholder represents and warrants to, and
agrees with, each International Underwriter that:
(a) Such Selling Stockholder has full legal right,
capacity, power and authority to enter into and perform this Agreement
and the Custody Agreement (as defined below) and to sell, transfer,
assign and deliver in the manner provided in this Agreement and the
Custody Agreement the International Shares to be sold by such Selling
Stockholder hereunder.
(b) Such Selling Stockholder is the lawful owner of the
International Shares to be sold by such Selling Stockholder hereunder
and upon sale and delivery of, and payment for, such International
Shares, as provided herein, such Selling Stockholder will convey good
and valid title to such International Shares, free and clear of all
liens, encumbrances, equities and claims whatsoever.
(c) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result,
under the Exchange Act or otherwise, in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the International Shares and has not effected any sales of
shares of Common Stock which, if effected by the issuer, would be
required to be disclosed in response to Item 701 of Regulation S-K
under the Act.
(d) Certificates in negotiable form for such Selling
Stockholder's International Shares have been placed in custody, for
delivery pursuant to the terms of this Agreement, under a Custody
Agreement duly executed and delivered by such Selling Stockholder, in
the form heretofore furnished to you (the "Custody Agreement") with
___________ of ___________, as Custodian (the "Custodian"); the
International Shares represented by the certificates so held in custody
for each Selling Stockholder are subject to the interests hereunder of
the International Underwriters, the Company and the other Selling
Stockholders; the arrangements for custody and delivery of such
certificates, made by such Selling Stockholder hereunder and under the
Custody Agreement, are not subject to termination by any acts of such
Selling Stockholder, or by operation of law,
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<PAGE> 14
whether by the death or incapacity of such Selling Stockholder or the
occurrence of any other event; and if any such death, incapacity or any
other such event shall occur before the delivery of such International
Shares hereunder, certificates for the International Shares will be
delivered by the Custodian in accordance with the terms and conditions
of this Agreement and the Custody Agreement as if such death,
incapacity or other event had not occurred, regardless of whether or
not the Custodian shall have received notice of such death, incapacity
or other event.
(e) No consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
by such Selling Stockholder of the transactions contemplated herein,
except such as may have been obtained under the Act and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the International Shares by the
International Underwriters and such other approvals as have been
obtained.
(f) Neither the sale of the International Shares being
sold by such Selling Stockholder nor the consummation of any other of
the transactions herein contemplated by such Selling Stockholder or the
fulfillment of the terms hereof by such Selling Stockholder will
conflict with, result in a breach or violation of, or constitute a
default under any law or the terms of any indenture or other agreement
or instrument to which such Selling Stockholder is a party or bound, or
any judgment, order or decree applicable to such Selling Stockholder of
any court, regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over such Selling Stockholder.
2. Purchase and Sale. (a) Subject to the terms and conditions
and in reliance upon the representations and warranties herein set forth, the
Company and the Selling Stockholders agree to sell to each International
Underwriter, and each International Underwriter agrees, severally and not
jointly, to purchase from the Company and the Selling Stockholders, at a
purchase price of $________ per share, the amount of the International
Underwritten Shares set forth opposite such International Underwriter's name in
Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company hereby grants
an option to the several International Underwriters to purchase, severally and
not jointly, up to 1,050,000 shares of the International Option Shares at the
same purchase price per share as the International Underwriters shall pay for
the International Underwritten Shares. Said option may be exercised only to
cover over-allotments in the sale of the International Underwritten Shares by
the International Underwriters. Said option may be exercised in whole or in part
at any time (but not more than once) on or before the 30th day after the date of
the Offering International Prospectus upon written or telegraphic notice by the
International Representatives to the Company setting forth the number of shares
of the International Option Shares as to which the several International
Underwriters are exercising the option and the settlement date; provided,
however, that to the extent that both the option provided for in this Section
2(b) and the option provided for in Section 2(b) of the U.S. Underwriting
Agreement are exercised, (i) such exercises shall occur on the same date and
(ii) the settlement dates in respect thereof shall be the same date. Delivery of
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<PAGE> 15
the International Option Shares, and payment therefor, shall be made as provided
in Section 3 hereof. The number of shares of the International Option Shares to
be purchased by each International Underwriter shall be the same percentage of
the total number of shares of the International Option Shares to be purchased by
the several International Underwriters as such International Underwriter is
purchasing of the International Underwritten Shares, subject to such adjustments
as you in your absolute discretion shall make to eliminate any fractional
shares.
(c) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company agrees to sell
to each International Underwriter, and each International Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
___% of the principal amount thereof, plus accrued interest, if any, on the
International Underwritten Notes from April ___, 1998, to the Closing Date, the
principal amount of the International Underwritten Notes set forth opposite such
International Underwriter's name in Schedule I hereto.
(d) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company hereby grants
an option to the several International Underwriters to purchase, severally and
not jointly, the International Option Notes at a purchase price of _____% of the
principal amount thereof, plus accrued interest, if any, from April __, 1998, to
the settlement date for the International Option Notes. Said option may be
exercised only to cover over-allotments in the sale of the International
Underwritten Notes by the International Underwriters. Said option may be
exercised in whole or in part at any time (but not more than once) on or before
the 30th day after the date of the Offering International Prospectus upon
written or telegraphic notice by the International Representatives to the
Company setting forth the principal amount of International Option Notes as to
which the several International Underwriters are exercising the option and the
settlement date; provided, however, that to the extent that both the option
provided for in this Section 2(d) hereof and the option provided for in Section
2(d) of the U.S. Underwriting Agreement are exercised, (i) such exercises shall
occur on the same date and (ii) the settlement dates in respect thereof shall be
the same date. Delivery of certificates for the International Option Notes, and
payment therefor, shall be made as provided in Section 3 hereof. The principal
amount of International Option Notes to be purchased by each International
Underwriter shall be the same percentage of the total principal amount of
International Option Notes to be purchased by the International Underwriters as
such International Underwriter is purchasing of the International Underwritten
Notes, subject to such adjustments as you in your absolute discretion shall make
to eliminate any fractional principal amounts.
3. Delivery and Payment. Delivery of and payment for the
International Underwritten Shares, the International Underwritten Notes, the
International Option Shares (if the option provided for in Section 2(b) hereof
shall have been exercised on or before the third Business Day prior to the
Closing Date) and the International Option Notes (if the option provided for in
Section 2(d) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
________ ___, 1998, or at such time on such later date not more than three
Business Days after the foregoing date as the International Representatives
shall designate, which date and time may be postponed
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<PAGE> 16
by agreement among the International Representatives, the Company and the
Selling Stockholders or as provided in Section 9 hereof (such date and time of
delivery and payment for the International Securities being herein called the
"Closing Date"). Delivery of the International Securities shall be made to the
International Representatives for the respective accounts of the several
International Underwriters against payment by the several International
Underwriters through the International Representatives of (i) $___________ by
wire transfer payable in same-day funds to an account of the Korea Development
Bank specified by the Company and (ii) the balance of the respective aggregate
purchase prices of the International Securities being sold by the Company and
each of the Selling Stockholders to or upon the order of the Company and each of
the Selling Stockholders by wire transfer payable in same-day funds to the
accounts specified by the Company and each of the Selling Stockholders or by
such other method as shall be agreed upon by the International Representatives
and the Company and such Selling Stockholders. Delivery of the International
Securities shall be made through the facilities of the Depository Trust Company
unless the International Representatives shall otherwise instruct.
It is understood and agreed that the Closing Date shall occur
simultaneously with the "Closing Date" under the U.S. Underwriting Agreement.
Each Selling Stockholder will pay all applicable state
transfer taxes, if any, involved in the transfer to the several International
Underwriters of the International Shares to be purchased by them from such
Selling Stockholders and the respective International Underwriters will pay any
additional stock transfer taxes involved in further transfers.
If the option provided for in Section 2(b) and/or Section 2(d)
hereof is exercised on or after the second Business Day prior to the Closing
Date, the Company will deliver (at the expense of the Company) to the
International Representatives, on the date(s) specified by the International
Representatives (which shall be within three Business Days after exercise of
said option(s)), the International Option Shares and/or International Option
Notes against payment by the several International Underwriters through the
International Representatives of the purchase price thereof to or upon the order
of the Company by wire transfer payable in same-day funds to an account
specified by the Company or by such other method as shall be agreed upon by the
International Representatives and the Company. Delivery of the International
Option Shares and/or International Option Notes shall be made through the
facilities of the Depositary Trust Company unless the International
Representatives shall otherwise instruct. If settlement for the International
Option Shares and/or International Option Notes occurs after the Closing Date,
the Company will deliver to the International Representatives on the settlement
date(s), and the obligation of the International Underwriters to purchase the
International Option Shares and/or International Option Notes, as the case may
be, shall be conditioned upon receipt of, supplemental opinions, certificates
and letters confirming as of such date(s) the opinions, certificates and letters
delivered on the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
International Underwriters propose to offer the International Securities for
sale to the public as set forth in the Offering Prospectuses.
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<PAGE> 17
5. Other Agreements.
A. The Company agrees with the several International
Underwriters that:
(a) The Company will use its best efforts to cause the
Offering Registration Statement, if not effective at the Execution
Time, and any amendment thereof to become effective. Prior to the
termination of the offering of the Securities, the Company will not
file any amendment of the Offering Registration Statement or supplement
to the Offering Prospectuses or any Rule 462(b) Registration Statement
unless the Company has furnished you a copy for your review prior to
filing and will not file any such proposed amendment or supplement to
which you reasonably object. Subject to the foregoing sentence, if the
Offering Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Offering Prospectuses is
otherwise required under Rule 424(b), the Company will cause the
Offering Prospectuses, properly completed, and any supplement thereto
to be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the International Representatives of such timely
filing. The Company will promptly advise the International
Representatives (i) when the Offering Registration Statement, if not
effective at the Execution Time, shall have become effective, (ii) when
the Offering Prospectuses, and any supplement thereto, shall have been
filed (if required) with the Commission pursuant to Rule 424(b) or when
any Rule 462(b) Registration Statement shall have been filed with the
Commission, (iii) when, prior to termination of the offering of the
Securities, any amendment to the Offering Registration Statement shall
have been filed or become effective, (iv) of any request by the
Commission for any amendment of the Offering Registration Statement or
any Rule 462(b) Registration Statement, or for any supplement to the
Offering Prospectuses or for any additional information, (v) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Offering Registration Statement or the institution
or threatening of any proceeding for that purpose and (vi) of the
receipt by the Company of any notification in writing with respect to
the suspension of the qualification of the Securities for sale in any
jurisdiction or with respect to the initiation or threatening of any
proceeding for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order or the suspension of any
such qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs
as a result of which either of the Offering Prospectuses as then
supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend the Offering
Registration Statement or supplement either of the Offering
Prospectuses to comply with the Act or the rules thereunder, the
Company promptly will (i) prepare and file with the Commission, subject
to the second sentence of paragraph (a) of this Section 5, an amendment
or supplement which will correct such statement or
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<PAGE> 18
omission or effect such compliance and (ii) supply any supplemented
Offering Prospectuses to you in such quantities as you may reasonably
request.
(c) As soon as practicable, the Company will make
generally available to its security holders and to the International
Representatives an earnings statement or statements of the Company and
the Subsidiaries which will satisfy the provisions of Section 11(a) of
the Act and Rule 158 under the Act.
(d) The Company will furnish to the International
Representatives and counsel for the International Underwriters, without
charge, signed copies of the Registration Statement (including exhibits
thereto) and to each other International Underwriter a copy of the
Offering Registration Statement (without exhibits thereto) and, so long
as delivery of a prospectus by an International Underwriter or dealer
may be required by the Act, as many copies of each Offering
International Preliminary Prospectus and the Offering International
Prospectus and any supplement thereto as the International
Representatives may reasonably request. The Company will pay the
expenses of printing or other production of all documents relating to
the offering.
(e) The Company will arrange, if necessary, for the
qualification of the Securities for sale under the laws of such
jurisdictions as the International Representatives may designate, will
maintain such qualifications in effect so long as required for the
distribution of the International Securities and will pay any fee of
the NASD, in connection with its review of the offering; provided,
however, that the Company shall not be required in connection
therewith, as a condition thereof, to qualify as a foreign corporation
or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation as doing business in any
jurisdiction.
(f) The Company will not, for a period of 180 days
following the Execution Time, without the prior written consent of SBI,
offer, pledge, sell or 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 (other than the Notes);
provided, however, that the Company may grant options and may issue and
sell shares of Common Stock pursuant to any employee stock option plan,
stock ownership plan or dividend reinvestment plan of the Company that
was approved by the Board of Directors of the Company prior to the
Execution Time and the Company may issue shares of Common Stock
issuable upon the conversion of securities or the exercise of warrants
outstanding at the Execution Time.
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<PAGE> 19
(g) The Company will use the net proceeds to the
Company of the offering of the Securities as described under the
heading "Use of Proceeds" in the Offering Prospectuses.
(h) The Company will use its best efforts to have the
Notes approved for quotation on the Nasdaq Stock Market.
(i) The Company will use its best efforts to have
Arthur Andersen LLP issue, on or prior to May 15, 1998 (or, to the
extent such date is prior to the Closing Date, within _____ Business
Days after the Closing Date), a revised audit report with respect to
the combined financial statements of the Company contained in the
Offering Prospectuses, which audit report shall not contain any
qualification as to the Company's ability to continue as a going
concern.
(j) The Company confirms as of the date hereof that it
is in compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, An Act Relating to Disclosure of Doing Business with
Cuba, and the Company further agrees that if it commences engaging in
business with the government of Cuba or with any person or affiliate
located in Cuba after the date the Offering Registration Statement
becomes or has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date is
later, or if the information reported in the Offering Prospectuses, if
any, concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company will
provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
B. Each Selling Stockholder agrees with the several
International Underwriters that it will not during the period of 180 days
following the Execution Time, without the prior written consent of SBI or unless
pursuant to the Securities Loan Agreement, offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce the offering of, any
other shares of Common Stock beneficially owned by such person, or any
securities convertible into, or exchangeable for, shares of Common Stock other
than shares of Common Stock disposed of as bona fide gifts.
C.(a) Each International Underwriter agrees that (i) it is not
purchasing any of the International Securities 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 of the
International Securities or distribute any Offering International
Prospectus to any person in the United States or Canada, or to a United
States or Canadian Person, and (iii) any dealer to whom it may sell any
of the International Securities 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 of
the International Securities in the United States or Canada, or to a
United States or Canadian Person or to any other dealer who does not so
represent and agree; provided, however, that the foregoing shall not
restrict (i) purchases and sales between the International Underwriters
on the one hand and the
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<PAGE> 20
U.S. Underwriters on the other hand pursuant to the Agreement Between
U.S. Underwriters and International Underwriters, (ii) stabilization
transactions contemplated under the Agreement Between International
Underwriters and U.S. Underwriters, conducted through SBI (or through
the International Representatives and U.S. Representatives) as part of
the distribution of the Securities, and (iii) sales to or through (or
distributions of Offering International Prospectuses or Offering
International Preliminary Prospectuses to) persons not United States or
Canadian Persons who are investment advisors, or who otherwise exercise
investment discretion, and who are purchasing for the account of any
United States or Canadian Person.
The agreement of the International Underwriters set forth in
the above paragraph shall terminate upon the earlier of the following
events:
(i) a mutual agreement of the International
Representatives and the U.S. Representatives to terminate the
selling restrictions set forth in such paragraph and in
Section 5C of the International Underwriting Agreement; or
(ii) the expiration of a period of 30 days after the
Closing Date, unless (A) the International Representatives
shall have given notice to the Company and the U.S.
Representatives that the distribution of the International
Securities by the International Underwriters has not yet been
completed, or (B) the U.S. Representatives shall have given
notice to the Company and the International Underwriters that
the distribution of the U.S. Securities by the U.S.
Underwriters has not yet been completed. If such notice by the
International Representatives or the U.S. Representatives is
given, the agreements set forth in such paragraph shall
survive until the earlier of (1) the event referred to in
clause (i) above or (2) the expiration of an additional period
of 30 days from the date of any such notice.
(b) Each International Underwriter severally represents
and agrees that:
(i) it has not offered or sold and, prior to the
expiration of six months from the closing of the offering of
the International Securities, 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 and will
not result in an offer to the public within the meaning of the
U.K. Public Offers of Securities Regulations 1995;
(ii) it has complied and will comply with all
applicable provisions of the U.K. Financial Services Act 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
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International Securities to a person who is of a kind
described in Article 11(3) of the U.K. 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.
6. Conditions to the Obligations of the International
Underwriters. The obligations of the International Underwriters to purchase (i)
the International Underwritten Shares and the International Underwritten Notes
and (ii) the International Option Shares and the International Option Notes, as
the case may be, shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders contained
herein as of the Execution Time, the Closing Date and any settlement date
pursuant to Section 3 hereof, to the accuracy of the statements of the Company
and the Selling Stockholders made in any certificates pursuant to the provisions
hereof, to the performance by the Company and the Selling Stockholders of their
respective obligations under this Agreement and to the following additional
conditions:
(a) If any Registration Statement has not become
effective prior to the Execution Time, unless the International
Representatives agree in writing to a later time, such Registration
Statement will become effective not later than (i) 6:00 PM, New York
City time, on the date of determination of the public offering price of
the Securities, if such determination occurred at or prior to 3:00 PM,
New York City time, on such date or (ii) 9:30 AM, New York City time,
on the Business Day following the day on which the public offering
price of the Securities was determined, if such determination occurred
after 3:00 PM, New York City time, on such date; if filing of any of
the Prospectuses, or any supplement thereto, is required pursuant to
Rule 424(b), the Prospectuses, and any such supplement, will be filed
in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of any Registration
Statement shall have been issued and no proceedings for that purpose
shall have been instituted or threatened.
(b) The Company shall have furnished to the
International Representatives the opinion of Wilson Sonsini Goodrich &
Rosati, counsel for the Company, dated the Closing Date, to the effect
that:
(i) each of the Company and the Subsidiaries
chartered or organized under the laws of any state of the
United States (the "U.S. Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and
authority to own its properties and conduct its business as
described in the Prospectuses;
(ii) all the outstanding shares of capital stock
of each U.S. Subsidiary have been duly and validly authorized
and issued and are fully paid and nonassessable, and, except
as otherwise set forth in the Prospectuses, all outstanding
shares of capital stock of the U.S. Subsidiaries are owned by
the
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Company, either directly or through wholly owned Subsidiaries,
free and clear of any perfected security interest and, to the
knowledge of such counsel, any other security interests,
claims, liens or encumbrances;
(iii) the capital stock of the Company conforms
as to legal matters in all material respects to the
description thereof contained in the Prospectuses; the
outstanding shares of Common Stock (including the Shares being
sold hereunder by the Selling Stockholders) have been duly and
validly authorized and issued and are fully paid and
nonassessable; the Shares have been duly and validly
authorized and, when issued and delivered to and paid for by
the International Underwriters pursuant to this Agreement and
by the U.S. Underwriters pursuant to the U.S. Underwriting
Agreement, will be fully paid and nonassessable; the Shares
have been duly authorized for listing, subject to official
notice of issuance, on the Nasdaq National Market; the
certificates for the Shares are in valid and sufficient form;
the holders of outstanding shares of capital stock of the
Company are not entitled to preemptive or other rights to
subscribe for the Shares under the Articles of Incorporation
or bylaws of the Company or under the laws of the State of
Delaware; and, to the knowledge of such counsel, except as set
forth in the Prospectuses, no options, warrants or other
rights to purchase, agreements or other obligations to issue,
or rights to convert any obligations into or exchange any
securities for, shares of capital stock of or ownership
interests in the Company are outstanding;
(iv) The Indenture has been duly authorized,
executed and delivered; the Indenture has been duly qualified
under the Trust Indenture Act and constitutes a valid and
binding obligation of the Company; the Notes have been duly
authorized and, when executed by the Company and authenticated
in accordance with the terms of the Indenture and paid for by
the holders thereof, will constitute valid, binding and
enforceable obligations of the Company entitled, to the
benefits provided by the Indenture, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and to general principles of equity; the
shares of Common Stock issuable upon conversion of the Notes
have been duly authorized for listing, subject to official
notice of issuance, on the Nasdaq National Market; the holders
of the outstanding shares of capital stock of the Company are
not entitled, under the Articles of Incorporation or bylaws of
the Company or under the laws of the State of Delaware, to any
preemptive or other rights to subscribe for the Notes or the
shares of Common Stock issuable upon the conversion thereof;
the shares of Common Stock initially issuable upon conversion
of the Notes have been duly and validly authorized and
reserved for issuance upon such conversion and, when issued
upon conversion, will be validly issued, fully paid and
nonassessable; and the Notes and the Indenture conform in all
material respects to the descriptions thereof contained in the
Offering Prospectuses.
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<PAGE> 23
(v) to the knowledge of such counsel, there is
no pending action, suit or proceeding, or any written threat
thereof, by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or
any of the Subsidiaries of a character required to be
disclosed in any Registration Statement which is not
adequately disclosed in the Prospectuses, and there is no
franchise, contract or other document of a character required
to be described in any Registration Statement or Prospectus,
or to be filed as an exhibit, which is not described or filed
as required; and the statements in the Prospectuses under the
headings "Reorganization," "Description of Capital Stock,"
"Description of the Convertible Notes," "Shares Eligible for
Future Sale" and "Certain United States Federal Tax
Consequences to Non-United States Holders of Common Stock and
Convertible Notes," insofar as such statements constitute a
summary of legal matters referred to therein, fairly summarize
the information called for with respect to such legal matters;
(vi) the Registration Statements have become
effective under the Act; any required filing of the
Prospectuses, and of any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period
required by Rule 424(b); to the knowledge of such counsel, no
stop order suspending the effectiveness of any Registration
Statement has been issued, no proceedings for that purpose
have been instituted or threatened and the Registration
Statements and the Prospectuses (other than the financial
statements and other financial and statistical information
contained therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
applicable requirements of the Act and the rules thereunder;
and such counsel has no reason to believe that on the
Effective Date or at the Execution Time the Registration
Statements contained any untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading or that the Prospectuses as of its date and on the
Closing Date included or includes any untrue statement of a
material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in
each case, other than the financial statements and other
financial information contained therein, as to which such
counsel need express no opinion);
(vii) each of this Agreement and the U.S.
Underwriting Agreement has been duly authorized, executed and
delivered by the Company;
(viii) no consent, approval, authorization, filing
with or order of any court or governmental agency or body is
required in connection with the transactions contemplated
herein or in the U.S. Underwriting Agreement, except such as
have been obtained under the Act and such as may be required
under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Securities by the
International Underwriters and the U.S. Underwriters in the
manner contemplated in this Agreement and the U.S.
Underwriting Agreement
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and in the Offering Prospectuses and such other approvals
(specified in such opinion) as have been obtained;
(ix) neither the issue and sale of the
Securities nor the performance of the Company's obligations
hereunder or under the U.S. Underwriting Agreement nor the
fulfillment of the terms hereof or thereof will conflict with,
or result in a breach or violation of or imposition of any
lien, charge or encumbrance upon any property or assets of the
Company or any of the U.S. Subsidiaries pursuant to, (i) the
charter or bylaws of the Company or any U.S. Subsidiary or
(ii) any U.S., California or Delaware statute, law, rule,
regulation, judgment, order or decree known to such counsel
applicable to the Company or any U.S. Subsidiary of any U.S.,
California or Delaware court, governmental body, arbitrator or
other authority having jurisdiction over the Company or any
U.S. Subsidiary or any of their respective properties;
(x) no holders of securities of the Company
have rights to the registration of such securities under the
Registration Statements;
(xi) each of the AICL Agreements has been duly
authorized, executed and delivered by the Company and the U.S.
Subsidiaries that are parties thereto (the "U.S. Subsidiary
Parties") and is a valid, binding and enforceable agreement of
the Company and the U.S. Subsidiary Parties, subject to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of
equity; neither the consummation of the transactions
contemplated in any of the AICL Agreements nor the fulfillment
of the terms thereof will conflict with, or result in a breach
or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any
of the U.S. Subsidiary Parties pursuant to, the charter or
bylaws of the Company or any U.S. Subsidiary Party; and
(xii) the Company is not and, after giving effect
to the offering and sale of the Securities and application of
the proceeds thereof as described in the Prospectuses under
the caption "Use of Proceeds," will not be an "investment
company" within the meaning of the 1940 Act.
In rendering such opinion, such counsel may rely (A) as
to matters involving the application of laws of any jurisdiction other
than the State of California, the United States or the corporate laws
of the State of Delaware or, with respect to the opinion referred to in
sub-paragraph (iv) above, the laws of the State of New York (to the
extent such opinion relates to the validity and binding effect of the
Indenture), to the extent they deem proper and specify in such opinion,
upon the opinion of other counsel of good standing whom they believe to
be reliable and who are satisfactory to counsel for the International
Underwriters and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and
public officials. Such opinion
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may also contain customary qualifications and limitations. References
to the Prospectuses in this paragraph (b) include any supplements
thereto at the Closing Date.
(c) The Company shall have furnished to the
International Representatives the opinion of Kevin Herron, Esq., the
General Counsel of the Company, dated the Closing Date, to the effect
that:
(i) neither the issue and sale of the
Securities nor the consummation of any other of the
transactions contemplated herein or in the U.S. Underwriting
Agreement nor the fulfillment of the terms hereof or thereof
will conflict with, or result in a breach or violation of or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the U.S.
Subsidiaries pursuant to, (i) the charter or bylaws of the
Company or any U.S. Subsidiary or (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement known to such
counsel to which the Company or any U.S. Subsidiary is a party
or bound or to which its property is subject (except for such
breaches or violations which would not, individually or in the
aggregate, have a Material Adverse Effect) or (iii) any
Pennsylvania statute, law, rule, regulation, judgment, order
or decree applicable to the Company or any U.S. Subsidiary of
any Pennsylvania court, governmental body, arbitrator or other
authority having jurisdiction over the Company or any U.S.
Subsidiary or any of their respective properties; and
(ii) neither the consummation of the
transactions contemplated in any of the AICL Agreements nor
the fulfillment of the terms thereof will conflict with, or
result in a breach or violation of or imposition of any lien,
charge or encumbrance upon any property or assets of the
Company or any of the U.S. Subsidiary Parties pursuant to, (i)
the charter or bylaws of the Company or any U.S. Subsidiary
Party or (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or
other agreement known to such counsel to which the Company or
any U.S. Subsidiary Party is a party or bound or to which
their respective property is subject (except for such breaches
or violations which would not, individually or in the
aggregate, have a Material Adverse Effect) or (iii) any
Pennsylvania statute, law, rule, regulation, judgment, order
or decree applicable to the Company or any U.S. Subsidiary
Party of any Pennsylvania court, governmental body, arbitrator
or other authority having jurisdiction over the Company or any
U.S. Subsidiary Party or any of their respective properties;
no consent, approval, authorization, filing with or order of
any U.S. court or governmental agency or body is required in
connection with the transactions contemplated in any of the
AICL Agreements, except __________ [LIST APPROVALS (IF ANY)
REQUIRED], each of which has been obtained.
In rendering such opinion, such counsel may rely as to
matters involving the application of laws of any jurisdiction other
than the State of Pennsylvania, the United States or the corporate laws
of the State of Delaware, to the extent he deems proper and
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specifies in such opinion, upon the opinion of other counsel of good
standing whom he believes to be reliable and who are satisfactory to
counsel for the International Underwriters. Such opinion may also
contain customary qualifications and limitations.
(d) The Company shall have furnished to the
International Representatives the opinion of Orloge, Del Costello,
Bacorro, Odulco, Calma & Carobonell, Philippine counsel for the
Company, dated the Closing Date, to the effect that:
(i) each of AAP, AAAP and AMI (the "Philippine
Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the jurisdiction in which it is chartered or organized, with
full corporate power and authority to own its properties and
conduct its business, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws
of each jurisdiction which requires such qualification; and
(ii) all the outstanding shares of capital stock
of each Philippine Subsidiary have been duly and validly
authorized and issued and are fully paid and nonassessable,
and, except (i) such shares of AAP owned by AICL, which shares
do not exceed 40.1% of the outstanding shares of AAP, (ii)
such shares of each Phillipine Subsidiary owned by directors
thereof, which shares in each case do not exceed 0.1 % of the
outstanding shares of such Philippine Subsidiary, (iii)
3,446,476 shares of preferred stock of AAP, which shares are
owned by Integrated Microelectronics, Inc., and (iv) as
otherwise set forth in the Prospectuses, all outstanding
shares of capital stock of the Philippine Subsidiaries are
owned by the Company, either directly or through wholly owned
Subsidiaries, free and clear of any perfected security
interest and, to the knowledge of such counsel, after due
inquiry, any other security interests, claims, liens or
encumbrances.
In rendering such opinion, such counsel may rely as to
matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Such opinion
may also contain customary qualifications and limitations. References
to the Prospectuses in this paragraph (d) include any supplements
thereto at the Closing Date.
(e) The Company shall have furnished to the
International Representatives the opinion of Kim & Chang, Korean
counsel for the Company, dated the Closing Date, to the effect that:
(i) AICL has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the Republic of Korea, with full corporate power and
authority to own its properties and conduct its business as
described in the Prospectuses;
(ii) each of the AICL Agreements has been duly
executed and delivered by AICL and is a valid, binding and
enforceable agreement of AICL,
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<PAGE> 27
subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general
principles of equity;
(iii) no consent, approval, authorization, filing
with or order of any court or governmental agency or body in
the Republic of Korea is required in connection with the
transactions contemplated in the AICL Agreements, except
_________________, each of which has been obtained; and
(iv) neither the consummation of any of the
transactions contemplated in the AICL Agreements nor the
fulfillment of the terms thereof will conflict with or result
in a breach or violation of the Articles of Incorporation of
AICL or any statute, law, rule or regulation of any regulatory
body, administrative agency, governmental body or other
authority in the Republic of Korea having jurisdiction over
AICL or any of its properties.
In rendering such opinion, such counsel may rely as to
matters of fact, to the extent they deem proper, on certificates of
responsible officers of AICL and public officials. Such opinion may
also contain customary qualifications and limitations. References to
the Prospectuses in this paragraph (e) include any supplements thereto
at the Closing Date.
(f) The Selling Stockholders shall have furnished to
the International Representatives the opinion of Wilson, Sonsini,
Goodrich & Rosati, counsel for the Selling Stockholders, dated the
Closing Date, to the effect that:
(i) this Agreement, the U.S. Underwriting Agreement
and the Custody Agreement have been duly executed and
delivered by the Selling Stockholders and each Selling
Stockholder has full legal right, capacity, power and
authority to enter into and perform this Agreement, the U.S.
Underwriting Agreement and the Custody Agreement and to sell,
transfer, assign and deliver in the manner provided in this
Agreement, the U.S. Underwriting Agreement and the Custody
Agreement the Shares being sold by such Selling Stockholder
hereunder and thereunder;
(ii) upon the delivery by each Selling Stockholder to
the several International Underwriters and the several U.S.
Underwriters of certificates for the Shares being sold
hereunder and under the U.S. Underwriting Agreement by such
Selling Stockholder against payment therefor as provided
herein, the International Underwriters and the U.S.
Underwriters will have good and valid title to such Shares,
free and clear to the knowledge of such counsel of any adverse
claims;
(iii) no consent, approval, authorization or order of
any court or governmental agency or body is required for the
consummation by any Selling Stockholder of the transactions
contemplated herein or in the U.S. Underwriting Agreement,
except such as may have been obtained under the Act and such
as may be required under the blue sky laws of any jurisdiction
in connection with the
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<PAGE> 28
purchase and distribution of the Shares by the International
Underwriters and the U.S. Underwriters and such other
approvals (specified in such opinion) as have been obtained;
(iv) neither the sale of the Shares being sold by any
Selling Stockholder nor the consummation of any other of the
transactions contemplated herein or in the U.S. Underwriting
Agreement by any Selling Stockholder or the fulfillment of the
terms hereof or thereof by any Selling Stockholder will
conflict with, result in a breach or violation of, or
constitute a default under any law or the charter or bylaws of
such Selling Stockholder, or any judgment, order or decree
known to such counsel to be applicable to such Selling
Stockholder of any court, governmental body or arbitrator
having jurisdiction over such Selling Stockholder; and
(v) the Securities Loan Agreement has been duly
executed and delivered by Mr. and Mrs. James J. Kim; Mr. and
Mrs. James J. Kim have full legal right, capacity, power and
authority to enter into and perform the Securities Loan
Agreement and to lend, assign and deliver in the manner
provided in the Securities Loan Agreement the Borrowed Shares
being lent by Mr. and Mrs. James J. Kim thereunder; Mr. and
Mrs. James J. Kim have good and valid title to the Borrowed
Shares, free and clear to the knowledge of such counsel of any
adverse claims; no consent, approval, authorization or order
of any court or governmental agency or body is required for
the consummation by Mr. and Mrs. James J. Kim of the
transactions contemplated in the Securities Loan Agreement,
except such as may have been obtained under the Act and such
as may be required under the blue sky laws of any jurisdiction
in connection with the borrowing and distribution of the
Borrowed Shares by SBI and such other approvals (specified in
such opinion) as have been obtained; and neither the lending
of the Borrowed Shares by Mr. and Mrs. James J. Kim nor the
consummation of any other of the transactions contemplated in
the Securities Loan Agreement by Mr. and Mrs. James J. Kim or
the fulfillment of the terms thereof by Mr. and Mrs. James J.
Kim will conflict with, result in a breach or violation of, or
constitute a default under any law or the terms of any
indenture or other agreement or instrument known to such
counsel and to which Mr. and Mrs. James J. Kim (or either of
them) are a party or bound, or any judgment, order or decree
known to such counsel to be applicable to Mr. and Mrs. James
J. Kim (or either of them) of any court, governmental body or
arbitrator having jurisdiction over either of them.
In rendering such opinion, such counsel may (A) rely
as to matters involving the application of laws of any jurisdiction
other than the State of California or Delaware or the United States, to
the extent they deem proper and specified in such opinion, upon the
opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the International
Underwriters, (B) rely as to matters of fact, to the extent they deem
proper, on certificates of the Selling Stockholders (including Mr. and
Mrs. James J. Kim) and public officials and (C) with
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<PAGE> 29
respect to the opinion in clause (ii) above, may assume each
International Underwriter and each U.S. Underwriter takes delivery of
the Shares without notice of any adverse claim. Such opinion may also
contain customary qualifications and limitations.
(g) The International Representatives shall have
received from Cleary, Gottlieb, Steen & Hamilton, counsel for the
International Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the International
Securities, the Registration Statements, the Prospectuses (together
with any supplement thereto) and other related matters as the
International Representatives may reasonably require, and the Company
and each Selling Shareholder shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(h) The Company shall have furnished to the
International Representatives a certificate of the Company, signed by
the Chairman of the Board or the President and the principal financial
or accounting officer of the Company, dated the Closing Date, to the
effect that the signers of such certificate have carefully examined the
Registration Statements, the Prospectuses, any supplements to the
Prospectuses, this Agreement and the U.S. Underwriting Agreement and
that:
(i) the representations and warranties of the Company
in this Agreement and the U.S. Underwriting Agreement are true
and correct in all material respects on and as of the Closing
Date with the same effect as if made on the Closing Date and
the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at
or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of
any Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to the Company's
knowledge, threatened; and
(iii) since the date of the most recent financial
statements included in the Prospectuses, there has been no
material adverse change in the condition (financial or other),
prospects, earnings, business or properties of the Company and
the Subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except
as set forth in or contemplated in the Prospectuses.
(i) Each Selling Stockholder shall have furnished to
the International Representatives a certificate, signed by or on behalf
of such Selling Stockholder, dated the Closing Date, to the effect that
the signer of such certificate has carefully examined the Offering
Registration Statement, the Offering Prospectuses, any supplement to
the Offering Prospectuses, this Agreement and the U.S. Underwriting
Agreement and that the representations and warranties of such Selling
Stockholder in this Agreement and the
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<PAGE> 30
U.S. Underwriting Agreement are true and correct in all material
respects on and as of the Closing Date to the same effect as if made on
the Closing Date.
(j) At the Execution Time and at the Closing Date,
Arthur Andersen LLP shall have furnished to the International
Representatives letters, dated respectively as of the Execution Time
and as of the Closing Date, in form and substance satisfactory to the
International Representatives, confirming that they are independent
accountants within the meaning of the Act and the applicable published
rules and regulations thereunder and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Registration
Statements and the Prospectuses and reported on by them comply
in form in all material respects with the applicable
accounting requirements of the Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by the Company
and the Subsidiaries; carrying out certain specified
procedures (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders, directors and the audit and
compensation committees of the Company and the Subsidiaries;
and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the
Company and the Subsidiaries as to transactions and events
subsequent to December 31, 1997, nothing came to their
attention which caused them to believe that:
(1) with respect to the period
subsequent to December 31, 1997, there were any
changes, at a specified date not more than five
business days prior to the date of the letter, in the
long-term debt of the Company and the Subsidiaries or
capital stock of the Company or decreases in the
total stockholders' equity of the Company or
decreases in working capital of the Company and the
Subsidiaries as compared with the amounts shown on
the December 31, 1997 combined balance sheet included
in the Registration Statements and the Prospectuses,
or for the period from December 31, 1997 to such
specified date there were any decreases, as compared
with the corresponding period in the preceding
quarter, in revenues, net operating income or
interest expense or in total or per share amounts of
net income of the Company and the Subsidiaries,
except in all instances for changes or decreases set
forth in such letter, in which case the letter shall
be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is
not deemed necessary by the International
Representatives;
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(2) the information included in the
Registration Statements and Prospectuses in response
to Item 301 (Selected Financial Data), Item 302
(Supplementary Financial Information) and Item 402
(Executive Compensation) of Regulation S-K under the
Act is not in conformity with the applicable
disclosure requirements of Regulation S-K; and
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and the Subsidiaries) set forth in the Registration
Statements and the Prospectuses, including the information set
forth under the captions "Summary Financial Data" and
"Selected Financial Data" in the Prospectuses, agrees with the
accounting records of the Company and the Subsidiaries,
excluding any questions of legal interpretation.
References to the Prospectuses in this paragraph (j) include any
supplement thereto at the date of the letter.
(k) At the Execution Time and at the Closing Date,
Samil Accounting Corporation shall have furnished to the International
Representatives and the Company a letter or letters, dated respectively
as of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the International Representatives and the
Company, confirming that they are independent accountants within the
meaning of the standards established for independent certified public
accountants in the Republic of Korea and stating in effect that they
have performed certain specified procedures as a result of which they
determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of
AICL) set forth in the Registration Statements and the Prospectuses,
including the information set forth under the captions "Risk Factors --
Dependence on Relationship with AICL; Potential Conflicts of Interest"
and "Relationship with Anam Industrial Co., Ltd." in the Prospectuses,
agrees with the accounting records of AICL, excluding any questions of
legal interpretation. References to the Prospectuses in this paragraph
(k) include any supplement thereto at the date of the letter.
(l) Subsequent to the Execution Time or, if earlier,
the dates as of which information is given in the Registration
Statements (exclusive of any amendment thereof) and the Prospectuses,
there shall not have been (i) any change or decrease specified in the
letter or letters referred to in paragraph (j) of this Section 6 or
(ii) any change, or any development involving a prospective change, in
or affecting the business or properties of the Company and the
Subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectuses the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the sole judgment of
the International Representatives, so material and adverse as to
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<PAGE> 32
make it impractical or inadvisable to proceed with the offering or
delivery of the International Securities as contemplated by the
Registration Statements (exclusive of any amendment thereof) and the
Prospectuses.
(m) At the Execution Time, the Company shall have
furnished to the International Representatives and the U.S.
Representatives a letter substantially in the form of Exhibit A hereto
from each officer, director and shareholder (other than the Selling
Stockholders) of the Company, which persons are listed in Schedule III
hereto, addressed to the International Representatives and the U.S.
Representatives.
(n) Prior to the Closing Date, the Company shall have
furnished to the International Representatives such further
information, certificates and documents as the International
Representatives may reasonably request.
(o) The closing of the purchase of the U.S. Securities
to be issued and sold by the Company pursuant to the U.S. Underwriting
Agreement shall occur concurrently with the closing described herein.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the International Representatives and
counsel for the International Underwriters, this Agreement and all obligations
of the International Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by the International Representatives. Notice of such
cancellation shall be given to the Company and each Selling Stockholder in
writing or by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Cleary, Gottlieb, Steen & Hamilton, counsel for
the International Underwriters, at 1 Liberty Plaza, New York, New York, on the
Closing Date.
7. Reimbursement of International Underwriters' Expenses. If
the sale of the International Securities provided for herein is not consummated
because any condition to the obligations of the International Underwriters set
forth in Section 6 hereof is not satisfied or because of any refusal, inability
or failure on the part of the Company or any Selling Stockholder to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the International Underwriters, the Company will reimburse the
International Underwriters severally through SBI on demand for all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the proposed purchase
and sale of the International Securities. If the Company is required to make any
payments to the International Underwriters under this Section 7 because of any
Selling Stockholder's refusal, inability or failure to satisfy any condition to
the obligations of the International Underwriters set forth in Section 6, the
Selling Stockholders pro rata in proportion to the percentage of International
Shares to be sold by each shall reimburse the Company on demand for all amounts
so paid.
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8. Indemnification and Contribution. (a) The Company and Mr.
James J. Kim jointly and severally agree to indemnify and hold harmless each
International Underwriter (including without limitation SBI (the "Market Maker")
in its capacity as a market maker for the Securities and SBI (the "Independent
Underwriter") in its capacity as "qualified independent underwriter" (within the
meaning of NASD Conduct Rule 2720)), the directors, officers, employees and
agents of each International Underwriter, and each person who controls any
International Underwriter within the meaning of either the Act or the Exchange
Act against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Offering
Registration Statement or in any amendment thereof, or in any Offering
Preliminary Prospectus or in either of the Offering Prospectuses, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company and Mr. James J. Kim will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any International
Underwriter through the International Representatives specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which the
Company or Mr. James J. Kim may otherwise have.
(b) Each International Underwriter severally agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Offering Registration Statement, and each person who
controls the Company within the meaning of either the Act or the Exchange Act
and Mr. James J. Kim, to the same extent as the foregoing indemnity from the
Company and Mr. James J. Kim to each International Underwriter, but only with
reference to written information relating to such International Underwriter
furnished to the Company by or on behalf of such International Underwriter
through the International Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any International Underwriter may
otherwise have. The Company and Mr. James J. Kim acknowledge that the statements
set forth in the last paragraph of the front cover page, the last paragraph of
the inside front cover page and, under the heading "Underwriting", the _______
paragraphs in the Offering Registration Statement, any Offering Preliminary
Prospectus and the Offering Prospectuses and any amendment or supplement thereto
constitute the only information furnished in writing by or on behalf of the
several International Underwriters for inclusion in any Offering Preliminary
Prospectus or the Offering Prospectuses and any amendment or supplement thereto.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is
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<PAGE> 34
to be made against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof; but the failure so to
notify the indemnifying party (i) will not relieve it from any liability under
paragraph (a) or (b) above unless and to the extent it did not otherwise learn
of such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ one separate counsel (and one
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate (and local) counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv)
the indemnifying party shall authorize the indemnified party in writing to
employ separate (and local) counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and Mr. James J. Kim, jointly and
severally, and the International Underwriters agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, Mr. James J. Kim and one or more
of the International Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company and Mr.
James J. Kim on the one hand and by the International Underwriters on the other
from the offering of the International Securities; provided, however, that in no
case shall any International Underwriter (except as may be provided in any
agreement among underwriters relating to the offering of the International
Securities) be responsible for any amount in excess of the underwriting discount
or commission applicable to the International Securities purchased by such
International Underwriter hereunder.
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<PAGE> 35
If the allocation provided by the immediately preceding sentence is unavailable
for any reason, the Company and Mr. James J. Kim, jointly and severally, and the
International Underwriters shall contribute in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and Mr. James J. Kim on the one hand and of the International
Underwriters on the other in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company and Mr. James J. Kim shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses)
received by them, and benefits received by the International Underwriters shall
be deemed to be equal to the total underwriting discounts and commissions, in
each case as set forth on the cover page of the Offering International
Prospectus. Benefits received by the Independent Underwriter in its capacity as
"qualified independent underwriter" shall be deemed to be equal to the
compensation received by the Independent Underwriter for acting in such
capacity. Relative fault shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
provided by the Company or Mr. James J. Kim on the one hand or by the
International Underwriters on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company, Mr. James J. Kim and the
International Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an International Underwriter within the meaning of either the Act or
the Exchange Act and each director, officer, employee and agent of an
International Underwriter shall have the same rights to contribution as such
International Underwriter, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each officer of the Company who
shall have signed the Offering Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this paragraph (d).
(e) The liability of each Selling Stockholder under such
Selling Stockholder's representations and warranties contained in Section 1
hereof and under the indemnity and contribution agreements contained in this
Section 8 shall be limited to an amount equal to the initial public offering
price of the International Shares sold by such Selling Stockholder to the
International Underwriters, less the underwriting discounts and commissions paid
thereon to the International Underwriters. The Company and the Selling
Stockholders may agree, as among themselves and without limiting the rights of
the International Underwriters under this Agreement, as to the respective
amounts of such liability for which they each shall be responsible.
(f) The Company and Mr. James J. Kim shall not have any
liability under this Section 8 with respect to any losses, claims, damages or
liabilities of an International Underwriter if copies of the Offering
International Prospectus, as then amended or supplemented,
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<PAGE> 36
were furnished by the Company to the International Underwriters as required by
this Agreement, and such copies of the Offering International Prospectus were
not sent or given by or on behalf of such International Underwriter, as required
by law, to the purchasers of the International Securities and if the Offering
International Prospectus, as so amended or supplemented, would have cured the
defect giving rise to such losses, claims, damages or liabilities.
9. Default by an International Underwriter. If any one or more
International Underwriters shall fail to purchase and pay for any of the
International Shares or International Notes agreed to be purchased by such
International Underwriter or International Underwriters hereunder and such
failure to purchase shall constitute a default in the performance of its or
their obligations under this Agreement, the remaining International Underwriters
shall be obligated severally to take up and pay for (in the respective
proportions which the amount of International Shares or International Notes, as
the case may be, set forth opposite their names in Schedule I hereto bears to
the aggregate amount of International Shares or International Notes, as the case
may be, set forth opposite the names of all the remaining International
Underwriters) the International Shares or International Notes which the
defaulting International Underwriter or International Underwriters agreed but
failed to purchase; provided, however, that in the event that (x) the aggregate
amount of International Shares which the defaulting International Underwriter or
International Underwriters agreed but failed to purchase shall exceed 10% of the
aggregate amount of International Shares set forth in Schedule I hereto or (y)
the aggregate principal amount of International Notes which the defaulting
International Underwriter or International Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate principal amount of International
Notes set forth in Schedule I hereto, then the remaining International
Underwriters shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the International Shares or International Notes,
as the case may be, and if such nondefaulting International Underwriters do not
purchase all the International Shares or International Notes, as the case may
be, this Agreement will terminate without liability to any nondefaulting
International Underwriter, the Selling Stockholders or the Company. In the event
of a default by any International Underwriter as set forth in this Section 9,
the Closing Date shall be postponed for such period, not exceeding five Business
Days, as the International Representatives shall determine in order that the
required changes in the Registration Statements and the Prospectuses or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting International Underwriter of its
liability, if any, to the Company, the Selling Stockholders and any
nondefaulting International Underwriter for damages occasioned by its default
hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the International Representatives, by
notice given to the Company prior to delivery of and payment for the
International Securities, if prior to such time (i) trading in the Company's
Common Stock shall have been suspended by the Commission or the Nasdaq National
Market or trading in securities generally on the New York Stock Exchange or the
Nasdaq National Market shall have been suspended or limited or minimum prices
shall have been established on such Exchange or National Market, (ii) a banking
moratorium shall have been declared by either Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war, or
other
36
<PAGE> 37
calamity or crisis, the effect of which on financial markets is such as to
make it, in the sole judgment of the International Representatives,
impracticable or inadvisable to proceed with the offering or delivery of the
International Securities as contemplated in the Offering International
Prospectus.
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, of each Selling Stockholder and of the International
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
International Underwriter, any Selling Stockholder or the Company or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the International Securities. The
provisions of Sections 7 and 8 and the last sentence of Section 9 hereof shall
survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the International
Representatives, will be mailed, delivered or telefaxed to the SBI General
Counsel (fax no.: (212) ______________) and confirmed to the General Counsel,
care of Smith Barney Inc., 333 West 34th Street, New York, New York 10001,
Attention: General Counsel; or, if sent to the Company, will be mailed,
delivered or telefaxed to James J. Kim (fax no.: (610) 431-9600) and confirmed
to it at 1345 Enterprise Drive, West Chester, Pennsylvania 19380, attention of
the Legal Department, with a copy to Larry W. Sonsini (fax no.: (650) 493-6811)
at Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California
94304; or, if sent to the Selling Stockholders, will be mailed, delivered, or
telefaxed to James J. Kim (fax no.: (610) 431-9600) and confirmed to it at the
address set forth in Schedule II hereto.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
37
<PAGE> 38
"Act" shall mean the Securities Act of 1933, as amended.
"Borrowing Effective Date" shall mean each date and time that
the Borrowing Registration Statement, any post-effective amendment or amendments
thereto and any Rule 462(b) Registration Statement relating thereto became or
shall become effective.
"Borrowing Preliminary Prospectus" shall mean any preliminary
prospectus with respect to the offering of the Borrowed Shares referred to in
paragraph 1A(c) above and any preliminary prospectus included in the Borrowing
Registration Statement at the Borrowing Effective Date that omits Rule 430A
Information.
"Borrowing Prospectus" shall mean the prospectus relating to
the Borrowed Shares that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required, shall mean
the form of final prospectus relating to the Borrowed Shares included in the
Borrowing Registration Statement at the Borrowing Effective Date.
"Borrowing Registration Statement" shall mean the registration
statement referred to in paragraph 1A(c) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto or any Rule 462(b) Registration
Statement becomes effective at any time or from time to time, shall also mean
such registration statement as so amended or such Rule 462(b) Registration
Statement, as the case may be. Such term shall include any Rule 430A Information
deemed to be included therein at the Borrowing Effective Date as provided by
Rule 430A.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York
City or London.
"Effective Date" shall mean each date and time that the
Offering Registration Statement, any post-effective amendment or
amendments thereto and any Rule 462(b) Registration Statement relating
thereto became or shall become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"Material Adverse Effect" shall mean a material adverse effect
on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and the Subsidiaries, taken as a
whole, whether or not arising in the ordinary course of business.
"Offering International Preliminary Prospectus" shall have the
meaning set forth under "Offering U.S. Preliminary Prospectus".
38
<PAGE> 39
"Offering Preliminary Prospectuses" shall have the meaning set
forth under "Offering U.S. Preliminary Prospectus".
