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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 000-29472
AMKOR TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OF INCORPORATION)
23-1722724
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1345 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
(610) 431-9600
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.001 PAR VALUE
5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2003
10 1/2% SENIOR SUBORDINATED NOTES DUE 2009
9 1/4% SENIOR NOTES DUE 2006
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No [
]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the average bid and asked prices of
such stock, was approximately $2,879,410,475 as of March 15, 2000.
The number of shares outstanding of each of the issuer's classes of common
equity, as of March 15, 2000, was as follows: 131,010,532 shares of Common
Stock, $0.001 par value.
Documents Incorporated by Reference: Portions of the definitive Proxy
Statement to be delivered to stockholders in connection with the 2000 Annual
Meeting of Stockholders are incorporated by reference into Part III.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I.................................................................. 2
Item 1. BUSINESS.................................................... 2
Item 2. PROPERTIES.................................................. 19
Item 3. LEGAL PROCEEDINGS........................................... 20
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 20
PART II................................................................. 21
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS......................................... 21
Item 6. SELECTED FINANCIAL DATA..................................... 22
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 24
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK........................................................ 42
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 43
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 81
PART III................................................................ 81
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT........... 81
Item 11. EXECUTIVE COMPENSATION...................................... 81
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 81
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 81
PART IV................................................................. 81
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K......................................................... 81
</TABLE>
USE OF CERTAIN TERMS
All references in this annual report to "Amkor," "we," "us," "our" or the
"company" are to Amkor Technology, Inc. and its subsidiaries. We refer to the
Republic of Korea, which is also commonly known as South Korea, as "Korea."
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PART I
ITEM 1. BUSINESS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This business section contains forward-looking statements. In some cases,
you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Risk Factors that May Affect Future Operating Performance" in Item
7 of this annual report. These factors may cause our actual results to differ
materially from any forward-looking statement.
OVERVIEW
Amkor is the world's largest independent provider of semiconductor
packaging and test services. We believe that we are also one of the leading
developers of advanced semiconductor packaging and test technology. We offer one
of the industry's broadest integrated sets of packaging and test services, which
are the final procedures necessary to prepare semiconductor devices for further
use. Our customers outsource the packaging and testing of semiconductor chips to
us in order to benefit from our expertise in the development and implementation
of packaging and test technology and our advanced manufacturing capabilities. We
also market the wafer fabrication services provided by Anam Semiconductor, Inc.
("ASI"). We have more than 190 customers, including 37 of the world's 40 largest
semiconductor companies, for whom we packaged more than 4.1 billion
semiconductor devices in 1999. Our customers include, among others, Advanced
Micro Devices, Inc., Intel Corporation, International Business Machines Corp.,
Lucent Technologies, Inc., Motorola, Inc., National Semiconductor Corp., Philips
Electronics N.V., ST Microelectronics PTE, Infineon Technologies AG and Texas
Instruments, Inc.
We provide packaging and test services through our three factories in the
Philippines and our factory in Korea known as K4, which we acquired from ASI in
May 1999. We currently source additional packaging and test services from three
factories, known as K1, K2 and K3, that are located in Korea and owned by ASI.
We intend to purchase the K1, K2 and K3 packaging and test facilities from ASI
during the second quarter of 2000 for a purchase price of approximately $950.0
million. These facilities constitute the remainder of ASI's packaging and test
business.
Our proposed acquisition of K1, K2 and K3 would eliminate our dependence on
ASI for packaging and test services. In 1999, we derived 45.0% of our net
revenues and 29.5% of our gross profit from sales of packaging and test services
performed by ASI. Historically, we have earned higher gross margins on the
packaging and test services performed by our company-owned facilities than on
the packaging and test services which we outsourced to ASI.
Following our acquisition of K1, K2 and K3, ASI's primary asset will be its
wafer fabrication facility. We currently purchase all of the output from this
wafer fabrication facility pursuant to a supply agreement. In 1999, we derived
15.3% of our net revenues and 8.8% of our gross profit from sales of wafer
fabrication services performed for us by ASI. In October 1999, we invested $41.6
million in ASI. We intend to make an additional investment of $459.0 million in
ASI. We expect ASI will use the proceeds from the sale of K1, K2 and K3 and our
investment to repay outstanding bank debt and for general corporate purposes. We
intend to finance the purchase of K1, K2 and K3 and the investment in ASI with
approximately $750.0 million of new secured bank debt, $410.0 million from a
private placement of our Series A preferred stock, cash on hand and the proceeds
from an offering of $225.0 million convertible subordinated notes ($258.8
million inclusive of the exercised over-allotment option).