"Offering Registration Statement" shall mean the registration
statement referred to in paragraph 1A(a) above, including the exhibits
thereto and the financial statements included therein, as amended at
the Execution Time (or, if not effective at the Execution Time, in the
form in which it shall become effective) and, in the event any
post-effective amendment thereto or any Rule 462(b) Registration
Statement becomes effective prior to the Closing Date, shall also mean
such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective
Date as provided by Rule 430A.
"Offering U.S. Preliminary Prospectus" and the "Offering
International Preliminary Prospectus", respectively, shall mean any
preliminary prospectus with respect to the offering of the U.S.
Securities and the International Securities, as the case may be,
referred to in paragraph 1A(a) above and any preliminary prospectus
with respect to the offering of the U.S. Securities and the
International Securities, as the case may be, included in the Offering
Registration Statement at the Effective Date that omits Rule 430A
Information; and the Offering U.S. Preliminary Prospectus and the
Offering International Preliminary Prospectus are hereinafter
collectively called the "Offering Preliminary Prospectuses".
"Preliminary Prospectuses" shall mean, collectively, the
Offering Preliminary Prospectuses and the Borrowing Preliminary
Prospectus.
"Prospectuses" shall mean, collectively, the Offering
Prospectuses and the Borrowing Prospectus.
"Registration Statements" shall mean, collectively, the
Offering Registration Statement and the Borrowing Registration
Statement.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules
under the Act.
"Rule 430A Information" shall mean information with respect to
the Securities or the Borrowed Shares, as the case may be, and the
offering thereof permitted to be omitted from the Offering Registration
Statement or the Borrowing Registration Statement, as the case may be,
when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the initial Offering Registration
Statement or the initial Borrowing Registration Statement, as the case
may be.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended.
39
<PAGE> 40
"United States or Canadian Person" shall mean 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, or any estate or trust the income of which is
subject to United States or Canadian Federal income taxation,
regardless of its source (other than any non-United States or
non-Canadian branch of any United States or Canadian Person), and shall
include any United States or Canadian branch of a person other than a
United States or Canadian Person. "U.S." or "United States" shall mean
the United States of America (including the states thereof and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
40
<PAGE> 41
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company, the Selling Stockholders and the several International
Underwriters.
Very truly yours,
Amkor Technology, Inc.
By: ____________________________
Name:
Title:
James J. Kim
____________________________
[Selling Stockholder]
By: ____________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Smith Barney Inc.
BancAmerica Robertson Stephens International Limited
Cowen International L.P.
By: Smith Barney Inc.
By:___________________________
Name:
Title:
For themselves and the other several International Underwriters named in
Schedule I to the foregoing Agreement.
41
<PAGE> 42
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of Principal Amount of
International Underwritten International Underwritten
International Underwriter Shares to Be Purchased Notes to Be Purchased
- ------------------------- -------------------------- --------------------------
<S> <C> <C>
Smith Barney Inc....................................................... $
BancAmerica Robertson Stephens International Limited................... $
Cowen International L.P................................................ $
[Other International Underwriters]..................................... $
------------------------ -----------------------
Total............................................................. $
======================== =======================
</TABLE>
1-1
<PAGE> 43
SCHEDULE II
Selling Stockholders Number of Shares
- -------------------- ----------------
Address
[Address for notice]
A-1
<PAGE> 44
SCHEDULE III
List of Officers, Directors and Shareholders
(other than Selling Stockholders)
III-1
<PAGE> 45
EXHIBIT A
[LETTERHEAD OF OFFICER, DIRECTOR, STOCKHOLDER OR SHAREHOLDER OF
AMKOR TECHNOLOGY, INC.]
Amkor Technology, Inc.
Public Offering of Common Stock and Convertible Notes
_______________, 1998
Smith Barney Inc.
BancAmerica Robertson Stephens
Cowen & Company
as U.S. Representatives of the several U.S. Underwriters
c/o Smith Barney Inc.
333 West 34th Street
New York, New York 10001
Smith Barney Inc.
BancAmerica Robertson Stephens International Limited
Cowen International L.P.
as International Representatives of the several International Underwriters
c/o Smith Barney Inc.
333 West 34th Street
New York, New York 10001
Ladies and Gentlemen:
This letter is being delivered to you in connection with (i)
the proposed U.S. Underwriting Agreement (the "U.S. Underwriting Agreement")
among Amkor Technology, Inc., a Delaware corporation (the "Company"), certain
selling stockholders of the Company and a group of U.S. Underwriters named
therein and (ii) the proposed International Underwriting Agreement (the
"International Underwriting Agreement") among the Company, certain selling
stockholders of the Company and a group of International Underwriters named
therein, relating to an underwritten public offering of Common Stock, $.001 par
value (the "Common Stock"), of the Company, and the Company's __% Convertible
Subordinated Notes due 2003.
In order to induce you and the other U.S. Underwriters and
International Underwriters to enter into the U.S. Underwriting Agreement and the
International Underwriting Agreement, the undersigned will not, without the
prior written consent of Smith Barney Inc.,
A-1
<PAGE> 46
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, with respect to, any shares of Common Stock of
the Company 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 of the U.S. Underwriting
Agreement and the International Underwriting Agreement, other than (i) upon the
exercise of any option or warrant, or the conversion of a security, outstanding
on the date of the U.S. Underwriting Agreement and the International
Underwriting Agreement and referred to in the Offering Prospectuses (as defined
in the U.S. Underwriting Agreement and the International Underwriting Agreement)
and (ii) shares of Common Stock disposed of as bona fide gifts approved by Smith
Barney Inc.
If for any reason the U.S. Underwriting Agreement and the
International Underwriting Agreement shall be terminated prior to the Closing
Date (as defined in the U.S. Underwriting Agreement and the International
Underwriting Agreement), the agreement set forth above shall likewise be
terminated.
Very truly yours,
_______________________________________
Signature
_______________________________________
Print Name
_______________________________________
Address
_______________________________________
A-2
<PAGE> 1
EXHIBIT 4.1
[AMKOR TECHNOLOGY LOGO]
AMKOR TECHNOLOGY, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
[GRAPHIC] [GRAPHIC]
COMMON STOCK CUSIP 031652 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES,
OF THE PAR VALUE OF $.001 EACH, OF THE COMMON STOCK OF
AMKOR TECHNOLOGY, INC. transferable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed in facsimile by its duly authorized officers and has caused its facsimile
seal to be affixed hereto.
Dated:
/s/ F. J. Marcucci [AMKOR TECHNOLOGY CORPORATE SEAL] /s/ James J. Kim
CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER
AND CHAIRMAN
COUNTERSIGNED AND REGISTERED:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE> 2
AMKOR TECHNOLOGY, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A FULL OR SUMMARY STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF
STOCK OR SERIES THEREOF AUTHORIZED TO BE ISSUED BY THE CORPORATION AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
SUCH REQUEST MAY BE MADE TO THE CORPORATION OR THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entities
JT TEN - as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT- Custodian
---------------- -------------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
-------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
--------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
---------------------------------------------
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated
----------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
--------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCK BROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT
TO SEC RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
<PAGE> 1
EXHIBIT 4.2
AMKOR TECHNOLOGY, INC.
AND
STATE STREET BANK AND TRUST COMPANY
AS TRUSTEE
$150,000,000
_____% Convertible Subordinated Notes due 2003*
------------------
INDENTURE
Dated as of , 1998
- ----------
*Plus an over-allotment option to purchase up to $22,500,000 principal amount of
____% Convertible Subordinated Notes due 2003.
<PAGE> 2
THIS INDENTURE, dated as of ______ __, 1998, is between Amkor Technology,
Inc., a Delaware corporation (the "Company"), and State Street Bank and Trust
Company, a trust company duly organized and existing under laws of the
Commonwealth of Massachusetts (the "Trustee"). The Company has duly authorized
the creation of its % Convertible Subordinated Notes due 2003 (the "Convertible
Subordinated Notes") and to provide therefor the Company and the Trustee have
duly authorized the execution and delivery of this Indenture. Each party agrees
as follows for the benefit of the other party and for the equal and ratable
benefit of the holders from time to time of the Convertible Subordinated Notes:
ARTICLE 1
DEFINITIONS
SECTION 1.01 Definitions.
"Acquiring Person" means any person (as defined in Section 13(d)(3) of the
Exchange Act) who or which, together with all affiliates and associates (each as
defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act and as further defined
below) of shares of Common Stock or other voting securities of the Company
having more than 50% of the total voting power of the Voting Stock of the
Company; provided, however, that an Acquiring Person shall not include (i) the
Company, (ii) any subsidiary of the Company, (iii) any Permitted Holder, (iv) an
underwriter engaged in a firm commitment underwriting in connection with a
public offering of the Voting Stock of the Company or (v) any current or future
employee or director benefit plan of the Company or any subsidiary of the
Company or any entity holding Common Stock of the Company for or pursuant to the
terms of any such plan. For purposes hereof, a person shall not be deemed to be
the beneficial owner of (A) any securities tendered pursuant to a tender or
exchange offer made by or on behalf of such person or any of such person's
affiliates until such tendered securities are accepted for purchase or exchange
thereunder, or (B) any securities if such beneficial ownership (1) arises solely
as a result of a revocable proxy delivered in response to a proxy or consent
solicitation made pursuant to the applicable rules and regulations under the
Exchange Act, and (2) is not also then reportable on Schedule 13D (or any
successor schedule) under the Exchange Act.
"Affiliate" means, when used with reference to any person, any other person
directly or indirectly controlling, controlled by, or under direct or indirect
common control of, the referent person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct or cause the direction of management or policies of the referent person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise. The terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
1
<PAGE> 3
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Note or beneficial interest therein, the rules and procedures
of the Depositary for such Global Note to the extent applicable to such
transaction and as in effect from time to time.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.
"Capital Stock" of any person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, but excluding any debt
securities convertible into such equity.
"Change of Control" means the occurrence of one or more of the following
events: (a) any person has become an Acquiring Person, (b) the Company
consolidates with or merges into any other corporation, or conveys, transfers or
leases all or substantially all of its assets to any person, or any other
corporation merges into the Company, and, in the case of any such transaction,
the outstanding Common Stock of the Company is changed or exchanged as a result,
unless the stockholders of the Company immediately before such transaction own,
directly or indirectly immediately following such transaction, at least a
majority of the combined voting power of the outstanding voting securities of
the corporation resulting from such transaction in substantially the same
proportion as their ownership of the Voting Stock of the Company immediately
before such transaction, or (c) any time the Continuing Directors do not
constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided, that a Change of
Control shall not be deemed to have occurred if either (y) the last sale price
of the Common Stock for any five trading days during the ten trading days
immediately preceding the Change of Control is at least equal to 105% of the
Conversion Price in effect on the date of such Change of Control or (z) at least
90% of the consideration (excluding cash payments for fractional shares) in the
transaction or transactions constituting the Change of Control consists of
shares of common stock that are, or upon issuance will be, traded on a United
States national securities exchange or approved for trading on an established
automated over-the-counter trading market in the United States.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company. Subject to the provisions
of Section 12.06, however, shares issuable on conversion of Convertible
Subordinated Notes shall include only shares of the class designated as Common
Stock of the Company at the date of this Indenture or shares of any class or
classes resulting from any reclassification or reclassifications thereof and
which have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation,
2
<PAGE> 4
dissolution or winding up of the Company and which are not subject to redemption
by the Company; provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
"Company" means the party named as such above until a successor replaces it
in accordance with Article 5 and thereafter means the successor.
A "consolidated subsidiary" of any person means a subsidiary which for
financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such person as a consolidated subsidiary.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on the
date of this Indenture or (ii) was nominated for election or elected to such
Board of Directors with the approval of a majority of the Continuing Directors
who were members of such Board at the time of such nomination or election.
"Convertible Subordinated Notes" means the ____% Convertible Subordinated
Notes due 2003 issued, authenticated and delivered under this Indenture.
"Conversion Price" means the initial conversion price specified in the form
of Convertible Subordinated Note in Paragraph 16 of such form, as adjusted in
accordance with the provisions of Article 12.
"Corporate Trust Office" means the corporate trust office of the Trustee at
which at any particular time the trust created by this Indenture shall
principally be administered; as of the date hereof, the Corporate Trust Office
is located at Two International Place, 4th Floor, Boston, MA 02110.
"Default" means any event that is, or after notice or passage of time, or
both, would be, an Event of Default.
"Depositary" means, with respect to any Global Notes, a clearing agency
that is registered as such under the Exchange Act and is designated by the
Company to act as Depositary for such Global Notes (or any successor securities
clearing agency so registered), which shall initially be DTC.
"Designated Event" means the occurrence of a Change of Control or a
Termination of Trading.
3
<PAGE> 5
"Designated Senior Debt" means any particular Senior Debt if the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Indebtedness shall be "Designated Senior Debt" for purposes
of the Indenture (provided that such instrument, agreement or other document may
place limitations and conditions on the right of such Senior Debt to exercise
the rights of Designated Senior Debt.)
"DTC" means The Depository Trust Company, a New York corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Global Note" means a Convertible Subordinated Note that is registered in
the Register.
"Indebtedness" means, with respect to any person, all obligations, whether
or not contingent, of such person (i) (a) for borrowed money (including, but not
limited to, any indebtedness secured by a security interest, mortgage or other
lien on the assets of the Company that is (1) given to secure all or part of the
purchase price of property subject thereto, whether given to the vendor of such
property or to another, or (2) existing on property at the time of acquisition
thereof), (b) evidenced by a note, debenture, bond or other written instrument,
(c) under a lease required to be capitalized on the balance sheet of the lessee
under GAAP or under any lease or related document (including a purchase
agreement) that provides that the Company is contractually obligated to purchase
or cause a third party to purchase and thereby guarantee a minimum residual
value of the lease property to the lessor and the obligations of the Company
under such lease or related document to purchase or to cause a third party to
purchase such leased property, (d) in respect of letters of credit, bank
guarantees or bankers' acceptances (including reimbursement obligations with
respect to any of the foregoing), (e) with respect to Indebtedness secured by a
mortgage, pledge, lien, encumbrance, charge or adverse claim affecting title or
resulting in an encumbrance to which the property or assets of such person are
subject, whether or not the obligation secured thereby shall have been assumed
by or shall otherwise be such person's legal liability, (f) in respect of the
balance of deferred and unpaid purchase price of any property or assets, (g)
under interest rate or currency swap agreements, cap, floor and collar
agreements, spot and forward contracts and similar agreements and arrangements;
(ii) with respect to any obligation of others of the type described in the
preceding clause (i) or under clause (iii) below assumed by or guaranteed in any
manner by such person through an agreement to purchase (including, without
limitation, "take or pay" and similar arrangements), contingent or otherwise
(and the obligations of such person under any such assumptions, guarantees or
other
4
<PAGE> 6
such arrangements); and (iii) any and all deferrals, renewals, extensions,
refinancings and refundings of, or amendments, modifications or supplements to,
any of the foregoing.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Interest Payment Date" means _____ and _____ of each year.
"Issue Date" means the date on which Convertible Subordinated Notes are
first issued and authenticated under this Indenture.
"Material Subsidiary" means any subsidiary of the Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act.
"Maturity Date" means __________ , 2003.
"Note Custodian" means State Street Bank and Trust Company, as custodian
with respect to any Global Note, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, the Chief Accounting Officer, any
Executive Vice President, Senior Vice President or Vice President (whether or
not designated by a number or numbers or word or words before or after the title
"Vice President"), the Treasurer, any other executive officer, the Secretary and
any Assistant Treasurer or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the principal executive officer, principal financial officer or
principal accounting officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who may be
an employee of or counsel to the Company or the Trustee except to the extent
otherwise indicated in this Indenture.
A "person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization, limited liability company or
government or any agency or political subdivision thereof.
"Permitted Holders" means James J. Kim and his estates, spouses, ancestors
and lineal descendants (and spouses thereof), the legal representatives of any
of the foregoing, and the
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<PAGE> 7
trustee of any bona fide trust of which one or more of the foregoing are the
sole beneficiaries or the grantors, or any person of which any of the foregoing,
individually or collectively, beneficially own (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) voting securities representing at least a majority
of the total voting power of all classes of Capital Stock of such person
(exclusive of any matters as to which class voting rights exist).
"redemption date" when used with respect to any of the Convertible
Subordinated Notes to be redeemed, means the date fixed by the Company for such
redemption pursuant to Article 3 of this Indenture and the Convertible
Subordinated Notes.
"redemption price" when used with respect to any of the Convertible
Subordinated Notes to be redeemed, means the price fixed for such redemption
pursuant to Article 3 of this Indenture and the Convertible Subordinated Notes.
"Regular Record Date" means the _____ or _____ immediately preceding each
Interest Payment Date.
"Representative" means (a) the indenture trustee or other trustee, agent or
representative for any Senior Debt or (b) with respect to any Senior Debt that
does not have any such trustee, agent or other representative, (i) in the case
of such Senior Debt issued pursuant to an agreement providing for voting
arrangements as among the holders or owners of such Senior Debt, any holder or
owner of such Senior Debt acting with the consent of the required persons
necessary to bind such holders or owners of such Senior Debt and (ii) in the
case of all other such Senior Debt, the holder or owner of such Senior Debt.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Debt" means the principal of, premium, if any, and interest on,
rent under, and any other amounts payable on or in respect of any Indebtedness
of the Company (including, without limitation, any Obligations in respect of
such Indebtedness and, in the case of Designated Senior Debt, any interest
accruing after the filing of a petition by or against the Company under any
bankruptcy law, whether or not allowed as a claim after such filing in any
proceeding under such bankruptcy law), whether outstanding on the date of this
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to the foregoing);
provided, however, that Senior Debt does not include (v) Indebtedness evidenced
by the Convertible Subordinated Notes, (w) any liability for federal, state,
local or other taxes owed or owing by the Company, (x) Indebtedness of the
Company to any Subsidiary of the Company except to the extent such Indebtedness
is of a type described in clause (ii) of the definition of Indebtedness, (y)
trade payables of the Company for goods, services or materials purchased in the
ordinary course of business (other than, to the extent they may otherwise
constitute trade payables, any obligations of the type described in clause (ii)
of the definition of Indebtedness), and
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<PAGE> 8
(z) any particular Indebtedness in which the instrument creating or evidencing
the same expressly provides that such Indebtedness shall not be senior in right
of payment to, or is pari passu with, or is subordinated or junior to, the
Convertible Subordinated Notes.
A "subsidiary" means, with respect to any person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
person or one or more of the other subsidiaries of that person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or managing
general partner of which is such person or a Subsidiary of such person or (b)
the only general partners of which are such person or of one or more
Subsidiaries of such person (or any combination thereof).
"Termination of Trading" will be deemed to have occurred if the Common
Stock (or other common stock into which the Convertible Subordinated Notes are
then convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established automated
over-the-counter trading market in the United States.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-
77bbbb) as in effect on the date of execution of this Indenture, except as
provided in Sections 9.03 and 12.06.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
manes the successor.
"Trust Officer" means an officer in the Corporate Trust Office of the
Trustee.
"U.S. Government Obligations" means direct obligation of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged. In order to have money available on a payment date
to pay principal or interest on the Convertible Subordinated Notes, the U.S.
Government Obligations shall be payable as to principal or interest on or before
such payment date in such amounts as will provide the necessary money. U.S.
Government Obligations shall not be callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
SECTION 1.02 Other Definitions
<TABLE>
<CAPTION>
Defined in
Section
<S> <C>
"Bankruptcy Law".......................................................... 6.01
"business day"............................................................ 10.07
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
Defined in
Section
<S> <C>
"Current Market Price".................................................... 2.05
"closing price"........................................................... 12.05
"Conversion Agent"........................................................ 2.03
"Custodian"............................................................... 6.01
"Designated Event Date"................................................... 4.06
"Designated Event Offer".................................................. 4.06
"Designated Event Offer Termination Date"................................. 4.06
"Designated Event Payment"................................................ 4.06
"Designated Event Payment Date"........................................... 4.06
"Event of Default"........................................................ 6.01
"Expiration Time"......................................................... 12.05
"fair market value"....................................................... 12.05
"Legal Holiday"........................................................... 10.07
"New Rights Plan.......................................................... 12.05
"non-electing share"...................................................... 12.06
"Paying Agent"............................................................ .2.03
"Payment Blockage Notice"................................................. 10.04
"Purchased Shares"........................................................ 12.05
"Record Date"............................................................. 12.05
"Registrar"............................................................... .2.03
"Securities".............................................................. 12.05
"trading day"............................................................. 12.05
"Trigger Event"........................................................... 12.05
</TABLE>
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the Commission;
"indenture securities" means the Convertible Subordinated Notes;
"indenture security holder" means a holder of a Convertible
Subordinated Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Convertible Subordinated Notes means the Company or
any other obligor on the Convertible Subordinated Notes.
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<PAGE> 10
All other terms in this Indenture that are defined by the TIA, defined by
TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) the male, female and neuter genders include one another.
ARTICLE 2
THE CONVERTIBLE SUBORDINATED NOTES
SECTION 2.01 Form and Dating.
The Convertible Subordinated Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the form set forth in
Exhibit A, which is part of this Indenture, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture. The Convertible Subordinated Notes may have notations, legends
or endorsements required by law, stock exchange rule or the Depositary or usage.
The Company shall approve the form of the Convertible Subordinated Notes and any
notation, legend or endorsement on them. Each Convertible Subordinated Note
shall be dated the date of its authentication.
The terms and provisions contained in the Convertible Subordinated Notes
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
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SECTION 2.02 Execution and Authentication.
Two Officers shall sign the Convertible Subordinated Notes for the Company
by manual or facsimile signature. The Company's seal shall be reproduced on the
Convertible Subordinated Notes.
If an Officer whose signature is on a Convertible Subordinated Note no
longer holds that office at the time the Convertible Subordinated Note is
authenticated, the Convertible Subordinated Note shall nevertheless be valid.
A Convertible Subordinated Note shall not be valid until authenticated by
the manual signature of the Trustee. The signature shall be conclusive evidence
that the Convertible Subordinated Note has been authenticated under this
Indenture.
Upon a written order of the Company signed by an Officer of the Company,
the Trustee shall authenticate Convertible Subordinated Notes for original issue
up to an aggregate principal amount of $150,000,000 (plus up to $22,500,000
aggregate principal amount of Convertible Subordinated Notes that may be sold by
the Company pursuant to the over-allotment option granted pursuant to (i) the
U.S. Underwriting Agreement, dated as of __________ , 1998, among the Company
and Smith Barney Inc., BancAmerica Robertson Stephens and Cowen & Company and
(ii) the International Underwriting Agreement, dated as of __________ , 1998,
among the Company and Smith Barney Inc., BancAmerica Robertson Stephens
International Limited and Cowen International L.P.). The aggregate principal
amount of Convertible Subordinated Notes outstanding at any time may not exceed
that amount except as provided in Section 2.07.
The Convertible Subordinated Notes shall be issuable only in registered
form without coupons and only in denominations of $1,000 or any integral
multiple thereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Convertible Subordinated Notes. An authenticating agent may
authenticate Convertible Subordinated Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same right as an
Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.03 Registrar, Paying Agent and Conversion Agent.
The Company shall maintain or cause to be maintained in such locations as
it shall determine, which may be the Corporate Trust Office, an office or
agency: (i) where securities may be presented for registration of transfer or
for exchange ("Registrar"); (ii) where Convertible Subordinated Notes may be
presented for payment ("Paying Agent"); (iii) an office or agency where
Convertible Subordinated Notes may be presented for conversion (the "Conversion
Agent"); and (iv) where notices and demands to or upon the Company in respect of
Convertible
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<PAGE> 12
Subordinated Notes and this Indenture may be served by the holders of the
Convertible Subordinated Notes. The Registrar shall keep a Register ("Register")
of the Convertible Subordinated Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars, one or more additional paying
agents and one or more additional conversion agents. The term "Paying Agent"
includes any additional paying agent and the term "Conversion Agent" includes
any additional Conversion Agent. The Company may change any Paying Agent,
Registrar, Conversion Agent or co-registrar without prior notice. The Company
shall notify the Trustee of the name and address of any Agent not a party to
this Indenture and shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar not a party to this
Indenture. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company or any of its subsidiaries may act as Paying
Agent, Registrar, Conversion Agent or co-registrar, except that for purposes of
Articles 3 and 8 and Section 4.06, neither the Company nor any of its
subsidiaries shall act as Paying Agent. If the Company fails to appoint or
maintain another entity as Registrar, or Paying Agent or Conversion Agent, the
Trustee shall act as such, and the Trustee shall initially act as such.
SECTION 2.04 Paying Agent To Hold Money in Trust.
The Company shall require each Paying Agent (other than the Trustee, who
hereby so agrees), to agree in writing that the Paying Agent will hold in trust
for the benefit of holders of the Convertible Subordinated Notes or the Trustee
all money held by the Paying Agent for the payment of principal or interest on
the Convertible Subordinated Notes, and will notify the Trustee of any default
by the Company in respect of making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a subsidiary of the Company) shall have no further
liability for the money. If the Company or a subsidiary of the Company acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the holders of the Convertible Subordinated Notes all money held by
it as Paying Agent.
SECTION 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
holders of Convertible Subordinated Notes and shall otherwise comply with TIA
Section 312(a). If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least seven business days before each Interest Payment Date,
and as the Trustee may request in writing within fifteen (15) days after receipt
by the Company of any such request (or such lesser time as the Trustee may
reasonably request in order to enable it to timely provide any notice to be
provided by it hereunder), a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of holders of
Convertible Subordinated Notes.
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<PAGE> 13
SECTION 2.06 Transfer and Exchange.
When Convertible Subordinated Notes are presented to the Registrar or a
co-registrar with a request to register a transfer or to exchange them for an
equal principal amount of Convertible Subordinated Notes for other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfers and exchanges, the Company shall issue and the Trustee shall
authenticate Convertible Subordinated Notes at the Registrar's request, bearing
registration numbers not contemporaneously outstanding. No service charge shall
be made to a holder for any registration of transfer or exchange (except as
otherwise expressly permitted herein), but the Company may require payment of a
sum sufficient to cover any transfer tax or other governmental charge payable
upon exchanges pursuant to Sections 2.10, 3.07, 9.05 or 12.02.
The Company or the Registrar shall not be required (i) to issue, register
the transfer of or exchange Convertible Subordinated Notes during a period
beginning at the opening of business fifteen (15) days before the day of any
selection of Convertible Subordinated Notes for redemption under Section 3.03
and ending at the close of business on the day of selection, (ii) to register
the transfer or exchange of any Convertible Subordinated Note so selected for
redemption in whole or in part, except the unredeemed portion of any Convertible
Subordinated Note being redeemed in part or (iii) to register the transfer of
any Convertible Subordinated Notes surrendered for repurchase pursuant to
Section 4.06.
All Convertible Subordinated Notes issued upon any transfer or exchange of
Convertible Subordinated Notes in accordance with this Indenture shall be the
valid obligations of the Company, evidencing the same debt, and entitled to the
same benefits under this Indenture as the Convertible Subordinated Notes
surrendered upon such registration of transfer or exchange.
The provisions of Clauses (1), (2), (3), (4) and (5) below shall apply only
to Global Notes:
(1) Each Global Note authenticated under this Indenture shall be registered
in the name of the Depositary designated for such Global Note or a nominee
thereof and delivered to such Depositary or a nominee thereof or Note Custodian
therefor, and each such Global Note shall constitute a single Convertible
Subordinated Note for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, in the event
that (i) the Depositary is unwilling, unable or ineligible to continue as
Depositary and a successor Depositary is not appointed by the Company within 90
days, or (ii) if, at any time in the Company's sole discretion, the Company
determines not to have a Global Note, the Company will issue Convertible
Subordinated Notes in definitive form in exchange for the Global Notes.
(3) Subject to Clause (2) above, any exchange of a Global Note for other
Securities may be made in whole or in part, and all Securities issued in
exchange for a Global Note or any portion thereof shall be registered in such
names as the Depositary for such Global Note shall direct.
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<PAGE> 14
(4) Every Convertible Subordinated Note authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global Note or
any portion thereof, whether pursuant to this Article 2 or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Note, unless
such Convertible Subordinated Note is registered in the name of a person other
than the Depositary for such Global Note or a nominee thereof.
(5) The Depositary or its nominee, as registered owner of a Global Note,
shall be the Holder of such Global Note for all purposes under the Indenture and
the Convertible Subordinated Notes, and owners of beneficial interests in a
Global Note shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Note will be shown
only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or its Agent Members and
such owners of beneficial interests in a Global Note will not be considered the
owners or holders thereof.
SECTION 2.07 Replacement Convertible Subordinated Notes.
If the holder of a Convertible Subordinated Note claims that the
Convertible Subordinated Note has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Convertible
Subordinated Note if the Trustee's requirements are met. If required by the
Trustee or the Company as a condition of receiving a replacement Convertible
Subordinated Note, the holder of a Convertible Subordinated Note must provide a
certificate of loss and an indemnity and/or an indemnity bond sufficient, in the
judgment of both the Company and the Trustee, to fully protect the Company, the
Trustee, any Agent and any authenticating agent from any loss, liability, cost
or expense which any of them may suffer or incur if the Convertible Subordinated
Note is replaced. The Company and the Trustee may charge the relevant holder for
their expenses in replacing any Convertible Subordinated Note.
The Trustee or any authenticating agent may authenticate any such
substituted Convertible Subordinated Note, and deliver the same upon the receipt
of such security or indemnity as the Trustee, the Company and, if applicable,
such authenticating agent may require. Upon the issuance of any substituted
Convertible Subordinated Note, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses connected therewith. In case any
Convertible Subordinated Note which has matured or is about to mature, or has
been called for redemption pursuant to Article 3, submitted for repurchase
pursuant to Section 4.06 or is about to be converted into Common Stock pursuant
to Article 12, shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Convertible Subordinated Note, pay
or authorize the payment of or convert or authorize the conversion of the same
(without surrender thereof except in the case of a mutilated Convertible
Subordinated Note), as the case may be, if the applicant for such payment or
conversion shall furnish to the Company, to the Trustee and, if applicable, to
the authenticating agent such security or indemnity as may be required by them
to save each of them harmless for any loss, liability, cost or expense caused by
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<PAGE> 15
or connected with such substitution, and, in case of destruction, loss or theft,
evidence satisfactory to the Company, the Trustee and, if applicable, any paying
agent or conversion agent of the destruction, loss or theft of such Convertible
Subordinated Note and of the ownership thereof.
Every replacement Convertible Subordinated Note is an additional obligation
of the Company and shall be entitled to all the benefits provided under this
Indenture equally and proportionately with all other Convertible Subordinated
Notes duly issued, authenticated and delivered hereunder.
SECTION 2.08 Outstanding Convertible Subordinated Notes.
The Convertible Subordinated Notes outstanding at any time are all the
Convertible Subordinated Notes properly authenticated by the Trustee except for
those canceled by the Trustee, those delivered to it for cancellation, and those
described in this Section as not outstanding.
If a Convertible Subordinated Note is replaced pursuant to Section 2.07, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Convertible Subordinated Note is held by a bona fide
purchaser.
If Convertible Subordinated Notes are considered paid under Section 4.01 or
converted under Article 12, they cease to be outstanding and interest on them
ceases to accrue.
Subject to Section 2.09 hereof, a Convertible Subordinated Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Convertible Subordinated Note.
SECTION 2.09 When Treasury Convertible Subordinated Notes Disregarded.
In determining whether the holders of the required principal amount of
Convertible Subordinated Notes have concurred in any direction, waiver or
consent, Convertible Subordinated Notes owned by the Company or an Affiliate of
the Company shall be considered as though they are not outstanding except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Convertible Subordinated
Notes which the Trustee knows are so owned shall be so disregarded.
SECTION 2.10 Temporary Convertible Subordinated Notes.
Until definitive Convertible Subordinated Notes are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Convertible
Subordinated Notes. Temporary Convertible Subordinated Notes shall be
substantially in the form of definitive Convertible Subordinated Notes but may
have variations that the Company considers appropriate
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<PAGE> 16
for temporary Convertible Subordinated Notes. If temporary Convertible
Subordinated Notes are issued, the Company will cause definitive Convertible
Subordinated Notes to be prepared without unreasonable delay. After the
preparation of definitive Convertible Subordinated Notes, the temporary
Convertible Subordinated Notes shall be exchangeable for definitive Convertible
Subordinated Notes upon surrender of the temporary Convertible Subordinated
Notes at any office or agency of the Company designated pursuant to Section 2.03
without charge to the holder of the Convertible Subordinated Note, except as
specified in Section 2.06. Upon surrender for cancellation of any one or more
temporary Convertible Subordinated Notes the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Convertible Subordinated Notes of authorized denominations.
Until so exchanged, the temporary Convertible Subordinated Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Convertible Subordinated Notes.
SECTION 2.11 Cancellation.
The Company at any time may deliver Convertible Subordinated Notes to the
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Trustee any Convertible Subordinated Notes surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else may cancel
Convertible Subordinated Notes surrendered for registration of transfer,
exchange, payment, replacement, conversion, redemption, repurchase or
cancellation. Upon written instructions of the Company, the Trustee shall
destroy and dispose of canceled Convertible Subordinated Notes as the Company
directs and, after such destruction, shall deliver a certificate of destruction
to the Company. The Company may not issue new Convertible Subordinated Notes to
replace Convertible Subordinated Notes that it has paid, redeemed or repurchased
or that have been delivered to the Trustee for cancellation or that any holder
has (i) converted pursuant to Article 12 hereof, (ii) submitted for redemption
pursuant to Article 3 hereof or (iii) submitted for repurchase pursuant to
Section 4.06 hereof (unless revoked).
SECTION 2.12 Defaulted Interest.
If the Company fails to make a payment of interest on the Convertible
Subordinated Notes, it shall pay such defaulted interest plus, to the extent
lawful, any interest payable on the defaulted interest. It may pay such
defaulted interest, plus any such interest payable on it, to the persons who are
holders of Convertible Subordinated Notes on a subsequent special record date.
The Company shall fix any such record date and payment date. At least 15 days
before any such record date, the Company shall mail to holders of the
Convertible Subordinated Notes a notice that states the record date, payment
date and amount of such interest to be paid.
SECTION 2.13 CUSIP Number.
The Company in issuing the Convertible Subordinated Notes may use a "CUSIP"
number, and if so, such CUSIP number shall be included in notices of redemption,
repurchase or exchange as a convenience to holders of Convertible Subordinated
Notes; provided, however, that any such
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<PAGE> 17
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Convertible
Subordinated Notes and that reliance may be placed only on the other
identification numbers printed on the Convertible Subordinated Notes. The
Company will promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION
SECTION 3.01 Optional Redemption.
The Company may redeem all or any portion of the Convertible Subordinated
Notes upon the terms and at the redemption prices set forth in each of the
Convertible Subordinated Notes. Any redemption shall be made pursuant to
Paragraph 5 of the Convertible Subordinated Notes and this Article 3.
SECTION 3.02 Notices to Trustee.
If the Company elects to redeem Convertible Subordinated Notes pursuant to
the optional redemption provisions of paragraph 5 of the Convertible
Subordinated Notes, it shall furnish to the Trustee, at least 15 (20 if less
than all of the then outstanding Convertible Subordinated Notes are to be
redeemed or if the Company requests the Trustee to give notice of redemption
pursuant to Section 3.04) days but not more than 60 days before a redemption
date (unless a shorter period shall be satisfactory to the Trustee), an
Officers' Certificate setting forth (i) the Section of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Convertible Subordinated Notes (if less than all) to be
redeemed, (iv) the redemption price and (v) the CUSIP number of the Convertible
Subordinated Notes being redeemed.
SECTION 3.03 Selection of Convertible Subordinated Notes To Be Redeemed.
If less than all the Convertible Subordinated Notes are to be redeemed, the
Trustee shall select the Convertible Subordinated Notes to be redeemed by a
method that complies with the requirements of the principal national securities
exchange, if any, on which the Convertible Subordinated Notes are listed or
quoted or, if the Convertible Subordinated Notes are not so listed, on a pro
rata basis by lot or by any other method that the Trustee considers fair and
appropriate. The Trustee shall make the selection not more than 60 days and not
less than 15 days before the redemption date from Convertible Subordinated Notes
outstanding and not previously called for redemption. The Trustee may select for
redemption a portion of the principal of any Convertible Subordinated Notes that
has a denomination larger than $1,000. Convertible Subordinated Notes and
portions thereof will be redeemed in the amount of $1,000 or integral multiples
of $1,000.
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Provisions of this Indenture that apply to Convertible Subordinated Notes
called for redemption also apply to portions of Convertible Subordinated Notes
called for redemption. The Trustee shall notify the Company promptly of the
Convertible Subordinated Notes or portions of Convertible Subordinated Notes to
be called for redemption.
If any Convertible Subordinated Note selected for partial redemption is
converted in part after such selection, the converted portion of such
Convertible Subordinated Note shall be deemed (so far as may be) to be the
portion to be selected for redemption. The Convertible Subordinated Notes (or
portion thereof) so selected shall be deemed duly selected for redemption for
all purposes hereof, notwithstanding that any such Convertible Subordinated Note
is converted in whole or in part before the mailing of the notice of redemption.
Upon any redemption of less than all the Convertible Subordinated Notes, the
Company and the Trustee may treat as outstanding any Convertible Subordinated
Notes surrendered for conversion during the period of 15 days next preceding the
mailing of a notice of redemption and need not treat as outstanding any
Convertible Subordinated Note authenticated and delivered during such period in
exchange for the unconverted portion of any Convertible Subordinated Note
converted in part during such period.
SECTION 3.04 Notice of Redemption.
At least 15 days but not more than 60 days before a redemption date, the
Company shall mail by first class mail a notice of redemption to each holder
whose Convertible Subordinated Notes are to be redeemed.
The notice shall identify the Convertible Subordinated Notes to be redeemed
and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Convertible Subordinated Note is being redeemed in part,
the portion of the principal amount of such Convertible Subordinated Note
to be redeemed and that, after the redemption date, upon surrender of such
Convertible Subordinated Note, a new Convertible Subordinated Note or
Convertible Subordinated Notes in principal amount equal to the unredeemed
portion will be issued in the name of the holder thereof;
(4) that Convertible Subordinated Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) that interest on Convertible Subordinated Notes called for
redemption and for which funds have been set apart for payment, ceases to
accrue on and after the redemption date (unless the Company defaults in the
payment of the redemption price or
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the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture);
(6) the paragraph of the Convertible Subordinated Notes pursuant to
which the Convertible Subordinated Notes called for redemption are being
redeemed;
(7) the aggregate principal amount of Convertible Subordinated Notes
(if less than all) that are being redeemed;
(8) the CUSIP number of the Convertible Subordinated Notes (provided
that the disclaimer permitted by Section 2.13 may be made);
(9) the name and address of the Paying Agent;
(10) that Convertible Subordinated Notes called for redemption may be
converted at any time prior to the close of business on the last trading
day immediately preceding the redemption date and if not converted prior to
the close of business on such date, the right of conversion will be lost;
and
(11) that in the case of Convertible Subordinated Notes or portions
thereof called for redemption on a date that is also an Interest Payment
Date, the interest payment due on such date shall be paid to the person in
whose name the Convertible Subordinated Note is registered at the close of
business on the relevant Regular Record Date.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the holder receives such notice. In
any case, failure to give such notice my mail or any defect in the notice to the
holder of any Convertible Subordinated Note designated for redemption as a whole
or in part shall not affect the validity of the proceedings for the redemption
of any Convertible Subordinated Note.
At the Company's request, the Trustee shall give notice of redemption in
the Company's name and at its expense.
SECTION 3.05 Effect of Notice of Redemption.
Once notice of redemption is mailed, Convertible Subordinated Notes called
for redemption become due and payable on the redemption date at the redemption
price set forth in the Convertible Subordinated Note.
SECTION 3.06 Deposit of Redemption Price.
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money in immediately available funds sufficient
to pay the redemption price of and
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accrued interest on all Convertible Subordinated Notes to be redeemed on that
date. The Trustee or the Paying Agent shall return to the Company any money not
required for that purpose.
On and after the redemption date, unless the Company shall default in the
payment of the redemption price, interest will cease to accrue on the principal
amount of the Convertible Subordinated Notes or portions thereof called for
redemption and for which funds have been set apart for payment and such
Convertible Subordinated Notes shall cease after the close of business on the
business day immediately preceding the Redemption Date to be convertible into
Common Stock and, except as provided in this Section 3.06 and 8.04, to be
entitled to any benefit or security under this Indenture, and the holders
thereof shall have no right in respect of such Convertible Subordinated Notes
except the right to receive the Redemption Price thereof and unpaid interest to
(but excluding) the Redemption Date. In the case of Convertible Subordinated
Notes or portions thereof redeemed on a redemption date which is also an
Interest Payment Date, the interest payment due on such date shall be paid to
the person in whose name the Convertible Subordinated Note is registered at the
close of business on the relevant Regular Record Date.
SECTION 3.07 Convertible Subordinated Notes Redeemed in Part.
Upon surrender of a Convertible Subordinated Note that is redeemed in part
only, the Company shall issue and the Trustee shall authenticate and deliver to
the holder of a Convertible Subordinated Note a new Convertible Subordinated
Note equal in principal amount to the unredeemed portion of the Convertible
Subordinated Note surrendered, at the expense of the Company, except as
specified in Section 2.06.
SECTION 3.08 Conversion Arrangement on Call for Redemption.
In connection with any redemption of Convertible Subordinated Notes, the
Company may arrange for the purchase and conversion of any Convertible
Subordinated Notes by an arrangement with one or more investment bankers or
other purchasers to purchase such Convertible Subordinated Notes by paying to
the Trustee in trust for the holders, on or before the date fixed for
redemption, an amount not less than the applicable redemption price, together
with interest accrued to the date fixed for redemption, of such Convertible
Subordinated Notes. Notwithstanding anything to the contrary contained in this
Article 3, the obligation of the Company to pay the redemption price of such
Convertible Subordinated Notes, together with interest accrued to the date fixed
for redemption, shall be deemed to be satisfied and discharged to the extent
such amount is so paid by the purchasers. If such an agreement is entered into,
a copy of which will be filed with the Trustee prior to the date fixed for
redemption, any Convertible Subordinated Notes not duly surrendered for
conversion by the holders thereof may, at the option of the Company, be deemed,
to the fullest extent permitted by law, acquired by such purchasers from such
holders and (notwithstanding anything to the contrary contained in Article 12)
surrendered by such purchasers for conversion, all as of immediately prior to
the close of business on the date fixed for redemption (and the right to convert
any such Convertible Subordinated Notes shall be deemed to have been extended
through such time), subject to payment of the above
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amount as aforesaid. At the direction of the Company, the Trustee shall hold and
dispose of any such amount paid to it in the same manner as it would monies
deposited with it by the Company for the redemption of Convertible Subordinated
Notes. Without the Trustee's prior written consent, no arrangement between the
Company and such purchasers for the purchase and conversion of any Convertible
Subordinated Notes shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Trustee as set forth in this Indenture,
and the Company agrees to indemnify the Trustee from, and hold it harmless
against, any loss, liability or expense arising out of or in connection with any
such arrangement for the purchase and conversion of any Convertible Subordinated
Notes between the Company and such purchasers to which the Trustee has not
consented in writing, including the costs and expenses incurred by the Trustee
in the defense of any claim or liability arising out of or in connection with
the exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
ARTICLE 4
COVENANTS
SECTION 4.01 Payment of Convertible Subordinated Notes.
The Company shall pay the principal of and interest on the Convertible
Subordinated Notes on the dates and in the manner provided in the Convertible
Subordinated Notes. Principal, interest, the redemption price and the Designated
Event Payment shall be considered paid on the date due if the Trustee or Paying
Agent (other than the Company or a subsidiary of the Company) holds as of 10:00
a.m. New York City time on that date immediately available funds designated for
and sufficient to pay all principal, interest, the redemption price and the
Designated Event Payment then due, provided, however, that money held by the
Agent for the benefit of holders of Senior Debt pursuant to the provisions of
Article 11 hereof or the payment of which to the holders of the Convertible
Subordinated Notes is prohibited by Article 11 shall not be considered to be
designated for the payment of any principal of or interest on the Convertible
Subordinated Notes within the meaning of this Section 4.01.
To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on (i)
overdue principal, at the rate borne by Convertible Subordinated Notes,
compounded semiannually; and (ii) overdue installments of interest (without
regard to any applicable grace period) at the same rate, compounded
semiannually.
SECTION 4.02 Commission Reports.
The Company shall comply with Section 314(a) of the TIA.
SECTION 4.03 Compliance Certificate.
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The Company shall deliver to the Trustee within 120 days after the end of
each fiscal year of the Company, an Officers' Certificate stating that a review
of the activities of the Company and its subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with a
view to determining whether the Company has fully performed its obligations
under this Indenture and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge, the Company is not in
default in the performance or observance of any of the terms and conditions
hereof (or, if any Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge)
and, that to the best of his or her knowledge, no event has occurred and remains
in existence by reason of which payments on account of the principal of or
interest on the Convertible Subordinated Notes are prohibited.
The Company shall, so long as any of the Convertible Subordinated Notes are
outstanding, deliver to the Trustee, forthwith upon becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default or
Event of Default.
SECTION 4.04 Maintenance of Office or Agency.
The Company shall maintain or cause to be maintained the office or agency
required under Section 2.03. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency not maintained by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, presentations, surrenders, notices and demands with
respect to the Convertible Subordinated Notes may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Convertible Subordinated Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designation.
SECTION 4.05 Continued Existence.
Subject to Article 5, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence.
SECTION 4.06 Repurchase Upon Designated Event.
Following a Designated Event (the date of each such occurrence being the
"Designated Event Date"), the Company shall notify the holders of Convertible
Subordinated Notes in writing of such occurrence and shall make an offer (the
"Designated Event Offer") to repurchase all Convertible Subordinated Notes then
outstanding at a repurchase price in cash (the "Designated Event Payment") equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to, but excluding, the Designated Event Payment Date (as defined below).
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Notice of a Designated Event shall be mailed by or at the direction of the
Company to the holders of Convertible Subordinated Notes as shown on the
Register of such holders maintained by the Registrar not more than 20 days after
the applicable Designated Event Date at the addresses as shown on the Register
of holders maintained by the Registrar, with a copy to the Trustee and the
Paying Agent. The Designated Event Offer shall remain open until a specified
date (the "Designated Event Offer Termination Date") which is at least 20
business days from the date such notice is mailed. During the period specified
in such notice, holders of Convertible Subordinated Notes may elect to tender
their Convertible Subordinated Notes in whole or in part in integral multiples
of $1,000 in exchange for cash. Payment shall be made by the Company in respect
of Convertible Subordinated Notes properly tendered pursuant to this Section on
a specified business day (the "Designated Event Payment Date") which shall be no
earlier than five business days after the applicable Designated Event Offer
Termination Date and no later than 60 days after the applicable Designated
Event.
The notice, which shall govern the terms of the Designated Event Offer,
shall include such disclosures as are required by law and shall state:
(a) that a Designated Event Offer is being made pursuant to this
Section 4.06 and that all Convertible Subordinated Notes will be accepted
for payment;
(b) the transaction or transactions that constitute the Designated
Event;
(c) the Designated Event Payment for each Convertible Subordinated
Note, the Designated Event Offer Termination Date and the Designated Event
Payment Date;
(d) that any Convertible Subordinated Note not accepted for payment
will continue to accrue interest in accordance with the terms thereof;
(e) that, unless the Company defaults on making the Designated Event
Payment, any Convertible Subordinated Note accepted for payment pursuant to
the Designated Event Offer shall cease to accrue interest on the Designated
Event Payment Date and no further interest shall accrue on or after such
date;
(f) that holders electing to have Convertible Subordinated Notes
repurchased pursuant to a Designated Event Offer will be required to
surrender their Convertible Subordinated Notes to the Paying Agent at the
address specified in the notice prior to 5:00 p.m., New York City time, on
the Designated Event Offer Termination Date and must complete any form
letter of transmittal proposed by the Company and acceptable to the Trustee
and the Paying Agent;
(g) that holders of Convertible Subordinated Notes will be entitled to
withdraw their election if the Paying Agent receives, not later than 5:00
p.m., New York City time, on the Designated Event Offer Termination Date, a
facsimile transmission or letter setting
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forth the name of the holder, the principal amount of Convertible
Subordinated Notes the holder delivered for purchase, the Convertible
Subordinated Note certificate number (if any) and a statement that such
holder is withdrawing his election to have such Convertible Subordinated
Notes purchased;
(h) that holders whose Convertible Subordinated Notes are repurchased
only in part will be issued Convertible Subordinated Notes equal in
principal amount to the unpurchased portion of the Convertible Subordinated
Notes surrendered;
(i) the instructions that holders must follow in order to tender their
Convertible Subordinated Notes; and
(j) that in the case of a Designated Event Offer Termination Date that
is also an interest payment date, the interest payment due on such date
shall be paid to the person in whose name the Convertible Subordinated Note
is registered at the close of business on the relevant Designated Event
Offer Termination Date.
On the Designated Event Offer Termination Date the Company shall (i) accept
for payment all Convertible Subordinated Notes or portions thereof properly
tendered pursuant to the Designated Event Offer, (ii) deposit with the Paying
Agent money sufficient to pay the Designated Event Payment with respect to all
Convertible Subordinated Notes or portions thereof so tendered and accepted and
(iii) deliver or cause to be delivered to the Trustee the Convertible
Subordinated Notes so accepted together with an Officers' Certificate setting
forth the aggregate principal amount of Convertible Subordinated Notes or
portions thereof tendered to and accepted for payment by the Company. On the
Designated Event Payment Date, the Paying Agent shall mail or deliver to the
holders of Convertible Subordinated Notes so accepted, the Designated Event
Payment, and the Trustee shall promptly authenticate and mail or cause to be
transferred by book entry to such holders a new Convertible Subordinated Note
equal in principal amount to any unpurchased portion of the Convertible
Subordinated Note surrendered, if any; provided that such new Convertible
Subordinate Notes will be in a principal amount of $1,000 or an integral
multiple thereof. Any Convertible Subordinated Notes not so accepted shall be
promptly mailed or delivered by the Company to the holder thereof.
In the case of any reclassification, change, consolidation, merger,
combination or sale or conveyance to which Section 12.06 applies, in which the
Common Stock of the Company is changed or exchanged as a result into the right
to receive stock, securities or other property or assets (including cash) which
includes shares of common stock of the Company or another person that are, or
upon issuance will be, traded on a United States national securities exchange or
approved for trading on an established automated over-the-counter trading market
in the United States and such shares constitute at the time such change or
exchange becomes effective in excess of 50% of the aggregate fair market value
of such stock, securities other property and assets (including cash) (as
determined by the Company, which determination shall be conclusive and binding),
then the person formed by such consolidation or resulting from such merger or
which
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acquires such assets, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture (which shall comply with the TIA as in force at
the date of execution of such supplemental indenture) modifying the provisions
of this Indenture relating to the right of holders of Convertible Subordinated
Notes to cause the Company to repurchase Convertible Subordinated Notes
following a Designated Event, including the applicable provisions of this
Section 4.06 and the definitions of Designated Event, Change of Control and
Termination of Trading, as appropriate, as determined in good faith by the
Company (which determination shall be conclusive and binding), to make such
provision apply to such common stock and the issuer thereof if different from
the Company and Common Stock of the Company (in lieu of the Company and the
Common Stock of the Company).
The Designated Event Offer shall be made by the Company in compliance with
all applicable provisions of the Exchange Act, and all applicable tender offer
rules promulgated thereunder, to the extent such laws and regulations are then
applicable and shall include all instructions and materials that the Company
shall reasonably deem necessary to enable such holders of Convertible
Subordinated Notes to tender their Convertible Subordinated Notes.
SECTION 4.07 Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 7.08, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 4.08 Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter enforced, that may affect the Company's
obligation to pay the Convertible Subordinated Notes; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law insofar as such law applies to the Convertible
Subordinated Notes, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law has been enacted.
SECTION 4.09 Taxes
The Company shall, and shall cause each of its subsidiaries to, pay prior
to delinquency all taxes, assessments and government levies, except as contested
in good faith and by appropriate proceedings.
ARTICLE 5
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SUCCESSORS
SECTION 5.01 When the Company May Merge, Etc.
The Company may not, in a single transaction or series of related
transactions, consolidate or merge with or into (whether or not the Company is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets to,
any person as an entirety or substantially as an entirety unless:
(a) either
(i) the Company shall be the surviving or continuing corporation or
(ii) the person formed by or surviving any such consolidation or into
which the Company is merged (if other than the Company) or the
person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the
Company substantially as an entirety
(1) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof or the
District of Columbia and
(2) shall expressly assume, by supplemental indenture in form
reasonably satisfactory to the Trustee, executed and
delivered to the Trustee, the due and punctual payment of
the principal of, and premium, if any, and interest on all
of the Convertible Subordinated Notes and the performance of
every covenant of the Convertible Subordinated Notes and
this Indenture on the part of the Company to be performed or
observed, including, without limitation, modifications to
rights of holders to cause the repurchase of Convertible
Subordinated Notes upon a Designated Event in accordance
with the last paragraph of Section 4.06 and conversion
rights in accordance with Section 12.06 to the extent
required by such Sections;
(b) immediately after giving effect to such transaction no Default and no
Event of Default shall have occurred and be continuing; and
(c) the Company or such person shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, comply with this provision of this Indenture and
that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
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For purposes of this Section 5.01, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more subsidiaries of the
Company, the capital stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
SECTION 5.02 Successor Corporation Substituted.
Upon any such consolidation, merger, sale, assignment, conveyance, lease,
transfer or other disposition in accordance with Section 5.01, the successor
person formed by such consolidation or into which the Company is merged or to
which such assignment, conveyance, lease, transfer or other disposition is made
will succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
had been named as the Company therein, and thereafter (except in the case of a
sale, assignment, transfer, lease, conveyance or other disposition) the
predecessor corporation will be relieved of all further obligations and
covenants under this Indenture and the Convertible Subordinated Notes.
SECTION 5.03 Purchase Option on Change of Control.
This Article 5 does not affect the obligations of the Company (including
without limitation any successor to the Company) under Section 4.06.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default.
An "Event of Default" with respect to any Convertible Subordinated Notes
occurs if:
(a) the Company defaults in the payment (whether or not such payment
is prohibited by the subordination provisions set forth in Article 11 of
this Indenture) of principal of, or premium, if any, on the Convertible
Subordinated Notes when due at maturity, upon repurchase, upon acceleration
or otherwise, including, without limitation, failure of the Company to make
any optional redemption payment when required pursuant to Article 3; or
(b) the Company defaults in the payment (whether or not such payment
is prohibited by the subordination provisions set forth in Article 11 of
this Indenture) of any installment of interest on the Convertible
Subordinated Notes when due (including any interest payable in connection
with a repurchase pursuant to Section 4.06 or in connection
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with any optional redemption payment pursuant to Article 3) and continuance
of such default for 30 days or more; or
(c) the Company defaults (other than a default set forth in clauses
(a) and (b) above and clause (d) below) in the performance of, or breaches,
any other covenant or warranty of the Company set forth in this Indenture
or the Convertible Subordinated Notes and fails to remedy such default or
breach within a period of 60 days after the receipt of written notice from
the Trustee or the holders of at least 25% in aggregate principal amount of
the then outstanding Convertible Subordinated Notes; or
(d) the Company defaults in the payment of the Designated Event
Payment in respect of the Convertible Subordinated Notes on the date
therefor, whether or not such payment is prohibited by the subordination
provisions set forth in Article 11 of this Indenture; or
(e) the Company fails to provide timely notice of any Designated Event
in accordance with Section 4.06; or
(f) failure of the Company or any Material Subsidiary to make any
payment at maturity, including any applicable grace period, in respect of
indebtedness for borrowed money of, or guaranteed or assumed by, the
Company or any Material Subsidiary, which payment is in an amount in excess
of $20,000,000, and continuance of such failure for 30 days after notice
thereof from the Trustee or the holders of at least 25% in aggregate
principal amount of the then outstanding Convertible Subordinated Notes; or
(g) default by the Company or any Material Subsidiary with respect to
any indebtedness referred to in clause (f) above, which default results in
the acceleration of any such indebtedness of an amount in excess of
$20,000,000 without such indebtedness having been paid or discharged or
such acceleration having been cured, waived, rescinded or annulled for 30
days after notice thereof from the Trustee or the holders of at least 25%
in aggregate principal amount of the then outstanding Convertible
Subordinated Notes; or
(h) the Company or any Material Subsidiary, pursuant to or within the
meaning of any Bankruptcy Law:
(v) commences a voluntary case,
(w) consents to the entry of an order for relief against it in an
involuntary case,
(x) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
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(y) makes a general assignment for the benefit of its creditors;
(z) makes the admission in writing that it generally is unable to
pay its debts as the same become due; or
(i) a court of competent jurisdiction enters a judgment, order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any Material Subsidiary
in an involuntary case,
(ii) appoints a Custodian of the Company or any Material
Subsidiary, and the order or decree remains unstayed and in effect for
90 days.
(iii) orders the liquidation of the Company or any Material
Subsidiary, and the order or decree remains unstayed and in effect for
90 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or state law for the relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
In the case of any Event of Default, pursuant to the provisions of this
Section 6.01, occurring by reason of any wilful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium which the Company would have had to pay if the Company then had
elected to redeem the Convertible Subordinated Notes pursuant to Paragraph 5 of
the Convertible Subordinated Notes, an equivalent premium shall also become and
be immediately due and payable to the extent permitted by law, upon the
acceleration of the Convertible Subordinated Notes notwithstanding anything
contained in this Indenture or in the Convertible Subordinated Notes to the
contrary.
If an Event of Default occurs prior to any date on which the Company is
prohibited from redeeming the Convertible Subordinated Notes, pursuant to
Paragraph 5 of the Convertible Subordinated Notes, by reason of any wilful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Convertible
Subordinated Notes prior to such date, then the premium specified in this
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Convertible Subordinated Notes.
SECTION 6.02 Acceleration.
If an Event of Default (other than an Event of Default with respect to the
Company specified in clauses (h) and (i) of Section 6.01) occurs and is
continuing, then and in every such case the Trustee, by written notice to the
Company, or the holders of at least 25% in aggregate
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principal amount of the then outstanding Convertible Subordinated Notes, by
written notice to the Company and the Trustee, may declare the unpaid principal
of, premium, if any, and accrued and unpaid interest on all the Convertible
Subordinated Notes to be due and payable. Upon such declaration such principal
amount, premium, if any, and accrued and unpaid interest shall become
immediately due and payable, notwithstanding anything contained in this
Indenture or the Convertible Subordinated Notes to the contrary, but subject to
the provisions of Article 11 hereof. If any Event of Default with respect to the
Company specified in clauses (h) or (i) of Section 6.01 occurs, all unpaid
principal of and premium, if any, and accrued and unpaid interest on the
Convertible Subordinated Notes then outstanding shall become automatically due
and payable subject to the provisions of Article 11 hereof, without any
declaration or other act on the part of the Trustee or any holder of Convertible
Subordinated Notes.
The holders of a majority in aggregate principal amount of the then
outstanding Convertible Subordinated Notes by notice to the Trustee may rescind
an acceleration of the Convertible Subordinated Notes and its consequences if
all existing Events of Default (other than nonpayment of principal of or
premium, if any, and interest on the Convertible Subordinated Notes which has
become due solely by virtue of such acceleration) have been cured or waived and
if the rescission would not conflict with any judgment or decree of any court of
competent jurisdiction. No such rescission shall affect any subsequent Default
or Event of Default or impair any right consequent thereto.
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Convertible Subordinated Notes or to enforce the
performance of any provision of the Convertible Subordinated Notes or this
Indenture. The Trustee may maintain a proceeding even if it does not possess any
of the Convertible Subordinated Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any holder of a Convertible
Subordinated Note in exercising any right or remedy occurring upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. All remedies are cumulative to the extent
permitted by law.
SECTION 6.04 Waiver of Past Defaults.
The holders of a majority in aggregate principal amount of the Convertible
Subordinated Notes then outstanding may, on behalf of the holders of all the
Convertible Subordinated Notes, waive an existing Default or Event of Default
and its consequences, except a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Convertible Subordinated Notes
(other than the non-payment of principal of and premium, if any, and interest on
the Convertible Subordinated Notes which has become due solely by virtue of an
acceleration which has been duly rescinded as provided above), or in respect of
a covenant or provision of this Indenture which cannot be modified or amended
without the consent of all holders of Convertible
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Subordinated Notes. When a Default or Event of Default is waived, it is cured
and stops continuing. No waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.
SECTION 6.05 Control by Majority.
The holders of a majority in aggregate principal amount of the then
outstanding Convertible Subordinated Notes may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights of other holders of
Convertible Subordinated Notes or that may involve the Trustee in personal
liability; provided that the Trustee shall have no duty or obligation (subject
to Section 7.01) to ascertain whether or not such actions of forebearances are
unduly prejudicial to such holders; provided, further, that the Trustee may take
any other action the Trustee deems proper that is not inconsistent with such
directions.
SECTION 6.06 Limitation on Suits.
A holder of a Convertible Subordinated Note may not pursue any remedy with
respect to this Indenture or the Convertible Subordinated Notes unless:
(1) the holder gives to the Trustee notice of a continuing Event of
Default;
(2) the holders of at least 25% in principal amount of the then
outstanding Convertible Subordinated Notes make a request to the Trustee to
pursue the remedy;
(3) such holder or holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(5) during such 60-day period the holders of a majority in principal
amount of the then outstanding Convertible Subordinated Notes do not give
the Trustee a direction inconsistent with the request.
A holder of a Convertible Subordinated Note may not use this Indenture to
prejudice the rights of another holder or to obtain a preference or priority
over another holder.
SECTION 6.07 Rights of Holders To Receive Payment.
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Subject to the provisions of Article 11 hereof, notwithstanding any other
provision of this Indenture, the right of any holder of a Convertible
Subordinated Note to receive payment of principal, premium, if any, and interest
on the Convertible Subordinated Note, on or after the respective due dates
expressed in the Convertible Subordinated Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, or to bring
suit for the enforcement of the right to convert the Convertible Subordinated
Note shall not be impaired or affected without the consent of the holder of a
Convertible Subordinated Note.
SECTION 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a), (b) or (d) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid on the Convertible Subordinated Notes and interest on
overdue principal and interest and such further amount as shall be sufficient to
cover the costs and, to the extent lawful, expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and the
holders of Convertible Subordinated Notes allowed in any judicial proceedings
relative to the Company, its creditors or its property. Nothing contained herein
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any holder of a Convertible Subordinated Note any plan of
reorganization, arrangement, adjustment or composition affecting the Convertible
Subordinated Notes or the rights of any holder thereof, or to authorize the
Trustee to vote in respect of the claim of any holder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07, including
payment of all compensation, expenses and liabilities incurred, and all
advances made, by the Trustee, and the costs and expenses of collection;
Second: to holders of Senior Debt to the extent required by Article
11;
Third: to holders of Convertible Subordinated Notes for amounts due
and unpaid on the Convertible Subordinated Notes for principal, premium, if
any, and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on
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the Convertible Subordinated Notes for principal, premium, if any, and
interest, respectively; and
Fourth: to the Company.
Except as otherwise provided in Section 2.12, the Trustee may fix a record
date and payment date for any payment to holders of Convertible Subordinated
Notes.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit, other than the Trustee, of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
holder pursuant to Section 6.07 or a suit by holders of more than 10% in
principal amount of the then outstanding Convertible Subordinated Notes.
ARTICLE 7
THE TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture and
covenants and agrees to perform the same, as herein expressed. Whether or not
herein expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Article 7.
SECTION 7.01 Duties of the Trustee.
(a) If an Event of Default known to the Trustee has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(b) Except during the continuance of an Event of Default known to the
Trustee:
(1) The duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
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(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any statements, certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the form required by
this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section;
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that is in any way related to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any financial liability in the performance of any of
its duties or the exercise of any of its rights and powers hereunder, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk of liability is not reasonably assured to
it.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree with the Company. Money held in trust by the
Trustee need not be segregated from other funds except to the extent required by
law.
SECTION 7.02 Rights of the Trustee.
(a) The Trustee may rely on and shall be protected in acting or refraining
from acting upon any resolution, Officers' Certificate, or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, security or other document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter contained therein.
(b) Any request, direction, order or demand of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof is herein
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specifically prescribed). In addition, before the Trustee acts or refrains from
acting, it may require an Officers' Certificate, an Opinion of Counsel or both.
The Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through its attorneys and
agents and other persons not regularly in its employ and shall not be
responsible for the misconduct or negligence of any attorney or agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith without negligence or willful misconduct which it believes to
be authorized or within its discretion, rights or powers.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
Officers of the Company.
(f) The Trustee shall not be required to give any bond or surety in respect
of the performance of its powers and duties hereunder.
(g) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or discretion of
any of the holders of Convertible Subordinated Notes pursuant to the provisions
of this Indenture, unless such holders have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities which
might be incurred therein or thereby.
(h) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, security or other document
unless requested in writing to do so by the holders of not less than a majority
in aggregate principal amount of the Convertible Subordinated Notes then
outstanding, provided that if the Trustee determines in its discretion to make
any such investigation, then it shall be entitled, upon reasonable prior notice
and during normal business hours, to examine the books and records and the
premises of the Company, personally or by agent or attorney, and the reasonable
expenses of every such examination shall be paid by the Company or, if paid by
the Trustee or any predecessor Trustee, shall be reimbursed by the Company upon
demand.
(i) The permissive rights of the Trustee to do things enumerated in this
Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its negligence or wilful misconduct.
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(j) The Trustee shall not be responsible for the computation of any
adjustment to the Conversion Price or for any determination as to whether an
adjustment is required and shall not be deemed to have knowledge of any
adjustment unless and until it shall have received the notice from the Company
contemplated by Section 12.05(j).
SECTION 7.03 Individual Rights of the Trustee.
Subject to Sections 7.10 and 7.11, the Trustee in its individual or any
other capacity may become the owner or pledgee of Convertible Subordinated Notes
with the same rights it would have if it were not the Trustee and may otherwise
deal with the Company or an Affiliate of the Company and receive, collect, hold
and retain collections from the Company with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights.
SECTION 7.04 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Convertible Subordinated
Notes. It shall not be accountable for the Company's use of the proceeds from
the Convertible Subordinated Notes or any money paid to the Company or upon the
Company's direction under any provision of this Indenture. It shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee, and it shall not be responsible for any statement or
recital herein or any statement in the Convertible Subordinated Notes or any
other document in connection with the sale of the Convertible Subordinated Notes
or pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each holder of a Convertible
Subordinated Note a notice of the Default or Event of Default within 60 days
after it occurs. A Default or an Event of Default shall not be considered known
to the Trustee unless it is a Default or Event of Default in the payment of
principal or interest when due under Section 6.01(a), (b) or (d) or the Trustee
shall have received notice thereof, in accordance with this Indenture, from the
Company or from the holders of a majority in principal amount of the outstanding
Convertible Subordinated Notes. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any
Convertible Subordinated Note, the Trustee may withhold the notice if and so
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interest of the holders of the Convertible
Subordinated Notes.
SECTION 7.06 Reports by the Trustee to Holders.
Within 60 days after the reporting date stated in Section 10.10, the
Trustee shall mail to holders of Convertible Subordinated Notes a brief report
dated as of such reporting date that
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complies with TIA Section 313(a) (but if no event described in TIA Section
313(a) has occurred within twelve months preceding the reporting date, no report
need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2).
The Trustee shall also transmit by mail all reports as required by TIA Section
313(c).
A copy of each report at the time of its mailing to holders of Convertible
Subordinated Notes shall be filed, at the expense of the Company, by the Trustee
with the Commission and each stock exchange or securities market, if any, on
which the Convertible Subordinated Notes are listed. The Company shall timely
notify the Trustee when the Convertible Subordinated Notes are listed or quoted
on any stock exchange or securities market.
SECTION 7.07 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time and the Trustee
shall be entitled to reasonable compensation for its acceptance of this
Indenture and its services hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by or on behalf of it in
addition to the compensation for its services. Such expenses may include the
reasonable compensation, disbursements and expenses of the Trustee's agents,
counsel and other persons not regularly in its employ.
The Company shall indemnify the Trustee against any loss, liability or
expense incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture and the trusts hereunder,
including the costs and expenses of defending itself against or investigating
any claim of liability in the premises, except as set forth in the next
paragraph. The Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company shall defend the
claim with counsel designated by the Company, who may be outside counsel to the
Company but shall in all events be reasonably satisfactory to the Trustee, and
the Trustee shall cooperate in the defense. In addition, the Trustee may retain
one separate counsel and, if deemed advisable by such counsel, local counsel,
and the Company shall pay the reasonable fees and expenses of such separate
counsel and local counsel. The indemnification herein extends to any settlement,
provided that the Company will not be liable for any settlement made without its
consent, provided, further, that such consent will not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through its own negligence or wilful
misconduct.
The Trustee shall have a lien prior to the Convertible Subordinated Notes
on all money or property held or collected by the Trustee to secure the
Company's payment obligations in this Section 7.07, except that held in trust to
pay principal and interest on Convertible Subordinated
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Notes. Such liens and the Company's obligations under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.08 Replacement of the Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign at any time and be discharged from the trust hereby
created by so notifying the Company. The holders of a majority in principal
amount of the then outstanding Convertible Subordinated Notes may remove the
Trustee by so notifying the Trustee and the Company in writing and may appoint a
successor Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the holders
of a majority in principal amount of the then outstanding Convertible
Subordinated Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
holders of at least 10% in principal amount of the then outstanding Convertible
Subordinated Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee after written request by any holder of a Convertible
Subordinated Note who has been a holder for at least six months fails to comply
with Section 7.10, such holder may
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petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to holders of
Convertible Subordinated Notes. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided that all sums
owing to the retiring Trustee hereunder have been paid and subject to the lien
provided for in Section 7.07. Notwithstanding the replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee with respect to expenses
and liabilities incurred by it prior to such replacement.
Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
preceding paragraph.
SECTION 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business (including the trust
created by this Indenture) to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.10 Eligibility, Disqualification.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1). The Trustee shall always have a combined capital and
surplus as stated in Section 10.10. The Trustee is subject to TIA Section 310(b)
regarding the disqualification of a trustee upon acquiring a conflicting
interest.
SECTION 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship set forth in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
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SECTION 8.01 Discharge of Indenture.
When (a) the Company delivers to the Trustee for cancellation all
Convertible Subordinated Notes theretofore authenticated (other than any other
Convertible Subordinated Notes which have been destroyed, lost or stolen and in
lieu of or in substitution for which other Convertible Subordinated Notes have
been authenticated and delivered) and not theretofore canceled, or (b) all the
Convertible Subordinated Notes not theretofore canceled or delivered to the
Trustee for cancellation have become due and payable, or are by their terms will
become due and payable within one year or are to be called for redemption within
one year under arrangements satisfactory to the Trustee for the giving of notice
of redemption, and the Company deposits with the Trustee, in trust, amounts
sufficient to pay at maturity or upon redemption of all of the Convertible
Subordinated Notes (other than any Convertible Subordinated Notes which have
been mutilated, destroyed, lost or stolen and in lieu of or in substitution for
which other Convertible Subordinated Notes have been authenticated and
delivered) not theretofore canceled or delivered to the Trustee for
cancellation, including principal and premium, if any, and interest due or to
become due to such date of maturity or redemption date, as the case may be, and
if in either case the Company also pays, or causes to be paid, all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect (except as to (i) rights of registration of transfer,
substitution, replacement and exchange and conversion of Convertible
Subordinated Notes, (ii) rights hereunder of holders of Convertible Subordinated
Notes to receive payments of principal of and premium, if any, and interest on,
the Convertible Subordinated Notes, (iii) the obligations under Sections 2.03
and 8.05 hereof and (iv) the rights, obligations and immunities of the Trustee
hereunder), and the Trustee, on demand of the Company accompanied by an
Officers' Certificate and an Opinion of Counsel as required by Section 10.04 and
at the Company's cost and expense, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture; the Company,
however, hereby agrees to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred by the Trustee and to compensate the
Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Convertible Subordinated Notes.
SECTION 8.02 Deposited Monies to be Held in Trust by Trustee.
Subject to Section 8.04, all monies deposited with the Trustee pursuant to
Section 8.01 shall be held in trust and applied by it to the payment,
notwithstanding the provisions of Article 11, either directly or through the
Paying Agent, to the holders of the particular Convertible Subordinated Notes
for the payment or redemption of which such monies have been deposited with the
Trustee, of all sums due and to become due thereon for principal and interest
and premium, if any.
SECTION 8.03 Paying Agent to Repay Monies Held.
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Upon the satisfaction and discharge of this Indenture, all monies then held
by any Paying Agent (other than the Trustee) shall, upon the Company's demand,
be repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be
released from all further liability with respect to such monies.
SECTION 8.04 Return of Unclaimed Monies.
Subject to the requirements of applicable law, any monies deposited with or
paid to the Trustee for payment of the principal of, premium, if any, or
interest on Convertible Subordinated Notes and not applied but remaining
unclaimed by the holders thereof for two years after the date upon which the
principal of, premium, if any, or interest on such Convertible Subordinated
Notes, as the case may be, have become due and payable, shall be repaid to the
Company by the Trustee on demand; provided, however, that the Company, or the
Trustee at the request of the Company, shall have first caused notice of such
payment to the Company to be mailed to each holder of a Convertible Subordinated
Note entitled thereto no less than 30 days prior to such payment and all
liability of the Trustee shall thereupon cease with respect to such monies; and
the holder of any of the Convertible Subordinated Notes shall thereafter look
only to the Company for any payment which such holder may be entitled to collect
unless an applicable abandoned property law designates another person.
SECTION 8.05 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 8.02 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Convertible
Subordinated Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.01 until such time as the Trustee or the Paying
Agent is permitted to apply all such money in accordance with Section 8.02;
provided, however, that if the Company makes any payment of interest on or
principal of any Convertible Subordinated Note following the reinstatement of
its obligations, the Company shall be subrogated to the rights of the holders
thereof to receive such payment from the money held by the Trustee or Paying
Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without the Consent of Holders.
The Company and the Trustee may amend this Indenture or the Convertible
Subordinated Notes without notice to or the consent of any holder of a
Convertible Subordinated Note for the purposes of:
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(a) curing any ambiguity or correcting or supplementing any defective
or inconsistent provision contained in this Indenture or making any other
changes in the provisions of this Indenture which the Company and the
Trustee may deem necessary or desirable provided such amendment does not
materially and adversely affect the legal rights under the Indenture of the
holders of Convertible Subordinated Notes.
(b) providing for uncertificated Convertible Subordinated Notes in
addition to or in place of certificated Convertible Subordinated Notes;
(c) evidencing the succession of another person to the Company and
providing for the assumption by such successor of the covenants and
obligations of the Company thereunder and in the Convertible Subordinated
Notes as permitted by Section 5.01;
(d) providing for conversion rights and/or repurchase rights of
holders of Convertible Subordinated Notes in the event of consolidation,
merger or sale of all or substantially all of the assets of the Company as
required to comply with Sections 5.01 and/or 12.06;
(e) reducing the Conversion Price;
(f) making any changes that would provide the holders of the
Convertible Subordinated Notes with any additional rights or benefits or
that does not adversely affect the legal rights under this Indenture of any
such holder; or
(g) complying with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA.
SECTION 9.02 With the Consent of Holders.
Subject to Section 6.07, the Company and the Trustee may amend this
Indenture or the Convertible Subordinated Notes with the written consent of the
holders of at least a majority in principal amount of the then outstanding
Convertible Subordinated Notes (including consents obtained in connection with a
tender offer or exchange offer for Convertible Subordinated Notes).
Subject to Sections 6.04 and 6.07, the holders of a majority in principal
amount of the Convertible Subordinated Notes then outstanding may also waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Convertible Subordinated Notes.
However, without the consent of each holder of a Convertible Subordinated
Note affected, an amendment or waiver under this Section may not (with respect
to any Convertible Subordinated Notes held by a non-consenting holder):
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(a) reduce the principal amount of Convertible Subordinated Notes
whose holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or premium on or change the fixed maturity
of any Convertible Subordinated Note or, except as permitted pursuant to
Section 9.01(a), alter the redemption provisions with respect thereto;
(c) reduce the rate of, or change the time for payment of, interest,
including defaulted interest, on any Convertible Subordinated Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Convertible Subordinated Notes
(except a rescission of acceleration of the Convertible Subordinated Notes
by the holders of at least a majority in aggregate principal amount of the
Convertible Subordinated Notes then outstanding and a waiver of the payment
default that resulted from such acceleration);
(e) make the principal of, or premium, if any, or interest on, any
Convertible Subordinated Note payable in money other than as provided for
herein and in the Convertible Subordinated Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or Events of Default or the rights of holders of
Convertible Subordinated Notes to receive payments of principal of,
premium, if any, or interest on the Convertible Subordinated Notes;
(g) waive a redemption payment with respect to any Convertible
Subordinated Notes;
(h) except as permitted herein (including Section 9.01(a)), increase
the Conversion Price or modify the provisions contained herein relating to
conversion of the Convertible Subordinated Notes in a manner adverse to the
holders thereof; or
(i) make any change to the abilities of holders of Convertible
Subordinated Notes to enforce their rights hereunder or the provisions of
clauses (a) through (i) of this Section 9.02.
To secure a consent of the holders of Convertible Subordinated Notes under
this Section, it shall not be necessary for such holders to approve the
particular form of any proposed amendment or waiver, but it shall be sufficient
if such consent approves the substance thereof.
After an amendment or waiver under this Section becomes effective, the
Company shall mail to holders of Convertible Subordinated Notes a notice briefly
describing the amendment or waiver.
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In order to amend any provisions of Article 11, holders of at least 75% in
aggregate principal amount of Convertible Subordinated Notes then outstanding
must consent to such amendment if such amendment would adversely affect the
rights of holders of Convertible Subordinated Notes.
SECTION 9.03 Compliance with the Trust Indenture Act.
Every amendment to this Indenture or the Convertible Subordinated Notes
shall be set forth in a supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.04 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a holder
of a Convertible Subordinated Note is a continuing consent by the holder and
every subsequent holder of a Convertible Subordinated Note or portion of a
Convertible Subordinated Note that evidences the same debt as the consenting
holder's Convertible Subordinated Note, even if notation of the consent is not
made on any Convertible Subordinated Note. However, any such holder or
subsequent holder may revoke the consent as to his or her Convertible
Subordinated Note or portion of a Convertible Subordinated Note if the Trustee
receives the notice of revocation before the date on which the Trustee receives
an Officers' Certificate certifying that the holders of the requisite principal
amount of Convertible Subordinated Notes have consented to the amendment or
waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the holders of Convertible Subordinated Notes entitled to
consent to any amendment or waiver. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
persons who were holders of Convertible Subordinated Notes at such record date
(or their duly designated proxies), and only those persons, shall be entitled to
consent to such amendment or waiver or to revoke any consent previously given,
whether or not such persons continue to be holders after such record date. No
consent shall be valid or effective for more than 90 days after such record date
unless consents from holders of the principal amount of Convertible Subordinated
Notes required hereunder for such amendment or waiver to be effective shall have
also been given and not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind every holder
of a Convertible Subordinated Note, unless it is of the type described in
clauses (a)-(i) of Section 9.02. In such case, the amendment or waiver shall
bind each holder of a Convertible Subordinated Note who has consented to it and
every subsequent holder of a Convertible Subordinated Note or portion of a
Convertible Subordinated Note that evidences the same debt as the consenting
holder's Convertible Subordinated Note.
SECTION 9.05 Notation on or Exchange of Convertible Subordinated Notes.
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Convertible Subordinated Notes authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article 9 may, and
shall if required by the Trustee, bear a notation in the form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Convertible Subordinated Notes so modified as to
conform, in the opinion of the Company and the Trustee, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for outstanding Convertible Subordinated
Notes without charge to the holders of the Convertible Subordinated Notes,
except as specified in Section 2.06.
SECTION 9.06 Trustee Protected.
The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article 9 if such amendment or supplemental indenture does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing such amendment or
supplemental indenture, the Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that such amendment or supplemental indenture is
authorized or permitted by this Indenture, that it is not inconsistent herewith,
and that it will be valid and binding upon the Company in accordance with its
terms.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), such duties imposed by such section of the
TIA shall control. If any provision of this Indenture expressly modifies or
excludes any provision of the TIA that may be so modified or excluded, the
Indenture provision so modifying or excluding such provision of the TIA shall be
deemed to apply.
SECTION 10.02 Notices.
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person or mailed by first-class mail,
with postage prepaid (registered or certified, return receipt requested), or
sent by facsimile or overnight air couriers guaranteeing next day delivery, to
the other's address as stated in Section 10.10. The Company or the Trustee by
notice to the other may designate additional or different addresses for
subsequent notices or communications.
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All notices and communications (other than those sent to holders of
Convertible Subordinated Notes) shall be deemed to have been duly given at the
time delivered by hand, if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; when transmission is
confirmed, if transmitted by facsimile; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery. Notwithstanding the foregoing, all notices to the Trustee shall be
effective only upon receipt by a Trust Officer.
Any notice or communication to a holder of a Convertible Subordinated Note
shall be mailed by first-class mail, with postage prepaid, to his or her address
shown on the Register kept by the Registrar. Failure to mail a notice or
communication to a holder or any defect in it shall not affect its sufficiency
with respect to other holders.
If a notice or communication is sent in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company sends a notice or communication to holders of Convertible
Subordinated Notes, it shall send a copy to the Trustee and each Agent at the
same time.
All notices or communications shall be in writing.
SECTION 10.03 Communication by Holders With Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other holders
with respect to their rights under this Indenture or the Convertible
Subordinated Notes. The Company, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
SECTION 10.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05) stating that, in the opinion of such person, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
SECTION 10.05 Statements Required in Certificate or Opinion.
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Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
Any Officers' Certificate may be based, insofar as it relates to legal
matters, upon an Opinion of Counsel, unless such Officer knows that the opinion
with respect to the matters upon which his or her certificate may be based as
aforesaid is erroneous. Any Opinion of Counsel may be based, insofar as it
relates to factual matters, upon certificates, statements or opinions of, or
representations by an officer or officers of the Company, or other persons or
firms deemed appropriate by such counsel, unless such counsel knows that the
certificates, statements or opinions or representations with respect to the
matters upon which his or her opinion may be based as aforesaid are erroneous.
Any Officers' Certificate, statement or Opinion of Counsel may be based,
insofar as it relates to accounting matters, upon a certificate or opinion of or
representation by an accountant (who may be an employee of the Company), or firm
of accountants, unless such Officer or counsel, as the case may be, knows that
the certificate or opinion or representation with respect to the accounting
matters upon which his or her certificate, statement or opinion may be based as
aforesaid is erroneous.
SECTION 10.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by, or a meeting of,
holders of Convertible Subordinated Notes. The Registrar or Paying Agent may
make reasonable rules and set reasonable requirements for its functions.
SECTION 10.07 Legal Holidays.
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A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the city in which the Corporate Trust
Office of the Trustee is located or the City of San Jose, California are not
required to be open, and a "business day" is any day that is not a Legal
Holiday. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If any date specified
in this Indenture, including, without limitation, a redemption date under
Paragraph 5 of Convertible Subordinated Notes, is a Legal Holiday, then such
date shall be the next succeeding business day.
SECTION 10.08 No Recourse Against Others.
No director, officer, employee or stockholder, as such, of the Company from
time to time shall have any liability for any obligations of the Company under
the Convertible Subordinated Notes or this Indenture or for any claim based on,
in respect of, or by reason of such obligations or their creation. Each holder
by accepting a Convertible Subordinated Note waives and releases all such
liability. This waiver and release are part of the consideration for the
Convertible Subordinated Notes. Each of such directors, officers, employees and
stockholders is a third party beneficiary of this Section 10.08.
SECTION 10.09 Counterparts.
This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 10.10 Other Provisions.
The Company initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.
The reporting date for Section 7.06 is [May 15] of each year. The first
reporting date is the [May 15] following the issuance of Convertible
Subordinated Notes hereunder.
The Trustee shall always have, or shall be a subsidiary of a bank or bank
holding company which has, a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is:
Amkor Technology, Inc.
1345 Enterprise Drive
West Chester, PA 19380
Attention: General Counsel's Office
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Facsimile: (610) 431-9967
Telephone: (610) 431-9600
The Trustee's address is:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, MA 02110
attention: Corporate Trust Department (Amkor Technology, Inc.
____% Convertible Notes due 2003)
Facsimile: (617) 664-5372
Telephone: (617) 664-5635
SECTION 10.11 Governing Law.
The internal laws of the State of New York shall govern this Indenture and
the Convertible Subordinated Notes, without regard to the conflict of laws
provisions thereof.
SECTION 10.12 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or a subsidiary. Any such other indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 10.13 Successors.
All agreements of the Company in this Indenture and the Convertible
Subordinated Notes shall bind its successor. All agreements of the Trustee in
this Indenture shall bind its successor.
SECTION 10.14 Severability.
In case any provision in this Indenture or in the Convertible Subordinated
Notes 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.
SECTION 10.15 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
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ARTICLE 11
SUBORDINATION
SECTION 11.01 Agreement to Subordinate.
The Company agrees, and each holder of Convertible Subordinated Notes by
accepting a Convertible Subordinated Note agrees, that the indebtedness
evidenced by the Convertible Subordinated Note is subordinated in right of
payment, to the extent and in the manner provided in this Article 11, to the
prior payment in full in cash or payment satisfactory to holders of Senior Debt
of all Senior Debt (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed), and that the subordination is for the benefit
of the holders of Senior Debt.
SECTION 11.02 Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive payment in
full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) in cash or other payment
satisfactory to the holders of the Senior Debt before holders of
Convertible Subordinated Notes shall be entitled to receive any payment
with respect to the Convertible Subordinated Notes (except that the holders
of Convertible Subordinated Notes may receive (i) securities that are
subordinated to at least the same extent as the Convertible Subordinated
Notes to (a) Senior Debt and (b) any securities issued in exchange for
Senior Debt and (ii) payments and other distributions made from any trust
created pursuant to Section 8.01 hereof); and
(2) until all Senior Debt is paid in full in cash or other payment
satisfactory to the holders of the Senior Debt, any distribution to which
holders of Convertible Subordinated Notes would be entitled but for this
Article 11 shall be made to holders of Senior Debt (except that holders of
Convertible Subordinated Notes may receive securities that are subordinated
to at least the same extent as the Convertible Subordinated Notes to (a)
Senior Debt and (b) any securities issued in exchange for Senior Debt), as
their interests may appear.
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SECTION 11.03 Default on Senior Debt and/or Designated Senior Debt.
The Company may not make any payment or distribution to the Trustee or any
holder of Convertible Subordinated Notes in respect of Obligations with respect
to the Convertible Subordinated Notes and may not acquire from the Trustee or
any holder of Convertible Subordinated Notes any Convertible Subordinated Notes
(other than, in each case, (i) distributions of securities that are subordinated
to at least the same extent as the Convertible Subordinated Notes to (a) Senior
Debt and (b) any securities issued in exchange for Senior Debt and (ii) payments
and other distributions made from any trust created pursuant to Section 8.01
hereof) until all Senior Debt has been paid in full in cash or other payment
satisfactory to the holders of the Senior Debt if:
(i) a default in the payment of any principal of, premium, if any,
interest, rent or other Obligations in respect of Senior Debt occurs and is
continuing beyond any applicable grace period in the agreement, indenture
or other document governing such Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that then permits holders of such Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of
the default (a "Payment Blockage Notice") from a person who may give it
pursuant to Section 11.11 hereof.
If the Trustee receives any Payment Blockage Notice pursuant to Section
11.03 (ii) hereof, no subsequent Payment Blockage Notice shall be effective for
purposes of such Section unless and until at least 365 days shall have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in respect
of the Convertible Subordinated Notes and may acquire them upon the earlier of:
(1) in the case of a payment default, upon the date upon which the
default is cured or waived or ceases to exist, or
(2) in the case of a nonpayment default referred to in Section
11.03(ii) hereof, the earlier of the date upon which the default is cured
or waived ceases to exist or 179 days after notice is received if the
maturity of such Designated Senior Debt has not been accelerated,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
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SECTION 11.04 Acceleration of Convertible Subordinated Notes
In the event of the acceleration of the Convertible Subordinated Notes
because of an Event of Default, the Company may not make any payment or
distribution to the Trustee or any holder of Convertible Subordinated Notes in
respect of Obligations with respect to Convertible Subordinated Notes and may
not acquire or purchase from the Trustee or any holder of Convertible
Subordinated Notes any Convertible Subordinated Notes (other than, in each case,
(i) distributions of securities that are subordinated to at least the same
extent as the Convertible Subordinated Notes to (a) Senior Debt and (b) any
securities issued in exchange for Senior Debt, and (ii) payments and other
distributions made from any trust created pursuant to Section 8.01) until all
Senior Debt has been paid in full in cash or other payment satisfactory to the
holders of Senior Debt or such acceleration is rescinded in accordance with the
terms of this Indenture.
If payment of the Convertible Subordinated Notes is accelerated because of
an Event of Default, the Company or the Trustee shall promptly notify holders of
Senior Debt or trustee(s) of such Senior Debt of the acceleration. The Company
may not pay the Convertible Subordinated Notes until five business days after
such holders or trustee(s) of Senior Debt receive notice of such acceleration
and, thereafter, may pay the Convertible Subordinated Notes only if the
provisions of this Article 11 otherwise permit payment at that time.
SECTION 11.05 When Distribution Must Be Paid Over.
In the event that the Trustee, any holder of Convertible Subordinated Notes
or any other person receives any payment or distributions of assets of the
Company of any kind with respect to the Convertible Subordinated Notes in
contravention of any terms contained in this Indenture, whether in cash,
property or securities, including, without limitation by way of set-off or
otherwise, then such payment shall be held by the recipient in trust for the
benefit of holders of Senior Debt, and shall be immediately paid over and
delivered to the holders of Senior Debt or the representative(s), to the extent
necessary to make payment in full of all Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution or provision therefor,
to or for the holders of Senior Debt; provided that the foregoing shall apply to
the Trustee only if the Trustee has actual knowledge (as determined in
accordance with Section 11.11) that such payment or distribution is prohibited
by this Indenture.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 11, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of holders of Convertible
Subordinated Notes or the Company or any other person money or assets to which
any holders of Senior Debt shall be entitled by virtue of this Article 11,
except if such payment is made as a result of the wilful misconduct or gross
negligence of the Trustee.
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SECTION 11.06 Notice by Company.
The Company shall promptly notify the Trustee of any facts known to the
Company that would cause a payment of any Obligations with respect to the
Convertible Subordinated Notes or the purchase of any Convertible Subordinated
Notes by the Company to violate this Article, but failure to give such notice
shall not affect the subordination of the Convertible Subordinated Notes to the
Senior Debt as provided in this Article.
SECTION 11.07 Subrogation.
After all Senior Debt is paid in full and until the Convertible
Subordinated Notes are paid in full, holders of Convertible Subordinated Notes
shall be subrogated (equally and ratably with all other indebtedness pari passu
with the Convertible Subordinated Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the holders of Convertible Subordinated Notes
have been applied to the payment of Senior Debt. A distribution made under this
Article to holders of Senior Debt that otherwise would have been made to holders
of Convertible Subordinated Notes is not, as between the Company and holders of
Convertible Subordinated Notes, a payment by the Company on the Convertible
Subordinated Notes.
SECTION 11.08 Relative Rights.
This Article defines the relative rights of holders of Convertible
Subordinated Notes and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and holders of Convertible
Subordinated Notes, the obligation of the Company, which is absolute and
unconditional, to pay principal of, premium, if any, and interest on the
Convertible Subordinated Notes in accordance with their terms;
(2) affect the relative rights of holders of Convertible Subordinated
Notes and creditors (other than with respect to Senior Debt) of the
Company, other than their rights in relation to holders of Senior Debt; or
(3) prevent the Trustee or any holder of Convertible Subordinated
Notes from exercising its available remedies upon a Default or Event of
Default, subject to the rights of holders and owners of Senior Debt to
receive distributions and payments otherwise payable to holders of
Convertible Subordinated Notes.
If the Company fails because of this Article to pay principal of or
interest on a Convertible Subordinated Note on the due date, the failure is
still a Default or Event of Default.
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SECTION 11.09 Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of the
indebtedness evidenced by the Convertible Subordinated Notes shall be impaired
by any act or failure to act by the Company or any holder of Convertible
Subordinated Notes or by the failure of the Company or any such holder to comply
with this Indenture.
SECTION 11.10 Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 11, the Trustee and the holders of Convertible Subordinated Notes
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other person making any distribution to the
Trustee or to the holders of Convertible Subordinated Notes for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Debt and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 11.
SECTION 11.11 Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 11 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee (other than pursuant to Section 11.04), and the Trustee may continue
to make payments on the Convertible Subordinated Notes, unless a Trust Officer
shall have received at least two business days prior to the date of such payment
or distribution written notice of facts that would cause such payment or
distribution with respect to the Convertible Subordinated Notes to violate this
Article. Only the Company or a Representative may give the notice.
Nothing in this Article 11 shall impair the claims of, or payments to, the
Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
SECTION 11.12 Authorization to Effect Subordination.
Each holder of a Convertible Subordinated Note by the holder's acceptance
thereof authorizes and directs the Trustee on the holder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in this Article 11, and appoints the
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Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in Section 6.09 hereof at least 30
days before the expiration of the time to file such claim, the holders of any
Senior Debt or their Representatives are hereby authorized to file an
appropriate claim for and on behalf of the holders of the Convertible
Subordinated Notes.
SECTION 11.13 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; provided, however, that the
second and third paragraphs of Section 11.11 shall not apply to the Company or
any subsidiary of the Company if it or such subsidiary acts as Paying Agent.
SECTION 11.14 Senior Debt Entitled to Rely.
The holders of Senior Debt shall have the right to rely upon this Article
11, and no amendment or modification of the provisions contained herein shall
diminish the rights of such holders unless such holders shall have agreed in
writing thereto.
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ARTICLE 12
CONVERSION OF CONVERTIBLE SUBORDINATED NOTES
SECTION 12.01 Right to Convert.
Subject to and upon compliance with the provisions of this Indenture, each
holder of Convertible Subordinated Notes shall have the right, at his or her
option, at any time on or before the close of business on the last trading day
prior to the Maturity Date (except that, (a) with respect to any Convertible
Subordinated Note or portion thereof which is called for redemption prior to
such date, such right shall terminate, except as provided in the fourth
paragraph of Section 12.02, before the close of business on the last trading day
preceding the date fixed for redemption (unless the Company defaults in payment
of the redemption price in which case the conversion right will terminate at the
close of business on the date such default is cured) and (b) with respect to any
Convertible Subordinated Note or portion thereof subject to a duly completed
election for repurchase, such right shall terminate on or before the close of
business on the Designated Event Offer Termination Date (unless the Company
defaults in the payment due upon repurchase or such holder elects to withdraw
the submission of such election to repurchase)) to convert the principal amount
of any Convertible Subordinated Note held by such holder, or any portion of such
principal amount which is $1,000 or an integral multiple thereof, into that
number of fully paid and non-assessable shares of Common Stock (as such shares
shall then be constituted) obtained by dividing the principal amount of the
Convertible Subordinated Note or portion thereof to be converted by the
Conversion Price in effect at such time, by surrender of the Convertible
Subordinated Note so to be converted in whole or in part in the manner provided
in Section 12.02. A holder of Convertible Subordinated Notes is not entitled to
any rights of a holder of Common Stock until such holder of Convertible
Subordinated Notes has converted his or her Convertible Subordinated Notes to
Common Stock, and only to the extent such Convertible Subordinated Notes are
deemed to have been converted to Common Stock under this Article 12.
SECTION 12.02 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends.
To exercise, in whole or in part, the conversion privilege with respect to
any Convertible Subordinated Note, the holder of such Convertible Subordinated
Note shall surrender such Convertible Subordinated Note, duly endorsed, at an
office or agency maintained by the Company pursuant to Section 4.04, accompanied
by the funds, if any, required by the penultimate paragraph of this Section
12.02, and shall give written notice of conversion in the form provided on the
Convertible Subordinated Notes (or such other notice which is acceptable to the
Company) to the office or agency that the holder of Convertible Subordinated
Notes elects to convert such Convertible Subordinated Note or such portion
thereof specified in said notice. Such notice shall also state the name or names
(with address or addresses) in which the certificate or certificates for shares
of Common Stock which are issuable on such conversion shall be issued, and shall
be
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accompanied by transfer taxes, if required pursuant to Section 12.07. Each such
Convertible Subordinated Note surrendered for conversion shall, unless the
shares issuable on conversion are to be issued in the same name as the
registration of such Convertible Subordinated Note, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Company duly
executed by, the holder of Convertible Subordinated Notes or his or her duly
authorized attorney. The holder of such Convertible Subordinated Notes will not
be required to pay any tax or duty which may be payable in respect of the issue
or delivery of Common Stock on conversion, but will be required to pay any tax
or duty which may be payable in respect of any transfer involved in the issue or
delivery of Common Stock in a name other than the same name as the registration
of such Convertible Subordinated Note.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, the Company shall issue and shall deliver to such
holder at the office or agency maintained by the Company for such purpose
pursuant to Section 4.04, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Convertible
Subordinated Note or portion thereof in accordance with the provisions of this
Article 12 and a check or cash in respect of any fractional interest in respect
of a share of Common Stock arising upon such conversion, as provided in Section
12.03 (which payment, if any, shall be paid no later than five business days
after satisfaction of the requirements for conversion set forth above).
Certificates representing shares of Common Stock will not be issued or delivered
unless all taxes and duties, if any, payable by the holder have been paid. In
case any Convertible Subordinated Note of a denomination of an integral multiple
greater than $1,000 is surrendered for partial conversion, and subject to
Section 2.02, the Company shall execute, and the Trustee shall authenticate and
deliver to the holder of the Convertible Subordinated Note so surrendered,
without charge to him or her, a new Convertible Subordinated Note or Convertible
Subordinated Notes in authorized denominations in an aggregate principal amount
equal to the unconverted portion of the surrendered Convertible Subordinated
Note.
Each conversion shall be deemed to have been effected as to any such
Convertible Subordinated Note (or portion thereof) on the date on which the
requirements set forth above in this Section 12.02 have been satisfied as to
such Convertible Subordinated Note (or portion thereof), and the person in whose
name any certificate or certificates for shares of Common Stock are issuable
upon such conversion shall be deemed to have become on said date the holder of
record of the shares represented thereby; provided, however, that any such
surrender on any date when the Company's stock transfer books are closed shall
constitute the person in whose name the certificates are to be issued as the
record holder thereof for all purposes on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which such Convertible Subordinated Note is
surrendered.
Any Convertible Subordinated Note or portion thereof surrendered for
conversion during the period from the close of business on the record date for
any interest payment through the close of business on the last trading day
immediately preceding such interest payment date shall
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(unless such Convertible Subordinated Note or portion thereof being converted
has been called for redemption pursuant to a notice of redemption mailed by the
Company to the holders in accordance with the provisions of Section 3.04) be
accompanied by payment, in funds acceptable to the Company, of an amount equal
to the interest otherwise payable on such interest payment date on the principal
amount being converted; provided however, that no such payment need be made if
there exists at the time of conversion a default in the payment of interest on
the Convertible Subordinated Notes. An amount equal to such payment shall be
paid by the Company on such interest payment date to the holder of such
Convertible Subordinated Note at the close of business on such record date;
provided, however, that if the Company defaults in the payment of interest on
such interest payment date, such amount shall be paid to the person who made
such required payment. Except as provided above in this Section 12.02, no
adjustment shall be made for interest accrued on any Convertible Subordinated
Note converted or for dividends on any shares issued upon the conversion of such
Convertible Subordinated Note as provided in this Article 12.
SECTION 12.03 Cash Payments in Lieu of Fractional Shares.
No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon conversion of Convertible Subordinated Notes. If
more than one Convertible Subordinated Note shall be surrendered for conversion
at one time by the same holder, the number of full shares which shall be
issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Convertible Subordinated Notes (or specified portions
thereof to the extent permitted hereby) so surrendered for conversion. If any
fractional share of stock otherwise would be issuable upon the conversion of any
Convertible Subordinated Note or Convertible Subordinated Notes, the Company
shall make an adjustment therefor in cash based upon the Current Market Price of
the Common Stock on the last trading day prior to the date of conversion.
SECTION 12.04 Conversion Price.
The conversion price shall be as specified in the form of Convertible
Subordinated Note attached as Exhibit A hereto, subject to adjustment as
provided in this Article 12.
SECTION 12.05 Adjustment of Conversion Price.
The Conversion Price shall be adjusted from time to time by the Company as
follows:
(a) If the Company shall hereafter pay a dividend or make a distribution to
all holders of the outstanding Common Stock in shares of Common Stock, the
Conversion Price in effect at the opening of business on the date following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the Record Date (as defined
in Section 12.05(g))
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fixed for such determination and the denominator shall be the sum of such number
of shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the Record Date. If any dividend or
distribution of the type described in this Section 12.05(a) is declared but not
so paid or made, the Conversion Price shall again be adjusted to the Conversion
Price which would then be in effect if such dividend or distribution had not
been declared.
(b) If the outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, if the
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(c) If the Company shall issue rights or warrants to all or substantially
all holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the Current Market Price (as defined in Section 12.05(g)) on the Record Date
fixed for the determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect at the
opening of business on the date after such Record Date by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date plus the number of shares which the
aggregate offering price of the total number of shares so offered would purchase
at such Current Market Price, and of which the denominator shall be the number
of shares of Common Stock outstanding on the close of business on the Record
Date plus the total number of additional shares of Common Stock so offered for
subscription or purchase. Such adjustment shall become effective immediately
after the opening of business on the day following the Record Date fixed for
determination of stockholders entitled to receive such rights or warrants. To
the extent that shares of Common Stock are not delivered pursuant to such rights
or warrants, upon the expiration or termination of such rights or warrants the
Conversion Price shall be readjusted to be the Conversion Price which would then
be in effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. If such rights or warrants are not so issued,
the Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights or
warrants, with the value of such consideration, if other than cash, to be
determined by the Board of Directors.