Since April 1999, ASI has been subject to a debt restructuring arrangement
with its Korean creditor banks known as a "workout." ASI is negotiating with its
creditor banks to terminate its workout in connection
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with our proposed acquisition of K1, K2 and K3 and our proposed investment in
ASI. ASI currently anticipates that its creditor banks will convert up to W150
billion (approximately $132 million) of ASI's debt into equity of ASI, in
addition to approximately W98 billion (approximately $82 million) of debt that
was converted into equity in October 1999. ASI is negotiating with its creditor
banks to obtain further concessions relating to its debt. In October 1999, we
purchased 10 million shares of ASI's common stock at a price of W5,000 per share
for approximately $41.6 million. As a result of this investment and the
conversion of ASI's debt to equity by the creditor banks, we now own
approximately 18% of ASI's voting stock. If our proposed investment in ASI and
the additional conversion of debt to equity by ASI's creditor banks are
completed, we expect to own approximately 43% of ASI's outstanding voting stock,
we expect Mr. James Kim, our Chairman and CEO, and members of his family to
beneficially own approximately 6% of ASI's outstanding voting stock and we
expect ASI's creditor banks to own approximately 34% of ASI's outstanding voting
stock. In addition, Mr. Kim and members of his family will beneficially own
approximately 51% of our outstanding common and preferred voting stock.
Through our acquisition of K1, K2 and K3 and our investment in ASI, we
expect to be better positioned to capitalize on the anticipated growth in the
semiconductor industry and the increasing outsourcing of packaging and test
services by semiconductor manufacturers.
INDUSTRY BACKGROUND
Semiconductor devices are the essential building blocks used in most
electronic products. As semiconductor devices have evolved, there have been
three important consequences: (1) an increase in demand for computers and
related products due to declining prices for such products, (2) the
proliferation of semiconductor devices into diverse end products such as
consumer electronics, communications equipment and automotive systems and (3) an
increase in the number of semiconductor devices in electronic products.
According to industry estimates, the worldwide semiconductor market has expanded
at a compound annual growth rate of 13.0% over a period of six years from $65.3
billion in 1992 to $136.2 billion in 1998 and is expected to increase from
$155.4 billion in 1999 to $250.8 billion by 2002.
TRENDS TOWARD OUTSOURCING
Historically, semiconductor companies packaged semiconductors primarily in
their own factories and relied on independent providers to handle overflow
volume. Today, semiconductor companies are increasingly outsourcing their
packaging and testing to independent providers for the following reasons:
Independent providers have developed expertise in advanced packaging
technologies.
Semiconductor companies are facing ever-increasing demands for
miniaturization, higher lead counts and improved thermal and electrical
performance in semiconductor devices. As a result of this trend, many
semiconductor companies view packaging as an enabling technology requiring
sophisticated expertise and technological innovation. However, they have had
difficulty developing the necessary capabilities with their internal resources
and are relying on independent providers of packaging and test services as a key
source of new package designs.
Independent providers can offer shorter time to market for new products
because their resources are dedicated to packaging and test solutions.
We believe that semiconductor companies are seeking to shorten the time to
market for their new products and that having the right packaging technology and
capacity in place is a critical factor in reducing delays for these companies.
Semiconductor companies frequently do not have sufficient time to develop
their packaging and test capabilities or the equipment and expertise to
implement new packaging technology in volume. For this reason, semiconductor
companies are leveraging the resources and capabilities of independent packaging
and test companies to deliver their new products to market more quickly.
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Many semiconductor manufacturers do not have the economies of scale to offset
the significant costs of building packaging and test factories.