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(d) If the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the Company
(other than any dividends or distributions to which Section 12.05(a) applies) or
evidences of its indebtedness, cash or other assets (including securities, but
excluding (i) any rights or warrants of a type referred to in Section 12.05(c)
and (ii) dividends and distributions paid exclusively in cash) (the foregoing
hereinafter in this Section 12.05(d) called the "Securities"), then, in each
such case, the Conversion Price shall be reduced so that the same shall be equal
to the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the Record Date (as defined in
Section 12.05(g)) with respect to such distribution by a fraction of which the
numerator shall be the Current Market Price (determined as provided in Section
12.05(g)) on such date less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors) on such date of the portion of the Securities so
distributed applicable to one share of Common Stock and the denominator shall be
such Current Market Price, such reduction to become effective immediately prior
to the opening of business on the day following the Record Date; provided,
however, that in the event the then fair market value (as so determined) of the
portion of the Securities so distributed applicable to one share of Common Stock
is equal to or greater than the Current Market Price on the Record Date, in lieu
of the foregoing adjustment, adequate provision shall be made so that each
holder of Convertible Subordinated Notes shall have the right to receive upon
conversion of a Convertible Subordinated Note (or any portion thereof) the
amount of Securities such holder would have received had such holder converted
such Convertible Subordinated Note (or portion thereof) immediately prior to
such Record Date. If such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not been declared. If the
Board of Directors determines the fair market value of any distribution for
purposes of this Section 12.05(d) by reference to the actual or when issued
trading market for any securities comprising all or part of such distribution,
it must in doing so consider the prices in such market over the same period used
in computing the Current Market Price pursuant to Section 12.05(g) to the extent
possible.
Notwithstanding any other provision of this Section 12.05(d) to the
contrary, rights, warrants, evidences of indebtedness, other securities, cash or
other assets (including, without limitation, any rights distributed pursuant to
any stockholder rights plan) shall be deemed not to have been distributed for
purposes of this Section 12.05(d) if the Company makes proper provision so that
each holder of Convertible Subordinated Notes who converts a Convertible
Subordinated Note (or any portion thereof) after the date fixed for
determination of stockholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, the amount and kind of such distributions
that such holder would have been entitled to receive if such holder had,
immediately prior to such determination date, converted such Convertible
Subordinated Note into Common Stock.
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Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"): (i) are deemed to be transferred with such shares of Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 12.05(d) (and no adjustment to the Conversion Price
under this Section 12.05(d) shall be required) until the occurrence of the
earliest Trigger Event, whereupon such rights and warrants shall be deemed to
have been distributed and an appropriate adjustment to the Conversion Price
under this Section 12.05(d) shall be made. If any such rights or warrants,
including any such existing rights or warrants distributed prior to the date of
this Indenture, are subject to subsequent events, upon the occurrence of each of
which such rights or warrants shall become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the occurrence of
each such event shall be deemed to be such date of issuance and record date with
respect to new rights or warrants (and a termination or expiration of the
existing rights or warrants without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of rights or
warrants, or any Trigger Event with respect thereto, that was counted for
purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 12.05 was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder or holders
of Common Stock with respect to such rights or warrants (assuming such holder
had retained such rights or warrants), made to all holders of Common Stock as of
the date of such redemption or repurchase, and (2) in the case of such rights or
warrants which shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
For purposes of this Section 12.05(d) and Sections 12.05(a) and (c), any
dividend or distribution to which this Section 12.05(d) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which Section 12.05(c) applies (or both),
shall be deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other than
such shares of Common Stock or rights or warrants to which Section 12.05(c)
applies (and any Conversion Price reduction required by this Section 12.05(d)
with respect to such dividend or distribution shall then be made) immediately
followed by (2) a dividend or distribution of such shares of Common Stock or
such rights or warrants (and any further Conversion Price reduction required by
Sections 12.05(a) and (c) with respect to such dividend or distribution shall
then be made, except that (A) the Record Date of such dividend or distribution
shall be substituted as "the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution", "Record Date fixed for
such determination" and "Record Date" within the meaning of Section 12.05(a) and
as "the date fixed for the determination of stockholders entitled to receive
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such rights or warrants", "the Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and "such Record Date"
within the meaning of Section 12.05(c) and (B) any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination" within the
meaning of Section 12.05(a)).
(e) If the Company shall, by dividend or otherwise, distribute cash to all
holders of its Common Stock (excluding any cash that is distributed upon a
merger or consolidation to which Section 12.06 applies or as part of a
distribution referred to in Section 12.05(d)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such all-cash
distributions to all holders of its Common Stock within the 12 months preceding
the date of payment of such distribution, and in respect of which no adjustment
pursuant to this Section 12.05(e) has been made, and (2) the aggregate of any
cash plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board of
Directors) of consideration payable in respect of any tender offer by the
Company or any of its subsidiaries for all or any portion of the Common Stock
concluded within the 12 months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to Section 12.05(f)
has been made, exceeds 15% of the product of the Current Market Price
(determined as provided in Section 12.05(g)) on the Record Date with respect to
such distribution times the number of shares of Common Stock outstanding on such
date, then, and in each such case, immediately after the close of business on
such date, the Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the close of business on such Record Date by a fraction (i) the
numerator of which shall be equal to the Current Market Price on the Record Date
less an amount equal to the quotient of (x) the excess of such combined amount
over such 15% and (y) the number of shares of Common Stock outstanding on the
Record Date and (ii) the denominator of which shall be equal to the Current
Market Price on such Record Date; provided, however, that if the portion of the
cash so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the Record Date, in
lieu of the foregoing adjustment, adequate provision shall be made so that each
holder of Convertible Subordinated Notes shall have the right to receive upon
conversion of a Convertible Subordinated Note (or any portion thereof) the
amount of cash such holder would have received had such holder converted such
Convertible Subordinated Note (or portion thereof) immediately prior to such
Record Date. If such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not been declared. Any
cash distribution to all holders of Common Stock as to which the Company makes
the election permitted by Section 12.05(m) and as to which the Company has
complied with the requirements of such Section shall be treated as not having
been made for all purposes of this Section 12.05(e).
(f) If a tender offer made by the Company or any of its subsidiaries for
all or any portion of the Common Stock expires and such tender offer (as amended
upon the expiration thereof) requires the payment to stockholders (based on the
acceptance (up to any maximum
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specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors) that, combined together with (1) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors), as of the expiration of such tender offer, of
consideration payable in respect of any other tender offers, by the Company or
any of its subsidiaries for all or any portion of the Common Stock, expiring
within the 12 months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to this Section 12.05(f) has been made
and (2) the aggregate amount of any such all-cash distributions to all holders
of the Common Stock within 12 months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to Section 12.05(e) has
been made, exceeds 15% of the product of the Current Market Price (determined as
provided in Section 12.05(g)) as of the last time (the "Expiration Time")
tenders could have been made pursuant to such tender offer (as it may be
amended) times the number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time, then, and in each such case,
immediately prior to the opening of business on the day after the date of the
Expiration Time, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to close of business on the date of the Expiration Time by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time multiplied by
the Current Market Price of the Common Stock on the trading day next succeeding
the Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the Expiration
Time. If the Company is obligated to purchase shares pursuant to any such tender
offer, but the Company is permanently prevented by applicable law from effecting
any such purchases or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in effect
if such tender offer had not been made. If the application of this Section
12.05(f) to any tender offer would result in an increase in the Conversion
Price, no adjustment shall be made for such tender offer under this Section
12.05(f).
(g) For purposes of this Section 12.05, the following terms shall have the
meaning indicated:
(1) "closing price" with respect to any securities on any day means
the closing price on such day or, if no such sale takes place on such day,
the average of the reported high and low prices on such day, in each case
on the Nasdaq National Market or New
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York Stock Exchange, as applicable, or, if such security is not listed or
admitted to trading on such national market or exchange, on the principal
national securities exchange or quotation system on which such security is
quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation
system, the average of the high and low prices of such security on the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or, if not so available, in such manner as furnished by any New
York Stock Exchange member firm selected from time to time by the Board of
Directors for that purpose, or a price determined in good faith by the
Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors.
(2) "Current Market Price" means the average of the daily closing
prices per share of Common Stock for the 10 consecutive trading days
immediately prior to the date in question; provided, however, that (1) if
the "ex" date (as hereinafter defined) for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Sections 12.05(a), (b), (c),
(d), (e) or (f) occurs during such 10 consecutive trading days, the closing
price for each trading day prior to the "ex" date for such other event
shall be adjusted by multiplying such closing price by the same fraction by
which the Conversion Price is so required to be adjusted as a result of
such other event, (2) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 12.05(a), (b), (c),
(d), (e) or (f) occurs on or after the "ex" date for the issuance or
distribution requiring such computation and prior to the day in question,
the closing price for each trading day on and after the "ex" date for such
other event shall be adjusted by multiplying such closing price by the
reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such other event, and (3) if the "ex" date for
the issuance or distribution requiring such computation is prior to the day
in question, after taking into account any adjustment required pursuant to
clause (1) or (2) of this proviso, the closing price for each trading day
on or after such "ex" date shall be adjusted by adding thereto the amount
of any cash and the fair market value (as determined by the Board of
Directors in a manner consistent with any determination of such value for
purposes of Sections 12.05(d) or (f), whose determination shall be
conclusive and described in a resolution of the Board of Directors) of the
evidences of indebtedness, shares of capital stock or assets being
distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation
under Section 12.05(f), the Current Market Price on any date shall be
deemed to be the average of the daily closing prices per share of Common
Stock for such day and the next two succeeding trading days; provided,
however, that if the "ex" date for any event (other than the tender offer
requiring such computation) that requires an adjustment to the Conversion
Price pursuant to Section 12.05(a), (b), (c), (d), (e) or (f) occurs on or
after the Expiration Time for the tender or exchange offer requiring such
computation and prior to the day in question, the closing price for each
trading day
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on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result of such
other event. For purposes of this paragraph, the term "ex" date, (1) when
used with respect to any issuance or distribution, means the first date on
which the Common Stock trades regular way on the relevant exchange or in
the relevant market from which the closing price was obtained without the
right to receive such issuance or distribution, (2) when used with respect
to any subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades regular way on such exchange or
in such market after the time at which such subdivision or combination
becomes effective, and (3) when used with respect to any tender or exchange
offer means the first date on which the Common Stock trades regular way on
such exchange or in such market after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments to the
Conversion Price are called for pursuant to this Section 12.05, such
adjustments shall be made to the Current Market Price as may be necessary
or appropriate to effectuate the intent of this Section 12.05 and to avoid
unjust or inequitable results as determined in good faith by the Board of
Directors.
(3) "fair market value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common
Stock have the right to receive any cash, securities or other property or
in which the Common Stock (or other applicable security) is exchanged for
or converted into any combination of cash, securities or other property,
the date fixed for determination of stockholders entitled to receive such
cash, securities or other property (whether such date is fixed by the Board
of Directors or by statute, contract or otherwise).
(5) "trading day" shall mean (x) if the applicable security is listed
or admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or another
national securities exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which trades may
be made thereon or (z) if the applicable security is not so listed,
admitted for trading or quoted, any day other than a Saturday or Sunday or
a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(h) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 12.05(a), (b), (c), (d), (e) and (f), as
the Board of Directors considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes.
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The Company from time to time may, to the extent permitted by law, reduce
the Conversion Price by any amount for any period of at least 20 days, if the
Board of Directors has made a determination that such reduction would be in the
Company's best interests, which determination shall be conclusive and described
in a resolution of the Board of Directors. The reduction in Conversion Price
shall be irrevocable during this period. Whenever the Conversion Price is
reduced pursuant to the preceding sentence, the Company shall mail to the
holders of Convertible Subordinated Notes at his or her last address appearing
on the Register of holders maintained for that purpose a notice of the reduction
at least 15 days prior to the date the reduced Conversion Price takes effect,
and such notice shall state the reduced Conversion Price and the period during
which it will be in effect.
(i) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 12.05(i)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article 12 shall be made
by the Company and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be.
No adjustment need be made for a change in the par value or no par value of
the Common Stock.
(j) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any Conversion Agent other than
the Trustee an Officers' Certificate setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such certificate, the Company shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion Price
to each holder of Convertible Subordinated Notes at his or her last address
appearing on the Register of holders maintained for that purpose within 20 days
of the effective date of such adjustment. Failure to deliver such notice shall
not affect the legality or validity of any such adjustment.
(k) In any case in which this Section 12.05 provides that an adjustment
shall become effective immediately after a Record Date for an event, the Company
may defer until the occurrence of such event issuing to the holder of any
Convertible Subordinated Note converted after such Record Date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the Common Stock issuable upon such conversion before giving effect to
such adjustment.
(l) For purposes of this Section 12.05, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common
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Stock. The Company shall not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.
(m) In lieu of making any adjustment to the Conversion Price pursuant to
Section 12.05(e), the Company may elect to reserve an amount of cash for
distribution to the holders of Convertible Subordinated Notes upon the
conversion of the Convertible Subordinated Notes so that any such holder
converting Convertible Subordinated Notes will receive upon such conversion, in
addition to the shares of Common Stock and other items to which such holder is
entitled, the full amount of cash which such holder would have received if such
holder had, immediately prior to the Record Date for such distribution of cash,
converted its Convertible Subordinated Notes into Common Stock, together with
any interest accrued with respect to such amount, in accordance with this
Section 12.05(m). The Company may make such election by providing an Officers'
Certificate to the Trustee to such effect on or prior to the payment date for
any such distribution and depositing with the Trustee on or prior to such date
an amount of cash equal to the aggregate amount that the holders of Convertible
Subordinated Notes would have received if such holders had, immediately prior to
the Record Date for such distribution, converted all of the Convertible
Subordinated Notes into Common Stock. Any such funds so deposited by the Company
with the Trustee shall be invested by the Trustee in U.S. Government Obligations
with a maturity not more than three (3) months from the date of issuance. Upon
conversion of Convertible Subordinated Notes by a holder thereof, such holder
shall be entitled to receive, in addition to the Common Stock issuable upon
conversion, an amount of cash equal to the amount such holder would have
received if such holder had, immediately prior to the Record Date for such
distribution, converted its Convertible Subordinated Note into Common Stock,
along with such holder's pro-rata share of any accrued interest earned as a
consequence of the investment of such funds. Promptly after making an election
pursuant to this Section 12.05(m), the Company shall give or shall cause to be
given notice to all holders of Convertible Subordinated Notes of such election,
which notice shall state the amount of cash per $1,000 principal amount of
Convertible Subordinated Notes such holders shall be entitled to receive
(excluding interest) upon conversion of the Convertible Subordinated Notes as a
consequence of the Company having made such election.
SECTION 12.06 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur: (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as
an entirety or substantially as an entirety to any other corporation as a result
of which holders of Common Stock shall be entitled to receive stock, securities
or other property or assets (including cash) with respect to or in exchange for
such Common Stock, then the Company or the successor or purchasing corporation,
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<PAGE> 68
as the case may be, shall execute with the Trustee a supplemental indenture
(which shall comply with the TIA as in force at the date of execution of such
supplemental indenture if such supplemental indenture is then required to so
comply) providing that the Convertible Subordinated Notes shall be convertible
into the kind and amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of the Convertible
Subordinated Notes (assuming, for such purposes, a sufficient number of
authorized shares of Common Stock available to convert all such Convertible
Subordinated Notes) immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance assuming such holder of
Common Stock did not exercise his or her rights of election, if any, as to the
kind or amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance (provided that, if
the kind or amount of securities, cash or other property receivable upon such
consolidation, merger, statutory exchange, sale or conveyance is not the same
for each share of Common Stock in respect of which such rights of election have
not been exercised ("non-electing share"), then, for the purposes of this
Section 12.06, the kind and amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance for each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
12. If, in the case of any such reclassification, change, consolidation, merger,
combination, sale or conveyance, the stock or other securities and assets
receivable thereupon by a holder of shares of Common Stock includes shares of
stock or other securities and assets of a corporation other than the successor
or purchasing corporation, as the case may be, in such reclassification, change,
consolidation, merger, combination, sale or conveyance, then such supplemental
indenture shall also be executed by such other corporation and shall contain
such additional provisions to protect the interests of the holders of the
Convertible Subordinated Notes as the Board of Directors shall reasonably
consider necessary by reason of the foregoing.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Convertible Subordinated Notes at his
or her address appearing on the Register of holders for that purpose within 20
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section 12.06 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 12.06 applies to any event or occurrence, Section 12.05
shall not apply.
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SECTION 12.07 Taxes on Shares Issued.
The issue of stock certificates on conversions of Convertible Subordinated
Notes shall be made without charge to the converting holder for any tax in
respect of the issue thereof. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of stock in any name other than that of the holder of any
Convertible Subordinated Note converted, and the Company shall not be required
to issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
SECTION 12.08 Reservation of Shares; Shares to Be Fully Paid; Listing of Common
Stock.
The Company shall provide, free from preemptive rights, out of its
authorized but unissued shares or shares held in treasury, sufficient shares to
provide for the conversion of the Convertible Subordinated Notes from time to
time as such Convertible Subordinated Notes are presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Convertible Subordinated Notes, the Company
shall take all corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue shares of such
Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock issued upon
conversion of Convertible Subordinated Notes will be fully paid and
non-assessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.
The Company further covenants that as long as the Common Stock is quoted on
the Nasdaq National Market, or its successor, the Company shall cause all Common
Stock issuable upon conversion of the Convertible Subordinated Notes to be
eligible for such quotation in accordance with, and at the times required under,
the requirements of such market, and if at any time the Common Stock becomes
listed on the New York Stock Exchange or any other national securities exchange,
the Company shall cause all Common Stock issuable upon conversion of the
Convertible Subordinated Notes to be so listed and kept listed.
SECTION 12.09 Responsibility of Trustee.
The Trustee shall not at any time be under any duty of responsibility to
any holders of Convertible Subordinated Notes to determine whether any facts
exist which may require any adjustment of the Conversion Price, or with respect
to the nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any
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<PAGE> 70
supplemental indenture provided to be employed, in making the same. The Trustee
shall not be accountable with respect to the validity or value (or the kind or
amount) of any shares of Common Stock, or of any securities or property, which
may at any time be issued or delivered upon the conversion of any Convertible
Subordinated Note; and the Trustee makes no representations with respect
thereto. Subject to the provisions of Section 7.01, the Trustee shall not be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Convertible Subordinated Note for the purpose of
conversion or to comply with any of the duties, responsibilities or covenants of
the Company contained in this Article 12. Without limiting the generality of the
foregoing, the Trustee shall not have any responsibility to determine the
correctness of any provisions contained in any supplemental indenture entered
into pursuant to Section 12.06 relating either to the kind or amount of shares
of stock or securities or property (including cash) receivable by holders of
Convertible Subordinated Notes upon the conversion of their Convertible
Subordinated Notes after any event referred to in such Section 12.06 or to any
adjustment to be made with respect thereto, but, subject to the provisions of
Section 7.01, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officers' Certificate
and Opinion of Counsel (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
SECTION 12.10 Notice to Holders Prior to Certain Actions.
If
(a) the Company declares a dividend (or any other distribution) on its
Common Stock (other than in cash out of retained earnings or other than a
dividend that results in an adjustment in the Conversion Price pursuant to
Section 12.05 as to which the Company has made an election in accordance
with Section 12.05(m)); or
(b) the Company authorizes the granting to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any share of any
class of Common Stock or any other rights or warrants; or
(c) there is any reclassification of the Common Stock (other than a
subdivision or combination of outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par
value), or of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or
of the sale or transfer of all or substantially all of the assets of the
Company; or
(d) there is any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
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then the Company shall cause to be filed with the Trustee and to be mailed to
each holder of Convertible Subordinated Notes at his or her address appearing on
the Register maintained for that purpose as promptly as possible but in any
event at least 15 days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed and attested, all as of the date first above written, signifying their
agreements contained in this Indenture.
AMKOR TECHNOLOGY, INC.
By
-------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
By
-------------------------------------
Name:
Title:
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<PAGE> 73
EXHIBIT A
(Face of Security)
[The following legend shall appear on the face of each Global Note:
THIS CONVERTIBLE SUBORDINATED NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF
THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY,
THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS CONVERTIBLE
SUBORDINATED NOTE FOR ALL PURPOSES.]
[The following legend shall appear on the face of each Global Note for which The
Depository Trust Company is to be the Depositary:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY THE AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OR DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR REGISTERED
CONVERTIBLE SUBORDINATED NOTES IN DEFINITIVE REGISTERED FORM IN THE LIMITED
CIRCUMSTANCES REFERRED TO IN THE INDENTURE, THIS GLOBAL NOTE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OR SUCH SUCCESSOR DEPOSITARY.]
No. _____ $________
CUSIP _____
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<PAGE> 74
AMKOR TECHNOLOGY, INC.
% CONVERTIBLE SUBORDINATED NOTE DUE 2003
promises to pay to
or registered assigns,
the principal sum of Dollars on , 2003 __________________
Interest Payment Dates: ________ and ________, commencing ______________________
Regular Record Dates: ________ and _________
Certificate of Authentication
This is one of the Convertible Subordinated Notes described in the
within-mentioned Indenture.
State Street Bank and Trust Company, AMKOR TECHNOLOGY,
as Trustee
By By
---------------------------------- -------------------------------------
Authorized Signatory Chief Financial Officer
Dated:
By
-------------------------------------
Assistant Secretary
(SEAL)
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<PAGE> 75
(Back of Security)
AMKOR TECHNOLOGY, INC.
% CONVERTIBLE SUBORDINATED NOTE DUE 2003
1. INTEREST. Amkor Technology, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Convertible
Subordinated Note at the rate per annum shown above. The Company will pay
interest semi-annually in arrears on ____________ and ____________ of each year,
beginning ____________. Interest on the Convertible Subordinated Notes will
accrue from the most recent interest payment date to which interest has been
paid or, if no interest has been paid, from ________. Interest will be computed
on the basis of a 360-day year composed of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Convertible
Subordinated Notes (except defaulted interest) to the person in whose name each
Convertible Subordinated Note is registered at the close of business on the
____________ or ____________ immediately preceding the relevant interest payment
date (each a "Regular Record Date") (other than with respect to a Convertible
Subordinated Note or portion thereof called for redemption on a redemption date,
or repurchased in connection with a Designated Event on a repurchase date,
during the period from the close of business on a Regular Record Date to (but
excluding) the next succeeding interest payment date, in which case accrued
interest shall be payable (unless such Convertible Subordinated Note or portion
thereof is converted) to the holder of the Convertible Subordinated Note or
portion thereof redeemed or repurchased in accordance with the applicable
redemption or repurchase provisions of the Indenture). Holder must surrender
Convertible Subordinated Notes to a Paying Agent to collect principal payments.
The Company will pay the principal of, premium, if any, and interest on the
Convertible Subordinated Notes at the office or agency of the Company maintained
for such purpose, in money of the United States that at the time of payment is
legal tender for payment of public and private debts. Until otherwise designated
by the Company, the Company's office or agency maintained for such purpose will
be the principal Corporate Trust Office of the Trustee (as defined below).
However, the Company may pay principal, premium, if any, and interest by check
payable in such money, and may mail such check to the holders of the Convertible
Subordinated Notes at their respective addresses as set forth in the Register of
holders of Convertible Subordinated Notes.
3. PAYING AGENT AND REGISTRAR. State Street Bank and Trust Company
(together with any successor Trustee under the Indenture referred to below, the
"Trustee"), will act as Paying Agent and Registrar. The Company may change the
Paying Agent, Registrar or co-registrar without prior notice. Subject to certain
limitations in the Indenture, the Company or any of its subsidiaries may act in
any such capacity.
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4. INDENTURE. The Company issued the Convertible Subordinated Notes under
an Indenture dated as of __________, 1998 (the "Indenture") between the Company
and the Trustee. The terms of the Convertible Subordinated Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA") as
in effect on the date of the Indenture. The Convertible Subordinated Notes are
subject to, and qualified by, all such terms, certain of which are summarized
hereon, and holders are referred to the Indenture and the TIA for a statement of
such terms. The Convertible Subordinated Notes are unsecured general obligations
of the Company limited to (except as otherwise provided in the Indenture) up to
$150,000,000 in aggregate principal amount, unless an election has been made as
set forth in Article 2 of the Indenture to increase such aggregate principal
amount by an amount not to exceed $22,500,000. Capitalized terms not defined
below have the same meaning as is given to them in the Indenture.
5. OPTIONAL REDEMPTION. The Company shall not have the option to redeem the
Convertible Subordinated Notes prior to ____________ __, 2001. Thereafter, the
Company shall have the option to redeem the Convertible Subordinated Notes, in
whole or from time to time in part, at the following redemption prices
(expressed as percentages of principal amount), if redeemed during the 12-month
period beginning ____________ of each year indicated (____________ with respect
to 2001) plus accrued and unpaid interest to, but excluding, the date fixed for
redemption; provided, however, that the Company shall not have the option to
redeem the Convertible Subordinated Notes unless the closing price of the Common
Stock on the principal stock exchange or market on which the Common Stock is
then quoted or admitted to trading equals or exceeds 125% of the Conversion
Price for at least 20 trading days within a period of 30 consecutive trading
days ending on the fifth trading day prior to the date the notice of redemption
is first mailed to the holders of the Convertible Subordinated Notes:
<TABLE>
<CAPTION>
Redemption
Year Price
- ---- ----------
<S> <C>
2001......................................................... %
2002......................................................... %
</TABLE>
and 100% at ________, 2003.
Notice of redemption will be mailed by first class mail at least 15 days
but not more than 60 days before the date fixed for redemption to each holder of
Convertible Subordinated Notes to be redeemed at his or her registered address.
Convertible Subordinated Notes in denominations larger than $1,000 may be
redeemed in part but only in integral multiples of $1,000. If less than all the
Convertible Subordinated Notes are to be redeemed, the Trustee shall select the
Convertible Subordinated Notes to be redeemed by a method that complies with the
requirements of the principal national securities exchange, if any, on which the
Convertible Subordinated Notes are listed or quoted, or, if the Convertible
Subordinated Notes are not so listed, on a pro rata
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basis by lot or by any other method that the Trustee considers fair and
appropriate. On and after the redemption date, interest ceases to accrue on
Convertible Subordinated Notes or portions thereof called for redemption (unless
the Company defaults in the payment of the redemption price). If this
Convertible Subordinated Note is redeemed on a date which is also an Interest
Payment Date, the interest payment due on such date will be paid to the person
in whose name this Convertible Subordinated Note is registered at the close of
business on such record date.
6. DESIGNATED EVENT. Upon a Designated Event, the Company shall make a
Designated Event Offer to repurchase all outstanding Convertible Subordinated
Notes at a price equal to 101% of the aggregate principal amount of the
Convertible Subordinated Notes, plus accrued and unpaid interest to, but
excluding, the date of repurchase, such offer to be made as provided in the
Indenture. To accept the Designated Event Offer, the holder hereof must comply
with the terms thereof, including surrendering this Convertible Subordinated
Note, with the "Option of Holder to Elect Repurchase" portion hereof completed,
to the Company, a depositary, if appointed by the Company, or a Paying Agent, at
the address specified in the notice of the Designated Event Offer mailed to
holders as provided in the Indenture, prior to termination of the Designated
Event Offer.
7. SUBORDINATION. The Company's payment of the principal of, premium, if
any, and interest on the Convertible Subordinated Notes is subordinated to the
prior payment in full of the Company's Senior Debt as set forth in the
Indenture. Each holder of Convertible Subordinated Notes by his or her
acceptance hereof covenants and agrees that all payments of the principal of,
premium, if any, and interest on the Convertible Subordinated Notes by the
Company shall be subordinated in accordance with the provisions of Article 11 of
the Indenture, and each holder of Convertible Subordinated Notes accepts and
agrees to be bound by such provisions.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Convertible Subordinated Notes
are in registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Convertible Subordinated Notes may be
registered and Convertible Subordinated Notes may be exchanged as provided in
the Indenture. As a condition of transfer, the Registrar and the Trustee may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company or the Registrar
need not exchange or register the transfer of any Convertible Subordinated Note
or portion of a Convertible Subordinated Note selected for redemption or
submitted for repurchase. Also, the Company or the Registrar need not exchange
or register the transfer of any Convertible Subordinated Note for a period of 15
days before a selection of Convertible Subordinated Notes to be redeemed.
9. PERSONS DEEMED OWNERS. The registered holder of a Convertible
Subordinated Note may be treated as its owner for all purposes.
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10. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or
the Convertible Subordinated Notes may be amended or supplemented with the
consent of the holders of at least a majority in principal amount of the then
outstanding Convertible Subordinated Notes and any existing default may be
waived with the consent of the holders of a majority in principal amount of the
then outstanding Convertible Subordinated Notes.
Without the consent of any holder, the Indenture or the Convertible
Subordinated Notes may be amended to: (a) cure any ambiguity or correct or
supplement any defective or inconsistent provision contained in the Indenture,
or make any other changes in the provisions of the Indenture which the Company
and the Trustee may deem necessary or desirable provided such amendment does not
materially and adversely affect the legal rights under the Indenture of the
holders of Convertible Subordinated Notes; (b) provide for uncertificated
Convertible Subordinated Notes in addition to or in place of certificated
Convertible Subordinated Notes; (c) evidence the succession of another person to
the Company and providing for the assumption by such successor of the covenants
and obligations of the Company thereunder and in the Convertible Subordinated
Notes as permitted by Section 5.01 of the Indenture; (d) provide for conversion
rights and/or repurchase rights of holders of Convertible Subordinated Notes in
the event of consolidation, merger or sale of all or substantially all of the
assets of the Company as required to comply with Sections 5.01 and/or 12.06 of
the Indenture; (e) reduce the Conversion Price; (f) make any change that would
provide any additional rights or benefits to the holders of Convertible
Subordinated Notes or that does not adversely affect the legal rights under the
Indenture of any such holder; or (g) comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the TIA.
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Convertible Subordinated Notes held by a non-consenting
holder): (a) reduce the principal amount of Convertible Subordinated Notes whose
holders must consent to an amendment, supplement or waiver; (b) reduce the
principal of, or premium on, or change the fixed maturity of any Convertible
Subordinated Note or, except as permitted pursuant to clause (a) of the
immediately preceding paragraph, alter the provisions with respect to the
redemption of the Convertible Subordinated Notes; (c) reduce the rate of or
change the time for payment of interest, including defaulted interest, on any
Convertible Subordinated Notes; (d) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the Convertible
Subordinated Notes (except a rescission of acceleration of the Convertible
Subordinated Notes by the holders of at least a majority in aggregate principal
amount of the Convertible Subordinated Notes and a waiver of the payment default
that resulted from such acceleration); (e) make the principal of, or premium, if
any, or interest on, any Convertible Subordinated Note payable in money other
than as provided for in the Indenture and in the Convertible Subordinated Notes;
(f) make any change in the provisions of the Indenture relating to waivers of
past Defaults or the rights of holders of Convertible Subordinated Notes to
receive payments of principal of, premium, if any, or interest on the
Convertible Subordinated Notes; (g) waive a redemption payment with respect to
any Convertible Subordinated Note; (h) make any change in the foregoing
amendment and waiver provisions, or (i) except as permitted by the Indenture
(including Section 9.01(a)),
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increase the Conversion Price or modify the provisions of the Indenture relating
to conversion of the Convertible Subordinated Notes in a manner adverse to the
holders thereof. In addition, any amendment to the provisions of Article 11 of
the Indenture (which relate to subordination) will require the consent of the
holders of at least 75% in aggregate principal amount of the Convertible
Subordinated Notes then outstanding if such amendment would adversely affect the
rights of holders of Convertible Subordinated Notes.
11. DEFAULTS AND REMEDIES. An Event of Default is: (a) default in payment
of the principal of, or premium, if any, on the Convertible Subordinated Notes,
when due at maturity, upon repurchase, upon acceleration or otherwise, whether
or not such payment is prohibited by the subordination provisions of the
Indenture; (b) default for 30 days or more in payment of any installment of
interest on the Convertible Subordinated Notes, whether or not such payment is
prohibited by the subordination provisions of the Indenture; (c) default by the
Company for 60 days or more after notice in the observance or performance of any
other covenants in the Indenture; (d) default in the payment of the Designated
Event Payment in respect of the Convertible Subordinated Notes on the date
therefor, whether or not such payment is prohibited by the subordination
provisions of the Indenture; (e) failure to provide timely notice of a
Designated Event; (f) failure of the Company or any Material Subsidiary to make
any payment at maturity, including any applicable grace period, in respect of
indebtedness for borrowed money of, or guaranteed or assumed by, the Company or
any Material Subsidiary which payment is in an amount in excess of $20,000,000
and continuance of such failure for 30 days after notice; (g) default by the
Company or any Material Subsidiary with respect to any such indebtedness, which
default results in the acceleration of such indebtedness of an amount in excess
of $20,000,000 without such indebtedness having been paid or discharged or such
acceleration having been cured, waived, rescinded, or annulled for 30 days after
notice; or (h) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Material Subsidiary. If an Event of Default occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount of
the then outstanding Convertible Subordinated Notes may declare the unpaid
principal of, premium, if any, and accrued and unpaid interest on all
Convertible Subordinated Notes then outstanding to be due and payable
immediately, except that in the case of an Event of Default arising from certain
events of bankruptcy, insolvency, or reorganization with respect to the Company
all outstanding Convertible Subordinated Notes become due and payable without
further action or notice. Holders of Convertible Subordinated Notes may not
enforce the Indenture or the Convertible Subordinated Notes except as provided
in the Indenture. The Trustee may require an indemnity satisfactory to it before
it enforces the Indenture or the Convertible Subordinated Notes. Subject to
certain limitations, holders of a majority in principal amount of the then
outstanding Convertible Subordinated Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders notice of
any continuing default (except a default in payment of principal, premium, if
any, or interest) if it determines that withholding notice is in their
interests. The Company must furnish annual compliance certificates to the
Trustee.
A-7
<PAGE> 80
12. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee or any of its
Affiliates, in their individual or any other capacities, may make or continue
loans to or guaranteed by, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not Trustee.
13. NO RECOURSE AGAINST OTHERS. No director, officer, employee or
stockholder, as such, of the Company shall have any liability for any
obligations of the Company under the Convertible Subordinated Notes or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each holder by accepting a Convertible
Subordinated Note waives and releases all such liability. The waiver and release
are part of the consideration for the Convertible Subordinated Notes.
14. AUTHENTICATION. This Convertible Subordinated Note shall not be valid
until authenticated by the manual signature of the Trustee or an authenticating
agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name of a
holder or an assignee, such as: TEN CO = tenants in common, TEN ENT = tenants by
the entireties, JT TEN = joint tenants with right of survivorship and not as
tenants in common, CUST = Custodian and U/G/M/A = Uniform Gifts to Minors Act.
16. CONVERSION. Subject to and upon compliance with the provisions of the
Indenture, the registered holder of this Convertible Subordinated Note has the
right at any time on or before the close of business on the last trading day
prior to ________________ (or in case this Convertible Subordinated Note or any
portion hereof that is (a) called for redemption prior to such date, before the
close of business on the last trading day preceding the date fixed for
redemption (unless the Company defaults in payment of the redemption price in
which case the conversion right will terminate at the close of business on the
date such default is cured) or (b) subject to a duly completed election for
repurchase, on or before the close of business on the Designated Event Offer
Termination Date (unless the Company defaults in payment due upon repurchase or
such holder elects to withdraw the submission of such election to repurchase )
to convert the principal amount hereof, or any portion of such principal amount
which is $1,000 or an integral multiple thereof, into that number of fully paid
and non-assessable shares of common stock of the Company ("Common Stock")
obtained by dividing the principal amount of the Convertible Subordinated Note
or portion thereof to be converted by the conversion price of $________ per
share, as adjusted from time to time as provided in the Indenture (the
"Conversion Price"), upon surrender of this Convertible Subordinated Note to the
Company at the office or agency maintained for such purpose (and at such other
offices or agencies designated for such purpose by the Company), accompanied by
written notice of conversion duly executed (and if the shares of Common Stock to
be issued on conversion are to be issued in any name other than that of the
registered holder of this Convertible Subordinated Note by instruments of
transfer, in form satisfactory to the Company, duly executed by the registered
holder or its duly authorized attorney) and, in case such surrender shall be
made during the period from the close of business on the Regular Record Date
immediately preceding any Interest Payment Date through the close
A-8
<PAGE> 81
of business on the last trading day immediately preceding such Interest Payment
Date (unless this Convertible Subordinated Note or the portion thereof being
converted has been called for redemption on a date in such period), also
accompanied by payment, in funds acceptable to the Company, of an amount equal
to the interest otherwise payable on such Interest Payment Date on the principal
amount of this Convertible Subordinated Note then being converted. Subject to
the aforesaid requirement for a payment in the event of conversion after the
close of business on a Regular Record Date immediately preceding an Interest
Payment Date, no adjustment shall be made on conversion for interest accrued
hereon or for dividends on Common Stock delivered on conversion. The right to
convert this Convertible Subordinated Note is subject to the provisions of the
Indenture relating to conversion rights in the case of certain consolidations,
mergers, or sales or transfers of substantially all the Company's assets.
The Company shall not issue fractional shares or scrip representing
fractions of shares of Common Stock upon any such conversion, but shall make an
adjustment therefor in cash based upon the current market price of the Common
Stock on the last trading day prior to the date of conversion.
The Company will furnish to any holder upon written request and without
charge a copy of the Indenture. Requests may be made to: General Counsel, Amkor
Technology, Inc., 1345 Enterprise Drive, West Chester, PA 19380.
A-9
<PAGE> 82
FORM OF CONVERSION NOTICE
To: AMKOR TECHNOLOGY, INC.
The undersigned registered owner of the Convertible Subordinated Note
hereby irrevocably exercises the option to convert this Convertible Subordinated
Note, or portion hereof (which is $1,000 or an integral multiple thereof) below
designated, into shares of Common Stock of Amkor Technology, Inc. in accordance
with the terms of the Indenture referred to in this Convertible Subordinated
Note, and directs that the shares issuable and deliverable upon the conversion,
together with any check in payment for fractional shares and Convertible
Subordinated Notes representing any unconverted principal amount hereof, be
issued and delivered to the registered holder hereof unless a different name has
been indicated below. If shares or any portion of this Convertible Subordinated
Note not converted are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. Any amount required to be paid by the undersigned on account of
interest and taxes accompanies this Convertible Subordinated Note. Dated:
Fill in for registration of shares if
to be delivered, and Convertible ----------------------------------------
Subordinated Notes if to be issued,
other than to and in the name of the ----------------------------------------
registered holder (Please Print):
----------------------------------------
Signature(s)
Principal amount to be converted (if
- ------------------------------------ less than all):
(Name) $___,000
- ------------------------------------ ----------------------------------------
(Street Address) Social Security or other Taxpayer
Identification Number
- ------------------------------------
(City, State and Zip Code)
Signature Guarantee:
- ------------------------------------
[Signatures must be guaranteed by an eligible Guarantor Institution (banks,
brokers, dealers, savings and loan associations and credit unions) with
membership in an approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15 if shares are to be issued, or
Convertible Subordinated Notes are to be delivered, other than to and in the
name of the registered holder(s).]
A-10
<PAGE> 83
ASSIGNMENT FORM
If you the holder want to assign this Convertible Subordinated Note, fill
in the form below and have your signature guaranteed:
I or we assign and transfer this Convertible Subordinated Note to ______________
(Insert assignee's social security or tax ID number) ___________________________
________________________________________________________________
________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________________________ agent
to transfer this Convertible Subordinated Note on the books of the Company. The
agent may substitute another to act for him.
Date: ___________ Your Signature: __________________________________________
(Sign exactly as your name appears on the
other side of this Convertible
Subordinated Note)
Signature Guarantee: ___________________________________________________________
[Signatures must be guaranteed by an eligible Guarantor Institution (banks,
brokers, dealers, savings and loan associations and credit unions) with
membership in an approved signature guarantee medallion program pursuant to
Securities and Exchange Commission Rule 17Ad-15 if shares are to be issued, or
Convertible Subordinated Notes are to be delivered, other than to and in the
name of the registered holder(s).]
A-11
<PAGE> 84
OPTION OF HOLDER TO ELECT REPURCHASE
If you wish to have this Convertible Subordinated Note repurchased by the
Company pursuant to Section 4.06 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Convertible Subordinated Note
purchased by the Company pursuant to Section 4.06 of the Indenture, state the
amount (in multiples of $1,000): $________
Date: _____________ Your Signature: ________________________
(Sign exactly as your name appears on
the other side of this Convertible
Subordinated Note)
Signature Guarantee: ________________________________________
A-12
<PAGE> 85
TABLE OF CONTENTS
(CONTINUED)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 1 DEFINITIONS................................................................... 1
SECTION 1.01 Definitions................................................... 1
SECTION 1.02 Other Definitions............................................. 7
SECTION 1.03 Incorporation by Reference of Trust Indenture Act............. 8
SECTION 1.04 Rules of Construction......................................... 9
ARTICLE 2 THE CONVERTIBLE SUBORDINATED NOTES............................................ 9
SECTION 2.01 Form and Dating............................................... 9
SECTION 2.02 Execution and Authentication..................................10
SECTION 2.03 Registrar, Paying Agent and Conversion Agent..................10
SECTION 2.04 Paying Agent To Hold Money in Trust...........................11
SECTION 2.05 Holder Lists..................................................11
SECTION 2.06 Transfer and Exchange.........................................12
SECTION 2.07 Replacement Convertible Subordinated Notes....................13
SECTION 2.08 Outstanding Convertible Subordinated Notes....................14
SECTION 2.09 When Treasury Convertible Subordinated Notes Disregarded......14
SECTION 2.10 Temporary Convertible Subordinated Notes......................14
SECTION 2.11 Cancellation..................................................15
SECTION 2.12 Defaulted Interest............................................15
SECTION 2.13 CUSIP Number..................................................15
ARTICLE 3 REDEMPTION....................................................................16
SECTION 3.01 Optional Redemption.
SECTION 3.02 Notices to Trustee............................................16
SECTION 3.03 Selection of Convertible Subordinated Notes To Be Redeemed ...16
SECTION 3.04 Notice of Redemption..........................................17
SECTION 3.05 Effect of Notice of Redemption................................18
SECTION 3.06 Deposit of Redemption Price...................................19
SECTION 3.07 Convertible Subordinated Notes Redeemed in Part...............19
SECTION 3.08 Conversion Arrangement on Call for Redemption.................19
ARTICLE 4 COVENANTS.....................................................................20
SECTION 4.01 Payment of Convertible Subordinated Notes.....................20
SECTION 4.02 Commission Reports............................................21
SECTION 4.03 Compliance Certificate........................................21
</TABLE>
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<PAGE> 86
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 4.04 Maintenance of Office or Agency... ...........................21
SECTION 4.05 Continued Existence...........................................21
SECTION 4.06 Repurchase Upon Designated Event..............................22
SECTION 4.07 Appointments to Fill Vacancies in Trustee's Office............24
SECTION 4.08 Stay, Extension and Usury Laws................................24
ARTICLE 5 SUCCESSORS....................................................................25
SECTION 5.01 When the Company May Merge, Etc...............................25
SECTION 5.02 Successor Corporation Substituted.............................26
SECTION 5.03 Purchase Option on Change of Control..........................26
ARTICLE 6 DEFAULTS AND REMEDIES.........................................................27
SECTION 6.01 Events of Default.............................................27
SECTION 6.02 Acceleration..................................................29
SECTION 6.03 Other Remedies................................................29
SECTION 6.04 Waiver of Past Defaults.......................................30
SECTION 6.05 Control by Majority...........................................30
SECTION 6.06 Limitation on Suits...........................................30
SECTION 6.07 Rights of Holders To Receive Payment..........................31
SECTION 6.08 Collection Suit by Trustee....................................31
SECTION 6.09 Trustee May File Proofs of Claim..............................31
SECTION 6.10 Priorities....................................................32
SECTION 6.11 Undertaking for Costs.........................................32
ARTICLE 7 THE TRUSTEE...................................................................33
SECTION 7.01 Duties of the Trustee.........................................33
SECTION 7.02 Rights of the Trustee.........................................34
SECTION 7.03 Individual Rights of the Trustee..............................35
SECTION 7.04 Trustee's Disclaimer..........................................35
SECTION 7.05 Notice of Defaults............................................36
SECTION 7.06 Reports by the Trustee to Holders.............................36
SECTION 7.07 Compensation and Indemnity....................................36
SECTION 7.08 Replacement of the Trustee....................................37
SECTION 7.09 Successor Trustee by Merger, etc..............................39
SECTION 7.10 Eligibility, Disqualification.................................39
SECTION 7.11 Preferential Collection of Claims Against Company.............39
</TABLE>
ii
<PAGE> 87
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE.......................................39
SECTION 8.01 Discharge of Indenture........................................39
SECTION 8.02 Deposited Monies to be Held in Trust by Trustee...............40
SECTION 8.03 Paying Agent to Repay Monies Held.............................40
SECTION 8.04 Return of Unclaimed Monies....................................40
SECTION 8.05 Reinstatement.................................................41
ARTICLE 9 AMENDMENTS....................................................................41
SECTION 9.01 Without the Consent of Holders................................41
SECTION 9.02 With the Consent of Holders...................................42
SECTION 9.03 Compliance with the Trust Indenture Act.......................43
SECTION 9.04 Revocation and Effect of Consents.............................44
SECTION 9.05 Notation on or Exchange of Convertible Subordinated Notes.....44
SECTION 9.06 Trustee Protected.............................................45
ARTICLE 10 GENERAL PROVISIONS...........................................................45
SECTION 10.01 Trust Indenture Act Controls..................................45
SECTION 10.02 Notices.......................................................45
SECTION 10.03 Communication by Holders With Other Holders...................46
SECTION 10.04 Certificate and Opinion as to Conditions Precedent............46
SECTION 10.05 Statements Required in Certificate or Opinion.................46
SECTION 10.06 Rules by Trustee and Agents...................................47
SECTION 10.07 Legal Holidays................................................47
SECTION 10.08 No Recourse Against Others....................................48
SECTION 10.09 Counterparts..................................................48
SECTION 10.10 Other Provisions..............................................48
SECTION 10.11 Governing Law.................................................49
SECTION 10.12 No Adverse Interpretation of Other Agreements.................49
SECTION 10.13 Successors....................................................49
SECTION 10.14 Severability..................................................49
SECTION 10.15 Table of Contents, Headings, Etc..............................49
ARTICLE 11 SUBORDINATION ...............................................................50
SECTION 11.01 Agreement to Subordinate......................................50
</TABLE>
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<PAGE> 88
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 11.02 Liquidation; Dissolution; Bankruptcy..........................50
SECTION 11.03 Default on Senior Debt and/or Designated Senior Debt..........51
SECTION 11.04 Acceleration of Convertible Subordinated Notes................52
SECTION 11.05 When Distribution Must Be Paid Over...........................52
SECTION 11.06 Notice by Company.............................................53
SECTION 11.07 Subrogation...................................................53
SECTION 11.08 Relative Rights...............................................53
SECTION 11.09 Subordination May Not Be Impaired by Company..................54
SECTION 11.10 Distribution or Notice to Representative......................54
SECTION 11.11 Rights of Trustee and Paying Agent............................54
SECTION 11.12 Authorization to Effect Subordination.........................54
SECTION 11.13 Article Applicable to Paying Agents...........................55
SECTION 11.14 Senior Debt Entitled to Rely..................................55
ARTICLE 12 CONVERSION OF CONVERTIBLE SUBORDINATED NOTES.................................56
SECTION 12.01 Right to Convert..............................................56
SECTION 12.02 Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends......56
SECTION 12.03 Cash Payments in Lieu of Fractional Shares....................58
SECTION 12.04 Conversion Price..............................................58
SECTION 12.05 Adjustment of Conversion Price................................58
SECTION 12.06 Effect of Reclassification, Consolidation, Merger or Sale.....67
SECTION 12.07 Taxes on Shares Issued........................................69
SECTION 12.08 Reservation of Shares; Shares to Be Fully Paid; Listing of
Common Stock..................................................69
SECTION 12.09 Responsibility of Trustee.....................................69
SECTION 12.10 Notice to Holders Prior to Certain Actions....................70
</TABLE>
iv
<PAGE> 89
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
310(a)(1)..............................................................7.10
(a)(2)...........................................................7.11
(a)(3)...........................................................N.A.
(a)(4)...........................................................N.A.
(b).................................................7.08, 7.10, 10.02
(c)..............................................................N.A.
311(a).................................................................7.11
(b)..............................................................7.11
(c)..............................................................N.A.
312(a).................................................................2.05
(b).............................................................10.03
(c).............................................................10.03
313(a).................................................................7.06
(b)(1)...........................................................N.A.
(b)(2)...........................................................7.06
(c).......................................................7.06, 10.02
(d)..............................................................7.06
314(a)..........................................................4.01, 10.02
(b)..............................................................N.A.
(c)(1)..........................................................10.04
(c)(2)..........................................................10.04
(c)(3)...........................................................N.A.
(d)..............................................................N.A.
(e).............................................................10.05
(f)..............................................................N.A.
315(a)..............................................................7.01(b)
(b).......................................................7.05, 10.02
(c)...........................................................7.01(a)
(d)...........................................................7.01(c)
(e)..............................................................6.11
316(a)(last sentence)..................................................2.09
(a)(1)(A)........................................................6.05
(a)(2)(B)........................................................6.04
(a)(2)...........................................................N.A.
(b)..............................................................6.02
317(a)(1)..............................................................6.08
(a)(2)...........................................................6.09
(b)..............................................................2.04
</TABLE>
N.A. means not applicable.
- ----------
*This Cross-Reference Table is not part of the Indenture.
v
<PAGE> 1
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is made as of this ___day
of _____, 1997 by and between Amkor Technology, Inc., a Delaware corporation
(the "COMPANY"), and _________________ ("INDEMNITEE").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty
in obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director, by reason of the fact that Indemnitee is or was a director
or officer of the Corporation or by reason of the fact that Indemnitee is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
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
Indemnitee in connection with such action or proceeding if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe Indemnitee's conduct
was unlawful. The termination of any action 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 (i) Indemnitee did not act in
good faith and in a manner which Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Company, or (ii) with respect to any
criminal action or proceeding, Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful.
<PAGE> 2
(b) Proceedings By or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding by
or in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement, in each case to the extent
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or proceeding if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the Company, and its stockholders, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Company in the performance of
Indemnitee's duty to the Company and its stockholders unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced in
Section 1(a) or (b) hereof (but not amounts actually paid in settlement of any
such action or proceeding, which shall be governed by Section 1(a)). Indemnitee
hereby undertakes to repay such amounts advanced only if, and to the extent
that, it shall ultimately be determined that Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to Indemnitee within twenty (20) days
following delivery of a written request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement, provided however, that a delay in giving such notice shall not
deprive Indemnitee of any right to be indemnified under this Agreement unless,
and then only to the extent that, such delay is materially prejudicial to the
defense of such claim. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). Notice shall be deemed received three business days after the
date postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
-2-
<PAGE> 3
(c) Procedure. Any indemnification provided for in Section 1
shall be made no later than forty-five (45) days after receipt of the written
request of Indemnitee. If a claim under this Agreement, under any statute, or
under any provision of the Company's Certificate of Incorporation or Bylaws
providing for indemnification, is not paid in full by the Company within
forty-five (45) days after a written request for payment thereof has first been
received by the Company, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 13 of this Agreement, Indemnitee shall also be entitled
to be paid for the expenses (including attorneys' fees) of bringing such action.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any action or
proceeding in advance of its final disposition) that Indemnitee has not met the
standards of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company, and Indemnitee shall be entitled
to receive interim payments of expenses pursuant to Subsection 2(a) unless and
until such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties' intention that if
the Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 2(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated under Section 2(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which approval
shall not be unreasonably withheld, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his counsel in any
such proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not, in fact, have employed counsel to assume
-3-
<PAGE> 4
the defense of such proceeding, then the fees and expenses of Indemnitee's
counsel shall be at the expense of the Company.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) Scope. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute or rule
which expands the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and Company's obligations, under this Agreement.
In the event of any change in any applicable law, statute or rule which narrows
the right of a Delaware corporation to indemnify a member of its Board of
Directors or an officer, such changes, to the extent not otherwise required by
such law, statute or rule to be applied to this Agreement shall have no effect
on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested directors, the General
Corporation Law of the State of Delaware, or otherwise, both as to action in
Indemnitee's official capacity and as to action in another capacity while
holding such office. The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
indemnified capacity even though he may have ceased to serve in such capacity at
the time of any action or other covered proceeding.
4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action or proceeding, but not, however, for the total amount there
of, the Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
5. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or applicable public policy
may prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the Company
has undertaken or may be required in the future to undertake with the Securities
and Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
6. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall,
from time to time, make the good faith determination whether or not it is
practicable for the Company to obtain
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<PAGE> 5
and maintain a policy or policies of insurance with reputable insurance
companies providing the officers and directors of the Company with coverage for
losses from wrongful acts, or to ensure the Company's performance of its
indemnification obligations under this Agreement. Among other considerations,
the Company will weigh the costs of obtaining such insurance coverage against
the protection afforded by such coverage. In all policies of directors' and
officers' liability insurance, Indemnitee shall be named as an insured in such a
manner as to provide Indemnitee the same rights and benefits as are accorded to
the most favorably insured of the Company's directors, if Indemnitee is a
director; or of the Company's officers, if Indemnitee is not a director of the
Company but is an officer. Notwithstanding the foregoing, the Company shall have
no obligation to obtain or maintain such insurance if the Company determines in
good faith that such insurance is not reasonably available, if the premium costs
for such insurance are disproportionate to the amount of coverage provided, if
the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the Company.
7. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Acts. To indemnify Indemnitee for any acts or
omissions or transactions from which a director may not be relieved of liability
under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors has approved the initiation or bringing of such suit; or
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
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<PAGE> 6
(d) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Company; or
(e) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits inuring to and recoverable by the Company
pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or
any similar successor statute.
9. EFFECTIVENESS OF AGREEMENT. To the extent that the
indemnification permitted under the terms of certain provisions of this
Agreement exceeds the scope of the indemnification provided for in the Delaware
General Corporation Law, such provisions shall not be effective unless and until
the Company's Certificate of Incorporation authorize such additional rights of
indemnification. In all other respects, the balance of this Agreement shall be
effective as of the date set forth on the first page and may apply to acts or
omissions of Indemnitee which occurred prior to such date if Indemnitee was an
officer, director, employee or other agent of the Company, or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, at the time
such act or omission occurred.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company"
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, officers, employees or
agents, so that if Indemnitee is or was a director, officer, employee 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, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
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.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
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12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of Delaware as
applied to contracts between Delaware residents entered into and to be performed
entirely within Delaware.
17. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
18. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in
this Agreement shall be construed as giving Indemnitee any right to be retained
in the employ of the Company or any of its subsidiaries or affiliated entities.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AMKOR TECHNOLOGY, INC.
By:
---------------------------------
Title:
------------------------------
Address:
AGREED TO AND ACCEPTED:
INDEMNITEE:
- ----------------------------------
Address:
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EXHIBIT 10.2
AMKOR TECHNOLOGY, INC.
1998 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
. to attract and retain the best available personnel for
positions of substantial responsibility,
. to provide additional incentive to Employees, Directors
and Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a committee of Directors appointed by
the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Amkor Technology, Inc., a Delaware
corporation.
(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "Director" means a member of the Board.
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(j) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
A Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between locations of
the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave
any Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
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(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the
Plan.
(s) "Option Agreement" means an agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(t) "Option Exchange Program" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1998 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or
Consultant.
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(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section
13 of the Plan, the maximum aggregate number of Shares which may be optioned
and sold under the Plan is 5,000,000 Shares, plus an annual increase to be
added on each anniversary date of the adoption of the Plan equal to the lesser
of (i) the number of Shares needed to restore the maximum aggregate number of
Shares which may be optioned and sold under the Plan to 5,000,000, or (ii) a
lesser amount determined by the Administrator. The Shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject
thereto shall become available for future grant or sale under the Plan (unless
the Plan has terminated); provided, however, that Shares that have actually
been issued under the Plan, whether upon exercise of an Option or Right, shall
not be returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares of Restricted Stock are
repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of
Service Providers.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted
hereunder as "performance-based compensation" within the meaning of Section
162(m) of the Code, the Plan shall be administered by a Committee of two or
more "outside directors" within the meaning of Section 162(m) of the Code.
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<PAGE> 5
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee,
which committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock
to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or
Stock Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
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<PAGE> 6
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options
longer than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The
Fair Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form
and under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
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<PAGE> 7
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 2,000,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
2,000,000 Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 13.
(iv) If an Option is cancelled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 15 of the
Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided
in the Option Agreement. Moreover, in the case of an Incentive Stock Option
granted to an Optionee who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Option
Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by
the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of grant.
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<PAGE> 8
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied before
the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant.
Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
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(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the
Plan and at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during
any unpaid leave of absence. An Option may not be exercised for a fraction of
a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii)
full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and his
or her spouse. Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will be made for
a dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period
of time as is specified in the Option Agreement to the extent that the Option
is vested on the date of termination (but in no event later than the expiration
of the term of such Option as set forth in the Option Agreement). In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert
to the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as
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<PAGE> 10
is specified in the Option Agreement to the extent the Option is vested on
the date of termination (but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered
by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is
specified in the Option Agreement (but in no event later than the expiration of
the term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the
person(s) entitled to exercise the Option under the Optionee's will or the laws
of descent or distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares an Option previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to
be paid, and the time within which the offeree must accept such offer. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement
in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by
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<PAGE> 11
cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 13 of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or distribution and
may be exercised, during the lifetime of the Optionee, only by the Optionee.
If the Administrator makes an Option or Stock Purchase Right transferable, such
Option or Stock Purchase Right shall contain such additional terms and
conditions as the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option and Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options or Stock Purchase Rights have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an
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<PAGE> 12
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option or Stock Purchase
Right shall lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Option or Stock Purchase Right
will terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the Optioned
Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully vested
and exercisable for a period of fifteen (15) days from the date of such notice,
and the Option or Stock Purchase Right shall terminate upon the expiration of
such period. For the purposes of this paragraph, the Option or Stock Purchase
Right shall be considered assumed if, following the merger or sale of assets,
the option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. Amendment and Termination of the Plan.
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<PAGE> 13
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of
any Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may require the
person exercising such Option or Stock Purchase Right to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
17. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
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<PAGE> 14
1998 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[OPTIONEE'S NAME AND ADDRESS]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
[25% OF THE SHARES SUBJECT TO THE OPTION SHALL VEST TWELVE MONTHS AFTER
THE VESTING COMMENCEMENT DATE, AND 1/48 OF THE SHARES SUBJECT TO THE OPTION
SHALL VEST EACH MONTH THEREAFTER, SUBJECT TO THE OPTIONEE CONTINUING TO BE A
SERVICE PROVIDER ON SUCH DATES].
<PAGE> 15
Termination Period:
This Option may be exercised for 30 days after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for one year after Optionee ceases to be a Service Provider.
In no event shall this Option be exercised later than the Term/Expiration Date
as provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share
set forth in the Notice of Grant (the "Exercise Price"), subject to the terms
and conditions of the Plan, which is incorporated herein by reference. Subject
to Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A (the
"Exercise Notice"), which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised (the
"Exercised Shares"), and such other representations and agreements as may be
required by the Company pursuant to the provisions of the Plan. The Exercise
Notice shall be completed by the Optionee and delivered to [TITLE] of the
Company. The Exercise Notice shall be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares. This Option shall be deemed to be
exercised upon receipt by the Company of such fully executed Exercise Notice
accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
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<PAGE> 16
3. Method of Payment. Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of the Plan and this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
5. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating
to this Option, as of the date of this Option, are set forth below. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
If the Optionee is an Employee or a former Employee, the Company will be
required to withhold from his or her compensation or collect from Optionee and
pay to the applicable taxing authorities an amount in cash equal to a
percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.
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<PAGE> 17
(ii) Incentive Stock Option. If this Option qualifies
as an ISO, the Optionee will have no regular federal income tax liability upon
its exercise, although the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price
will be treated as an adjustment to alternative minimum taxable income for
federal tax purposes and may subject the Optionee to alternative minimum tax in
the year of exercise. In the event that the Optionee ceases to be an Employee
but remains a Service Provider, any Incentive Stock Option of the Optionee that
remains unexercised shall cease to qualify as an Incentive Stock Option and
will be treated for tax purposes as a Nonstatutory Stock Option on the date
three (3) months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at
least one year after exercise and two years after the grant date, any gain
realized on disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes. If the Optionee disposes of ISO Shares within
one year after exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the lesser of (A) the
difference between the Fair Market Value of the Shares acquired on the date of
exercise and the aggregate Exercise Price, or (B) the difference between the
sale price of such Shares and the aggregate Exercise Price. Any additional
gain will be taxed as capital gain, short-term or long-term depending on the
period that the ISO Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein
by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of Delaware.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT
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<PAGE> 18
THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED
AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT
ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee
has reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
relating to the Plan and Option Agreement. Optionee further agrees to notify
the Company upon any change in the residence address indicated below.
OPTIONEE: AMKOR TECHNOLOGY, INC.
- -------------------------------- -----------------------------------
Signature By
- -------------------------------- -----------------------------------
Print Name Title
- --------------------------------
Residence Address
- ---------------------------------
-5-
<PAGE> 19
EXHIBIT A
1998 STOCK PLAN
EXERCISE NOTICE
AMKOR TECHNOLOGY, INC.
Goshen Corporate Park
1345 Enterprise Drive
West Chester, PA 19380
Attention: [TITLE]
1. Exercise of Option. Effective as of today, ________________,
199__, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of AMKOR TECHNOLOGY, INC. (the
"Company") under and pursuant to the 1998 Stock Plan (the "Plan") and the Stock
Option Agreement dated _____________, 19___ (the "Option Agreement"). The
purchase price for the Shares shall be $_____________, as required by the
Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company
the full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date of issuance, except as provided in Section 13
of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted
with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all
<PAGE> 20
prior undertakings and agreements of the Company and Purchaser with respect to
the subject matter hereof, and may not be modified adversely to the Purchaser's
interest except by means of a writing signed by the Company and Purchaser.
This agreement is governed by the internal substantive laws, but not the choice
of law rules, of Delaware.
Submitted by: Accepted by:
PURCHASER: AMKOR TECHNOLOGY, INC.
- ------------------------------ -----------------------------------
Signature By
- ------------------------------ -----------------------------------
Print Name Its
Address: Address:
- ------------------------------- Amkor Technology, Inc.
- ------------------------------- Goshen Corporate Park
1345 Enterprise Drive
West Chester, PA 19380
----------------------------------
Date Received
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<PAGE> 1
EXHIBIT 10.4
S CORPORATION TERMINATION, TAX ALLOCATION
AND INDEMNIFICATION AGREEMENT
This S CORPORATION TERMINATION, TAX ALLOCATION AND INDEMNIFICATION
AGREEMENT (the "Agreement"), between Amkor Technology, Inc., a Delaware
corporation ("ATI"), Amkor Electronics, Inc., a Pennsylvania corporation ("AEI",
ATI and AEI are collectively referred to the "Company"), and James J. Kim, the
David D. Kim Trust of December 31, 1987, the John T. Kim Trust of December 31,
1987, and the Susan Y. Kim Trust of December 31, 1987 (each such person or
entity, a "Shareholder," and such person and all such entities, collectively,
the "Shareholders") (the Company and the Shareholders are hereinafter referred
to individually as a "party" and collectively as the "parties").
WHEREAS, AEI is an S corporation, as defined in Section 1361(a) of the
Code (as hereinafter defined) and will continue to be an S corporation until the
Termination Date (as hereinafter defined); and
WHEREAS, AEI will be merged with and into ATI pursuant to a
reincorporation of AEI into Delaware in a tax free reorganization; and
WHEREAS, the Shareholders own capital stock of the Company; and
WHEREAS, it is anticipated that ATI will close an underwritten initial
public offering of its common stock (the "Public Offering"); and
WHEREAS, in connection with the Public Offering, it is anticipated that
AEI will distribute to the Shareholders an amount which represents AEI's
cumulative net income in all prior periods while it was an S corporation, less
the amount of distributions previously made to the Shareholders; and
WHEREAS, prior to the merger of AEI with and into ATI, the Shareholders
and the Company wish to revoke AEI's status as an S Corporation; and
WHEREAS, the Shareholders and the Company wish to enter into an
agreement as to the termination of AEI's status as an S corporation, the method
used to allocate AEI's income during its S Termination Year (as hereinafter
defined) pursuant to Code Section 1362(e)(3), and the indemnification of the
Company and the Shareholders with respect to certain tax matters.
NOW, THEREFORE, the parties agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms, as used herein, have the following
meanings:
"C Short Year" means the portion of the S Termination Year of the
Company beginning on the Termination Date and ending on December 31, 1998.
"Code" means the Internal Revenue Code of 1986, as amended, and, in
the context of a state or local tax, a reference to the Code or a section of the
Code includes any similar applicable provision of state or local law.
"Excess Distributions" means the excess of cash or property
distributions by the Company to a Shareholder over the federal and state income
taxes paid by the Shareholder with respect to the taxable income of the Company
for all periods during which the Company has been an S corporation, including
the S Short Year.
"S Short Year" means that portion of the S Termination Year of the
Company beginning on January 1, 1998, and ending on the day before the
Termination Date.
"S Termination Year" means the Company's fiscal year beginning
January 1, 1998.
"Taxes" means all taxes, however denominated, including any
interest, penalties or additions to tax that may become payable in respect
therewith, imposed by any federal, state, local or foreign government or any
agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income, payroll
and employee withholding, unemployment insurance, social security, sales and
use, excise, profits, value added, ad valorem, occupancy, disability, franchise,
gross receipts, environmental, occupation, real and personal property, stamp,
transfer, license, net worth, real property gains, capital, worker's
compensation taxes.
"Tax Benefit" shall mean (i) with respect to a Shareholder the
amount of the Tax savings resulting from a decrease in that Shareholder's
allocable share of S Corporation taxable income if and to the extent that
decrease results in an increase (or would result in an increase absent a net
operating loss) in the Tax liability of the Company, and (ii) with respect to
the Company the amount of the Tax savings resulting from a decrease in its
taxable income if and to the extent that decrease results in an increase in the
Tax liability of a Shareholder attributable to that Shareholder's allocable
share of S Corporation taxable income.
"Tax Returns" means all reports, estimates, information statements
and returns relating to, or required to be filed in connection with, any Taxes.
2
<PAGE> 3
"Termination Date" means the date on which S corporation status of
AEI is terminated as a result of revocation of such status in accordance with
Section 1362(d)(1) of the Code or otherwise.
ARTICLE II
TERMINATION
2.1 TERMINATION OF S STATUS. AEI's S corporation status shall be
terminated as a result of revocation of such status pursuant to Section
1362(d)(1) of the Code. The Company agrees to execute and file with the Internal
Revenue Service an executed election in substantially the form attached hereto
to as Exhibit A, prior to the Termination Date. The termination of the AEI's S
corporation status shall be effective prior to (i) its reincorporation as ATI
and (ii) the closing of the Public Offering.
2.2 SHAREHOLDER CONSENT. Each Shareholder agrees to execute and deliver
to the Company an executed consent in substantially the form attached hereto to
as Exhibit B, prior to the Termination Date.
ARTICLE III
ALLOCATION OF INCOME
3.1 ALLOCATION ELECTION. The Company agrees to elect and the
Shareholders agree to consent, pursuant to Section 1362(e)(3) of the Code, to
allocate Tax items to its S Short Year and C Short Year pursuant to normal tax
accounting rules (the "closing of the books method") rather than by the pro rata
allocation method contained in Section 1362(e)(2) of the Code. The Company and
each of the Shareholders agree to take all necessary actions under Treasury
Regulation Section 1.1362-6 (or successor thereto) to cause such election and
consents and the revocation election and consents to be effective for federal
income tax purposes, including the execution and delivery, by the Shareholders
to the Company of a consent in substantially the form attached hereto as Exhibit
C, prior to the Termination Date. Additionally, the Company agrees to execute
and attach to its Tax Return filed with the Internal Revenue Service an executed
election in substantially the form attached hereto to as Exhibit D.
ARTICLE IV
TAX RETURNS AND INDEMNIFICATION
4.1 FILING TAX RETURN FOR THE TERMINATION YEAR. The Company shall be
responsible for and shall effect the filing of all Tax Returns required to be
filed by the Company with respect to all taxable periods ending prior to, with
or within the Termination Year. The Company shall cause such returns to include
the Company's income from all sources for all periods covered by such returns.
3
<PAGE> 4
4.2 SHAREHOLDER INDEMNIFICATION FOR TAX LIABILITIES. Except with respect
to any tax jurisdiction that does not recognize S corporations as pass-through
entities and to the extent any tax jurisdiction either (i) does not accord S
corporation tax treatment to nonresident shareholders or (ii) requires an S
corporation to make an affirmative election to be treated as an S corporation
and the Company does not make such an election, each Shareholder, severally
(according to the percentage of the outstanding shares of the Company's common
stock owned by such Shareholder for the year in question) and not jointly,
hereby indemnifies and agrees to hold the Company harmless from, against and in
respect for any U.S. federal or state income Tax liability (including interest
and penalties), if any, resulting from the Company failing to qualify as an S
corporation under Code Section 1361(a)(1) (as enacted and in effect prior to the
Termination Date), pursuant to a final determination by the applicable taxing
authority, for every taxable year on or before the Termination Date as to which
the Company filed or files Tax Returns claiming status as an S corporation,
provided, however, that the total payments to be made by a Shareholder pursuant
to this Section 4.2 shall not exceed the Excess Distributions received by the
Shareholder with respect to all taxable years in which such Shareholder was a
Shareholder.
4.3 COMPANY INDEMNIFICATION FOR TAX LIABILITIES. Except with respect to
any tax jurisdiction that does not recognize S corporations as pass-through
entities and to the extent any tax jurisdiction either (i) does not accord S
corporation tax treatment to nonresident shareholders or (ii) requires an S
corporation to make an affirmative election to be treated as an S corporation
and the Company does not make such an election, the Company hereby indemnifies
and agrees to hold each Shareholder harmless from, against and in respect for,
on an after-tax basis, any U.S. federal or state income Tax liability (including
interest and penalties), if any, resulting from such Shareholder being required
to include in income, pursuant to a final determination by the applicable taxing
authority, amounts in excess of the income shown to be reportable by such
shareholder on the Tax Returns of the Company as originally filed for every
taxable year on or before the Termination Date as to which the Company filed or
files Tax Returns claiming status as an S corporation; provided, however, that
any indemnification and hold harmless hereunder shall be limited to the amount
of cash or the value of property actually received by the Company from another
party (or deemed received by the Company in the case of another entity actually
owned, directly or indirectly, by the Company) connected to the event giving
rise to such requirement to include additional amounts in a Shareholder's
income.
4.4 INDEMNIFICATION FOR TIMING DIFFERENCES. The Company and each of the
Shareholders hereby agree to pay to the other party the amount of any Tax
Benefit (as defined above) resulting from a final determination of an adjustment
(by reason of an amended return, claim for refund, audit or otherwise) with
respect to such parties' federal or state Tax liability.
4.5 AUDIT AND CONTEST RIGHTS. The parties hereto shall cooperate with
each other in the conduct of any audit or other proceeding relating to Taxes.
Within ten (10) days of the notice of any proposed or threatened adjustment
which could give rise to a claim for indemnification under Section 4.2, 4.3, or
4.4, the Company shall notify the Shareholders or a Shareholder shall notify the
Company thereof. The Shareholders shall have the right to control any resulting
proceedings and to determine when, whether and to what extent to settle any such
claim, assessment or dispute which would give rise to a claim for
indemnification under Section 4.2 or
4
<PAGE> 5
4.4. The Company shall have the right to control any resulting proceedings and
to determine when, whether and to what extent to settle any such claim,
assessment or dispute which would give rise to a claim for indemnification under
Section 4.3 or 4.4. A party hereto shall not make any election, take any Tax
Return position, or agree to any adjustment or adjustments that would have the
effect of increasing any Tax liability with respect to any period ending on or
before the Termination Date without obtaining the prior written consent of the
other party. Each party agrees to execute any powers of attorney or other
documents necessary to permit the appropriate party to conduct such proceedings.
4.6 PAYMENTS. A party required to make any payment under Section 4.2,
4.3 or 4.4 shall make such payment within thirty (30) days after the final
determination (as such term is defined in Section 1313(a) of the Code) of any
Tax liability resulting in a claim for indemnification.
ARTICLE V
MISCELLANEOUS
5.1 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute an instrument representing the
Agreement between the parties hereto.
5.2 CONSTRUCTION OF TERMS. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, form or
corporation, other than the parties hereto or their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
5.3 GOVERNING LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the
substantive laws of the Commonwealth of Pennsylvania without regard to
Pennsylvania choice of law rules.
5.4 AMENDMENT AND MODIFICATION. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, nor is this Agreement intended to confer upon any other person except
the parties any rights or remedies hereunder.
5.5 INTERPRETATION. The title, article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
5.6 SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be held to illegal, invalid and unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and
5
<PAGE> 6
the parties shall use their best efforts to replace such illegal, invalid or
unenforceable provisions with an enforceable provision approximating, to the
extent possible, the original intent of the parties.
5.7 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter constrained
herein. There are no representations, promises, warranties, covenants, or
undertakings with respect to the subject matter contained herein, other than
those expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
5.8 EFFECTIVE DATE. This Agreement shall become effective on the
Termination Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ___ day of __________, 1998.
AMKOR TECHNOLOGY, INC., A DELAWARE CORPORATION
By:_______________________________ By:___________________________________
Title: President Title: Secretary
AMKOR ELECTRONICS, INC., A PENNSYLVANIA CORPORATION
By:_______________________________ By:___________________________________
Title: President Title: Secretary
SHAREHOLDERS:
__________________________________ ______________________________________
James J. Kim the David D. Kim Trust of
December 31, 1987
__________________________________ ______________________________________
the John T. Kim Trust of the Susan Y. Kim Trust of
December 31, 1987 December 31, 1987
6
<PAGE> 7
EXHIBIT A
STATEMENT OF REVOCATION OF ELECTION
Internal Revenue Service Center
{Address}
RE: Amkor Technology, Inc., a Delaware corporation
EIN 23-2925614
Revocation of S Corporation Election
The S corporation election under IRC Section 1362(a) of Amkor
Technology, Inc., a Delaware corporation, with its principal office located at
1345 Enterprise Drive, West Chester, Pennsylvania 19380, is hereby revoked as of
(DATE). At the time of revocation, the number of shares (issued and outstanding)
of Amkor Technology, Inc. stock, including nonvoting stock, is (NUMBER).
Attached are the consents to the revocation by shareholders owning more
than one-half of the issued and outstanding shares.
AMKOR TECHNOLOGY, INC., A DELAWARE CORPORATION
By:___________________________
Title: President
Date:_________________________
Attachment
{All revocations and consents should be mailed to the IRS certified mail return
receipt requested.}
7
<PAGE> 8
EXHIBIT B
SHAREHOLDERS' STATEMENT OF CONSENT TO REVOCATION OF ELECTION
We, the undersigned, being shareholders of Amkor Technology, Inc., a
Delaware corporation ("ATI") holding more than one-half of ATI's issued and
outstanding shares (including nonvoting stock), do hereby consent to the
revocation by ATI of its S corporation election under IRC Section 1362(a). The
revocation is to be effective as of __________ 1998.
Under penalties of perjury, the undersigned declare that the facts
presented in the accompanying statement are, to the best of our knowledge and
belief, true, correct, and complete.
<TABLE>
<CAPTION>
Social Security Date
Name and or Employer Number of Acquired Tax Year End
Address Identification Shares Per Regs. (Month & Day)
Number Owned 1.1362-6(b)(1)
<S> <C> <C> <C> <C>
James J. Kim ________________ __________ ___________
1345 Enterprise Drive
West Chester, PA 19301
the David D. Kim Trust
of December 31, 1987 ________________ __________ ___________
1500 E. Lancaster Avenue
Paoli, PA 19301
the John T. Kim Trust
of December 31, 1987 ________________ __________ ___________
1500 E. Lancaster Avenue
Paoli, PA 19301
the Susan Y. Kim Trust
of December 31, 1987 ________________ __________ ___________
1500 E. Lancaster Avenue
Paoli, PA 19301
</TABLE>
______________________________ ______________________________________
Signature Signature
______________________________ ______________________________________
Signature Signature
8
<PAGE> 9
Dated:______________, 1998
{All election and consents should be mailed to the IRS certified mail return
receipt requested.}
9
<PAGE> 10
EXHIBIT C
SHAREHOLDER CONSENT
RE: Amkor Technology, Inc., a Delaware corporation
EIN 23-2925614
SHAREHOLDER NAME:_______________________________
SHAREHOLDER ADDRESS:____________________________
____________________________
____________________________
____________________________
TAXPAYER IDENTIFICATION NUMBER:_________________
NUMBER OF SHARES:_______________________________
DATE OR DATES SHARES ACQUIRED:__________________
__________________
DATE SHAREHOLDER'S TAX YEAR ENDS:_______________
THE UNDERSIGNED HEREBY CONSENTS TO THE ELECTION OF AMKOR TECHNOLOGY, INC., A
DELAWARE CORPORATION TO ALLOCATE THE TAXABLE INCOME OF THE CORPORATION FOR THE S
TERMINATION YEAR AS PROVIDED BY SECTION 1362(e)(3) OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED.
This consent is executed by the undersigned under penalties of perjury.
Date:____________________________ Signature:______________________________
Date:____________________________ Signature:______________________________
Note: Each person owning a community property, tenancy in common, joint tenancy,
or tenancy by the entirety interest must sign. Consent of minor must be by legal
representative or parent if no legal representative. Consent of qualifying trust
must be the person treated as shareholder under Section 1361(b)(1) of the Code.
10
<PAGE> 11
EXHIBIT D
ELECTION TO CLOSE BOOKS UPON S CORPORATION TERMINATION.
(Attach to Form 1120)
Amkor Technology, Inc., a Delaware corporation ("ATI"), EIN 23-2925614,
with the consent of all the shareholders of the short S year and all the
shareholders on the first day of the short C year (attached), elects under IRC
Section 1362(e)(3) not to have the pro rata allocation of S corporation items
under IRC Section 1362(e)(2) apply to the S termination year ending (Date). The
date of the ATI's termination was _______________, 1998 and the cause of
termination was an election to revoke its status as an S corporation.
AMKOR TECHNOLOGY, INC., A DELAWARE CORPORATION
By:______________________________
Title: President
Date:____________________________
Attachment
11
<PAGE> 1
EXHIBIT 10.16
AMKOR TECHNOLOGY, INC.
1998 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1998 Director Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means Amkor Technology, Inc., a Delaware
corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation
the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq
Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on
such exchange or system for the last market trading day prior to the
time of determination as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the
Fair Market Value of a Share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock for the last
market
<PAGE> 2
trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Board deems
reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(i) "Inside Director" means a Director who is an Employee.
(j) "Option" means a stock option granted pursuant to the
Plan.
(k) "Optioned Stock" means the Common Stock subject to an
Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an
Employee.
(n) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1998 Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section
10 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 300,000 Shares of Common Stock (the "Pool"). The Shares
may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
-2-
<PAGE> 3
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically
granted an Option to purchase 15,000 Shares (the "First Option") on the date on
which the later of the following events occurs: (A) the effective date of this
Plan, as determined in accordance with Section 6 hereof, or (B) the date on
which such person first becomes an Outside Director, whether through election by
the stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically
granted an Option to purchase 5,000 Shares on each date on which such person is
re-elected by the stockholders of the Company as an Outside Director; provided
that, as of such date, he or she shall have served on the Board for at least the
preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii)
and (iii) hereof, any exercise of an Option granted before the Company has
obtained stockholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such stockholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of each Option granted hereunder shall be
as follows:
(A) the term of the Option shall be ten (10)
years.
(B) the Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100%
of the Fair Market Value per Share on the date of grant of the Option. For
purposes of Options granted at the time of the effectiveness of this Plan
pursuant to Section 6 hereof the Fair Market Value shall be the initial price
to the Underwriters as set forth in the final prospectus included within the
registration statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(D) subject to Section 10 hereof, the Option
shall become exercisable as to one-third (1/3) of the Shares subject to the
Option on each anniversary of its date of grant, provided that the Optionee
continues to serve as a Director on such dates.
(vi) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the Board or the stockholders to increase the number of
Shares which may be issued under the Plan or through cancellation or expiration
of Options previously granted hereunder.
-3-
<PAGE> 4
5. Eligibility. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective on the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case
of Shares acquired upon exercise of an Option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iv) consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan, or (v) any combination of the foregoing
methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
-4-
<PAGE> 5
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination,
and only to the extent that the Optionee was entitled to exercise it on the date
of such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of such termination, and to the extent that the Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as
a Director terminates as a result of total and permanent disability (as defined
in Section 22(e)(3) of the Code), the Optionee may exercise his or her Option,
but only within twelve (12) months following the date of such termination, and
only to the extent that the Optionee was entitled to exercise it on the date of
such termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable
-5-
<PAGE> 6
pursuant to the automatic grant provisions of Section 4 hereof shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation or the sale of substantially all of the
assets of the Company, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or substituted
for, the Option or equivalent option shall continue to be exercisable as
provided in Section 4 hereof for so long as the Optionee serves as a Director or
a director of the Successor Corporation. Following such assumption or
substitution, if the Optionee's status as a Director or director of the
Successor Corporation, as applicable, is terminated other than upon a voluntary
resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of
-6-
<PAGE> 7
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger or sale of
assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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<PAGE> 8
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Stockholder Approval. The Plan shall be subject to approval by
the stockholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval shall be obtained in the degree and
manner required under applicable state and federal law and any stock exchange
rules.
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<PAGE> 9
AMKOR TECHNOLOGY, INC.
DIRECTOR OPTION AGREEMENT
Amkor Technology, Inc., a Delaware corporation (the "Company"), has
granted to ______________________________________ (the "Optionee"), an option to
purchase a total of [__________________ (_________)] shares of the Company's
Common Stock (the "Optioned Stock"), at the price determined as provided herein,
and in all respects subject to the terms, definitions and provisions of the
Company's 1998 Director Option Plan (the "Plan") adopted by the Company which is
incorporated herein by reference. The terms defined in the Plan shall have the
same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is
not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its
term in accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
(a) This Option shall become exercisable in
installments cumulatively with respect to one-third (1/3) of the Optioned Stock
one year after the date of grant, and as to an additional one-third (1/3) of
the Optioned Stock on each anniversary of the date of grant, so that one hundred
percent (100%) of the Optioned Stock shall be exercisable three years after the
date of grant; provided, however, that in no event shall any Option be
exercisable prior to the date the stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of
a share.
(c) In the event of Optionee's death, disability or
other termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such written
notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price.
4. Method of Payment. Payment of the exercise price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
<PAGE> 10
(i) cash;
(ii) check; or
(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Company and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten
(10) years from the date of grant of this Option, and may be exercised during
such period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the
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<PAGE> 11
date of exercise of the Option, to the extent not included in income as
described above, will be treated as capital gain or loss.
DATE OF GRANT: ______________
AMKOR TECHNOLOGY, INC.,
a Delaware corporation
By: ____________________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: ______________________
----------------------------------------
Optionee
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<PAGE> 12
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
Amkor Technology, Inc.
- -------------------------------
- -------------------------------
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Amkor Technology, Inc. (the "Company") under and pursuant to the
Company's 1998 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee
has received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company
the aggregate purchase price for the Shares that Optionee has elected to
purchase and has made provision for the payment of any federal or state
withholding taxes required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by
reference. This Exercise Notice and the Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the
<PAGE> 13
subject matter hereof. This Exercise Notice and the Agreement are governed by
Delaware law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: AMKOR TECHNOLOGY, INC.
_______________________________ By: ____________________________________
Its: ___________________________________
Address:
_______________________________
_______________________________
_______________________________
Dated: ________________________ Dated: _________________________________
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<PAGE> 1
EXHIBIT 10.17
AMKOR TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean AMKOR TECHNOLOGY, INC. and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time
gross earnings and commissions, but exclusive of payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary
which has been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an
Employee of the Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than five (5) months in
any calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each
Purchase Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day on the date of such
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(k) "Offering Periods" shall mean the periods of
approximately six (6) months during which an option granted pursuant to the Plan
may be exercised, commencing on the first Trading Day on or after dates of each
year to be determined by the Board and terminating on the last Trading Day in
the periods ending six (6) months later. The duration and timing of Offering
Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean each of the periods of
approximately six months duration in an Offering Period during which payroll
deductions shall be accumulated for Employees to be applied towards the
purchase of Common Stock at the end of each such period.
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<PAGE> 3
(o) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national
stock exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on
a given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other
person whose stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own capital stock of the Company and/or hold
outstanding options to purchase such stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of the capital stock
of the Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of the Company
and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the fair market value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by
consecutive, overlapping Offering Periods with a new Offering Period commencing
on the first Trading Day on or after dates of each year to be determined by the
Board, and continuing thereafter until terminated in accordance with Section 20
hereof. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without shareholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
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<PAGE> 4
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable,
unless sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made
on each pay day during the Offering Period in an amount not exceeding fifteen
percent (15%) of the Compensation which he or she receives on each pay day
during the Offering Period.
(b) All payroll deductions made for a participant shall
be credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her
participation in the Plan as provided in Section 10 hereof, or may increase or
decrease the rate of his or her payroll deductions during the Offering Period
by completing or filing with the Company a new subscription agreement
authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full payroll
period following five (5) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall
remain in effect for successive Offering Periods unless terminated as provided
in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock.
At any time, the
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<PAGE> 5
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable
withholding obligations, including any withholding required to make available
to the Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on each Exercise Date during such Offering Period
(at the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Employee be permitted to purchase during each Purchase
Period more than [30,000] shares of the Company's Common Stock (subject to any
adjustment pursuant to Section 19) on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof.
The option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares shall be purchased; any payroll
deductions accumulated in a participant's account which are not sufficient to
purchase a full share shall be retained in the participant's account for the
subsequent Purchase Period or Offering Period, subject to earlier withdrawal by
the participant as provided in Section 10 hereof. Any other monies left over
in a participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all
the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account shall be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall
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<PAGE> 6
not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period
shall not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any
reason, he or she shall be deemed to have elected to withdraw from the Plan and
the payroll deductions credited to such participant's account during the
Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall
be automatically terminated. The preceding sentence notwithstanding, a
participant who receives payment in lieu of notice of termination of employment
shall be treated as continuing to be an Employee for the participant's
customary number of hours per week of employment during the period in which the
participant is subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization
of the Company as provided in Section 19 hereof, the maximum number of shares
of the Company's Common Stock which shall be made available for sale under the
Plan shall be 1,000,000 shares, plus an annual increase to be added on each
anniversary date of the adoption of the Plan equal to the lesser of (i) the
number of shares needed to restore the maximum aggregate number of shares
available for sale under the Plan to 1,000,000, or (ii) a lesser amount
determined by the Board. If, on a given exercise date, the number of shares
with respect to which options are to be exercised exceeds the number of shares
then available under the Plan, the Company shall make a pro rata allocation of
the shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
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<PAGE> 7
(b) The participant shall have no interest or voting
right in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the
Plan shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
14. Administration. The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or
its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the
full extent permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to exercise of the option. If a participant is
married and the designated beneficiary is not the spouse, spousal consent shall
be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
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<PAGE> 8
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the Reserves, the maximum number of
shares each participant may purchase each Purchase Period (pursuant to Section
7), as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Exercise Date (the "New Exercise
Date"), and shall terminate immediately prior to the consummation of such
proposed dissolution or liquidation, unless provided otherwise by the Board.
The New Exercise Date shall be before the date of the Company's proposed
dissolution or liquidation. The Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
(c) Merger or Asset Sale. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
end on the New Exercise Date. The New Exercise Date shall be before the date
of the Company's proposed sale or merger. The Board shall notify each
participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participant's option
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<PAGE> 9
has been changed to the New Exercise Date and that the participant's option
shall be exercised automatically on the New Exercise Date, unless prior to such
date the participant has withdrawn from the Offering Period as provided in
Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section
19 hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its shareholders. Except as provided in
Section 19 hereof, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent
necessary to comply with Section 423 of the Code (or any successor rule or
provision or any other applicable law, regulation or stock exchange rule), the
Company shall obtain shareholder approval in such a manner and to such a degree
as required.
(b) Without shareholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the
Offering Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each participant properly correspond
with amounts withheld from the participant's Compensation, and establish such
other limitations or procedures as the Board (or its committee) determines in
its sole discretion advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are
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<PAGE> 10
being purchased only for investment and without any present intention to sell
or distribute such shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned applicable provisions
of law.
23. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the
extent permitted by any applicable laws, regulations, or stock exchange rules
if the Fair Market Value of the Common Stock on any Exercise Date in an
Offering Period is lower than the Fair Market Value of the Common Stock on the
Enrollment Date of such Offering Period, then all participants in such Offering
Period shall be automatically withdrawn from such Offering Period immediately
after the exercise of their option on such Exercise Date and automatically
re-enrolled in the immediately following Offering Period as of the first day
thereof.
-10-
<PAGE> 11
EXHIBIT A
AMKOR TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________________________ hereby elects to
participate in the AMKOR TECHNOLOGY, INC. 1998 Employee Stock Purchase
Plan (the "Employee Stock Purchase Plan") and subscribes to purchase
shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 0 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan.
I understand that my participation in the Employee Stock Purchase Plan
is in all respects subject to the terms of the Plan. I understand
that my ability to exercise the option under this Subscription
Agreement is subject to shareholder approval of the Employee Stock
Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
_______________________________________________________________________
________________.
6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day of
the Offering Period during which I purchased such shares) or one year
after the Exercise Date, I will be treated for federal income tax
purposes as having received ordinary income at the time of such
disposition in an amount equal to the excess of the fair market value
of the shares at the time such shares were purchased by me
<PAGE> 12
over the price which I paid for the shares. I hereby agree to notify
the Company in writing within 30 days after the date of any
disposition of my shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The Company may, but
will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of
Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year and 1-year holding periods, I understand that
I will be treated for federal income tax purposes as having received
income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to
the lesser of (1) the excess of the fair market value of the shares at
the time of such disposition over the purchase price which I paid for
the shares, or (2) 15% of the fair market value of the shares on the
first day of the Offering Period. The remainder of the gain, if any,
recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase
Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
_______________________________ _____________________________________________
Relationship
_____________________________________________
(Address)
-2-
<PAGE> 13
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
_______________________________________
Spouse's Signature (If beneficiary other
than spouse)
-3-
<PAGE> 14
EXHIBIT B
AMKOR TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the AMKOR
TECHNOLOGY, INC. 1998 Employee Stock Purchase Plan which began on ____________,
19____ (the "Enrollment Date") hereby notifies the Company that he or she
hereby withdraws from the Offering Period. He or she hereby directs the
Company to pay to the undersigned as promptly as practicable all the payroll
deductions credited to his or her account with respect to such Offering Period.
The undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to
participate in succeeding Offering Periods only by delivering to the Company a
new Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:____________________________
<PAGE> 1
EXHIBIT 10.19
PACKAGING & TEST SERVICES AGREEMENT
BY AND AMONG
AMKOR TECHNOLOGY, INC.
AMKOR ELECTRONICS, INC.
C.I.L. LIMITED
ANAM USA, INC.
AND
ANAM INDUSTRIAL CO., LTD.
JANUARY 1, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
Article I Purpose 3
Article II Definitions 4
Article III Marketing & Sales Services 5
Article IV Purchase Commitments & Forecasts 6
Article V Packaging Services 8
Article VI Specifications, Quality & Reliability 8
Article VII Electronic Data & Information Exchange 9
Article VIII Delivery & Risk of Loss 10
Article IX Pricing & Invoicing 10
Article X Packaging Services Warranty 11
Article XI Intellectual Property Warranty & Indemnifications 12
Article XII Intellectual Property Ownership & Licenses 13
Article XIII Research & Development & Technology Ownership 15
Article XIV Liability Limitations 15
Article XV Term 15
Article XVI Arbitration 16
Article XVII Miscellaneous 17
2
<PAGE> 3
PACKAGING AND TEST SERVICES AGREEMENT
This Packaging and Test Services Agreement ("Agreement") is made and
entered into this 1st day of January 1998 ("Effective Date") by and among Amkor
Technology, Inc., a corporation organized and existing under the laws of the
state of Delaware, with offices located at 1345 Enterprise Drive, West Chester,
Pennsylvania 19380; Amkor Electronics, Inc., a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania, with offices
located at 1345 Enterprise Drive, West Chester, Pennsylvania 19380; C.I.L.
Limited, a corporation organized and existing under the laws of the Cayman
Islands, with offices located at CIBC Building, Edward Street, Grand Cayman,
Cayman Islands; Anam USA, Inc., a corporation organized and existing under the
laws of the Commonwealth of Pennsylvania, with offices located at 1345
Enterprise Drive, West Chester, Pennsylvania 19380; and, Anam Industrial Co.,
Ltd., a corporation organized and existing under the laws of the Republic of
Korea, with offices located at 280-8 Sungsu 2-ga, Sungdong-ku, Seoul 133-120,
Korea ("Parties").
RECITALS
WHEREAS, Amkor Technology, Inc. ("ATI") is the parent corporation of,
among other legal entities, Amkor Electronics, Inc. ("Amkor") and C.I.L. Limited
("CIL"); and
WHEREAS, Anam Industrial Co., Ltd. ("AICL"), a publicly traded Korean
company, is engaged in the business, inter alia, of performing various
semiconductor packaging and test services and desires to market said services to
the semiconductor industry through Amkor and CIL; and
WHEREAS, Amkor and CIL are engaged in the business of marketing
subcontract packaging and test services to the semiconductor industry and desire
to purchase such services from AICL; and
WHEREAS, Anam USA, Inc. ("Anam USA"), a wholly-owned subsidiary of
AICL, is a trading company that will establish financing arrangements for AICL,
Amkor and CIL with respect to the services and transactions contemplated
hereunder.
NOW THEREFORE, in consideration for the mutual covenants and promises
contained herein and in reliance thereon, the Parties hereby agree as follows:
1. ARTICLE I - PURPOSE
The Parties hereto have enjoyed a well-established and synergistic
business relationship whereby Amkor and CIL and their respective
Affiliates have established numerous relationships with semiconductor
companies to provide integrated circuit packaging and test services. A
substantial portion of these services has been performed by AICL, who,
in turn, has relied on Amkor and CIL for their worldwide marketing and
sales capabilities.
The purpose of this Agreement is to establish a long-term arrangement
between the Parties to provide Packaging Services to the semiconductor
industry. The Parties believe that such a long-term relationship, under
the terms and conditions of this Agreement, is necessary to assure
their respective long-term profitability and growth and is in their
respective best interests.
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<PAGE> 4
2. ARTICLE II - DEFINITIONS
2.1 "Affiliate" of a Party shall mean an entity that is controlled
by such Party or by an entity controlling such Party. For the
purposes of the foregoing, "control" means ownership, directly
or indirectly, of at least fifty percent (50%) of the voting
stock of the controlled entity.
2.2 "Bankruptcy Event" shall mean any of the following events or
circumstances with respect to a Party: (i) such Party ceases
conducting its business in the normal course; (ii) becomes
insolvent or becomes unable to meet its obligations as they
become due; (iii) make a general assignment for the benefit of
its creditors; (iv) petitions, applies for, or suffers or
permits with or without its consent the appointment of a
custodian, receiver, trustee in bankruptcy or similar officer
for all or any substantial part of its business or assets; or
(v) avails itself or becomes subject to any proceeding under
the U.S. Bankruptcy Code or any similar state, federal or
foreign, including Korean, statute relating to bankruptcy,
insolvency, reorganization, receivership, arrangement,
adjustment of debts, dissolution or liquidation, which
proceeding is not dismissed within sixty (60) days of
commencement thereof.
2.3 "Customer" shall mean a third party with whom Amkor, CIL or
AICL, as the case may be, enters into a contractual
arrangement to provide Packaging Services.
2.4 "Die" shall mean the semiconductor wafers and/or die supplied
to AICL by Customers for the Packaging Services.
2.5 "Direct Material Costs" shall mean direct material costs
incurred in the performance of Packaging Services .
2.6 "Customer Contract" shall mean a contract (including the Amkor
or CIL Quotation) between Amkor or CIL, as the case may be,
and a Customer to provide Packaging Services to such Customer.
2.7 "Intellectual Property Rights" shall mean all rights in, to,
or arising out of: (i) any U.S., international or foreign
patent or any application therefor and any and all reissues,
divisions, continuations, renewals, extensions and
continuations-in-part thereof; (ii) inventions (whether
patentable or not in any country), invention disclosures,
improvements, trade secrets, proprietary information,
know-how, technology and technical data; (iii) copyrights,
copyright registrations, mask works, mask work registrations,
and applications therefor in the U.S. or any foreign country,
and all other rights corresponding thereto throughout the
world; and (iv) any other proprietary rights in or to
Technology anywhere in the world.
2.8 "Packaging Services" shall mean providing integrated circuit
assembly, packaging and test services, or related services by
AICL with respect to Customer Die .
2.9 "Products" shall mean integrated circuits assembled and/or
tested by AICL for Amkor, CIL or their respective Customers.
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<PAGE> 5
2.10 "Qualified Facilities" shall mean any of AICL's four (4)
Korean factories which are qualified to perform Packaging
Services for Customer Products pursuant to Customer
requirements, specifications and other similar criteria.
2.11 "Quotation" shall mean the written quotation provided by Amkor
or CIL to their Customers which contains the material terms of
agreement for Packaging Services.
2.12 "Technology" shall mean all technology, however embodied,
including all know-how, show-how, techniques, processes,
specifications, recipes, mask works, design rules, trade
secrets, inventions (whether or not patented or patentable),
algorithms, routines, software, net lists, files, databases,
works of authorship, devices and hardware.
2.13 "Term" shall mean the term of this Agreement as defined in
Section 15.1.
2.14 "Total Device Revenue" shall mean all amounts billed to
Customers by Amkor or CIL for Packaging Services including 1)
base price, 2) material and process adders, 3) gold/silver
adders, 4) fast track premiums, and 5) lot charges, but
excluding packing/shipping materials (i.e., trays) and
miscellaneous charges such as tooling and non-recurring
engineering costs.
3. ARTICLE III - MARKETING & SALES SERVICES
3.1 Amkor will provide Packaging Services to Customers that
principally are located in the United States. CIL will provide
Packaging Services to Customers that principally are located
outside of the United States excluding the Republic of Korea
which will be serviced directly by AICL.
3.2 Amkor and CIL, either directly or through their respective
Affiliates, will enter into Customer Contracts for Packaging
Services and, upon execution of same, will provide AICL with
the material terms and conditions thereof.
3.3 Amkor and CIL will use commercially reasonable efforts to
enter into Customer Contracts so as to maximize the
utilization of AICL's manufacturing capacity consistent with
the respective interests of the Parties, their respective
obligations under the Agreement, and the operational and
business requirements of the manufacturing and packaging
facilities of ATI's Affiliates. In furtherance of the
foregoing, Amkor's and CIL's responsibilities to AICL will
include using reasonable commercial efforts to:
3.3.1 actively and diligently market Packaging Services to
potential and existing Customers;
3.3.2 provide timely Forecasts (as defined below in Section
4.1) to permit AICL to efficiently plan its capacity
requirements; and
3.3.3 arrange through an Affiliate of ATI, Amkor-Anam,
Inc., for the supply to AICL of all direct materials
to enable AICL to package and test products in
accordance with the relevant Customer Contract.
5
<PAGE> 6
3.4 CIL will have the sole discretion to have Packaging Services
performed by any of (Subject to the purchase commitment
described in Article IV below, Amkor and i) the Affiliates of
ATI, (ii) third parties, or (iii) AICL.
4. ARTICLE IV - PURCHASE COMMITMENTS & FORECASTS
4.1 Amkor and CIL shall have the right of first refusal with
respect to substantially all of the utilization of AICL's
capacity subject to the terms herein. In order to facilitate
an orderly and equitable capacity reservation and allocation
process, Amkor, CIL, and AICL agree that Amkor will coordinate
the process for commitment and allocation of AICL's capacity
among the Customers based on a mutually agreed upon set of
rules for equitably reserving and allocating AICL's capacity
(the "Commitment & Allocation Policy"). Amkor, CIL and AICL
shall use commercially reasonable efforts to obtain each month
from their Customers a six-month rolling forecast of such
Customers' requirements ("Forecasts"). Updates to said
Forecasts shall be communicated to Amkor as demand changes are
received from the Customers.
4.2 AICL will provide Amkor and CIL, on a monthly basis, a
six-month rolling capacity plan ("Capacity Plan") by package,
for packaging services, and by test platform, for test
services. AICL will further provide a weekly notification to
Amkor and CIL of any changes in delivery schedules or
equipment ratings to the Capacity Plan since the last monthly
report. In order to facilitate AICL's capacity planning and
materials procurement services, Amkor and CIL will include
with their Forecasts to AICL their assessment of these
Forecasts. AICL will use the Customers' Forecasts and Amkor's
and CIL's assessment of these Forecasts only as a guide of
anticipated requirements, and such Forecasts and judgements
will not constitute a commitment by either (i) AICL to Amkor
or CIL, or (ii) by Amkor or CIL to AICL. Such Customer
Forecasts will not constitute a commitment by the Customers to
furnish Die for packaging or testing in amounts at least equal
to their respective Forecasts.