Semiconductor packaging is a complex process requiring substantial
investment in specialized equipment and factories. As a result of the large
capital investment required, this manufacturing equipment must operate at a high
capacity level for an extended period of time to be cost effective. Shorter
product life cycles, faster introductions of new products and the need to update
or replace packaging equipment to accommodate new products have made it more
difficult for semiconductor companies to sustain high levels of capacity
utilization. Independent providers of packaging and test services, on the other
hand, can use equipment at high utilization levels over a longer period of time
for a broad range of customers, effectively extending the life of the equipment.
The availability of high quality independent packaging and testing allows
semiconductor manufacturers to focus their resources on semiconductor design and
wafer fabrication rather than semiconductor packaging and testing.
As the cost to build a new wafer fabrication facility has increased to over
$1 billion, semiconductor companies are choosing to focus their capital
resources on core wafer fabrication activities. As a result, semiconductor
companies are outsourcing to independent packaging and test providers who have
the ability to invest the capital needed to develop new packaging and test
capacity.
There is a growing number of semiconductor companies without factories, known
as "fabless" companies, that outsource all of the manufacturing of their
semiconductor designs.
Fabless semiconductor companies focus exclusively on the semiconductor
design process and outsource virtually every significant step of the
semiconductor manufacturing process. According to industry estimates, revenues
of fabless semiconductor companies as a percentage of the worldwide
semiconductor industry are forecasted to grow from 6.8% in 1998 to 9.8% by 2003.
We believe that fabless semiconductor companies will continue to be a
significant driver of growth in the independent packaging and test industry.
These outsourcing trends, combined with the growth in the number of
semiconductor devices being produced and sold, are increasing demand for
independent packaging and test services. 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. According to
industry estimates, the worldwide semiconductor packaging and test market was
$21.7 billion in 1999, of which $6.4 billion, or 29.3% was outsourced.
Additionally, industry estimates provide that the worldwide semiconductor
packaging and test market will reach $32.8 billion by 2002, of which $11.2
billion, or 34.1%, will be outsourced.
Certain of the same forces driving the growth of independent packaging and
testing are also driving demand for independent wafer fabrication services. Many
semiconductor companies are outsourcing some or all of their wafer fabrication
needs because the cost to build new wafer foundries has been rising steadily.
This is particularly true for newer, smaller geometry technologies which cannot
be produced in many semiconductor companies' existing wafer foundries. As the
demand for semiconductor devices with smaller geometries increases, we believe
semiconductor companies will increasingly utilize independent wafer
manufacturers.
STRATEGY
To build upon our leading industry position and to remain the preferred
independent provider of semiconductor packaging and test services, we are
pursuing the following strategies:
Capitalize on Outsourcing Trend. We intend to continue to capitalize on
the projected growth of the independent semiconductor packaging and test
segment. We believe that semiconductor manufacturers will increasingly outsource
packaging and test services to those independent providers who deliver superior
quality and value. We work with our customers to quantify the cost savings of
our services compared to their in-house capabilities. We believe our
leading-edge technologies and manufacturing expertise enable us to optimize
production yields, reduce cycle times and lower per unit costs.
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Leverage Scale and Scope of Packaging and Test Capabilities. We are
committed to expanding both the scale of our operations and the scope of our
packaging and test services. We believe that our scale and scope allow us to
provide cost-effective solutions to our customers in the following ways:
- We have the capacity to absorb large orders and accommodate quick
turn-around times;
- We use our size and industry position to obtain low pricing on materials
and manufacturing equipment; and
- We offer an industry-leading breadth of packaging and test services and
can serve as a single source for many of our customers.
Maintain Our Technology Leadership. We intend to continue to develop
leading-edge packaging technologies. We believe that our focus on research and
product development will enable us to enter new markets early, capture market
share and promote the adoption of our new package designs as industry standards.
We seek to enhance our in-house research and development capability and joint
development activities with ASI in Korea through the following activities:
- We are collaborating with customers to gain access to technology roadmaps
for the next generation of semiconductor designs;
- We are collaborating with companies, such as Compaq Computer Corporation,
Ericsson Corporation, and Nokia Group, which purchase semiconductor
devices from our customers, to design new packages that function with the
next generation of electronic products; and
- We are implementing new package designs by entering into technology
alliances and by licensing leading-edge designs from others: we and Sharp
Corporation have entered into a strategic alliance to promote chip scale
packaging with fleXBGA(R). We have licensed from Tessera, Inc. their
BGA(R) design. We have also licensed "flip-chip" package technology from
LSI Logic Corporation.
Provide an Integrated, Turnkey Solution. We are able to provide a complete
turnkey solution comprised of semiconductor wafer fabrication, packaging and
test services. We believe that this will enable customers to achieve faster time
to market for new products and reduce manufacturing costs.
Strengthen Customer Relationships. We intend to further develop our
long-standing customer relationships. We believe that because of today's
shortened technology life cycles, integrated communications are crucial to speed
time to market. We have customer support personnel located near the facilities
of major customers and in acknowledged technology centers. These support
personnel work closely with customers to plan production for existing packages
as well as to develop requirements for the next generation of packaging
technology. In addition, we are implementing direct electronic links with our
customers to enhance communication and facilitate the flow of real-time
engineering data and order information.
Pursue Selective Acquisitions and Strategic Relationships. We are
evaluating candidates for strategic acquisitions and joint ventures to
strengthen our core business and expand our geographic reach. We believe that
there are many opportunities to acquire the in-house packaging factories of
semiconductor manufacturers. We intend to structure any such acquisition to
include long-term supply contracts with the seller. In addition, by establishing
joint ventures, we intend to enter new markets near clusters of wafer foundries,
which are large sources of demand for packaging and test services. For example,
in October 1998, we entered into a joint venture with Taiwan Semiconductor
Manufacturing Corporation, Acer Inc., Scientek International Investment Co. Ltd.
and Chinfon Semiconductor & Technology Company to build a packaging and test
factory in Taiwan, a market with significant demand in which we currently have
few customers.
COMPETITIVE STRENGTHS
Leading Industry Position. We are the world's largest independent provider
of semiconductor packaging and test services. We have increased our revenues and
built our leading position through: (1) one of the industry's broadest offerings
of packaging and test services, (2) expertise in the development and implementa-
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tion of packaging and test technology, (3) long-standing relationships with our
customers and (4) advanced manufacturing capabilities.
Broad and Integrated Packaging and Test Services. With over 1,000
different package types, we offer one of the semiconductor industry's broadest
lines of packaging and test services. We provide customers with a wide array of
packaging alternatives including mature leadframe packages and newer advanced
leadframe and laminate packages. We also offer an extensive line of services to
test digital logic, analog and mixed signal semiconductor devices. We believe
that the breadth of our packaging and test services is important to customers
seeking to reduce the number of their suppliers.
Leading Technology Innovator. We believe that we are one of the leading
providers of advanced semiconductor packaging and test solutions. We have
designed and developed state-of-the-art thin package formats and laminate
packages including our PowerQuad(R), Super BGA(R), fleXBGA(R) and ChipArray(R)
BGA packages. To maintain our leading industry position, we have 125 employees
engaged in research and development focusing on the design and development of
new semiconductor packaging and test technology. We work closely with customers
and technology partners to develop new and innovative package designs. We also
participate in joint development activities with ASI's research and development
staff in Korea.
Long-standing Relationships with Prominent Semiconductor Companies. Our
customer base consists of more than 190 companies, including 37 of the world's
40 largest semiconductor companies. In our 32-year operating history, we have
developed long-standing relationships with many of our customers. We have served
each of our ten largest customers, based on our 1999 net revenues, for more than
ten years.
Advanced Manufacturing Capabilities. We believe that our company's and
ASI's manufacturing excellence has been a key factor in our success in
attracting and retaining customers. We have worked with ASI, our customers and
suppliers to develop proprietary process technologies to enhance our existing
manufacturing capabilities. These efforts have directly resulted in reduced time
to market, increased quality and lower manufacturing costs. We believe our
manufacturing cycle times are among the fastest available from any independent
provider of packaging and test services.
PACKAGING AND TEST SERVICES
Packaging Services
We offer a broad range of package formats designed to provide our customers
with a full array of packaging solutions. Our packages are divided into three
families: traditional leadframe, advanced leadframe and laminate, as described
below.
Semiconductor packages have evolved from traditional leadframe to advanced
leadframe to laminate in response to the increasing demands of today's
high-performance electronic products. The differentiating characteristics of
these packages include: (1) the size of the package, (2) the number of
electrical connections the package can support and (3) the thermal and
electrical requirements of the package.