4.3 In addition to the Forecasts, Amkor, CIL and AICL will
annually prepare a sales projection by month and by package
for the upcoming fiscal year ("Annual Plan") in order to
facilitate AICL's longer-range capacity and space planning.
AICL will use the Annual Plan only as a guide to anticipated
requirements and such projections will not constitute a
commitment by either (i) AICL to Amkor or CIL, or (ii) by
Amkor or CIL to AICL.
4.4 Amkor and CIL will consult with AICL prior to making
commitments to its Customers with respect to processing
specifications or cycle time. AICL will be obligated to
process all Die received from Amkor's and CIL's Customers in
accordance with the processing and cycle time specifications
agreed to by Amkor and CIL and their Customers and in
accordance with the commitments of capacity made by Amkor and
CIL to their Customers.
4.5 Immediately upon receipt of each lot of Die from the Customers
at either AICL's bonded warehouse in Korea or Amkor's shipping
office in San Jose, California, AICL will provide an accurate,
firm ship date for the completed packaged and/or
6
<PAGE> 7
tested Products. For bulk Die receipts (i.e., Die shipments
from a given Customer for a given package that exceed the
current week's processing commitment as made by either Amkor
or CIL to the given Customer), AICL will immediately provide a
planned ship date for the quantity of Die exceeding the
current week's loading commitment. AICL shall commit that this
planned ship date will be considered a "not later than" ship
date by Amkor, CIL and the Customer.
4.6 In the event that Customers of Amkor or CIL send Die that has
not been Forecasted or committed to AICL ("Unforecasted Die")
for Packaging Services, AICL will be obligated to perform the
requested services within the agreed upon cycle time for those
Customers, provided that AICL's capacity and raw materials
inventory, at that point in time, on the line in question is
sufficient to satisfy the cycle time commitments for the Die
already awaiting production plus the Unforecasted Die, and
also provided that Amkor or CIL has engaged such Customers'
business as evidenced by a Customer Contract.
4.7 In the event that the volume of Customer Die awaiting
Packaging Services exceeds AICL's capacity or raw materials
inventory to process that Die within the cycle times agreed
upon with each Customer, Amkor shall manage AICL's capacity or
raw materials inventory among Amkor's, CIL's and AICL's
Customers in accordance with the Allocation Policy. For this
purpose, a packaging or test line is deemed to be "on
allocation" if the volume of Die in front of the line exceeds
one week's capacity on that line. Likewise, a particular raw
material component will be deemed to be "on allocation" if the
volume of Die requiring that particular component plus the
future loading commitments made that require that component
exceeds the current inventory plus the anticipated deliveries
of that component over the same time period.
4.8 [*]
4.9 Remediation for higher levels of capacity under-utilization
that persist for extended periods can be comprehended in the
quarterly contract price renegotiations between Amkor, CIL,
and AICL pursuant to this Agreement should all Parties agree
thereto. In the event that AICL adds capacity beyond the
levels suggested by the Customer Forecasts, Amkor's and CIL's
judgements of those Forecasts, and the Annual Plan, and such
capacity becomes unutilized, such unutilized capacity will not
be considered for possible remediation in the quarterly
contract price renegotiations between Amkor, CIL, and AICL.
Furthermore, in the event that persistently higher levels of
under-utilization of capacity result from AICL's failure to
procure sufficient supplies of raw materials, as suggested by
the Customer
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 8
Forecasts, such under-utilized capacity will likewise not be
considered for possible remediation.
5. ARTICLE V - PACKAGING SERVICES
5.1 AICL will provide Packaging Services to Amkor and CIL, or on
behalf of Amkor and CIL to their respective Customers. Such
services will be in conformity with the obligations of Amkor
and CIL to their respective Customers as set forth in the
relevant Customer Contract and will otherwise permit Amkor and
CIL to fulfill their respective Customer obligations.
5.2 In furtherance of the foregoing, AICL shall, among other
things, use its reasonable commercial efforts to:
5.2.1 maintain a coordinated tracking system capable of
identifying the status of Customer materials and Die
at any time;
5.2.2 participate with Amkor and CIL in compiling the
Annual Plan (as defined under Section 4.3) based on
annual demand as forecasted by Amkor and CIL and in
accordance with a worldwide management accounting
system to be prescribed by Amkor;
5.2.3 obtain, install and qualify required capacity
commensurate with demand as forecasted in the Annual
Plan, the six-month rolling Customer Forecasts (as
defined under Section 4.2) or such other level of
capacity as mutually agreed among Amkor, CIL and
AICL;
5.2.4 provide purchasing and custodial services for Amkor
and CIL regarding required direct materials and
tooling for Customer Contracts; and
5.2.5 engage in the R&D activities in cooperation with
Amkor, as set forth in Article XIII.
6. ARTICLE VI - SPECIFICATIONS, QUALITY & RELIABILITY
6.1 AICL shall manufacture and supply all Products to or on behalf
of Amkor and CIL in accordance with the specifications
provided to AICL by Amkor, CIL or their respective Customers.
6.2 Amkor and CIL reserve the right to modify the specifications
as may be required by technological enhancements, cost
considerations, market conditions, or other similar factors.
Any such modifications shall be submitted to AICL who shall
take immediate actions to incorporate such changes in the
applicable Products as soon as reasonably possible.
6.3 AICL will be responsible for meeting and maintaining quality
and reliability standards as reasonably specified by the
Customer Contracts.
6.4 AICL will perform Packaging Services only at Qualified
Facilities.
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<PAGE> 9
6.5 AICL will not implement Product changes and/or changes in
Product materials which may directly or indirectly impact
compliance with the Customer's specifications, unless such
changes have been approved by Amkor or CIL, as the case may
be.
7. ARTICLE VII - ELECTRONIC DATA & INFORMATION EXCHANGE
7.1 For purposes of satisfying Customer requirements and
optimizing the flow of business communications, Amkor, CIL,
AICL, and Customers will work jointly to effect the electronic
exchange of certain data and information as described below.
7.1.1 AICL will provide information from its internal
computer systems to Amkor and CIL, as agreed to by
Amkor, CIL, and AICL, to support Amkor's and CIL's
needs to perform certain functions including, but not
limited to, billing, lot tracking, product costing,
capacity commitments, order promising, annual and
long range planning, material planning, material
procurement and control, and quality tracking and
reporting.
7.1.2 Amkor and CIL will likewise provide information from
their internal computer systems to AICL to support
AICL's needs in certain areas including, but not
limited to, capacity planning, material procurement
services, and production scheduling.
7.1.3 Amkor, CIL, and AICL will work jointly to establish
and maintain an effectively linked electronic mail
system, communications network, data exchange
network, electronic document management and control
system, and workflow systems.
7.1.4 AICL will establish and maintain a FTP (File Transfer
Protocol) site and capability for the purpose of
receiving engineering, production, and other such
documents electronically from Amkor's and CIL's
Customers, and as a means for staging data required
by certain Customers.
7.1.5 AICL will provide Amkor's and CIL's Customers with
reports or other information directly, from time to
time, as deemed necessary by Amkor and CIL, or their
respective Customers, and in compliance with the
formats, means, and definitions prescribed by such
Customers.
7.1.6 When communicating information to Amkor and CIL or
their Customers, AICL will utilize definitions in
terms, data fields, and measurements as prescribed by
Amkor and CIL, or by Amkor's and CIL's Customers, as
the case may be.
7.1.7 AICL will provide Amkor and CIL with any necessary
information or assistance in meeting any Customers'
information exchange requirements that may directly
or indirectly affect AICL.
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<PAGE> 10
7.2 Amkor, CIL, and AICL agree to notify and gain approval from
the other Parties should such Party desire to implement any
changes or upgrades to the foregoing systems and networks that
could potentially have an impact on the other Parties. The
data and information contemplated above shall be subject to
the confidentiality agreement pursuant to Section 17.1 hereof.
8. ARTICLE VIII - DELIVERY & RISK OF LOSS
8.1 Amkor and CIL shall be responsible for ensuring the delivery
of Customer Die or wafers to AICL. All return shipments of
Products by AICL shall be made in accordance with the terms
specified in the applicable Customer Contract.
8.2 All Products shall be shipped in secure containers with
applicable labels identifying, as required, any Customer
specific Product numbering or lot number. Each shipment shall
also contain the agreed upon processing documentation such as
commercial invoices or bills of lading.
8.3 AICL shall be responsible for the safe storage and handling of
Customer Die or wafers while in its possession. The liability
of AICL in regard to any damage or loss to said Die or wafers
while in its possession shall be determined in accordance with
the applicable Customer Contract, and AICL shall indemnify
Amkor or CIL to the extent of their liability under said
Contract.
9. ARTICLE IX - PRICING & INVOICING
[*]
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 11
[*]
10. ARTICLE X - PACKAGING SERVICES WARRANTY
10.1 Warranty
AICL warrants, at a minimum, that its Packaging Services and
Products (excluding Customer supplied Die and wafers) shall be
in conformance with the specifications provided by Amkor, CIL
or their respective Customers and will be free from defects in
workmanship and materials. In addition, AICL shall adhere to
those warranties specified in any Customer Contracts, provided
that copies of said warranties were made available to AICL
prior to the performance of Packaging Services under such
Customer Contracts.
10.2 Remedy
Upon breach of any of the warranties made or referred to in
Section 10.1 above, AICL, at the sole option of Amkor or CIL,
shall either rework any nonconforming Product or issue a
credit for the amount of the associated Packaging Services.
Subject to Section 10.3 and Article XIV, AICL will indemnify,
defend, and hold harmless Amkor and CIL against all warranty
claims, settlement costs or damages arising out of AICL's
failure to comply with
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
11
<PAGE> 12
any warranties provided by Amkor or CIL under their respective
Customer Contracts.
10.3 Limitation
THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE IN LIEU OF ALL
OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, WARRANTIES AS TO MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT WILL ANY PARTY
BE LIABLE OR RESPONSIBLE FOR ANY CONSEQUENTIAL, INDIRECT,
INCIDENTAL, PUNITIVE OR SPECIAL DAMAGES ARISING OUT OF OR
RESULTING FROM THE PERFORMANCE OF ANY OBLIGATIONS HEREUNDER.
11. ARTICLE XI - INTELLECTUAL PROPERTY WARRANTY & INDEMNIFICATIONS
[*]
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 13
12. ARTICLE XII - INTELLECTUAL PROPERTY OWNERSHIP AND LICENSES
12.1 Intellectual Property Ownership
12.1.1 Except as set forth herein, this Agreement shall not
affect a Party's Intellectual Property Rights
existing prior to the Effective Date.
12.1.2 Each Party shall own all Intellectual Property Rights
in Technology created or invented by such Party's
employees, as determined in accordance with
principles of United States law.
12.1.3 Any Technology created or invented by the employees
of more than one Party, and all Intellectual Property
Rights therein, will be jointly owned by the Parties
that are the employers of such employees, as
determined in accordance with principles of United
States law. Such joint ownership will be without the
duty to account. Such Parties shall cooperate in the
enforcement of such jointly-owned Intellectual
Property Rights against third-party infringers.
12.2 Licenses
12.2.1 Amkor and CIL hereby grant to AICL and its Affiliates
a non-exclusive, non-sublicensable, perpetual,
worldwide, irrevocable license under all Intellectual
Property Rights that Amkor, CIL or any of their
Affiliates now or during the Term may hold or
acquire, and which they are free to license to third
parties without payment of any kind to (i) provide
Packaging Services, (ii) manufacture, use, sell and
import Products, and (iii) perform AICL's related
activities. Amkor, CIL and their Affiliates shall
disclose promptly to AICL any Technology to which
AICL would reasonably desire access in connection
with the performance of its obligations under this
Agreement, the provision of Packaging Services, or
the operation of its Packaging Services business.
12.2.2 AICL, on behalf of itself and its Affiliates, hereby
grants to Amkor, CIL and their Affiliates a
non-exclusive, fully sublicensable, perpetual,
worldwide, irrevocable license under all Intellectual
Property Rights that AICL or its Affiliates now or
during the Term may hold or acquire, and which they
are free to license to third parties without payment
of any kind to (i) provide Packaging Services, (ii)
have manufactured, use, sell and import Products, and
(iii) otherwise conduct activities related to the
Packaging Services. AICL shall disclose promptly to
Amkor, CIL and their Affiliates any Technology to
which Amkor and CIL would reasonably desire access in
order for Amkor, CIL and their Affiliates to operate
their Packaging Service businesses.
12.3 Intellectual Property Protection
12.3.1 The Parties shall cooperate to obtain patents,
copyright and mask work registrations, and other
intellectual property protection with respect to any
Technology developed by any of them related to
Packaging Services or resulting from any joint
development hereunder. In the case of
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jointly-owned Intellectual Property Rights, the
Parties shall equitably allocate the costs of
obtaining patent, copyright, mask work and other
protection for such Intellectual Property Rights
among themselves.
12.3.2 Notwithstanding the foregoing, each Party shall have
the right to file patent applications or copyright or
mask work registrations on any inventions made by, or
works authored by, its employees. Any patents or
registrations issuing from such applications shall be
exclusively owned by the Party that made such
application.
12.4 Third Party Licenses
In the event that a Party intends to license Technology from a
third party, it will endeavor to obtain a license on equal
terms for any of the other Parties and their Affiliates to the
extent that such other Parties and Affiliates would benefit
from such a license.
12.5 Enforcement of Intellectual Property
12.5.1 If a Party becomes aware that a third party is
infringing such Party's or any other Party's
Intellectual Property Rights, such Party shall
promptly notify the relevant other Parties thereof.
12.5.2 Where such Intellectual Property Rights are owned by
only one Party, such Party shall have the sole right
to determine whether or not to bring infringement or
unfair competition or related proceedings in
connection with any such infringement.
12.5.3 If such infringed Intellectual Property Rights are
owned by more than one Party, then within thirty (30)
days of receipt of such notice or otherwise becoming
aware of such infringement, such Parties shall
determine which of them, if any, shall bring an
infringement or unfair competition or related
proceedings in connection with such infringement. In
any event, all such parties shall cooperate in the
bringing of such action and, where required, join
such action. Any amount awarded with respect to any
proceeding shall be payable entirely to the Party or
Parties bringing such proceeding, unless otherwise
agreed by the Parties. Any disputes as to which Party
has the right to prosecute such proceeding, or as to
allocation of proceeds from such proceeding, shall be
settled by arbitration as provided in Article 16.
12.6 Use of AICL Trademarks
AICL hereby grants to Amkor and CIL and their respective
Affiliates the right to use AICL's and Anam USA's respective
corporate names, trademarks and service marks ("AICL
Trademarks") in connection with the promotion of AICL's
Packaging Services and otherwise in connection with Amkor's
and CIL's Packaging Service operations. Amkor and CIL and
their respective Affiliates shall observe all instructions and
directions provided to them by AICL or Anam USA regarding the
use of the AICL Trademarks. Amkor and CIL and
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their respective Affiliates shall not use the AICL Trademarks
in a manner that detracts from the goodwill associated with
such AICL Trademarks.
13. ARTICLE XIII - RESEARCH & DEVELOPMENT
13.1 Joint R&D Committee
Amkor, CIL and their Affiliates and AICL shall establish a
committee ("R&D Committee") to coordinate their respective
research and development activities and any joint research and
development projects. Amkor and AICL shall designate two (2)
individuals to serve on the R&D Committee. Such R&D Committee
shall meet from time to time during the Term, as it shall in
its discretion determine.
13.2 Coordination
13.2.1 Amkor, CIL and their Affiliates and AICL shall
collaborate in and coordinate their respective
research and development activities, as well as those
of their respective Affiliates, so as to foster the
development of new and improved technologies related
to Packaging Services.
13.2.2 Unless otherwise agreed or determined by the R&D
Committee, (i) Amkor, CIL and their Affiliates will
have primary responsibility for developing new and
advanced packaging designs and technologies; and (ii)
AICL and its Affiliates will have primary
responsibility for developing new and advanced
technologies for packaging and test processes,
methods and systems.
13.3 Funding
Unless specifically agreed in writing to the contrary, Amkor,
CIL and their Affiliates and AICL will fund their own (and
their respective Affiliates') research and development
efforts.
14. ARTICLE XIV - LIABILITY LIMITATIONS
14.1 Exclusion of Damages
EXCEPT AS PROVIDED IN ARTICLE 11, IN NO EVENT SHALL ANY PARTY
BE LIABLE TO ANY OTHER PARTY HEREUNDER FOR ANY INDIRECT,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON
BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT
LIABILITY, OR OTHERWISE, AND WHETHER OR NOT THE PARTY AGAINST
WHOM LIABILITY IS SOUGHT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGE.
15. ARTICLE XV - TERM
15.1 The Agreement will have an initial term of five (5) years,
commencing on the Effective Date, and thereafter may be
terminated by any Party upon five (5)
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years' prior written notice at any time after the fifth (5th)
anniversary of the Effective Date.
15.2 In addition, the Agreement will be terminable with respect to
a Party in the event of a material breach of such Party which
is not cured within thirty (30) calendar days from receipt of
a notice of such breach by any non-breaching Party.
15.3 Any Party may terminate this Agreement upon one hundred eighty
days' written notice to the other Parties if a Bankruptcy
Event occurs with respect to another Party that is not an
Affiliate of the terminating Party.
15.4 In the event of termination, the Parties shall mutually
determine the most reasonable disposition of any
work-in-progress and other Packaging Services so as to best
fulfill the requirements of the Customer Contracts.
16. ARTICLE XVI - ARBITRATION
16.1 Arbitration of Disputes
16.1.1 Any controversy, dispute or claim arising out of, in
connection with, or in relation to the
interpretation, performance or breach of this
Agreement, including any claim based on contract,
tort or statute, shall be settled, at the request of
any Party, by arbitration conducted in Santa Clara,
California, or such other location upon which the
Parties may mutually agree, before and in accordance
with the then-existing Rules of Commercial
Arbitration of the American Arbitration Association
("AAA"), and judgment upon any award rendered by the
arbitrator may be entered by any state or federal
court having jurisdiction thereof.
16.1.2 The Parties hereby consent to the jurisdiction of an
arbitration panel and of the courts located in, and
venue in, Philadelphia, Pennsylvania, with respect to
any dispute arising under this Agreement.
16.1.3 Any controversy concerning whether a dispute is an
arbitrable dispute hereunder shall be determined by
one or more arbitrators selected in accordance with
Section 16.3.
16.1.4 The Parties intend that this agreement to arbitrate
be valid, specifically enforceable and irrevocable.
16.2 Initiation of Arbitration
A Party may initiate arbitration hereunder by filing a written
demand for arbitration with each other Party to the dispute in
accordance with Section 17.10 and with the AAA. Arbitration
hereunder shall be conducted on a timely, expedited basis.
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16.3 Selection of Arbitrator
Any arbitration shall be held before a single arbitrator, who
shall be selected in accordance with the procedures of the
AAA, and shall be a member of the Large Complex Case Panel
with significant intellectual property (patent and copyright)
law and semiconductor manufacturing experience. If the Parties
are unable to agree on a single arbitrator, then each of AICL
and Amkor shall select an arbitrator and such arbitrators
shall select a third arbitrator. Such arbitration shall then
be held before such three (3) arbitrators.
16.4 Awards
The arbitrator(s) may, in its discretion award to the
prevailing Party in an arbitration proceeding commenced
hereunder, and the court shall include in its judgment for the
prevailing Party in any claim arising hereunder, the
prevailing Party's costs and expenses (including expert
witness expenses and reasonable attorneys' fees) of
investigating, preparing and presenting such arbitration claim
or cause of action.
17. ARTICLE XVII - MISCELLANEOUS
17.1 Confidentiality
The Parties will enter into appropriate non-disclosure
agreements respecting the treatment of their respective
confidential technical and business information and
confidential information disclosed to any of them by third
Parties. AICL acknowledges that this Agreement may be required
to be filed or provided as supplemental information to the
U.S. Securities and Exchange Commission. In the event of any
such filing or provision, ATI and its Affiliates agree to use
reasonable efforts to seek confidential treatment for portions
of such documents that ATI and its Affiliates conclude in
their discretion are appropriate subjects for such treatment.
17.2 Audits
AICL will permit Customers to visit the Qualified Facilities
and to conduct audits of AICL in accordance with industry
norms and the terms and conditions specified in the Customer
Contracts.
17.3 Assignability
AICL will not be permitted to assign, directly or indirectly,
any of its obligations or duties under the Agreement, without
the consent of the other Parties hereto. This Agreement shall
be binding on, and inure to the benefit of, all successors and
assignees of the Parties.
17.4 Integration
This Agreement will supersede all contracts and agreements
currently existing between the Parties with respect to the
terms hereof. In the event of any
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inconsistency between this Agreement and any existing
agreement or contract between the Parties, the terms of this
Agreement shall prevail.
17.5 Force Majeure
No 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 Parties 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.
17.6 Export Laws
This Agreement is subject to all applicable United States laws
and regulations relating to exports and to all administrative
acts of the U.S. Government pursuant to such laws and
regulations. No Party shall export or re-export, directly or
indirectly, any technical data or semiconductor materials in
violation of the aforementioned export laws.
17.7 Survival
The rights and obligations of those sections which by their
nature survive, including, but not limited to Articles , VIII,
X, XI, XII, XIII and XIV of this Agreement, shall survive and
continue after any expiration or termination of this Agreement
and shall bind the Parties and their legal representatives,
successors and assigns.
17.8 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.
17.9 Governing Law
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 State of California without regard to that state's
choice of laws. The UN Convention on the International Sale of
Goods shall not apply to this Agreement, or any transactions
contemplated hereby or thereby.
17.10 Notices
All notices, requests, demands, waivers, and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly
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given: (i) when delivered by hand or confirmed facsimile
transmission; (ii) one (1) day after delivery by receipted
overnight delivery; or (iii) four (4) days after being mailed
by certified or registered mail, return receipt requested,
with postage prepaid to the appropriate address set forth at
the beginning of this Agreement or to such other person or
address as any Party shall furnish to the other Parties in
writing pursuant to the above.
17.11 Counterparts
This Agreement may be executed in counterparts which taken
together shall constitute one and the same document.
INTENDING TO BE LEGALLY BOUND, the Parties hereto have caused this Agreement to
be executed as of the date first above written.
AMKOR TECHNOLOGY, INC. ANAM INDUSTRIAL CO., LTD.
By: By:
--------------------------- ---------------------------
Name: Frank J. Marcucci Name: In Kil Hwang
--------------------------- ---------------------------
Title: CFO & Secretary Title: President
--------------------------- ---------------------------
AMKOR ELECTRONICS, INC. C.I.L. LIMITED
By: By:
--------------------------- ---------------------------
Name: Frank J. Marcucci Name: Richard McMillan
--------------------------- ---------------------------
Title: Executive Vice President Title:
--------------------------- ---------------------------
ANAM USA, INC.
By:
---------------------------
Name: Hong Taek Chung
---------------------------
Title: President
---------------------------
19
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Exhibit 10.20
FOUNDRY AGREEMENT
THIS FOUNDRY AGREEMENT (this "Agreement"), dated as of November 1, 1997, (the
"Effective Date") is entered into by and among Amkor Technology, Inc. ("ATI") a
Delaware corporation with a place of business at 1345 Enterprise Drive, West
Chester, Pennsylvania 19380, Amkor Electronics, Inc. a Pennsylvania corporation
("Amkor (Pa.)"), with a place of business at 1345 Enterprise Drive, West
Chester, Pennsylvania 19380, C.I.L. Limited (Caymans) ("CIL"), a Cayman Islands
corporation with a place of business at CIBC Building, Edward Street, Grand
Cayman, Cayman Islands, Anam Industrial Co., Ltd. ("AICL") a Korean corporation
with a place of business at 280-8 Sungsu 2-ga, Sungdong-ku, Seoul 133-120, Korea
and Anam USA, Inc. ("Anam USA") a Pennsylvania corporation with a place of
business at 1345 Enterprise Drive, West Chester, Pennsylvania 19380 (each, a
"Party"; together, the "Parties").
W I T N E S S E T H:
WHEREAS, in connection with an initial public offering of the stock of
ATI (the "IPO"), Amkor (Pa.) will be merged into ATI;
WHEREAS, following the IPO, ATI will commence operations including
engaging in those operations previously engaged in by Amkor (Pa.);
WHEREAS, until the occurrence of the IPO, ATI will not assume the
responsibilities of Amkor (Pa.) under this Agreement;
WHEREAS, ATI is, or will become the parent corporation of, among other
legal entities, CIL;
WHEREAS, AICL, a publicly traded Korean company, is engaged in the
business, inter alia, of owning and operating a semiconductor foundry in Korea;
WHEREAS, Amkor (Pa.) and CIL are engaged in the business of providing
foundry services to third parties, which foundry services will be performed by
AICL;
WHEREAS, Anam USA is a wholly-owned subsidiary of AICL and is engaged
in (a) providing certain services to AICL, Amkor (Pa.) and CIL regarding the
obtaining and extending of credit to AICL, Amkor (Pa.) and CIL and (b) acting as
a trading company for the purpose of facilitating transactions between Amkor
(Pa.) and CIL, on the one hand, and AICL on the other;
<PAGE> 2
WHEREAS, the Parties wish to set forth the terms and conditions under
which AICL will manufacture semiconductor wafers and otherwise perform foundry
services as a subcontractor to Amkor (as defined below) and CIL;
WHEREAS, the Parties and their predecessor corporations have enjoyed a
well-established and synergistic business relationship whereby Amkor and CIL and
their respective affiliates have entered in numerous contracts with
semiconductor companies to provide semiconductor packaging and testing services
and have had some of such services performed by AICL;
WHEREAS, the Parties wish to establish a long-term arrangement among
them to provide Foundry Services (as such term is herein defined) to the
semiconductor industry in a manner similar to the manner the Parties operate
their packaging services operations;
WHEREAS, AICL and Amkor wish to coordinate their respective research
and development activities; and
WHEREAS, the Parties believe that such a long-term relationship, under
the terms and conditions set forth in this Agreement, is necessary to assure
their respective long-term profitability and growth, and is in their respective
best interest.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises contained herein, the Parties hereby agree as follows:
ARTICLE 1. CONSTRUCTION AND DEFINITIONS
SECTION 1.1. CONSTRUCTION. (a) All references in this Agreement to
"Articles," "Sections" and "Exhibits" refer to the articles, sections and
exhibits of this Agreement.
(b) The words "hereof," "herein" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
subdivision contained in this Agreement.
(c) The words "include" and "including" when used herein are
not exclusive and mean "include, without limitation" and "including, without
limitation," respectively.
SECTION 1.2. DEFINITIONS. As used herein:
(a) "Affiliate" of a Party means an entity that is controlled
by such Party or by an entity controlling such Party. For the purposes of the
foregoing, "control" means ownership, directly or indirectly, of at least 50% of
the voting stock of the controlled entity.
(b) "Amkor" means, prior to the IPO, Amkor (Pa.), and
following the IPO, ATI.
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(c) "Bankruptcy Event" means any of the following events or
circumstances with respect to a Party, such Party: (i) ceases conducting its
business in the normal course; (ii) becomes insolvent or becomes unable to meet
its obligations as they become due; (iii) makes a general assignment for the
benefit of its creditors; (iv) petitions, applies for, or suffers or permits
with or without its consent the appointment of a custodian, receiver, trustee in
bankruptcy or similar officer for all or any substantial part of its business or
assets; or (v) avails itself or becomes subject to any proceeding under the U.S.
Bankruptcy Code or any similar state, federal or foreign, including Korean,
statute relating to bankruptcy, insolvency, reorganization, receivership,
arrangement, adjustment of debts, dissolution or liquidation, which proceeding
is not dismissed within sixty (60) days of commencement thereof.
(d) "Change of Control" means, with respect to a Party: (A)
the direct or indirect acquisition of either (i) the majority of the voting
stock of such Party or (ii) all or substantially all of the assets of such
Party, by another entity in a single transaction or series of related
transactions; or (B) the merger of such Party with, or into, another entity. The
reincorporation of a Party shall not be considered a Change of Control.
(e) "Confidential Information" means any information: (i)
disclosed by one Party (the "Disclosing Party") to the other Party (the
"Receiving Party"), which, if in written, graphic, machine-readable or other
tangible form is marked as "Confidential" or "Proprietary", or which, if
disclosed orally or by demonstration, is identified at the time of initial
disclosure as confidential and such identification is reduced to writing and
delivered to the Receiving Party within thirty (30) days of such disclosure; or
(ii) which is otherwise deemed to be confidential by the terms of this
Agreement.
(f) "Customer" means a third party with whom Amkor, CIL and/or
AICL, as the case may be, enters into a contractual arrangement to provide
Foundry Services.
(g) "Customer Contract" means a contract (including a binding
purchase order) between Amkor or CIL, as the case may be, and a Customer to
provide Foundry Services to such Customer. Customer Contracts may include AICL
as a party.
(h) "Customer Payment" is the net amount payable by a Customer
to Amkor or CIL, as the case may be, for all services and deliverables under the
relevant Foundry Contract with respect to services performed, and wafers
produced, by AICL.
(i) "EDE System" means the electronic data exchange and
communications ("EDE") system to be established among the Parties and certain
Customers.
(j) "Foundry" means the semiconductor wafer foundry owned and
operated by AICL in Buchon, Korea and such other foundries as shall be owned and
operated by AICL during the Term.
(k) "Foundry Management System" means the computerized Foundry
operation and planning, management accounting, and accounting system, including
the EDE System, established by
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the Parties for the purposes of planning, managing and coordinating among them
the provision of Foundry Services and the operation the Foundry.
[*]
(n) "Foundry Services" means the manufacturing and testing of
Products, including semiconductor wafers and die, and related services provided
to a Customer.
(o) "Indemnified Party" means a Party hereunder that receives
an indemnity from an Indemnifying Party hereunder in accordance with Article 13.
(p) "Indemnifying Party" means a Party hereunder providing an
indemnity to any other Party hereunder in accordance with Article 13.
(q) "Intellectual Property Rights" means all rights in, to, or
arising out of: (i) any U.S., international or foreign patent or any application
therefor and any and all reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof; (ii) inventions (whether
patentable or not in any country), invention disclosures, improvements, trade
secrets, proprietary information, know-how, technology and technical data; (iii)
copyrights, copyright registrations, mask works, mask work registrations, and
applications therefor in the U.S. or any foreign country, and all other rights
corresponding thereto throughout the world; and (iv) any other proprietary
rights in or to Technology anywhere in the world.
(r) "Products" means semiconductor wafers, die, and other
materials or deliverables manufactured by AICL for Customers in accordance with
this Agreement.
(s) "Technology" means all technology, however embodied,
including all know-how, show-how, techniques, processes, specifications,
recipes, mask works, design rules, trade secrets, inventions (whether or not
patented or patentable), algorithms, routines, software, net lists, files,
databases, works of authorship, devices and hardware.
(t) "Term" means the term of this Agreement defined in Section
15.1.
ARTICLE 2. MARKETING AND SALES
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SECTION 2.1. EXCLUSIVITY. AICL shall not provide Foundry Services
directly to any Customer. Amkor and CIL shall together have the exclusive right,
in all countries, to enter into contracts with Customers to provide AICL's
Foundry Services to such Customers.
SECTION 2.2. AMKOR AND CIL TERRITORIAL DIVISION. Amkor may provide
Foundry Services only to Customers that principally are located in the United
States. CIL may provide Foundry Services and Packaging Services to Customers
that principally are located outside of the United States.
SECTION 2.3. CUSTOMER CONTRACTS. (a) Amkor and CIL, either directly or
thorough their respective Affiliates, shall enter into Customer Contracts, if
any, in a form generally approved by AICL.
(b) Amkor and CIL shall use commercially reasonable efforts to
enter into Customer Contracts to the extent consistent with the respective
interests of the Parties and their obligations set forth in this Agreement.
(c) AICL shall perform the Foundry Services required under
each Customer Contract on the terms and conditions set forth in this Agreement
and such other terms and conditions as the Parties may deem necessary with
respect to such Customer Contract. AICL shall perform all such Foundry Services
in a manner that satisfies Amkor's and CIL's respective obligations pursuant to
such Customer Contracts.
(d) AICL shall act as an independent subcontractor to perform
Foundry Services for Amkor or CIL, as the case may be.
(e) Neither Amkor nor CIL shall have any authority to bind
AICL to any contract with a Customer.
(f) Upon execution of each Customer Contract, Amkor and CIL
shall provide to AICL a copy of such Customer Contract.
[*]
ARTICLE 3. OPERATION OF FOUNDRY BUSINESS
SECTION 3.1. AICL'S GENERAL RESPONSIBILITIES WITH RESPECT TO FOUNDRY
SERVICES. AICL shall:
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(a) participate with Amkor and CIL in compiling an annual
operational plan based on annual demand as forecasted by Amkor and CIL in
accordance with a worldwide management accounting basis to be prescribed by
Amkor;
(b) obtain, install and qualify required Foundry capacity
commensurate with demand as forecasted in the operational plan or such other
level of capacity as is mutually agreed among Amkor, CIL and AICL;
(c) purchase Customer tooling for wafer fabrication and wafer
testing, including photolithography masks and test fixtures;
(d) maintain a coordinated electronic tracking system able to
identify the status of Customer Products (including masks, tooling, wafers and
die and other materials) at any time; and
SECTION 3.2. AMKOR'S AND CIL'S GENERAL OBLIGATIONS. Amkor and CIL shall
use commercially reasonable efforts to:
(a) actively and diligently market Foundry Services to
potential and existing Customers;
(b) provide Customer Forecasts (as defined below) to permit
AICL to efficiently plan its capacity requirements; and
(c) where required by a Customer Contract, cooperate with AICL
to arrange for the supply to AICL of all photolithography masks and related
materials to be used in the wafer fabrication process.
ARTICLE 4. FOUNDRY PRICING
[*]
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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[*]
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the omitted portions.
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[*]
ARTICLE 5. FORECASTS AND ORDER COORDINATION
SECTION 5.1. FOUNDRY MANAGEMENT SYSTEMS. (a) Amkor, CIL and AICL shall
cooperate to acquire, install and operate a computerized Foundry Management
System which, among other things, will facilitate:
(i) EDE (as set forth below) between the Parties and
Customers;
(ii) Customer order processing;
(iii) Supply chain optimization and decision support;
(iv) Foundry capacity forecasting;
(v) Foundry utilization monitoring and optimization; and
(vi) Management accounting.
(b) Amkor shall be responsible for engaging third-party
consultants for the purpose of installing the Foundry Management System.
(c) Amkor shall be responsible for acquiring a license from i2
Technologies (or other vendor) and such other software vendors as may be chosen
by Amkor for software that will perform the features of the Foundry Management
System and such other functions as the Parties may deem desirable.
[*]
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[*]
(e) No Party may implement any change or upgrade to the
Foundry Management System that potentially could have a material detrimental
impact on any other Party or its business without the consent of each such
Party.
SECTION 5.2. ELECTRONIC DATA EXCHANGE. (a) For purposes of satisfying
Customer requirements and optimizing the flow of business communications among
Amkor, CIL, AICL and Customers, Amkor and AICL shall establish, as part of the
Foundry Management System or otherwise, an EDE System.
(b) Such EDE System shall include an electronic mail system, a
communications network, a data exchange network, and electronic document
interchange systems.
(c) AICL shall provide to Amkor and CIL, through such EDE
System or otherwise, the manufacturing information and reports needed to enable
Amkor and CIL to satisfy their respective obligations pursuant to their
respective Customer Contracts on a timely basis and to plan their respective
business operations.
(d) Without limiting the foregoing, AICL shall provide Amkor
and CIL the following information on a regular basis and also on an as requested
basis:
(i) inventory levels including wafers and/or die and
work-in-process and rejects;
(ii) production schedule status and shipment dates;
(iii) engineering and quality data for yield loss analysis;
(iv) Foundry loading levels; and
(v) cycle time data.
SECTION 5.3. CUSTOMER FORECASTS. Amkor and CIL shall use commercially
reasonable efforts to obtain each month from each of their respective Customers
a six (6)-month rolling forecast of such Customer's requirements, by work week,
for Foundry Services ("Customer Forecasts"). Amkor and CIL shall provide such
Customer Forecasts to AICL. AICL shall use such Customer Forecasts only as a
guide to anticipated requirements, and such forecasts shall not constitute a
commitment by either (i) AICL to Amkor or CIL or (ii) by Amkor or CIL to AICL.
SECTION 5.4. ORDER COORDINATION. Prior to entering into a Customer
Contract, or otherwise agreeing to provide Foundry Services, Amkor and CIL shall
consult with AICL for the purposes of
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determining, or shall otherwise determine, that AICL has the Foundry capacity to
provide such Foundry Services. In furtherance of the foregoing:
(i) upon Amkor's or CIL's request, AICL shall
provide a response, in writing or through
the EDE System to be developed hereunder, as
to whether, and in what time-frame, AICL can
provide the specified Foundry Services;
(ii) upon receipt of written wafer start releases
from Amkor or CIL, AICL shall provide
accurate delivery dates for completed
associated wafers and/or die; and
(iii) AICL shall schedule wafer starts to conform
to the cycle time requirements of the
Customers.
SECTION 5.5. ALLOCATION. At all times when the demand of all Customers
exceeds AICL's available Foundry capacity, subject to any preexisting agreements
of AICL, Amkor or CIL with third parties, Amkor and CIL, at their sole
discretion, shall have the right to allocate AICL's Foundry capacity among their
Customers.
[*]
SECTION 5.7. HANDLING OF CUSTOMER MATERIALS. Unless a particular
Customer Contract provides otherwise, to the extent, if at all, that the
relevant Customer provides any masks, tapes, wafers, tooling or other materials
directly or through Amkor or CIL to AICL, such materials shall remain the
property of the Customer. AICL shall be responsible for secured storage handling
and accounting for such Customer materials in accordance with the terms of the
relevant Customer Contract. AICL shall keep confidential all Customer materials
to the extent set forth in the relevant Customer Contract or otherwise agreed
between the Customer and Amkor or CIL, as the case may be.
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ARTICLE 6. SHIPMENTS, PAYMENTS , ETC.
SECTION 6.1. CUSTOMER SHIPMENTS. (a) Amkor and CIL shall be responsible
for ensuring the delivery to Customers of wafers and other products manufactured
by AICL; provided, however, that AICL shall assume such obligation upon Amkor's
and CIL's request.
(b) AICL shall ship all such products in secure containers with labels
identifying, as required, any Customer-specific product numbering or lot number.
Each shipment shall also contain the agreed-upon processing documentation such
as commercial invoices or bills of lading.
SECTION 6.2. STORAGE. AICL shall be responsible for the safe storage
and handling of Customer products in AICL's possession. The liability of AICL
with regard to any damage to or loss of such Products shall be determined in
accordance with the applicable Customer Contract, and, in accordance with
Section 13.3, AICL shall indemnify Amkor and CIL to the extent of their
liability under such Customer Contract.
ARTICLE 7. RECORDS, ETC.
SECTION 7.1. RECORDS. (a) Each Party shall timely create and keep
complete and accurate books and records ("Records") regarding its operations
hereunder, including any records or materials that relate to or form the basis
for any payment or other obligation of such Party to any other Party hereunder.
(b) Each Party shall maintain its Records for at least three
(3) years from the date such records were created.
(c) Each Party shall make available, at no cost, to each other
Party and its authorized representatives (the "Requesting Party"), copies of, or
access to, such Records as may be relevant under this Agreement to the
Requesting Party and as the Requesting Party may reasonably request.
SECTION 7.2. ACCESS. (a) Amkor, CIL and AICL shall each allow free
access to its respective premises by employees of any of them.
(b) Without limiting the foregoing, AICL shall make available
office space and resources, including access to its Foundry Management System,
to Amkor and CIL employees for the purpose of coordinating the operations of the
Parties hereunder.
(c) Each Party shall be responsible for the conduct of its
employees while they are on the premises of another Party and, during such time,
such employees shall abide by all rules and regulations of the Party on whose
premises they are.
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SECTION 7.3. AUDIT. (a) Each Party (the "Audited Party") shall, during
the Term and for three (3) years thereafter, at its sole cost and expense
(except as provided below), provide reasonable assistance to any other Party
(the "Auditing Party"), including providing access to the Audited Party's
facilities and Records, to enable the Auditing Party and third-party auditors
and examiners selected by the Auditing Party to conduct audits and examinations
of the Records and operations of the Audited Party relating to this Agreement.
(b) An Auditing Party shall provide the Audited Party with at least ten
(10) business days' notice prior to conducting any audit hereunder. Each such
audit shall be conducted at reasonable hours and in a manner that does not
materially interfere with the Audited Party's operations. Each Party may audit
each other Party as described herein not more than two (2) times each calendar
year, unless otherwise required by law or regulation.
ARTICLE 8. CONFIDENTIAL INFORMATION
SECTION 8.1. CONFIDENTIAL INFORMATION EXCLUSIONS. Notwithstanding the
provisions of Section 1.2(d), Confidential Information shall exclude information
that the Receiving Party can demonstrate: (i) was independently developed by the
Receiving Party without any use of the Disclosing Party's Confidential
Information or by the Receiving Party's employees or other agents (or
independent contractors hired by the Receiving Party) who have not been exposed
to the Disclosing Party's Confidential Information; (ii) becomes known to the
Receiving Party, without restriction, from a source other than the Disclosing
Party without breach of this Agreement and that had a right to disclose it;
(iii) was in the public domain at the time it was disclosed or becomes in the
public domain through no act or omission of the Receiving Party; or (iv) was
rightfully known to the Receiving Party, without restriction, at the time of
disclosure.
SECTION 8.2. COMPELLED DISCLOSURE. In the event that a Receiving Party
discloses Confidential Information of a Disclosing Party pursuant to the order
or requirement of a court, administrative agency, or other governmental body;
such Receiving Party shall provide prompt notice thereof to such Disclosing
Party and shall use its best efforts to obtain a protective order or otherwise
prevent public disclosure of such information.
SECTION 8.3. CONFIDENTIALITY OBLIGATION. The Receiving Party shall
treat as confidential all of the Disclosing Party's Confidential Information and
shall not use such Confidential Information except as expressly permitted under
this Agreement. Without limiting the foregoing, the Receiving Party shall use at
least the same degree of care which it uses to prevent the disclosure of its own
confidential information of like importance, but in no event with less than
reasonable care, to prevent the disclosure of the Disclosing Party's
Confidential Information. To the extent consistent with the foregoing, a
Receiving Party may use any knowledge, confidential information, trade secrets
or proprietary information constituting Confidential Information of a Disclosing
Party that is retained in
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the memory of such Receiving Party's employees or that constitutes any such
employee's general knowledge or skill, even if acquired in connection with this
Agreement, for any purpose whatsoever.
SECTION 8.4. REMEDIES. Unauthorized use by a Party of another Party's
Confidential Information will diminish the value of such information. Therefore,
if a Party breaches any of its obligations with respect to confidentiality or
use of Confidential Information hereunder, the relevant Disclosing Party shall
be entitled to seek equitable relief to protect its interest therein, including
but not limited to injunctive relief, as well as money damages.
SECTION 8.5. NO CONFIDENTIAL INFORMATION OF OTHER PARTIES. Each Party
represents and warrants that it has not and shall not use in the course of its
performance hereunder, and shall not disclose to any other Party, any
confidential information of any third party, unless such Party expressly is
authorized by such third party to do so.
ARTICLE 9. ANAM USA'S RESPONSIBILITIES
SECTION 9.1. CREDIT FUNCTIONS. Anam USA shall use its best efforts to
obtain lines of credit at lowest commercially available rates of interest to
permit letters of credit to be opened, with AICL as beneficiary, for payment for
AICL's performance of Foundry Services.
ARTICLE 10. INTELLECTUAL PROPERTY OWNERSHIP AND LICENSES
SECTION 10.1. INTELLECTUAL PROPERTY OWNERSHIP. (a) Except as set forth
herein, this Agreement shall not affect a Party's Intellectual Property Rights
existing prior to the Effective Date.
(b) Each Party shall own all Intellectual Property Rights in
Technology created or invented by such Party's employees, as determined in
accordance with principles of United States law.
(c) Any Technology created or invented by the employees of
more than one Party, and all Intellectual Property Rights therein, will be
jointly owned by the Parties that are the employers of such employees, as
determined in accordance with principles of United States law. Such joint
ownership will be without the duty to account. Such Parties shall cooperate in
the enforcement of such jointly-owned Intellectual Property Rights against
third-party infringers.
SECTION 10.2. LICENSES. (a) Amkor and CIL hereby grant to AICL and its
Affiliates a non-exclusive, non-sublicensable, perpetual, worldwide,
irrevocable license under all Intellectual Property Rights that Amkor or CIL now
or during the Term may hold or acquire, and which they are free to license to
third parties without payment of any kind, to (i) provide Foundry Services, (ii)
manufacture, use, sell and import Products, and (iii) otherwise operate the
Foundry and perform AICL's related activities. Amkor and CIL shall disclose
promptly to AICL any Technology to which AICL reasonably
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would desire access in connection with the performance of its obligations under
this Agreement, the provision of Foundry Services, or the operation of its
Foundry business.
(b) AICL, on behalf of itself and its Affiliates, hereby
grants to Amkor, CIL and their Affiliates a non-exclusive, fully sublicensable,
perpetual, worldwide, irrevocable, license under all Intellectual Property
Rights that AICL or its Affiliates now or during the Term may hold or acquire,
and which they are free to license to third parties without payment of any kind,
to (i) provide Foundry Services, (ii) have manufactured, use, sell and import
Products, and (iii) otherwise conduct activities related to the Foundry
Services. AICL shall disclose promptly to Amkor and CIL any Technology to which
Amkor and CIL would reasonably desire access in order to perform their
obligations under the Agreement or to otherwise operate their Foundry Service
businesses.
SECTION 10.3. INTELLECTUAL PROPERTY PROTECTION. (a) The Parties shall
cooperate to obtain patents, copyright and mask work registrations, and other
intellectual property protection with respect to any Technology developed by any
of them related to Foundry Services or resulting from any joint development
hereunder. In the case of jointly-owned Intellectual Property Rights, the
Parties shall equitably allocate the costs of obtaining patent, copyright, mask
work and other protection for such Intellectual Property Rights among
themselves.
(b) Notwithstanding the foregoing, each Party shall have the
right to file patent applications or copyright or mask work registrations on any
inventions made by, or works authored by, its employees. Any patents or
registrations issuing from such applications shall be exclusively owned by the
Party that made such application.
SECTION 10.4. THIRD PARTY LICENSES. In the event that a Party intends
to license Technology from a third party, it will endeavor to obtain a license
on equal terms for any of the other Parties to the extent that such other
Parties would benefit from such a license.
SECTION 10.5. ENFORCEMENT OF INTELLECTUAL PROPERTY. (a) If a Party
becomes aware that a third party is infringing such Party's or any other Party's
Intellectual Property Rights, such Party shall promptly notify the relevant
other Parties thereof.
(b) Where such Intellectual Property Rights are owned by only
one Party, such Party shall have the sole right to determine whether or not to
bring infringement or unfair competition or related proceedings in connection
with any such infringement.
(c) If such infringed Intellectual Property Rights are owned
by more than one Party, then within thirty (30) days of receipt of such notice
or otherwise becoming aware of such infringement, such Parties shall determine
which of them, if any, shall bring an infringement or unfair competition or
related proceedings in connection with such infringement. In any event, all such
Parties shall cooperate in the bringing of such action, and, where required,
join such action. Any amount awarded with respect to any such proceeding shall
be payable entirely to the Party or Parties bringing such proceeding, unless
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otherwise agreed by the Parties. Any disputes as to which Party has the
right to prosecute such proceeding, or as to allocation of proceeds from such
proceeding, shall be settled by arbitration as provided in Article 16.
SECTION 10.6. USE OF AICL TRADEMARKS. (a) AICL hereby grants to Amkor
and CIL (and their respective Affiliates) the right to use AICL's and Anam USA's
respective corporate names, trademarks and service marks ("AICL Trademarks") in
connection with the promotion of AICL's Foundry Services and otherwise in
connection with Amkor's and CIL's Foundry Service operations. Amkor and CIL (and
their respective Affiliates) shall observe all instructions and directions
provided to them by AICL or Anam USA regarding the use of the AICL Trademarks.
Amkor and CIL (and their respective Affiliates) shall not use the AICL
Trademarks in a manner that detracts from the goodwill associated with such AICL
Trademarks.
(b) To the extent required by or advisable under Korean law, the
Parties will enter into a separate trademark agreement in accordance with the
terms set forth in Section 10.6(a) and register such license agreement with the
appropriate Korean authorities.
ARTICLE 11. RESEARCH AND DEVELOPMENT
SECTION 11.1. JOINT R&D COMMITTEE. Amkor and AICL shall establish a
committee (the "R&D Committee") to coordinate their respective research and
development activities and any joint research and development projects. Amkor
and AICL shall designate two (2) individuals to serve on a the R&D Committee.
Such R&D Committee shall meet from time to time during the Term, as it shall in
its discretion determine.
SECTION 11.2. COORDINATION. (a) Amkor and AICL shall collaborate in,
and coordinate, their respective research and development activities, as well as
those of their respective Affiliates, so as to foster the development of new and
improved technologies related to Foundry Services.
(b) Unless otherwise agreed or determined by the R&D
Committee, (i) AICL will have primary responsibility for, and will confine its
research and development activities to, the development of process technology
used in the operation of the Foundry and (ii) Amkor will have primary
responsibility for, and will confine its research and development activities to,
the specification of required process technology features, the development and
creation of design cell libraries, design tools and designs optimized for AICL's
foundry processes.
SECTION 11.3. FUNDING. Unless specifically agreed in writing to the
contrary, Amkor and AICL will fund their own (and their respective Affiliates')
research and development efforts.
ARTICLE 12. WARRANTIES
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SECTION 12.1. GENERAL WARRANTY. Each Party hereby represents and
warrants to the other Parties that (i) such Party has the right, power and
authority to enter into this Agreement and to fully perform all its obligations
hereunder; and (ii) the making of this Agreement does not violate any agreement
existing between such Party and any third party.
SECTION 12.2. AICL FOUNDRY SERVICES WARRANTY. (a) AICL warrants to
Amkor and CIL, with respect to Foundry Services, that:
(i) the relevant Products will be manufactured by AICL
using processes that conform to the processes that
have been specified and qualified by the relevant
Customer for such Product; and
(ii) as delivered by AICL to Amkor and CIL or their
respective Customers, the relevant Products shall
conform to the specifications (including as to yield
and defect levels) set forth in the relevant Customer
Contract.
(b) AICL shall grant to Amkor and CIL, for the benefit of their
Customers, such other warranties with respect to Foundry Services and Products
as Amkor and CIL provide to their respective Customers in the relevant Customer
Contracts, or as may be imposed by law, provided that AICL has received notice
of such warranties prior to its manufacture of such Products.
SECTION 12.3. REMEDIES. In the event of a breach by AICL of the
warranties set forth in Section 12.2, AICL shall provide to Amkor or CIL, as the
case may be, or on its behalf, to its Customer, the same remedy that Amkor or
CIL, as the case may be, is required to provide to such Customer pursuant to the
relevant Customer Contract.
SECTION 12.4. INTELLECTUAL PROPERTY WARRANTY. (a) AICL warrants that
(i) its performance of the Foundry Services and any other services hereunder,
and (ii) the Products and any other material or things delivered by it to Amkor
and CIL and Customers hereunder, will not infringe or misappropriate any third
party's Intellectual Property Rights.
(b) Notwithstanding the foregoing, AICL shall have no
responsibility for infringement arising from any Foundry Service performed for,
or Product delivered to, Amkor or CIL for a Customer to the extent that such
infringement arises solely from AICL's compliance with or use of specifications,
processes, instructions or materials as provided by such Customer.
(c) If any Foundry Services or Products infringe or
misappropriate, or in Amkor's or CIL's, as the case may be, reasonable
determination is likely to infringe or misappropriate, any third party's
Intellectual Property Rights, in addition to the obligations set forth in
Article 13, AICL shall, at Amkor's and CIL's choice and at AICL's sole expense,
either (i) obtain from such third party the right to continue to operate the
Foundry and provide Foundry Services and Products, or (ii) to the extent
permitted, modify the Foundry, Foundry Services and Products to avoid and
eliminate such
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infringement or misappropriation, as the case may be; provided, however, that
such Foundry Services and Products shall at all times comply with all relevant
specifications.
SECTION 12.5. DISCLAIMERS. Except as may be agreed to in writing by
AICL, Amkor and CIL shall disclaim and limit their warranties and limit their
liability to their respective Customers to at least the same extent that AICL
limits its warranties and disclaims liability to Amkor and CIL hereunder.
SECTION 12.6. NO LIENS. AICL represents and warrants that all Products
delivered by it to Amkor, CIL or their respective Customers will be free of all
third-party liens, security interests and other encumbrances.
ARTICLE 13. INDEMNITIES
SECTION 13.1. AICL INDEMNITY. AICL and Anam USA shall, jointly and
severally, indemnify and hold Amkor and CIL and their Affiliates, and each of
their respective employees, directors, distributors, agents, customers,
licensees, successors and assigns harmless from and against all costs,
liabilities, losses, damages, expenses and judgments resulting from or arising
out of (i) any breach of any warranty made by AICL hereunder, including pursuant
to Article 12, (ii) in connection with any claim, action or proceeding, in a
court or otherwise, related to any such breach, (iii) or resulting from AICL's
breach of, or failure to perform under, any agreement among AICL, Amkor and any
Customer; or (iv) any breach by AICL of any agreement between AICL and TI. AICL
and Anam USA shall settle or defend, at their option, all such claims, actions
and proceedings at AICL's and Anam USA's sole cost and expense.
SECTION 13.2. AMKOR INDEMNITY. Amkor and CIL shall, jointly and
severally, indemnify and hold AICL and Anam USA and their Affiliates, and each
of their respective employees, directors, distributors, agents, customers,
licensees, successors and assigns harmless from and against all costs,
liabilities, losses, damages, expenses and judgments resulting from or arising
out of any breach of (i) any warranty made by Amkor or CIL hereunder, including
pursuant to Article 12, or in connection with any claim, action or proceeding,
in a court or otherwise, related to any such breach or (ii) any breach of any
agreement between Amkor and TI. Amkor and CIL shall settle or defend, at their
option, all such claims, actions and proceedings at Amkor's and CIL's sole cost
and expense.
SECTION 13.3. LIMITATION. An Indemnifying Party shall have no
obligation with respect to any claim, action or proceeding (a "Claim") pursuant
to this Article 13 unless (i) such Indemnifying Party is promptly notified by
the Indemnified Party of such Claim, (ii) such Indemnifying Party has sole
control of the defense and settlement of such Claim, and (iii) the associated
Indemnified Party provides such Indemnifying Party with reasonable assistance,
at such Indemnifying Party's expense, in the defense and settlement of such
Claim.
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SECTION 13.4. PAYMENTS. In the event that AICL is required to make any
indemnity payment to Amkor, CIL or any of their respective Affiliates, such
indemnified Party and AICL shall comply with the Korean government regulations
necessary to enable AICL to obtain approval to make such payments in United
States currency.
ARTICLE 14. LIABILITY LIMITATIONS
SECTION 14.1. EXCLUSION OF DAMAGES. EXCEPT AS PROVIDED IN ARTICLE 13,
IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY HEREUNDER FOR ANY
INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH
OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR OTHERWISE, AND
WHETHER OR NOT THE PARTY AGAINST WHOM LIABILITY IS SOUGHT HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGE.
SECTION 14.2. FAILURE OF ESSENTIAL PURPOSE. The limitations specified
in this Article shall survive and apply even if any limited remedy specified in
this Agreement is found to have failed of its essential purpose.
ARTICLE 15. TERM AND TERMINATION
SECTION 15.1. TERM. (a) The initial term of this Agreement shall
commence on the Effective Date and continue unless terminated in accordance with
this Article 15.
(b) Any Party may terminate this Agreement for any or no
reason with respect to such Party, upon on five (5) years' written notice given
to all other Parties at any time after the fifth (5th) anniversary of the
Effective Date.
SECTION 15.2. DEFAULT. If a Party (a "Breaching Party") defaults in the
performance of any of its material obligations to another Party or Parties
hereunder (the "Non-Breaching Party"), the Breaching Party shall use its best
efforts to correct such default within ninety (90) days after written notice
thereof from the Non-Breaching Party. If any such default is not corrected
within such ninety (90)-day period, then provided that the Non-Breaching Party
is not an Affiliate of the Breaching Party, the Non-Breaching Party shall have
the right, in addition to any other remedies it may have, to terminate this
Agreement by giving written notice to all Parties.
SECTION 15.3. TERMINATION FOR INSOLVENCY. Any Party may terminate this
Agreement upon one hundred eighty (180) days' written notice to the other
Parties if a Bankruptcy Event occurs with respect to another Party that is not
an Affiliate of the terminating Party.
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SECTION 15.4. EFFECT OF TERMINATION. Upon any expiration or termination
of this Agreement (i) AICL shall complete all work in progress with respect to
Customer Contracts entered into prior to such termination, (ii) each Party shall
satisfy its payment obligations hereunder that arose prior to such termination
or incurred in connection with any completion of work in progress, and (iii)
each Party shall return all property, including copies of all Confidential
Information, to the Party that owns such property.
SECTION 15.5. SURVIVAL. The following Articles and Sections shall
survive any termination or expiration of this Agreement: 1, 7.1, 7.3, 8, 10,
11.1, 11.3, 11.5, 13, 14, 15, 16, 17 and 18.
ARTICLE 16. ARBITRATION
SECTION 16.1. ARBITRATION OF DISPUTES. (a) Any controversy, dispute or
claim arising out of, in connection with, or in relation to the interpretation,
performance or breach of this Agreement, including any claim based on contract,
tort or statute, shall be settled, at the request of any Party, by arbitration
conducted in Santa Clara County, California, USA or such other location upon
which the Parties may mutually agree, before and in accordance with the
then-existing Rules of Commercial Arbitration of the American Arbitration
Association ("AAA"), and judgment upon any award rendered by the arbitrator may
be entered by any State or Federal court having jurisdiction thereof.
(b) The Parties hereby consent to the jurisdiction of an
arbitration panel and of the courts located in, and venue in, Santa Clara
County, California, USA, with respect to any dispute arising under this
Agreement.
(c) Any controversy concerning whether a dispute is an
arbitrable dispute hereunder shall be determined by the one or more arbitrators
selected in accordance with Section 16.3.
(d) The Parties intend that this agreement to arbitrate be
valid, specifically enforceable and irrevocable.
SECTION 16.2. INITIATION OF ARBITRATION. A Party may initiate
arbitration hereunder by filing a written demand for arbitration with each other
Party to the dispute in accordance with Section 17.11 and with the AAA.
Arbitration hereunder shall be conducted on a timely, expedited basis.
SECTION 16.3. SELECTION OF ARBITRATOR. Any arbitration shall be held
before a single arbitrator, who shall be selected in accordance with the
procedures of the AAA, and shall be a member of the Large Complex Case Panel
with significant intellectual property (patent and copyright) law and
semiconductor manufacturing experience. If the Parties are unable to agree on
single arbitrator, then each of AICL and Amkor shall select an arbitrator and
such arbitrators shall select a third arbitrator. Such arbitration shall then be
held before such three arbitrators.
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SECTION 16.4. AWARDS. The arbitrator(s) may, in its discretion, award
to the prevailing Party in any arbitration proceeding commenced hereunder, and
the court shall include in its judgment for the prevailing Party in any claim
arising hereunder, the prevailing Party's costs and expenses (including expert
witness expenses and reasonable attorneys' fees) of investigating, preparing and
presenting such arbitration claim or cause of action.
ARTICLE 17. MISCELLANEOUS
SECTION 17.1. INDEPENDENT CONTRACTORS. The Parties hereto are
independent contractors. Nothing contained herein or done pursuant to this
Agreement shall constitute any Party the agent of any other Party for any
purpose or in any sense whatsoever, or constitute the Parties as partners or
joint venturers.
SECTION 17.2. BANKRUPTCY. (a) All rights and licenses with respect to
Intellectual Property Rights licensed to a Party pursuant to this Agreement are,
and shall otherwise be deemed to be, for purposes of Section 365(n) of the
United States Bankruptcy Code, licenses to rights of "intellectual property" as
defined thereunder. Notwithstanding any provision contained herein to the
contrary, if a Party (the "Bankrupt Party") is under any proceeding under the
Bankruptcy Code and the trustee in bankruptcy of such Party, or such Party, as a
debtor in possession, rightfully elects to reject this Agreement, the other
Parties that are not Affiliates of the Bankrupt Party may, pursuant to 11 U.S.C.
Section 365(n)(1) and (2), retain any and all rights granted to them hereunder,
to the maximum extent permitted by law, subject to the payments specified
herein.
SECTION 17.3. ASSIGNABILITY. AICL and Anam USA shall not assign or
delegate this Agreement, or any of AICL's or Anam USA's rights or duties
hereunder, directly, indirectly, by operation of law, or otherwise, or in
connection with a Change of Control, and any such purported assignment or
delegation shall be void, except with the express written permission of Amkor.
Without limiting the foregoing, any permitted assigns or successors of the
Parties shall be bound by all terms and conditions of this Agreement and this
Agreement shall inure to the benefit of such permitted successors or assigns.
SECTION 17.4. ENTIRE AGREEMENT. The terms and conditions herein
contained constitute the entire agreement between the Parties with respect to
the subject matter hereof and supersede all previous and contemporaneous
agreements and understandings, whether oral or written, between the Parties with
respect to the subject matter hereof.
SECTION 17.5. AMENDMENT. No alteration, amendment, waiver, cancellation
or any other change in any term or condition of this Agreement shall be valid or
binding on any Party unless mutually assented to in writing by all Parties.
SECTION 17.6. FORCE MAJEURE. No Party shall be liable for delay in
performance or failure to perform, in whole or in part, to the extent due to
labor dispute, strike, war or act of war, insurrection,
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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 Parties 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.
SECTION 17.7. EXPORT LAWS. This Agreement is subject to all applicable
United States laws and regulations relating to exports and to all administrative
acts of the U.S. Government pursuant to such laws and regulations. No Party
shall export or re-export, directly or indirectly, any technical data or
semiconductor or other materials in violation of the any U.S. export or similar
laws.
SECTION 17.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THAT STATE'S CHOICE OF LAWS.
THE UNITED NATIONS CONVENTION ON THE INTERNATIONAL SALE OF GOODS SHALL NOT APPLY
TO THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 17.9. NO WAIVER. The failure of a Party to enforce at any time
any of the provisions of this Agreement, or the failure to require at any time
performance by any other Party of any of the provisions of this Agreement, shall
in no way be construed to be a present or future waiver of such provisions, nor
in any way affect the validity thereof or a Party's right to enforce each and
every such provision thereafter. The express waiver by a Party of any provision,
condition or requirement of this Agreement shall not constitute a waiver of any
future obligation to comply with such provision, condition or requirement.
SECTION 17.10. SEVERABILITY. If, for any reason, a court of competent
jurisdiction finds any provision of this Agreement, or portion thereof, to be
invalid or unenforceable, such provision of the Agreement will be enforced to
the maximum extent permissible so as to effect the intent of the Parties, and
the remainder of this Agreement will continue in full force and effect. The
Parties agree to negotiate in good faith an enforceable substitute provision for
any invalid or unenforceable provision that most nearly achieves the intent and
economic effect of such provision.
SECTION 17.11. NOTICES. All notices, requests, demands, waivers, and
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given: (i) when delivered by hand or confirmed
facsimile transmission; (ii) one day after delivery by receipted overnight
delivery; or (iii) four days after being mailed by certified or registered mail,
return receipt requested, with postage prepaid to the appropriate address set
forth at the beginning of this Agreement or to such other person or address as
any Party shall furnish to the other Parties in writing pursuant to the above.
SECTION 17.12. TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
-21-
<PAGE> 22
SECTION 17.13. COUNTERPARTS. This Agreement may be executed in
counterparts which, taken together, shall constitute one and the same document.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized officers or representatives to be effective as
of the date first above written.
AMKOR TECHNOLOGY, INC. ANAM INDUSTRIAL CO., LTD.
By:___________________________________ By:___________________________________
Name: Name:
Title: Title:
AMKOR ELECTRONICS, INC. ANAM USA, INC.
By:___________________________________ By:___________________________________
Name: Name:
Title: Title:
C.I.L. LIMITED
By:_________________________________
Name:
Title:
-22-
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1. CONSTRUCTION AND DEFINITIONS.........................................................................-2-
Section 1.1. Construction........................................................................-2-
Section 1.2. Definitions.........................................................................-2-
ARTICLE 2. MARKETING AND SALES..................................................................................-4-
Section 2.1. Exclusivity.........................................................................-4-
Section 2.2. Amkor and CIL Territorial Division..................................................-4-
Section 2.3. Customer Contracts..................................................................-4-
Section 2.4. Customer Pricing....................................................................-5-
ARTICLE 3. OPERATION OF FOUNDRY BUSINESS........................................................................-5-
Section 3.1. AICL's General Responsibilities with Respect to Foundry Services....................-5-
Section 3.2. Amkor's and CIL's General Obligations...............................................-5-
ARTICLE 4. FOUNDRY PRICING......................................................................................-6-
Section 4.1. Foundry Fee.........................................................................-6-
Section 4.2. Additional Non-Recurring Engineering Costs..........................................-6-
Section 4.3. Determination of Foundry Factor.....................................................-6-
Section 4.4. Payment Obligation..................................................................-7-
Section 4.5. Payment Flow........................................................................-7-
ARTICLE 5. FORECASTS AND ORDER COORDINATION.....................................................................-7-
Section 5.1. Foundry Management Systems..........................................................-7-
Section 5.2. Electronic Data Exchange............................................................-8-
Section 5.3. Customer Forecasts..................................................................-9-
Section 5.4. Order Coordination..................................................................-9-
Section 5.5. Allocation..........................................................................-9-
Section 5.6. TI Agreement........................................................................-9-
Section 5.7. Handling of Customer Materials.....................................................-10-
ARTICLE 6. SHIPMENTS, PAYMENTS , ETC...........................................................................-10-
Section 6.1. Customer Shipments.................................................................-10-
Section 6.2. Storage............................................................................-10-
ARTICLE 7. RECORDS, ETC........................................................................................-10-
Section 7.1. Records............................................................................-10-
Section 7.2. Access.............................................................................-11-
Section 7.3. Audit..............................................................................-11-
</TABLE>
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<PAGE> 24
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 8. CONFIDENTIAL INFORMATION............................................................................-11-
Section 8.1. Confidential Information Exclusions................................................-11-
Section 8.2. Compelled Disclosure...............................................................-11-
Section 8.3. Confidentiality Obligation.........................................................-12-
Section 8.4. Remedies...........................................................................-12-
Section 8.5. No Confidential Information of Other Parties.......................................-12-
ARTICLE 9. ANAM USA'S RESPONSIBILITIES.........................................................................-12-
Section 9.1. Credit Functions...................................................................-12-
ARTICLE 10. INTELLECTUAL PROPERTY OWNERSHIP AND LICENSES.......................................................-12-
Section 10.1. Intellectual Property Ownership...................................................-12-
Section 10.2. Licenses..........................................................................-13-
Section 10.3. Intellectual Property Protection..................................................-13-
Section 10.4. Third Party Licenses..............................................................-13-
Section 10.5. Enforcement of Intellectual Property..............................................-14-
Section 10.6. Use of AICL Trademarks............................................................-14-
ARTICLE 11. RESEARCH AND DEVELOPMENT...........................................................................-14-
Section 11.1. Joint R&D Committee...............................................................-14-
Section 11.2. Coordination......................................................................-15-
Section 11.3. Funding...........................................................................-15-
ARTICLE 12. WARRANTIES..........................................................................................-15-
Section 12.1. General Warranty..................................................................-15-
Section 12.2. AICL Foundry Services Warranty....................................................-15-
Section 12.3. Remedies..........................................................................-15-
Section 12.4. Intellectual Property Warranty....................................................-16-
Section 12.5. Disclaimers.......................................................................-16-
Section 12.6. No Liens..........................................................................-16-
ARTICLE 13. INDEMNITIES........................................................................................-16-
Section 13.1. AICL Indemnity....................................................................-16-
Section 13.2. Amkor Indemnity...................................................................-16-
Section 13.3. Limitation........................................................................-17-
Section 13.4. Payments..........................................................................-17-
ARTICLE 14. LIABILITY LIMITATIONS .............................................................................-17-
Section 14.1. Exclusion of Damages..............................................................-17-
Section 14.2. Failure of Essential Purpose......................................................-17-
ARTICLE 15. TERM AND TERMINATION...............................................................................-17-
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
<S> <C>
Section 15.1. Term..............................................................................-17-
Section 15.2. Default...........................................................................-17-
Section 15.3. Termination for Insolvency........................................................-18-
Section 15.4. Effect of Termination.............................................................-18-
Section 15.5. Survival..........................................................................-18-
ARTICLE 16. ARBITRATION .......................................................................................-18-
Section 16.1. Arbitration of Disputes...........................................................-18-
Section 16.2. Initiation of Arbitration.........................................................-19-
Section 16.3. Selection of Arbitrator...........................................................-19-
Section 16.4. Awards ...........................................................................-19-
ARTICLE 17. MISCELLANEOUS......................................................................................-19-
Section 17.1. Independent Contractors...........................................................-19-
Section 17.2. Bankruptcy........................................................................-19-
Section 17.3. Assignability.....................................................................-19-
Section 17.4. Entire Agreement..................................................................-20-
Section 17.5. Amendment.........................................................................-20-
Section 17.6. Force Majeure.....................................................................-20-
Section 17.7. Export Laws.......................................................................-20-
Section 17.8. Governing Law.....................................................................-20-
Section 17.9. No Waiver ........................................................................-20-
Section 17.10. Severability.....................................................................-20-
Section 17.11. Notices..........................................................................-21-
Section 17.12. Titles and Subtitles.............................................................-21-
Section 17.13. Counterparts.....................................................................-21-
</TABLE>
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<PAGE> 26
FOUNDRY AGREEMENT
by and among
AMKOR TECHNOLOGY, INC.;
AMKOR ELECTRONICS, INC.;
C.I.L. LIMITED (CAYMANS);
ANAM INDUSTRIAL CO., LTD.;
and
ANAM USA
dated as of November 1, 1997
<PAGE> 1
Exhibit 10.22
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of __________, 1998 between AMKOR TECHNOLOGY, INC., a Delaware
corporation (the "Company"), and Smith Barney Inc. (the "Borrower") in
consideration of the Master Securities Loan Agreement of even date herewith.
Reference is made to the Securities Loan Agreement of even date herewith (the
"Securities Loan Agreement"), by and among Smith Barney Inc., and James L. Kim
and Agnes C. Kim (collectively the "Lender"). The Company hereby confirms its
agreement with the Borrower as follows:
1. SHELF REGISTRATION.
(a) The Company shall use its best efforts to cause the
Securities and Exchange Commission (the "Commission") to declare effective as
promptly as practicable (if not declared effective as of the date hereof) the
registration statement on Form S-1 (No. 333- ) (as amended or supplemented
from time to time, the "Shelf Registration Statement") of the Company under the
Securities Act of 1933, as amended (the "1933 Act"), covering, among other
things, the offering and sale by Borrower of shares of common stock of the
Company ("Common Stock") that are Loaned Securities (as defined in the
Securities Loan Agreement) ("Loaned Company Stock"). If the Shelf Registration
Statement has become or becomes effective pursuant to Rule 430A under the 1933
Act, or filing of the prospectus constituting a part thereof (as amended or
supplemented from time to time, the "Prospectus") is otherwise required under
Rule 424(b) under the 1933 Act, the Company will cause the Prospectus, properly
completed, and any supplement thereto to be filed with the Commission pursuant
to the applicable paragraph of Rule 424(b) within the time period prescribed.
2. REGISTRATION PROCEDURES. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Company shall furnish to Borrower, prior to the filing
thereof with the Commission, a copy of each amendment to the Shelf Registration
Statement and each amendment or supplement, if any, to the Prospectus (and of
each report or other document incorporated therein by reference) and shall use
its best efforts to reflect in each such document, when so filed with the
Commission, such changes thereto as Borrower reasonably may propose.
(b) Notwithstanding any other provision hereof, the Company
shall take such action as may be necessary so that (i) the Shelf Registration
Statement, and any amendment thereto, and any Prospectus, and any amendment or
supplement thereto (and each report or other document incorporated therein by
reference in each case) complies in all material respects with the 1933 Act and
the Securities Exchange Act of 1934, as amended (the "1934 Act") and the
respective rules and
-1-
<PAGE> 2
regulations thereunder, (ii) the Shelf Registration Statement, and any amendment
thereto, does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
Prospectus, and any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Company
shall not be responsible for the correctness of any information contained in the
Shelf Registration Statement or the Prospectus or any amendment or supplement
thereto provided to the Company in writing by Borrower specifically for
inclusion therein.
(c) The Company shall promptly advise Borrower, and, if
requested by Borrower, confirm such advice in writing:
(i) when any amendment to the Shelf Registration
Statement has been filed with the Commission and when the Shelf
Registration Statement or any amendment thereto has become effective;
(ii) of any request by the Commission for amendments
or supplements to the Shelf Registration Statement, the Prospectus, or
each report or other document incorporated by reference therein, or for
additional information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Shelf Registration Statement
or the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Loaned Company Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event as a result of
which the Prospectus would include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) The Company shall not take any action to withdraw the
Shelf Registration Statement without the prior written consent of Borrower. The
Company will make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Shelf Registration Statement or any
suspension of qualification of the Loaned Company Stock in any jurisdiction at
the earliest possible time.
(e) The Company will furnish to Borrower, without charge, at
least one copy of the Shelf Registration Statement and any amendment thereto,
any report or document incorporated by reference therein, including financial
statements and schedules, and, if Borrower so requests in writing, all exhibits
thereto (including those incorporated by reference).
-2-
<PAGE> 3
(f) The Company will deliver to Borrower, without charge, as
many copies of the Prospectus and any amendment or supplement thereto as
Borrower may reasonably request; and will consent to the use of the Prospectus
or any amendment or supplement thereto by Borrower in connection with the
offering and sale of the Loaned Company Stock.
(g) The Company will register or qualify or cooperate with
Borrower in connection with the registration or qualification of the Loaned
Company Stock for offer and sale under the securities or blue sky laws of such
jurisdictions as Borrower reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Loaned Company Stock; provided, however, that the Company
will not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action which would subject it
to general service of process or to taxation in any such jurisdiction where it
is not then so subject.
(h) Upon the occurrence of any event described in Section
2(c)(v) above, the Company will promptly prepare and file with the Commission a
post-effective amendment to the Shelf Registration Statement or an amendment or
supplement to the Prospectus forming a part thereof or any document or report
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to purchasers of the
Loaned Company Stock, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Company
may delay the preparation and filing of any such amendment or supplement (i) to
the extent required by applicable law (in which event the Company shall promptly
notify the Borrower in writing of such requirement of applicable law) or (ii)
for a period not exceeding 28 calendar days (or such longer period as agreed to
in writing by Borrower) from the date of occurrence of such event if such
amendment or supplement would disclose a material financing, acquisition or
other corporate development with respect to the Company and the chief executive
officer or chief financial officer of the Company shall have determined in good
faith (and shall have notified the Borrower in writing of such determination)
that such disclosure is not in the best interest of the Company.
(i) The Company shall instruct Borrower in writing to
immediately suspend its use of the Prospectus if (i) the Commission has issued a
stop order suspending the effectiveness of the Shelf Registration Statement,
(ii) an event contemplated by Section 2(c)(v) above has occurred or (iii) the
Board of Directors of the Company, on the advice of its counsel, reasonably
concludes that it is inadvisable as a matter of the federal securities laws that
the Prospectus continue to be used. Such an instruction shall be given by
facsimile transmission, with receipt confirmed telephonically. Such an
instruction shall be deemed received (A) if receipt by each required recipient
is telephonically confirmed between the hours of 7:30 a.m. and 4:30 p.m. on any
Business Day, two hours after the last such confirmation is obtained or (B)
otherwise, upon the next opening of business of the Nasdaq National Market
following the time the last such confirmation is made.
-3-
<PAGE> 4
(j) Promptly upon the Company satisfying the eligibility
criteria for use of a Form S-3 under the 1933 Act, the Company will file a
post-effective amendment to the Shelf Registration Statement to convert it from
a Form S-1 to a Form S-3 registration statement.
3. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify, contribute to and hold
harmless Borrower and each person, if any, who controls Borrower within the
meaning of Section 15 of the 1933 Act as follows:
(1) against any and all loss, liability, claim,
damage, expense and judgment whatsoever ("Loss") arising out of any
untrue statement or alleged untrue statement of a material fact
contained in the Shelf Registration Statement (or any amendment thereto
or any information document or report incorporated by reference
therein), or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus
(or any amendment or supplement thereto or any information document or
report incorporated by reference therein) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(2) against any and all loss, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(3) against any and all expense whatsoever,
reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (1) or (2) above;
provided, however, that the provisions of this
Section 3 shall not apply to any Loss to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by
Borrower expressly for use in the Shelf Registration Statement (or amendment
thereto) or the Prospectus.
(b) The Company agrees to indemnify and hold harmless Borrower
against any and all Loss, following receipt by Borrower of a written instruction
from the Company to cease using the Prospectus, to the extent such Loss arises
out of Borrower's inability to deliver Loaned Company Stock upon settlement of
trades entered into prior to receipt by Borrower of such instruction. The
-4-
<PAGE> 5
Company shall not be required under this Section 3(b) to indemnify Borrower for
any Loss to the extent such Loss arises out of (1) Borrower's inability to
deliver Loaned Company Stock upon settlement of trades entered into after
receipt by Borrower of such instruction, (2) the bad faith or gross negligence
of Borrower or (3) Borrower's failure to take reasonable steps to mitigate its
Loss.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to the Company of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify the
Company shall not relieve the Company from any liability which it may have
otherwise under this Section 3. The Company may participate at its own expense
in the defense of any such action.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity provided for in Sections 3(a), (b) and (c)
above is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and Borrower shall
contribute to the aggregate Losses of the nature contemplated by said indemnity
agreement incurred by the Company and Borrower, in such proportions as is
appropriate to reflect the relative fault of the Company, on the one hand, and
Borrower, on the other hand, in connection with the statements or omissions that
resulted in such Losses, determined by reference to whether any alleged untrue
statement or omission related to information provided by the Company, on the one
hand, or Borrower, on the other hand; provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 3(d), each
person, if any, who controls Borrower within the meaning of Section 15 of the
1933 Act shall have the same rights to contribution as Borrower.
4. OBLIGATIONS OF THE COMPANY.
(a) The Company from time to time (but not more than once per
calendar quarter), upon receipt of a written request from Borrower therefor,
shall furnish or cause to be furnished to Borrower:
(1) The opinions of legal counsel for the Company, in
form and substance reasonably satisfactory to Borrower, substantially
in the form set forth in Sections 7(b), 7(c), 7(d) and 7(e) of the U.S.
Underwriting Agreement dated , 1998 (the "Underwriting
Agreement") among Smith Barney Inc., BancAmerica Robertson Stephens,
Cowen & Company and the Company;
(2) A certificate of the Company, signed by the
Chairman of the Board or the President and the principal financial or
accounting officer of the Company, to the effect that (i) from the date
of the most recent financial information contained in the Prospectus
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company or its subsidiaries, considered as one
enterprise, and (ii) no stop order suspending the effectiveness of the
Shelf
-5-
<PAGE> 6
Registration Statement has been issued and no proceedings for that
purpose have been initiated or threatened by the Commission; and
(3) A letter from the independent public accountants
of the Company, in form and substance satisfactory to Borrower, to the
same effect as set forth in Section 7(j) of the Underwriting Agreement.
5. REGISTRATION EXPENSES. The Company will bear all expenses incurred
in connection with the performance of its obligations under this Agreement.
6. TERMINATION. This Agreement and the obligations of the parties
hereunder shall terminate upon the termination of the Securities Loan Agreement,
except for any liabilities and obligations pursuant to Sections 3 and 5 hereof.
7. MISCELLANEOUS.
(a) The Company has not entered into, nor will the Company on
or after the date of this Agreement enter into, any agreement which is
inconsistent with the rights granted to Borrower in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to Borrower hereunder
do not in any way conflict with the rights granted to the holders of the
Company's other issued and outstanding securities under any such agreements.
(b) The provisions of this Agreement, including the provisions
of this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Borrower.
(c) Any request, demand, authorization, notice, waiver,
consent, report or communication to a party hereunder shall, unless this
Agreement specifically provides otherwise, be in writing and delivered in person
or mailed by first-class mail, postage prepaid, addressed as follows or
transmitted by facsimile transmission to the following facsimile numbers (or to
such address or facsimile number as such party may designate by the notice):
if to the Company:
Amkor Technology, Inc.
1345 Enterprise Drive
West Chester, PA 19380
Attention: Chief Financial Officer
Facsimile No.: (610) 431-9967
Telephone No.: (610) 431-9600
-6-
<PAGE> 7
if to Borrower:
Smith Barney Inc.
333 West 34th Street
New York, NY 10001
Facsimile No.:
Telephone No.:
with copies in the case of any notice, advice or instruction
under Section 2 to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94306
Attention: Larry W. Sonsini
Facsimile No.: (650) 493-6811
Telephone No.: (650) 493-9300
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Alan L. Beller
Facsimile No.: (212) 225-3999
Telephone No.: (212) 225-2000
Any request, demand, authorization, notice, waiver, consent,
report or communication hereunder shall be deemed given when actually received,
except that any request, demand, authorization, notice waiver, consent, report
or communication actually received on a day that is not a Business Day or after
business hours on a Business Day shall be deemed given and received on the next
succeeding Business Day.
(d) This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York.
(g) In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AMKOR TECHNOLOGY, INC.
By: _____________________________________
Name:
Title:
Confirmed and accepted as of the date first above written:
SMITH BARNEY INC.
By: _______________________________
Name:
Title:
-8-
<PAGE> 1
EXECUTION COPY
Exhibit 10.23
MANUFACTURING AND
PURCHASE AGREEMENT
BETWEEN
TEXAS INSTRUMENTS INCORPORATED,
ANAM INDUSTRIAL CO., LTD.
AND
AMKOR ELECTRONICS, INC.
DATED AS OF JANUARY 1, 1998
<PAGE> 2
EXECUTION COPY
TABLE OF CONTENTS
Page
Article 1. Definitions.......................................................1
Article 2. Items and Cooperation to be Supplied by Anam and/or Amkor.........3
Article 3. Specifications, Quality Inspection, Testing and Customer Service..5
Article 4. Manufacturing Changes............................................11
Article 5. TI Loading Obligations and Option................................12
Article 6. TI Forecasts and Purchase Orders.................................14
Article 7. Pricing .........................................................17
Article 8. Shipping, Payment and Packaging .................................20
Article 9. Warranties and Liability Limitations.............................22
Article 10. Amendment of Certain Prior Agreements...........................25
Article 11. Term............................................................25
Article 12. Confidentiality.................................................25
Article 13. Termination and Dispute Resolution..............................25
Article 14. Miscellaneous...................................................29
<PAGE> 3
EXECUTION COPY
MANUFACTURING AND PURCHASE AGREEMENT
This Manufacturing and Purchase Agreement (this "Agreement") dated as of January
1, 1998 (the "Effective Date") is made by and among TEXAS INSTRUMENTS
INCORPORATED, a Delaware, U.S.A. corporation, with its principal place of
business at 13500 North Central Expressway, Dallas, Texas 75265, U.S.A. ("TI"),
ANAM INDUSTRIAL CO., LTD., a corporation of the Republic of Korea, with its
principal place of business at Seoul, Republic of Korea ("Anam"), and AMKOR
ELECTRONICS INC., a Pennsylvania, U.S.A. corporation, with its principal place
of business at 1345 Enterprise Drive, West Chester, Pa 19380 ("Amkor"). TI, Anam
and Amkor are hereinafter referred to individually by their respective names or
as Party and collectively as Parties.
RECITALS
WHEREAS, Anam is engaged in the business of, among other things, operating
a semiconductor foundry in Korea;
WHEREAS Amkor is in the business of, among other things contracting with
third parties to sell semiconductor wafers and die manufactured by Anam;
WHEREAS, the Parties desire to implement certain provisions of the
Technical Assistance Agreement dated as of January 28, 1997 ("Phase 1 TAA")
between TI and Anam and the Technical Assistance Agreement of even date herewith
("Phase 2 TAA") between TI and Anam for the purchase by TI from Amkor, and the
sale by Amkor to TI, of TI Products (as hereinafter defined) to be manufactured
by Anam;
WHEREAS, TI and Anam desire to amend and supersede certain provisions of
the Phase 1 TAA related to matters covered by this Agreement; and
WHEREAS, the Parties desire to address manufacturing requirements,
loading, pricing and other purchase-related terms and conditions for both Phase
1 Products, Phase 2 Products;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, the Parties, intending to be legally bound, hereby
agree as follows:
ARTICLE 1.
DEFINITIONS
For purposes of this Agreement, the following words, terms and phrases shall
have the meanings assigned to them in this Article 1 unless specifically
otherwise stated. Furthermore, any defined term herein shall have a constant
meaning regardless of whether it is used in its singular or plural form.
1
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ADVANCED AVAILABLE TECHNOLOGY means, as the context herein requires, "Advanced
Available Technology" as defined in the Phase 1 TAA and/or "Advanced Available
Technology" as defined in the Phase 2 TAA.
CUSTOMER QUALIFICATION means that a TI customer has qualified a particular TI
Product device manufacturable by Anam hereunder for sale by TI to such customer,
as reflected in TI's written notification thereof to Anam.
FACILITY means the completed wafer fabrication plant known as Anam Fabrication
Buchon (AFB) 1, located at 222, Dodang-dong, Wonmi-gu, Buchon, Kyunggi-do, Korea
420-130 which Anam constructed, in connection with the Phase 1 TAA, which
Facility includes only a single 60 meter by 100 meter clean room. The term
Facility includes a wafer fabrication facility and equipment only, and shall not
include facilities or equipment for assembly and testing of Products.
PHASE 1 means that portion of the clean room within the Facility, the process
capability of which, as currently contemplated by the Parties, is sufficient to
manufacture approximately 15,000 wafer starts per month under the provisions of
the Phase 1 TAA.
PHASE 1 PRODUCTS means "TI Products," as defined in the Phase 1 TAA.
PHASE 2 means that portion of the clean room within the Facility, the process
capability of which, as currently contemplated by the Parties, is sufficient to
manufacture approximately 10,000 wafer starts per month under the provisions of
the Phase 2 TAA.
PHASE 2 PRODUCTS means "TI Products," as defined in the Phase 2 TAA.
PROCESS QUALIFICATION means TI's written certification that a unique process
flow within the broader C10-node or C07-node (e.g., the split-gate C10 process
flow and the split-gate C07 process flow) in operation at the Facility, which
unique process flow cannot be qualified by similarity to another already
qualified process flow, is qualified per the standards referred to within TI as
the "QSS standards."
PROCESS QUALIFICATION COSTS means all costs incurred during the period of
operation preceding Process Qualification relating to (i) the fabrication of
prototype wafers, (ii) the Process Qualification testing of those wafers,
including but not limited to costs relating to the acquisition, production,
testing (including but not limited to final test, life test and environmental
test), assembly and/or qualification testing of sample materials (including but
not limited to wafers), and (iii) the failure analysis of failed units.
PRODUCTS means Phase 1 Products and Phase 2 Products, as defined herein.
PRODUCT QUALIFICATION means, with respect to TI Products, the process, as
described herein, resulting in TI issuing its written certification that such TI
Products and their
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manufacture have achieved a level of quality, consistency and reliability that
meets or exceeds the Specifications in accordance with this Agreement.
PRODUCT QUALIFICATION COSTS means all costs incurred during Product
Qualification relating to (i) the fabrication of prototype wafers, (ii) the
Product Qualification testing of those wafers, including but not limited to
costs relating to the acquisition, production, testing (including but not
limited to final test, life test and environmental test), assembly and/or
qualification testing of sample materials (including but not limited to wafers),
and (iii) the failure analysis of failed units; provided, however, that Product
Qualification Costs shall not in any event include Process Qualification Costs.
QUALIFICATION COSTS means Product Qualification Costs and Process Qualification
Costs.
SPECIFICATIONS means specifications related to a specific process flow which are
supplied to Anam in writing by TI to describe, characterize, circumscribe and
define the design characteristics, quality and performance of TI Products,
manufacturing processes, manufacturing equipment or Product Qualification and
which are consistent with Specifications which are applicable to the same
process flow manufactured by a TI facility comparable to the Facility.
TERM means the period during which this Agreement is in effect, as more
specifically set forth in Article 11 of this Agreement.
TI PRODUCTS means TI Products as defined in the Phase 1 TAA and as defined in
the Phase 2 TAA.
Unless otherwise provided herein, other capitalized terms herein shall have the
meaning assigned to them in either or both the Phase 1 TAA or the Phase 2 TAA,
as the context herein requires.
ARTICLE 2.
ITEMS AND COOPERATION TO BE SUPPLIED BY ANAM AND/OR AMKOR
2.1 MANUFACTURE. In accordance with the Phase 1 TAA, Phase 2 TAA, or any other
applicable Technical Assistance Agreement ("TAA") executed between the Parties,
Anam shall manufacture the TI Products to be sold by Amkor to TI hereunder.
2.2 COSTS, EXPENSES AND FEES. Except as otherwise expressly provided for in
this Agreement, any applicable TAA or as may otherwise be agreed between the
Parties, Amkor and Anam shall be solely responsible for any and all costs,
expenses, fees and the like for equipment, labor, facilities, materials and
other items required in connection with Anam's and Amkor's performance of their
obligations hereunder or under any applicable TAA.
2.3 QUALIFICATION COSTS. TI shall bear all Product Qualification Costs
associated with the initial Product Qualification of each TI Product other than
those costs relating to mask sets that, pursuant to Section 2.04 below, shall be
borne by either Anam or TI. Without limiting the application of Section 2.02
above, Anam shall bear all Process Qualification
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Costs.
2.4 MASK SETS.
2.4.1 For each TI Product which is to be manufactured by Anam for TI
and which requires a specific mask design, TI agrees to
provide to Anam the design data base and Technical Information
necessary for Anam to manufacture or have manufactured mask
sets, including any such additional mask sets (or portions
thereof) as may be redesigned by TI from time to time, to be
used for manufacturing such product.
2.4.2 Subject to Sections 2.04.03, 2.04.04 and 5.04, Anam shall bear
the costs of all mask sets ordered prior to January 1, 1999
relating to Phase 1 Products.
2.4.3 TI shall bear the costs of (i) the initial mask set relating
to each Phase 2 Product and (ii) the initial mask set ordered
on or after January 1, 1999 for each Phase 1 Product. Anam
shall bear the cost of the mask sets used solely in connection
with Process Qualification under the Phase 1 TAA and the Phase
2 TAA; provided, however, that if, and to the extent (i) the
same mask set used in Process Qualification is used in
production, and (ii) TI would otherwise be obligated to have
paid for such production mask set under this Section 2.04.03,
then Anam and TI shall share equally the cost of purchasing
such qualification mask set.
2.4.4 Notwithstanding anything to the contrary set forth in this
Section 2.04, TI shall bear the cost of any reasonable mask
redesign and mask manufacturing costs associated with
modifications or changes to the original mask sets which are
necessitated by design errors or changes by TI or TI's
Customers with respect to the initial mask sets. For any
wafers that have been manufactured in whole or in part that
are required to be scrapped due to any such design error or
change of TI or TI's customers, TI shall pay Amkor an amount
(the "Wafer Termination Amount") equal to:
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*
2.4.5 Anam shall be responsible for the costs of all masks and mask
sets for which TI is not otherwise responsible pursuant to
Sections 2.04.03, 2.04.04 and 5.04.04.
2.5 TI MASK SET PROTECTION. Anam shall protect all mask sets as Trade and
Industrial Secrets of TI according to Article 10 of the applicable TAA. When any
mask set is no longer usable by Anam for the purposes of this Agreement, Anam
shall either return the mask set to TI immediately, or, upon TI's instructions,
destroy the mask set and provide TI with written certification of any such
destruction.
2.6 MATERIAL QUALITY REQUIREMENTS AND EQUIPMENT USAGE. TI will provide to Anam
the most current version of TI's manufacturing Specifications, test programs and
other test procedures needed by Anam to manufacture TI Products. In the process
of qualifying the Facility and the manufacture of each TI Product, Anam shall,
unless it obtains TI's consent to the contrary, use the same materials, recipes,
processes, specifications and equipment directly relating to the manufacture of
TI Products that TI uses in its commercial production of such TI Products as may
have been disclosed by TI to Anam or as otherwise instructed by TI.
Notwithstanding the foregoing, where required by local availability of materials
and supplies, with the consent of TI, which consent shall not unreasonably be
withheld or delayed, Anam may use materials, recipes, processes, specifications
and equipment that are different from those used by TI.
ARTICLE 3.
SPECIFICATIONS, QUALITY INSPECTION, TESTING AND CUSTOMER SERVICE
3.1 CHANGE TO SPECIFICATIONS. TI has the right to modify, change or alter the
Specifications from time-to-time, at its sole discretion and upon reasonable
written notice to Anam. In the event TI makes a change to the Specifications,
the Parties, through good faith negotiations, shall agree upon the delivery
schedule of the TI Products resulting from said change and TI's and Anam's
respective responsibilities, in accordance with Section 3.02 for the costs
incurred by Anam in connection with such changes, within thirty (30) days
following any such notice. All Specification changes shall be consistent with
TI's own Specification changes and shall not require Anam to perform changes not
otherwise generally performed by TI with respect to comparable process flows
under comparable circumstances.
3.2 SPECIFICATION CHANGE COSTS.
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3.2.1 In the event TI changes the Specifications pursuant to Section
3.01, then:
(a) If the change results in an improvement in the
manufacture of Products in general, including the
process for manufacturing the Products in general, then
Anam shall bear all costs associated with the change to
the extent that they relate to such improvements and
result in savings to Anam; or
(b) Subject to Section 3.02.01(a), TI shall bear all costs
associated with the change.
3.2.2 TI shall give Anam reasonable notice prior to exercising its
option to change Specifications, and TI and Anam shall
exercise reasonable efforts to resolve any hardships which
Anam would suffer from such change in the Specifications. For
purposes of this Section 3.02, "costs" shall include, but not
be limited to, costs relating to wafers, assembly, testing,
Qualification Costs, engineering for failure analysis,
incremental equipment to run qualification lots, and the like.
3.3 TI RESIDENT INSPECTOR. Anam agrees that TI employee safety and well-being,
product quality and reliability assurance, and the protection of TI's
intellectual property, including but not limited to Technical Information, are
of material importance to TI. Therefore, throughout the Term, TI shall have the
right to maintain at the Facility, at TI's sole discretion, one or more resident
representatives, as reasonably approved by Anam, for the purpose of monitoring
compliance with this Agreement, the Specifications, and TI safety and
environmental standards for the protection of TI personnel, and protecting TI's
intellectual property, including but not limited to Technical Information. Anam
shall provide suitable office space for use by such representatives, and shall
provide reasonable access to the manufacturing processes for the TI Products as
may be required for monitoring said compliance. Such representatives shall not
interfere with Anam's operation of the Facility.
3.4 TI CUSTOMER RIGHT OF INSPECTION. Upon reasonable notice, Anam agrees to
allow TI customer representatives (who have been approved by TI), to conduct
quality control and Specification audits and certification/qualification of the
Facility, and manufacturing process, provided that, where requested by Anam, a
TI employee accompanies such customer during its audit in the Facility, subject
to reasonable rules of Anam relating to visitors.
3.5 TI RIGHT TO MONITOR PRODUCTION. Throughout the Term, during completion of
production lots for TI, TI may perform monitoring tests and may recommend
disposition or corrective action where variance to the Specifications exists.
Anam will support this activity with quality trend reports and such other
documentation as shall be reasonably requested by TI from time-to-time. In
addition, if at any other time TI detects variances or deviations from
Specifications, TI may recommend corrective actions to Anam.
3.6 VISITS AND SECRECY AGREEMENT. Anything to the contrary in this Article 3
notwithstanding, each and every personnel of TI or TI's customers who shall be
given
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access to the Anam Facility pursuant to this Agreement, including, without
limitation, pursuant to Section 3.03, 3.04 and 3.05 shall execute an agreement,
which shall include reasonable terms governing the protection of Anam
confidential information, as a condition precedent to admission or access to
such Facility or receipt of technical information of Anam pursuant to this
Agreement. All such personnel shall fully abide by all Facility rules and
regulations. TI shall be fully liable for any personal injury or property damage
resulting from any act or omission of TI's personnel while on the premises of
Anam. All transitory visits of TI and TI customers shall be arranged at such
times and in such manner as to minimize interference with the activities of
Anam.
3.7 ANAM CORRECTIVE ACTIONS. During the Term, Anam agrees to use reasonable
commercial efforts to make corrective actions as may be reasonably recommended
by TI as soon as practicable, after written notification of the problem;
provided, however, that TI shall use reasonable commercial efforts to assist
Anam in taking such action recommended by TI or in solving problems.
3.8 CYCLE TIME. Anam agrees to supply TI Products to TI in cycle times which
shall be competitive with merchant world-class foundry companies. In any event,
Anam agrees that the maximum production cycle time (i.e., the period from the
start date for production specified in the TI Start Plan (as defined below) by
TI to Anam's shipment of TI Products) shall be [*] except where otherwise
expressly provided for herein.
3.9 EXPEDITED PRODUCTION. On production lots specified by TI, Anam shall
expedite cycle time to a [*], or such other cycle time as may be agreed (such
expedited lots herein referred to as "Hot Lots"). Regardless of the stage of the
production process at which a normal lot is converted into a Hot Lot, for each
such Hot Lot shipped within such cycle time, TI shall pay Anam a fee of [*];
provided, however, that:
(a) Unless otherwise agreed, Anam shall not be obligated to so expedite
production, through March 31, 1998, on more than [*] at any one
time; from April 1, 1998 through June 30, 1998, on more than [*] at
any one time; and thereafter, on more than [*] at any one time; and
(b) Any lots required to be expedited pursuant to Section 8.05, below
shall not count against the limits described in Section 3.09.00(a)
above.
3.10 TESTING. Anam shall perform multi-probe testing in a manner consistent with
TI practice, to the extent disclosed by TI to Anam, at Anam's Buchon, Republic
of Korea site on all TI Products delivered to TI hereunder and, without limiting
its obligations elsewhere provided for herein, shall be responsible, at its sole
expense, for having sufficient facilities, test equipment, labor, test programs
and other items in place on such site to meet required quantities and cycle
times. Notwithstanding the foregoing, TI shall be responsible, solely at its
expense, for furnishing to Anam in a timely manner copies of the multi-probe
test
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programs necessary for Anam to perform multiprobe testing on the required
quantities and within the required cycle times; provided, however, that TI shall
be under no obligation to furnish test programs compatible with any test
equipment other than the test equipment TI uses in its wholly-owned facilities
for comparable wafers. All test programs required to be implemented by Anam in
accordance with this Section 3.10 shall be consistent with TI's own test
programs and shall not require Anam to perform testing not otherwise generally
performed by TI with respect to comparable products. Anam shall use no other
test programs on TI Products other than those furnished or approved by TI. TI
agrees to purchase any testers used by Anam for TI Products at the end of Anam's
use of such testers on TI Products. TI's purchase price for such equipment shall
be equal to Anam's original purchase price for such equipment depreciated on a
five-year straight line basis and subject to a discount in price for excessive
wear and tear.
3.11 TI INCOMING TESTING AND INSPECTION.
3.11.1 TI shall furnish to Anam from time to time, as required,
quality and reliability Specifications applicable to TI
Products. Among other things, those Specifications will
specify the quality standards referred to within TI as the
"Category 1" standards. Such Specification shall be consistent
with specifications applicable to the Category 1
specifications met by TI's own facilities. Following receipt
of each shipment, TI may perform incoming tests on each
shipment of TI Products. In the event such tests demonstrate
that such TI Products fail to conform to the then-applicable
quality and reliability Specifications furnished by TI and
such Specifications conform to the foregoing, TI shall have
the right to return, after confirmation of failures, such TI
Products to Anam for rework or replacement at no cost to TI.
TI has the right to recommend corrective action to address
variances from Specifications. Such return shipments shall be
made by TI, F.O.B. the destination from which they were
originally shipped by Anam. A return material authorization
("RMA") form previously issued by Anam must accompany any such
returned TI Products.
3.11.2 TI agrees to perform incoming inspection of TI Products for
conformance with applicable Specifications within ninety (90)
days of delivery, and to advise Anam and Amkor of rejections
by written or electronic notice within five (5) business days
after inspection. If any delivery of products by Anam or Amkor
does not conform in any material respect to TI's order for
such TI Products or is found to fail applicable inspection, TI
shall have the right to reject such delivery by giving timely
notice to Anam and Amkor to that effect. TI will thereupon
return the non-conforming TI Products to Amkor or Anam (as the
case may be) at Amkor's or Anam's cost and risk, for, as may
be agreed between Amkor and TI, credit or rescreen and
replacement. If it is agreed that such TI Products shall be
rescreened, Anam and Amkor shall use reasonable efforts to
rescreen and replace such non-
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conforming wafers or dies and to do so, if at all, within
forty-five (45) days after the receipt thereof. TI will
provide Anam and Amkor with a report specifying the reason for
any rejection. All rejected products may be subjected to
inspection by Anam or Amkor to confirm that they are
defective. Any TI Product not rejected by TI within ninety
(90) days plus five (5) business days after receipt by TI
shall be deemed accepted. In the event that it determined that
TI's rejection of a TI Product was not justified in accordance
with the foregoing, TI shall reimburse Anam or Amkor, as the
case may be, for all costs incurred in connection with such
rejection, including without limitation in connection with the
shipping and testing of such TI Product.
3.11.3 Nothing in this Section 3.11 shall limit TI's rights under
Section 3.12 below.
3.12 CONFORMANCE TO QUALITY AND RELIABILITY STANDARDS; STOP SHIPMENTS.
3.12.1 Prior to any shipment of TI Products to TI, Anam shall:
(a) Visually inspect such outgoing TI Products in accordance
with applicable Specifications; and
(b) electrically test such TI Products to determine whether:
(i) such TI Products conform to the relevant Category
1 standards (as defined in Section 3.11 above), as
may be applicable to such TI Products in
accordance with Section 3.11; and
(ii) the defective parts per million ("DPPM") levels of
such shipment (as determined under then-current TI
practice applied by TI to comparable products
manufactured by TI) for such TI Products conform
to the DPPM levels agreed upon by the Parties
provided that such DPPM levels shall not be lower
than those demonstrated by the manufacturing
process, as qualified, in use at a TI wholly-owned
facility, which process is most comparable to the
one in use at the Facility.
3.12.2 Unless otherwise permitted by TI, Anam shall assure that the
TI Products meet, and shall not ship TI Products to TI that do
not meet, the standards set forth in Section 3.12.01 above.
3.12.3 If it is determined by TI within 90 days of the shipment of TI
Products to TI that such TI Products do not conform to the
standards set forth in Section 3.12.01, above, then
notwithstanding anything to the contrary contained herein and
upon written notice by TI, Anam shall stop all
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further shipments of such TI Products to TI, and TI shall be
under no obligation to accept or pay for any such shipments,
until TI shall be reasonably satisfied that appropriate
corrective actions have been taken by Anam to address the
nonconformance to such Category 1 standards and/or DPPM levels
in accordance with Section 3.12.01 above.
3.12.4 Notwithstanding Section 3.11 above, or Sections 3.12.03 and
3.12.02 above, TI shall discuss with Anam in good faith the
disposition of those TI Products produced and held hereunder
that fail to satisfy Category 1 standards [*].
3.13 SECURITY AND DESTRUCTION OF SCRAP. Anam shall not assign, consign, deliver,
transfer or otherwise provide TI Products, and shall undertake security measures
(including but not limited to scrap and non-conforming TI Product destruction)
sufficient to prevent TI Products (including all defective TI Products which do
not meet Specifications) from being sold, assigned, consigned, delivered,
transferred or otherwise provided, to any third party without the express
written consent of TI. Unless otherwise specified in writing by TI, (a) all
defective TI Products which cannot be repaired economically shall be scrapped
and destroyed and (b) such defective TI Products shall not be transferred to any
third party. TI shall have the right, from time-to-time, to review (i) Anam's
security and scrap destruction procedures and (ii) Anam's compliance with such
procedures.
3.14 PRODUCTION HOLDS. At TI's request, Anam shall hold production on any lot
without charging TI an extra fee for that service for the [*]. With respect to
lots for which the hold is made prior to the backgrind stage and which hold
exceeds [*], TI will pay Anam [*]. TI shall not be required to pay Anam a hold
fee with respect to lots for which the hold is made from and following the
backgrind stage. If any hold on a lot exceeds [*], TI, at its option, will
thereupon either (i) release the lot for cancellation pursuant to Section 8.06,
or (ii) release the lot for further processing. In the event that a lot which is
on hold is canceled in accordance with Section 8.06, TI shall pay Anam only the
cancellation charge provided under Section 8.06.
3.15 WAFER BANK. Upon TI's request Anam agrees to store, at no additional
expense to TI, up to [*] (or such other amount as may be agreed from time to
time) unfinished wafers that have been processed up to the contact or "via"
stage of processing for a period not to exceed 365 days. After Anam has stored
such wafer for 60 days, Amkor shall have the right to invoice TI for, and TI
shall purchase, such wafers at the Fixed Wafer Price therefor; provided that, in
such case, Anam shall complete the processing of, and
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delivery of, such wafers upon TI's request at no additional cost.
Notwithstanding the foregoing, upon shipment of such wafer to TI, the Price for
such wafer shall be recalculated in accordance with Article 7 and if such
recalculated Price is different from the Fixed Wafer Price paid, Amkor shall
issue a credit or debit to TI, as the case may be, for such difference. Any
wafers so purchased by TI, while in the possession of Anam, shall be owned by TI
and retained by Anam on a consignment basis and Anam shall continue to be
responsible for any loss or damage to such wafers while they are in Anam's
possession. In the event that either Anam or Amkor is responsible for a wafer
for which TI has paid in accordance with the foregoing not being ultimately
saleable to TI in accordance with this Agreement, Amkor shall credit TI the
amount paid for such wafer.
3.16 IMPLEMENTATION OF TECHNICAL INFORMATION.
3.16.1 Unless otherwise instructed by TI, and except as provided in
Section 2.06, Anam shall, in accordance with this Agreement
and the applicable TAA, implement all Technical Information
provided under the applicable TAA as well as any manufacturing
improvements (including TI Product performance improvements)
as and when the Technical Information is furnished by TI to
Anam.
3.16.2 Anam shall establish failure analysis capability reasonably
satisfactory to TI, prior to Product Qualification.
3.17 TEST CORRELATION PROCEDURES. TI and Anam agree that quality and reliability
assurance are of prime importance to TI's customers; therefore, both companies
agree to establish test correlation procedures to assure compliance with TI
customer requirements.
3.18 ANAM PROCESS RECORDS. Anam shall maintain, for a period of three (3) years
from each date of origin, accurate records describing processing detail on a per
die-lot basis.
3.19 OBSOLETE PRODUCTS. Notwithstanding anything to the contrary contained
herein, if over any six-month period the quantity of TI's orders for TI Products
falling within any particular process flow (e.g., the 33C10.c3 process flow)
constitutes less than the lower of (i) one percent (1%) of the Anam total wafer
manufacturing capacity in such period or (ii) 1,500 wafers, then Anam may notify
TI in writing of its intention to exercise its rights under this Section 3.19,
and after two and one-half years following such notice, Anam may refuse any
further order for TI Products so falling within such process flow; provided,
however, that if TI has (i) the same process flow qualified at a TI wholly-owned
facility and (ii) available capacity for the manufacturing of such TI Products
at such facility, then Anam may refuse any such further order after nine (9)
months following such notice.
3.20 PERFORMANCE METRICS. TI and Anam shall share with each other, on a periodic
basis, their respective data under the performance metrics as may be agreed
between them and reports of their respective performance against such metrics.
ARTICLE 4.
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MANUFACTURING CHANGES
Both TI and Anam understand that the particular TI Product to be provided to TI
for initial Product Qualification and as qualified by TI will define the
applicable manufacturing process with respect to the manufacture of TI Products.
After Product Qualification is successfully completed, Anam shall not make any
changes to said manufacturing process(es) or the Specifications without the
prior written instruction and consent of TI. Any unauthorized manufacturing
changes by Anam which affect the form, fit, function or reliability of the TI
Products shall render them unqualified. TI assumes no liability for the
manufacture of unqualified TI Products. Any particular TI Product and its
manufacture can become unqualified after Product Qualification if such formerly
qualified TI Product subsequently falls below applicable Specifications. Changes
to a particular TI Product or its manufacture may necessitate re-qualification.
TI or Anam shall bear the costs associated with the foregoing as determined
under the applicable TAA and this Agreement.
ARTICLE 5.
TI LOADING OBLIGATIONS AND OPTION
5.01 LOADING OBLIGATIONS.
5.1.1 Throughout the Term, TI and/or TI's Affiliates (individually
or collectively) shall, subject to only the conditions set
forth in Section 5.03, purchase from Amkor, and Amkor shall
sell (subject, inter alia, to Section 6.03) to TI, no less
than the quantities of TI Products provided in this Section
5.01, as follows:
[*]
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*
5.1.2 For the purpose of the foregoing the term "month" means
calendar month; provided, however, that if the Phase 2
Qualification Date does not occur at the beginning of a
calender month, the Parties shall adjust the time periods set
forth in Section 5.01.01 above accordingly.
5.1.3 TI shall purchase TI Products in accordance with Article 6
below. Such purchases shall be at such prices and upon such
terms as are set forth in this Agreement.
5.1.4 Notwithstanding the foregoing, TI shall not be deemed to be in
breach of Sections 5.01.01(a) and 5.01.01(d) for so long as TI
meets its minimum purchases obligations under such sections as
determined on a rolling six-month average basis.
5.1.5 Anam and Amkor agree to take all reasonable commercial efforts
to work with TI with respect to this Section 5.01.
5.02 CAPACITY. Regardless of Anam's actual manufacturing capacity, "Capacity"
means, with respect to Phase 1, 15,000 wafer starts per month, and, with respect
to Phase 2, 10,000 wafer starts per month, unless otherwise agreed.
5.03 CONDITIONS TO TI PURCHASE OBLIGATIONS. TI shall be relieved by Anam and
Amkor of TI's obligation to purchase TI Products from Amkor pursuant to Section
5.01 only during the period and to the extent that: (i) Amkor and Anam have
failed to achieve a sufficient number of Customer Qualifications to support such
purchase obligations, such failure is the fault of Amkor or Anam and TI has used
reasonable commercial efforts to obtain such Customer Qualifications; or (ii)
Anam has materially failed to meet Specifications and TI Product performance
specifications (e.g., cycle time, yield and delivery targets), and provided that
in such case Anam and TI shall work together to remedy such failure.
5.4 C12 PRODUCTS.
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5.4.1 Anam shall manufacture the 33C12X3L devices listed on Annex C
that TI has redesigned for manufacture with the 25C10 process
node ("C12 Products"). TI shall purchase from Amkor and Amkor
shall sell to TI such C12 Products manufactured by Anam in
quantities of, in 1998, [*], at a Fixed Wafer Price for wafers
started through the first half of 1998 of [*], and for wafers
started from and after the second half of 1998, [*], provided
that the second half 1998 the Fixed Wafer Price will be
increased as needed to maintain a 1998 average amount payable
for all C12 Products of [*].
5.4.2 [*]
5.4.3 The C12 Products purchased pursuant to this Section 5.04 shall
not apply to TI's loading obligations set forth in Section
5.01.01.
5.4.4 Notwithstanding anything to the contrary set forth herein,
including in Section 2.04, TI shall be responsible for the
cost of any mask set used in the Product Qualification for any
C12 Product and the initial mask set used in the manufacture
of a C12 Product.
5.4.5 Except as otherwise provided in this Section 5.04, all C12
Products will be treated as Phase 1 Products are treated
hereunder.
ARTICLE 6.
TI FORECASTS AND PURCHASE ORDERS
6.1 ANNUAL QUANTITY PROJECTIONS. By the 15th of May of each year during the
Term, TI shall provide to Amkor the annual quantities of Wafer Outs by
technology node (e.g., C10, C07) estimated to be purchased from Amkor by TI for
the upcoming three (3) to five (5) year time period (the "Annual Quantity
Projections"). For purposes of this Agreement, "Wafer Outs" means finished
wafers. Such Annual Quantity Projections shall be a good faith estimate by TI
but shall be for informational purposes only and not constitute a binding
purchase obligation of TI. The Annual Quantity Projections may be issued
electronically.
6.2 FIXED LOADINGS. Subject to Article 5 above, TI shall purchase from Amkor,
Amkor shall sell, and Anam shall manufacture, quantities and types of TI
Products to the extent such quantities and types are deemed fixed in Forecasts
and TI Start Plans issued in
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accordance with the following provisions of this Article 6.
6.3 MONTHLY FORECASTS.
6.3.1 At least two weeks prior to the start of each month, TI shall
issue to Amkor a forecast (the "Forecast") of the monthly
quantity of wafer starts by technology node (e.g., C10, C07)
and process flow (e.g., 33c10x4L) to be purchased by TI from
Amkor during the next twelve months. The first three months
included in each Forecast shall be deemed fixed as to the
quantity of wafer starts and the related technology nodes.
Accordingly, the quantities of wafer starts and technology
nodes specified for the first and second months of each
Forecast shall be the same as the quantities of wafer starts
and technology nodes specified for the second and third months
of the immediately preceding Forecast.
6.3.2 The last nine months included in each Forecast shall be deemed
fixed as to the quantity of wafer starts, except that in each
Forecast, TI may increase or decrease the quantity of wafer
starts specified for any of the last nine months of such
Forecast (a "Subject Month") by up to an amount equal to five
(5) percentage points of the Capacity specified in such
Forecast for the corresponding month immediately preceding the
Subject Month. Such forecasted amount, adjusted in accordance
with the foregoing, shall be deemed fixed as to the quantity
of wafer starts, unless further varied in subsequent Forecasts
issued in accordance with this Section 6.03.02.
6.3.3 Nothing in this Section 6.03 shall restrict TI from specifying
in its Forecasts quantities less than its minimum loading
requirements under Section 5.01, provided TI satisfies those
requirements on a six-month rolling average basis as set forth
in Section 5.01.04.
6.4 DAILY LOADING REQUIREMENTS AND WEEKLY FORECAST.
6.4.1 On a daily basis, Monday through Friday, TI shall issue to
Amkor a seven-day TI Start Plan (the "TI Start Plan"). The TI
Start Plan shall specify device types, and quantities in terms
of wafer starts for TI Products the production of which is to
commence for each of the seven days covered by the TI Start
Plan. TI shall issue each TI Start Plan at least 24 hours in
advance of the first date (Korea time) covered by such TI
Start Plan. The TI Start Plan will be issued electronically.
The following table sets forth the day of the week (determined
on the basis of Dallas, U.S., local time) on which each TI
Start Plan is issued and the corresponding day (or days) of
the week ("Fixed Days"), determined on the basis of Korean
local time, for which the quantities set forth in such TI
Start Plan shall be deemed fixed as to device
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types and quantities in terms of wafer starts:
TI Start Plan issuance Date, by Fixed Days
5:00pm Dallas, U.S. Local Time:
Monday Wednesday
Tuesday Thursday
Wednesday Friday
Thursday Saturday
Friday Sunday, Monday and
Tuesday
6.4.2 Anam shall commence production of such device types
in such quantities as specified for each such Fixed
Day. The remaining days of each TI Start Plan shall
be for informational purposes only and shall not be
deemed fixed to any extent.
6.4.3 Anam shall produce TI Products, through the third
quarter of 1998, in lots of 6, 12 or 24 wafers, as
specified in TI Start Plans, and after such period,
in lot sizes to be agreed upon by the Parties, which
agreement shall be based in part on whether Anam
incurs materially higher per-die costs in the
production of smaller lot sizes.
6.5 SHIPPING INSTRUCTIONS. On Monday of each week, TI shall provide Amkor a
Shipping Instruction Report identifying wafer shipments (including
shipment destinations) that need to be made in the current week
starting on that Monday.
6.6 FURTHER AGREEMENT. Nothing in this Article 6 shall restrict the Parties
from agreeing from time to time on quantities and types of TI Products
different from those deemed fixed pursuant to the foregoing provisions.
6.7 YIELD ESTIMATES.
6.7.1 Anam shall provide to TI accurate multi-probe yield
("MPY") and process yields estimates for Anam's
production of each TI Product device on a weekly
basis, or more frequently if there is a material
change in the estimated MPY or process yield last
communicated to TI.
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6.7.2 Anam acknowledges that the quantities of Wafer Outs TI specifies
in TI Forecasts and of wafer starts TI specifies in the TI
Start Plans are dependent on the accuracy of such MPY and
process yield estimates, as provided by Anam. Therefore, if
with respect to any particular TI Product device type, Anam's
actual integrated yield (i.e., the cumulation of the MPY and
the process yield) exceeds the integrated yield estimate last
furnished by Anam to TI in time to allow TI to adjust its
Forecast or the TI Start Plan accordingly, then the other
provisions of this Article 6 notwithstanding, but subject to
TI's rights elsewhere provided in this Agreement relating to
inspection, quality, reliability, warranty and the like, TI
shall purchase such excess of such device type, but only up to
the Acceptable Yield Variance. For purposes hereof, the
"Acceptable Yield Variance" means, through 1998, [*] and,
after December 31, 1998, [*] Any such excess so purchased by
TI shall count against TI's loading requirements elsewhere
provided for hereunder.
6.8 UNNECESSARY VARIATIONS. TI and Anam shall each use commercially reasonable
efforts to minimize unnecessary variations in order to achieve as nearly as
possible linear weekly shipments.
6.9 PURCHASE ORDER PROCESS. Two weeks prior to the start of each quarter, at
the same time as the Quarterly Forecast, TI shall supply to Amkor a written
blanket purchase order. The purchase order shall be issued solely for
administrative/invoicing purposes and shall only provide the estimated amount
payable by TI to Amkor in U.S. Dollars. The purchase order shall not be binding
in any respect. Any terms and conditions expressed in any purchase order or
acknowledgment shall have no force and effect between the Parties.
6.10 REVISIONS. The Parties may agree in writing from time to time to revise the
periods covered by the rolling forecasts, the forecasting and ordering process,
the forecast and ordering data, and/or the technology by which the forecasts and
orders are communicated to take advantage of more efficient and effective means
of transacting business. During the Phase 1 node start-up period and until March
31, 1998, TI shall provide forecasted volume by device name. These data are for
informational purposes only and do not constitute a formal start plan commitment
by TI.
ARTICLE 7.
PRICING
7.1 PRICING.
7.1.1 For TI Products delivered to TI in accordance with this
Agreement, TI shall pay Amkor an amount (the "Price")
calculated in accordance with this Article 7. [*]
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[*]
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[*]
ARTICLE 8.
SHIPPING, PAYMENT AND PACKAGING
8.1 SHIPMENTS. Shipments shall be made FCA (INCO Terms), Facility (the "FCA
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Point"), in accordance with the routing and "ship to" instructions in TI's
shipping instructions. All title and risk of loss or damage shall pass from
Amkor to TI upon Anam's delivery to the FCA Point, provided Anam has shipped the
TI Products in accordance with TI's reasonable routing and "ship to"
instructions and any other packing and shipping instructions. TI shall be
responsible for all shipping, handling and insurance costs from the FCA Point to
the destination of the shipment.
8.2 PAYMENT PROCEDURES.
8.2.1 On the day Anam makes shipment, Amkor shall send to TI a shipping
notice containing the number of TI Products shipped, estimated
amount payable, lot number, and purchase order number. Amkor
shall also provide, at the end of each week, a weekly invoice and
reconciliation statement showing all shipments made during the
week and any special or incidental fees incurred that week as
authorized by this Agreement (e.g., Hot Lot fees).
8.2.2 TI's payment shall be net thirty (30) days of each such weekly invoice
and reconciliation statement.
8.3 DELIVERY.
8.3.1 Anam shall ship TI Products to TI's designated delivery points on the
dates required to meet the cycle time requirements hereunder from
the production start dates specified in TI Start Plans (the
"Scheduled Shipment Date"), but in no event shall Anam ship TI
Products sooner than three (3) days in advance of the Scheduled
Shipment Date. Except for those TI Products which are subject to
delays caused by holds or storage at the wafer bank, as described
in Sections 3.14 and 3.15 respectively, in the event that any TI
Products are not shipped in accordance with such delivery dates,
Anam agrees to ship via air freight (or as directed by TI) and to
pay for all extra costs.
8.3.2 In addition to the TI packing and shipping instructions, the TI
Products shall be packaged in accordance with applicable TI
Specifications and Korean Laws and U.S. laws to ensure safe
arrival at TI's designated delivery point.
8.4 PACKING AND SHIPPING INSTRUCTIONS.
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8.4.1 Anam will properly pack and describe shipments in accordance with TI
Specifications and applicable carrier and legal regulations.
Shipments will be made at the lowest possible freight charges. TI
may assist Anam by providing freight classifications or
classifying material. Anam will insure or declare value on
shipments except on parcel post, unless TI specifies otherwise.
On shipment where value is declared, Anam will ship prepaid
insured for a minimum of the equivalent of Fifty U.S. Dollars
(U.S. $50.0) to facilitate tracing. If shipping by air carrier,
Anam will ship freight prepaid. Anam shall consolidate the air
and surface shipments on single bills of lading insofar as
possible so as to avoid premium freight costs unless instructed
otherwise by TI.
8.4.2 In case any shipment does not correspond to normal practice in the
industry (e.g., require special handling shipments or air ride
suspension, or air shipment over five hundred (500) pounds, or
over one hundred twenty (120) inches long or wide or over
fifty-six (56) cubic feet, etc.), Anam agrees to notify TI's
appropriate traffic department seventy-two (72) hours prior to
shipment for special shipping instructions.
8.4.3 Each box, crate or carton will show TI's full street address and TI
Start Plans lot number regardless of how shipped. On air carrier
shipments, a packing list shall accompany each container and
shall describe the contents of such container. On all other
shipments, Anam will provide a packing list to accompany each
shipment, referencing the appropriate TI Start Plans lot number
and purchase order number. The bill of lading also will reference
the TI Start Plan lot number and purchase order number.
8.4.4 Anam is responsible for packing shipments correctly based on the
carrier/mode utilized. Charges for packing and crating shall be
deemed part of the Price and no additional charges will be made
therefor unless specifically requested by TI on the TI Start
Plans. Anam agrees to ship via the carrier specified by TI.
8.5 RETURN MATERIALS AUTHORIZATION. TI Products returned to Anam or Amkor
pursuant to Sections 9.2 or 3.11 or as otherwise permitted hereunder shall be
returned freight collect. To the extent reasonably practicable, replacement
service by Anam or Amkor shall be made on an expedited, "courier", basis, to the
extent practicable, not to exceed [*], from the date of return, at no additional
expense to TI. Anam agrees to provide RMA as soon as reasonably possible, but
not exceeding five (5) business days after return by TI.
8.6 CUSTOMER CANCELLATION. Upon a cancellation of an order by a TI customer on
the basis of which customer order TI ordered a lot in production hereunder, of a
lot already in production at the Facility, TI shall have the right to cancel
such lot; provided, however that TI shall pay Amkor an amount equal to the Wafer
Termination Amount (as defined in
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Section 2.4.4).
ARTICLE 9.
WARRANTIES AND LIABILITY LIMITATIONS
9.1 PRODUCT WARRANTY. Anam warrants to TI that the TI Products as delivered to
TI hereunder will conform to the relevant Specifications and shall be free from
any defects in material or workmanship for a period of [*] from the
date of delivery to TI (hereinafter, the "Warranty Period").
9.2 PRODUCT WARRANTY REMEDY.
9.2.1 If, within the Warranty Period, any TI Products are in breach of the
warranty set forth in Section 9.1, TI shall notify Anam promptly
in writing of such breach, and Anam shall promptly, at TI's
option, either (i) if Anam still has the capability to
manufacture such TI Products, repair or replace such TI Products
at no cost to TI or TI's customers, or (ii) credit to TI's
account [*]. A Return Materials Authorization ("RMA") form
previously issued by Anam must accompany any such returned TI
Products. Such return shipment shall be made by TI, F.O.B. TI's
shipping dock or such other shipping location as may be
designated by TI.
9.2.2 If it is determined that a TI Product returned to Anam in accordance
with the foregoing has not breached the warranty set forth in
Section 9.1, TI shall reimburse Anam the costs incurred by Anam
in connection with Anam's treatment of such TI Product as a
product subject to Section 9.2.1, including the return of such TI
Product and the testing thereof.
9.3 ANAM AND TI INDEMNITY.
9.3.1 Anam will hold TI harmless from, and indemnify it against, all costs
and damages, up to the total amount paid by TI to Amkor for a
particular TI Product to which this indemnity relates, incurred
by TI resulting from any claims made by third parties arising out
of such TI Products manufactured by Anam, to the extent that such
TI Product breached the warranty set forth in Section 9.1,
provided the liability for such claims is not due to any
intentional misconduct or gross negligence by TI (including
without limitation, that of any TI employee or agent).
9.3.2 TI will hold Anam and Amkor harmless from, and indemnify them
against,
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all costs and damages in excess of the total amount paid by TI to
Anam or Amkor for a particular TI Product to which this indemnity
relates, incurred by Anam or Amkor as a result of any claim
against Anam or Amkor by any customer of TI with respect to such
TI Product; provided, however, that in no case shall TI be
obligated to hold Anam or Amkor harmless or indemnify Anam or
Amkor against any claim arising out of the intentional misconduct
or gross negligence of Anam or Amkor (including without
limitation, that of any Anam or Amkor employee or agent).
9.4 SOLE WARRANTY.
9.4.1 WITH RESPECT TO TI PRODUCTS, THE WARRANTY SET FORTH IN SECTION 9.1
STATES ANAM'S AND AMKOR'S SOLE WARRANTY, AND SECTION 9.2.1 STATE
TI'S SOLE REMEDIES FOR THE BREACH OF SUCH WARRANTY.
9.4.2 WITH RESPECT TO TI PRODUCTS, THE WARRANTIES IN THIS ARTICLE 9 ARE
EXCLUSIVE AND STATED IN LIEU OF, AND ANAM AND AMKOR HEREBY
DISCLAIM, ALL OTHER WARRANTIES, WHETHER EXPRESS, STATUTORY, OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND, EXCEPT
AS PROVIDED IN SECTION 8 ("INDEMNITY BY ANAM") OF THE PHASE 2
TAA, NON-INFRINGEMENT. THE PARTIES NEITHER ASSUME NOR AUTHORIZE
ANY OTHER PERSON TO ASSUME FOR THE PARTIES ANY OTHER LIABILITIES
IN CONNECTION WITH THE MANUFACTURE OR SALE OF SUCH PRODUCTS. THE
WARRANTIES SHALL NOT APPLY TO ANY OF SUCH PRODUCTS WHICH HAVE
BEEN REPAIRED OR ALTERED BY TI, EXCEPT AS AUTHORIZED BY ANAM, OR
AMKOR, OR WHICH SHALL BE SUBJECTED TO MISUSE, NEGLIGENCE,
ACCIDENT OR ABUSE BY TI OR ITS CUSTOMERS.
9.5 WARRANTY DISCLAIMER. ANAM AND AMKOR MAKE NO WARRANTY OR REPRESENTATION THAT
THE TI PRODUCTS DELIVERED HEREUNDER ARE, OR WILL BE, SUITABLE FOR USE AS
COMPONENTS IN LIFE SUPPORT DEVICES OR SYSTEMS OR ANY AVIATION, NUCLEAR, OR OTHER
APPLICATION THAT PROTECTS, SUPPORTS, OR SUSTAINS LIFE, WHERE THE FAILURE OF SUCH
COMPONENT TO PERFORM MAY RESULT IN SIGNIFICANT BODILY INJURY, CAUSE THE FAILURE
OF, OR AFFECT THE SAFETY OR EFFECTIVENESS OF SUCH DEVICE, SYSTEM OR APPLICATION.
NOTHING IN THIS SECTION 9.5 SHALL LIMIT THE WARRANTY UNDER SECTION 9.1.
9.6 LIABILITY LIMITATION. ANAM'S AND AMKOR'S TOTAL AGGREGATE LIABILITY TO TI
ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING UNDER THIS
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ARTICLE, SHALL NOT EXCEED THE AGGREGATE AMOUNTS PAID BY TI TO AMKOR HEREUNDER.
EXCEPT FOR TI'S OBLIGATION TO PURCHASE AND PAY FOR TI PRODUCTS, TI'S TOTAL
AGGREGATE LIABILITY TO ANAM AND AMKOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, INCLUDING UNDER THIS ARTICLE, SHALL NOT EXCEED THE AGGREGATE AMOUNTS
PAID BY TI TO ANAM HEREUNDER.
IN NO EVENT SHALL ANY PARTY BE LIABLE FOR LOST PROFITS, COST OF PROCUREMENT OF
SUBSTITUTE GOODS OR ANY OTHER SPECIAL, DIRECT, INDIRECT, RELIANCE, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY, WHETHER
BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE.
THE FOREGOING LIMITATIONS SHALL APPLY REGARDLESS OF WHETHER THE PARTY AGAINST
WHOM LIABILITY IS ASSERTED HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES
AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
ARTICLE 10.
AMENDMENT OF CERTAIN PRIOR AGREEMENTS
The Parties agree that (i) Articles 5, 6, 7 and 8 and Sections 2.4 and 2.5 of
the Phase 1 TAA, (ii) Sections III and IV of Annex A of the Phase 1 TAA, and
(iii) the Amendment to the Phase 1 TAA, dated September 29, 1997, each in their
entirety, shall be of no further force or effect and shall be replaced and
superseded by the terms and conditions of this Agreement. Except as stated in
the foregoing, the Phase 1 TAA shall not be considered revised or amended in any
way by this Agreement. The Amkor Marketing Agreement dated as of August 1997
among TI, Anam and Amkor shall be of no further force and effect and shall be
replaced and superseded by Section 10.1.2 and Annexes B and C of the Phase 2
TAA.
ARTICLE 11.
TERM
This Agreement shall be effective upon its execution by the Parties and shall
continue in effect, with respect to Phase 1 Products, throughout the Term of the
Phase 1 TAA and with respect to Phase 2 Products, throughout the Term of the
Phase 2 TAA (as defined therein) and throughout the term of any other TAA
between TI and Anam to the extent those Parties agree.
ARTICLE 12.
CONFIDENTIALITY
This Agreement incorporates Article 10 of the Phase 2 TAA in its entirety herein
by reference, and such article shall be considered as part of this Agreement so
long as this Agreement is effective, provided, however, that nothing herein
shall limit the survival of such obligations as set forth therein. Both Anam and
Amkor expressly agree to be bound by Article 10 of the Phase 2 TAA.
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ARTICLE 13.
TERMINATION AND DISPUTE RESOLUTION
13.1 TERMINATION. Where the following grants to a Party the right to terminate
this Agreement, such Party may exercise such right in accordance with this
Article 13. For the purpose of this Article 13, Anam and Amkor on the one hand,
and TI on the other hand, shall each be considered a Party.
13.1.1 Expiration or Termination of TAA. Unless extended, upon the
expiration of the term or the termination of the last
effective TAA, this Agreement shall terminate automatically
but in accordance with any terms set forth in such TAA; or
13.1.2 Mutual Agreement of the Parties. The Parties may mutually
terminate this Agreement, in which event the future
relationship of the Parties shall be determined by the
Parties; or
13.1.3 An Uncured Material Breach. Subject to Sections 13.2, 13.3 and
13.4 of this Agreement, a Party may terminate this
Agreement, and at its option, any TAAs, in the event of an
uncured material breach hereof by the other Party. A
material breach includes without limitation a curable breach
that is not cured in accordance with Section 13.3.
13.2 RESOLUTION OF DISPUTES. It is the intent of the Parties that any breach of
this Agreement be resolved in an amicable manner, to the fullest extent
possible, and that any such resolution be reasonable in light of the rights and
obligations of the Parties. If any breach should arise which cannot be resolved
by the personnel of each Party directly involved, the following procedures of
Sections 13.3 through 13.4 inclusive shall apply in each of the circumstances
described below.
13.3 CURE. If either Party (the "Breaching Party") shall at any time breach this
Agreement, without any material causative fault on the part of the other Party
(the "Non-Breaching Party"), by failing to perform any provision of this
Agreement, the Non-Breaching Party may advise of its intention to terminate this
Agreement by providing formal written notice of breach pursuant to Section 14.13
to the Breaching Party specifying the breach. Notice for purposes of the
foregoing provided other than in strict accordance with Section 14.13 will not
be effective. Notwithstanding the foregoing, this Agreement will not be
terminable if: (i) the breach specified in the notice is remedied within the
sixty (60) day period following receipt of the notice by the Breaching Party or
(ii) if the breach reasonably requires more than sixty (60) days to correct, the
Breaching Party has, within thirty (30) days from receipt of the notice of
breach, begun substantial corrective action to cure the breach and submitted a
written remediation plan to the Non-Breaching Party pursuant to Section 14.13
providing a detailed explanation of the steps to be taken to cure the breach as
quickly as practicable, the Breaching Party diligently pursues such corrective
action, and such breach is actually cured within ninety (90) days following
receipt of the notice of breach. If any breach is not cured within the time
permitted, the Non-Breaching Party shall have the right to issue a notice of
termination of this Agreement within 90 days
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of the expiration of the foregoing cure period by giving written notice thereof
to the Breaching Party. The Non-Breaching Party shall state in its notice of
termination whether it intends to exercise its option to terminate any TAAs.
Upon the giving of such notice of termination this Agreement shall terminate in
accordance with Section 13.6. The Party receiving notice shall have the right to
cure any such breach up to the date of the notice of termination. In the event
of a material breach, the Non-Breaching Party shall have the right to suspend
further implementation or effectuation of its obligations under this Agreement
affected by such breach, and shall not be obligated to resume such activities
until such breach has been cured. This Section 13.3 shall run concurrently with
the conciliation process set forth in Section 13.4 below.
13.4 CONCILIATION PROCESS. At any time during the Term, upon the occurrence of
one or more breaches under this Agreement, the Non-breaching Party shall
promptly deliver written notification to the alleged Breaching Party setting out
in reasonable detail and in clear and concise language the good faith basis for
and the specifics of such breach. Within the applicable cure period provided in
Section 13.3, either Party has the right to demand the following meetings:
13.4.1 Upon fourteen (14) calendar days' notice, a meeting of the
project coordinators for the purposes of, among other
things:
(a assessing the good faith basis for the claimed breach;
(b defining, assessing and prioritizing the
alternatives reasonably available to cure
such breach or to correct the circumstances
or situations that gave rise to such breach
so as to make its reoccurrence unlikely; and
(c adopting by unanimous vote, one or more curative or
corrective courses of action.
13.4.2 If, after meeting in accordance with Section 13.4.1,
the project coordinators are unable to resolve the breach, a
meeting of an advisory committee consisting of the
Presidents of Amkor, Anam and the TI Executive Vice
President responsible for the Semiconductor Group and two
additional personnel of their choice, one of each from TI
and Anam or Amkor for further attempts at resolution, upon
fourteen (14) calendar days' notice.
13.4.3 If, after meeting in accordance with Section 13.4.2, such
advisory committee is unable to resolve the dispute, a
meeting of the respective Chief Executive Officer of each of
TI and Anam or Amkor for the purpose of attempting to
resolve the breach, upon fourteen calendar days' notice.
13.5 REMEDIES, INJUNCTIVE AND OTHER EQUITABLE RELIEF. Upon the failure to cure
a
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material breach by either Party of any provision of this Agreement, the
Non-Breaching Party shall have the right to pursue all available remedies at law
or in equity that it may elect, including but not limited to specific
performance or injunctive relief, in order to obtain the benefits which have
been provided pursuant to this Agreement and the TAAs, or to obtain adequate
recourse or compensation in the event the same are not so provided.
13.6 TERMINATION PROCEDURE. Following the issuance of a notice of termination
by the Non-Breaching Party in accordance with Section 13.3, the Parties shall
promptly meet and establish, in good faith, a reasonable transition plan that
will permit for a period not to exceed two years: (i) Anam, subject to the
payment of royalties under any TAA (including Section 5.3.1 of the Phase 2
TAA), to continue to use the technology provided to it under such TAA so that it
will have the ability to continue in the foundry business using TI technology
and at the same time transition to another process technology by the end of such
period, and (ii) TI to continue to purchase TI Products from Amkor in the manner
provided in this Agreement so that TI's supply of products will not be
interrupted in such period while TI transitions to another source for such
products. If during the transition period, Amkor or Anam repeatedly and
materially fails to fulfill TI's reasonable requirements for TI Products, TI may
terminate the transition period upon sixty days' notice.
13.7 FORCE MAJEURE.
13.7.1 Should either Party be prevented from performing its contractual
obligations under this Agreement due to the cause or causes of
force majeure such as new acts of war or aggression (declared or
undeclared) by North Korea or other third country or economy,
fire, storm, flood, typhoon or other severe weather conditions,
earthquake, strike, student unrest, legal restraints, government
or like interference, judicial action, accidental damage to
equipment, as well as any other cause outside the control of that
Party, that Party shall not be liable to the other Party for any
delay or failure of performance caused by any of the above
events. "Force majeure" shall include the failure to obtain such
license(s) and other approvals, including export licenses, as are
required by U.S. law or other applicable law for the equipment,
software, technology and Products to be provided pursuant to the
terms of this Agreement, except where such failure is due to a
Party's breach of this Agreement.
13.7.2 In addition to providing notice in the manner set out in Section
14.13, the Party affected by Force Majeure shall notify the other
Party of the occurrence of any of the events set out in Section
14.16.1 in writing by cable, telex, facsimile, or electronic mail
within the shortest possible time.
13.7.3 Should the delay caused by any of the above events continue for
more than ninety (90) days, the Parties shall settle the problem
of further performance of the Agreement through friendly
negotiations as soon
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as possible with the objective of restructuring the
relationship among them such that the effects of such
delay are minimized. If the Parties cannot agree on a
mutually acceptable solution within six (6) months of
any Party request for such negotiations either Party
may terminate this Agreement and any TAAs to the
extent permitted by, and in accordance with, Section
13.06.
ARTICLE 14.
MISCELLANEOUS
14.1 ANNEX. Annexes A, B and C of this Agreement are an integral part hereof.
All amendments, supplements and alterations to this Agreement shall be made in
written form and signed by the authorized representative of the Parties, and
such shall thereafter form an integral part of this Agreement.
14.2 SEVERABILITY. In the event that any of the provisions of this Agreement,
or portions thereof, or documents referenced herein are held to be unenforceable
or invalid by any court of competent jurisdiction, the validity and
enforceability of the remaining provisions, or portions thereof, shall not be
affected thereby. If the purposes of this Agreement are substantially frustrated
by any events contemplated by this Section 14.02, a Party may terminate this
Agreement in the manner and as if the conditions of Section 13.01.02 existed.
14.3 CONFIDENTIALITY OF THIS AGREEMENT. No Party, without the prior written
consent of the other, shall either issue or cause the issuance of a press
release or public announcement or disclose to any third party the contents of
this Agreement or the transactions contemplated hereby. Under this requirement a
Party shall be permitted to disclose, under confidentiality and use
restrictions, such terms of this Agreement as are reasonably required to be
disclosed in response to reasonable requests made by governmental authorities or
potential investors or lenders not affiliated with any semiconductor developer
or manufacturer in the ordinary course of seeking governmental approvals or for
obtaining debt or equity financing, bank credit or the like.
Notwithstanding the foregoing or anything to the contrary set forth in the TAAs,
each party may disclose the existence of this Agreement and the general fact
that the Parties have entered into a technology transfer agreement and this
Agreement.
14.4 HEADINGS. The headings of the Articles and Sections of this Agreement are
for reference purposes only and shall not be deemed to affect in any way the
meaning or interpretation of the Articles to which they refer.
14.5 WAIVER. The failure on the part of any Party to exercise or enforce any
rights conferred on it hereunder shall not be deemed to constitute a waiver of
any rights nor operate to bar the exercise or enforcement of any rights at any
time or at times thereafter.
14.6 FURTHER ACTIONS. The Parties agree to execute and deliver to each other all
30
<PAGE> 33
EXECUTION COPY
additional instruments, to provide all information, and to do or refrain from
doing all further acts and things as may be necessary or as may be reasonably
requested by any Party hereto, more fully to vest in, and to assure each Party
of, all rights, powers, privileges, and remedies herein intended to be granted
to or conferred upon such Party.
14.7 ASSIGNMENT. A Party shall not assign or delegate this Agreement or any
right or duty under this Agreement or portion thereof (including an assignment
or delegation by operation of law, other than in connection with a
reincorporation) without the prior written consent of the other Parties.
Notwithstanding the foregoing, TI may assign this Agreement or any obligation
hereunder to any Subsidiary of TI upon written notice to Anam. In such event, TI
shall guarantee such Subsidiary's performance of its obligations under this
Agreement and such assignment obligation shall not release TI of any of its
obligations hereunder. Notwithstanding the foregoing, Amkor and Anam may assign
or delegate their rights and duties hereunder among themselves or to their
respective Affiliates, provided that such assignment or delegation does not
cause TI to incur any additional obligations or costs. In the event of such
delegation or assignment, Amkor and Anam shall guarantee such Affiliate's
performance of their obligations under this Agreement and such assignment
obligation shall not release Amkor or Anam of any of their obligations
hereunder. Amkor and Anam shall be jointly and severally liable for the
obligations and liabilities of either of them under this Agreement. Any
attempted assignment or delegation, other than the delegation expressly
permitted in this Section 14.07, shall be null and void.
14.8 AMKOR-ANAM AGREEMENT. Amkor and Anam represent and warrant to TI that they
will enter into and cause to remain in effect an agreement providing for, inter
alia, Amkor and its Affiliates to sell all of Anam's wafer manufacturing
capacity to third parties, including TI as contemplated by this Agreement.
14.9 NO THIRD PARTY BENEFICIARIES. Except as specifically set forth or referred
to herein, nothing express or implied in this Agreement is intended to or shall
be construed to confer upon or to give any person other than the Parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
14.10 ENGLISH. All correspondence of which any Party is a recipient or sender
shall be in English. All documents which are issued in Korea pursuant to this
Agreement shall be provided to TI in English translation.
14.11 INSURANCE. Anam shall obtain and maintain throughout the Term such kinds
and amounts of insurance as are reasonable and customary in the trade, including
but not limited to insurance covering product liability, theft, fire, worker's
compensation, etc.
14.12 INTEGRATION. This Agreement, and the Phase 1 TAA and Phase 2 TAA, contain
the entire understanding and agreement among the Parties with respect to the
subject matter hereof and thereof and supersedes all prior oral and written
understandings and agreements relating thereto, and may not be modified,
discharged or terminated except by the written consent of the Parties. In the
event of any conflict between this Agreement and either the Phase 1 TAA or the
Phase 2 TAA, the terms of this Agreement shall prevail.
31
<PAGE> 34
14.13 NOTICES. All notices, orders and other communications related to the
operations and transactions contemplated by this Agreement shall be transmitted
to the appropriate Party in the manner set forth in the sections governing such
notices, orders or communications, or as otherwise may be agreed. Any formal
communications pursuant to this Agreement, including without limitation notices
under Article 13 shall be served on each Party in writing via facsimile
transmission (confirmed by registered letter), registered letter, telex or
prepaid cable to the following persons at the following addresses and fax
numbers:
if to TI:
Mr. Kevin Ritchie
13353 Floyd Road, M/S 344
Dallas, Texas 75243
Fax: 972 995-5086
with a copy to:
General Counsel
7839 Churchill Way M/S 3999
Dallas, Texas 75251
Fax: 972 917-4418
if to either Anam or Amkor, both to:
Dr. Kwang O. Park
222, Dodang-dong
Wonmi-gu, Buchon
Kyunggi-do, Korea 420-130
Fax: 032 683-8104
and
Mr. Eric R. Larson
MK Plaza
720 Park Boulevard #230
Boise, ID 83706
Fax: 208 345-8199
with copies to:
Mr. Ki Chang Lee, Esq.
Hanol Law Offices
14th Floor, Oriental Chemical Building
50 Sokong-Dong, Chung-Ku
Seoul, Korea 100-718
Fax: 82 32 598 4888
32
<PAGE> 35
EXECUTION COPY
and
Kevin Heron, Esq.
General Counsel
Amkor Technology, Inc.
1345 Enterprise Drive
West Chester, Pa 19380
Fax: 610 431-7189
Selwyn B. Goldberg, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Rd.
Palo Alto, Ca 94304
Fax: 650 496-4006
14.14 GOVERNING LAW. This Agreement shall be governed by, construed and enforced
in accordance with the laws of Texas, U.S.A., as applicable to contracts made
and fully performed in Texas. The United Nations Convention on the International
Sales of Goods shall not apply to this Agreement or any transactions
contemplated by this Agreement. Anam and Amkor hereby irrevocably consent to the
jurisdiction of the courts of the State of Texas and of Federal courts of the
U.S.A. located in the State of Texas.
14.15 REMEDIES. The Parties acknowledge that no specified remedies, such as
liquidated damages, are provided for in this Agreement for breaches of several
of the obligations hereunder, such as the minimum purchase, forecasting,
manufacturing and cycle time performance obligations. The Parties agree to
review each Party's historical performance hereunder from time to time during
the Term and discuss the appropriateness of agreeing on specified remedies in
light of such performance. The Parties contemplate that the first such review
shall take place in or around October 1998. The absence of any specified
remedies herein shall in no event limit either Party's rights in law or in
equity for breaches by the other.
33
<PAGE> 36
EXECUTION COPY
14.16 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
in English, each of which shall be enforceable by or against the Parties
executing such counterparts, and all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, and intending to be legally bound hereby, TI, Anam and Amkor
have caused their duly authorized representatives to execute this Agreement.
ANAM INDUSTRIAL CO., LTD. TEXAS INSTRUMENTS INCORPORATED
By:________________________ By:___________________________
Name: _____________________ Name: ________________________
Title: ______________________ Title: __________________________
Date: ______________________ Date: _________________________
AMKOR ELECTRONICS, INC.
By:________________________
Name: _____________________
Title: ______________________
Date: ______________________
34
<PAGE> 37
EXECUTION COPY
ANNEX A
[*]
- -----------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
35
<PAGE> 38
EXECUTION COPY
ANNEX B
PERCENTAGE COMPLETION TABLE EXAMPLE:
[*]
- -----------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
1
<PAGE> 39
EXECUTION COPY
[*]
- -----------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
2
<PAGE> 40
EXECUTION COPY
[*]
- -----------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
3
<PAGE> 41
EXECUTION COPY
[*]
- -----------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
4
<PAGE> 42
EXECUTION COPY
[*]
- -----------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
5
<PAGE> 43
EXECUTION COPY
[*]
- -----------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
6
<PAGE> 44
EXECUTION COPY
[*]
- -----------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
7
<PAGE> 45
EXECUTION COPY
ANNEX C
C12 DEVICES
LC541
LC545
LC546
LC548
F452654
F452659
8
<PAGE> 1
Exhibit 21.1 Subsidiaries
Amkor, Inc., a Delaware corporation
AK Industries, Inc., a Texas corporation
Amkor-Anam, Inc., a Texas corporation
Amkor International Holdings, Ltd., a Cayman Islands company
First Amkor Cayman Islands, Ltd., a Cayman Islands company
Amkor/Anam Advanced Packaging, Inc., a Philippines corporation ("P3")
Amkor/Anam Pilipinas, Inc., a Philippines corporation ("P1")
Automated Microelectronics Inc., a Philippines corporation ("P2")
T.L. Limited, a Cayman Islands company
C.I.L. Limited, a Cayman Islands company
Amkor/Anam EuroServices S.A.R.L., a French company
Amkor Wafer Fabrication Services, S.A.R.L., a French company
Amkor Receivables Corp., a Delaware corporation
<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 Amendment
No. 3 to the Registration Statement (no. 333-37235) on Form S-1.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Philadelphia, Pa.
March 25, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
AMKOR TECHNOLOGY, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 23-2925614
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1345 ENTERPRISE DRIVE -- GOSHEN CORPORATE PARK
WEST CHESTER, PA 19380
(Address of principal executive offices) (Zip Code)
$150,000,000 ___% CONVERTIBLE SUBORDINATED NOTES DUE 2003
(Title of indenture securities)
GENERAL
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH
IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the March 23, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ PAUL D. ALLEN
------------------------------------
NAME PAUL D. ALLEN
TITLE VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by AMKOR
TECHNOLOGY, INC. of its $150,000,000 __% CONVERTIBLE SUBORDINATED NOTES DUE
2003, we hereby consent that reports of examination by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ PAUL D. ALLEN
------------------------------------
NAME PAUL D. ALLEN
TITLE VICE PRESIDENT
DATED: MARCH 23, 1998
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business December 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
Dollars
<S> <C> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ...................... 2,220,829
Interest-bearing balances ............................................... 10,076,045
Securities................................................................. 10,373,821
Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge subsidiary .......... 5,124,310
Loans and lease financing receivables:
Loans and leases, net of unearned income .................. 6,270,348
Allowance for loan and lease losses ....................... 82,820
Allocated transfer risk reserve............................ 0
Loans and leases, net of unearned income and allowances ................. 6,187,528
Assets held in trading accounts ........................................... 1,241,555
Premises and fixed assets ................................................. 410,029
Other real estate owned ................................................... 100
Investments in unconsolidated subsidiaries ............................... 38,831
Customers' liability to this bank on acceptances outstanding .............. 44,962
Intangible assets ......................................................... 224,049
Other assets............................................................... 1,507,650
----------
Total assets .............................................................. 37,449,709
========================
LIABILITIES
Deposits: In domestic offices ........................................ 10,115,205
Noninterest-bearing ......................... 7,739,136
Interest-bearing ............................ 2,376,069
In foreign offices and Edge subsidiary................................ 14,791,134
Noninterest-bearing .......................... 71,889
Interest-bearing ............................14,719,245
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank
and of its Edge subsidiary .............................................. 7,603,920
Demand notes issued to the U.S. Treasury and Trading Liabilities .......... 194,059
Trading liabilities........................................................ 1,036,905
Other borrowed money ...................................................... 459,252
Subordinated notes and debentures ......................................... 0
Bank's liability on acceptances executed and outstanding .................. 44,962
Other liabilities ......................................................... 972,782
Total liabilities ......................................................... 35,218,219
----------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Thousands of
Dollars
<S> <C> <C> <C>
EQUITY CAPITAL
Perpetual preferred stock and related surplus.............................. 0
Common stock .............................................................. 29,931
Surplus ................................................................... 444,620
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,763,076
Cumulative foreign currency translation adjustments ....................... (6,137)
Total equity capital ...................................................... 2,231,490
----------
Total liabilities and equity capital ...................................... 37,449,709
==========
</TABLE>
4
<PAGE> 7
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 90,917
<SECURITIES> 2,524
<RECEIVABLES> 107,038
<ALLOWANCES> 4,234
<INVENTORY> 102,804
<CURRENT-ASSETS> 358,422
<PP&E> 624,920
<DEPRECIATION> 197,859
<TOTAL-ASSETS> 855,592
<CURRENT-LIABILITIES> 555,292
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 90,829
<TOTAL-LIABILITY-AND-EQUITY> 855,592
<SALES> 1,455,761
<TOTAL-REVENUES> 1,455,761
<CGS> 1,242,669
<TOTAL-COSTS> 1,354,920
<OTHER-EXPENSES> 39,835
<LOSS-PROVISION> 3,490
<INTEREST-EXPENSE> 32,241
<INCOME-PRETAX> 61,006
<INCOME-TAX> 7,078
<INCOME-CONTINUING> 53,928
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,281
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