As the size of semiconductor devices shrinks for use in portable computers
and wireless telecommunications products, the size of packages must also shrink.
In leading-edge packages, the size of the package is reduced to approximately
the size of the individual chip itself, in a process known as chip scale
packaging.
The number of electrical connections on a semiconductor device is an
important factor in determining its end use in electronic products. As
semiconductor devices increase in complexity, the number of electrical
connections that is required also increases. Leadframe products have electrical
connections from the semiconductor device to the electronic product through
leads on the perimeter of the package. Our newer laminate products use balls on
the bottom of the package to create the electrical connections and can support
larger numbers of electrical connections. These products are called ball grid
array or BGA products.
Advanced thermal and electrical characteristics of a particular package
improve the functionality and durability of today's high-powered semiconductor
devices. For example, a copper layer in a package can help reduce thermal wear
on the semiconductor device and improve its electrical conductivity.
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The following table sets forth by product type, for the periods indicated,
the amount of our packaging and test net revenues in millions of dollars and the
percentage of such net revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1998 1999
--------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Traditional leadframe................... $ 834 57.3% $ 603 41.5% $ 560 34.6%
Advanced leadframe...................... 312 21.4 343 23.6 412 25.5
Laminate................................ 251 17.3 438 30.2 561 34.7
Test and other.......................... 59 4.0 68 4.7 84 5.2
------ ----- ------ ----- ------ -----
Total packaging and test net
revenues......................... $1,456 100.0% $1,452 100.0% $1,617 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
In addition, we had $116 million and $293 million of net revenues from
wafer fabrication services in 1998 and 1999, respectively.
Traditional Leadframe Packages
Traditional leadframe packages are the most widely used package family and
are characterized by a chip encapsulated in a plastic mold compound with metal
leads on the perimeter. This package family has evolved from a design where the
leads are plugged into holes on the circuit board to a design where the leads
are soldered to the surface of the circuit board. We offer a wide range of lead
counts and body sizes to satisfy variations in the size of customers'
semiconductor devices. Continuous engineering and customization has reduced the
footprint of the package on the circuit board and improved the electrical
performance of the package. In addition, we have designed package types to
dissipate the heat generated by high-powered semiconductor devices. Such "power"
designs are advancements on our small outline package (SOP) and metric quad flat
package (MQFP) and are called PowerSOP(R) and PowerQuad(R).
The following table presents our traditional leadframe packages, including
the number of leads and the description of and end uses for each package format.
<TABLE>
<CAPTION>
NUMBER
PACKAGE FORMAT OF LEADS DESCRIPTION END USES
- -------------- -------- ----------- --------
<S> <C> <C> <C>
Plastic Dual In-line
Package -- PDIP.......... 8-48 General purpose plastic Games, telephones,
package used in consumer televisions, audio
electronic products equipment and computer
peripherals
Shrink PDIP -- SPDIP....... 30-64 General purpose plastic Games, telephones,
packages used in consumer televisions, audio
electronic product equipment and computer
peripherals
Hermetic................... Custom Ceramic package used in Military, space and
high-reliability commercial aviation
applications products
Plastic Leaded Chip
Carrier -- PLCC.......... 20-84 Package with leads on two Copiers, printers,
sides used in a consumer scanners, desktop personal
electronics and products in computers, electronic games
which the size of the and monitors
package is not vital
Small Outline Integrated
Circuit -- SOIC.......... 8-44 Small leadframe package Pagers, cordless
designed for applications telephones, fax machines,
requiring low height copiers, printers, computer
peripherals, audio and
video products and
automotive systems
</TABLE>
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<TABLE>
<CAPTION>
NUMBER
PACKAGE FORMAT OF LEADS DESCRIPTION END USES
- -------------- -------- ----------- --------
<S> <C> <C> <C>
Metric Quad Flat Package --
MQFP..................... 44-304 Package with leads on four Desktop personal computers,
sides designed for advanced consumer and industrial
processors, controllers, products, commercial and
digital signal processors office equipment and
(DSPs) and application automotive systems
specific integrated
circuits (ASICs)
PowerQuad(R)............... 64-304 Higher-performance, High-performance computers
thermally-enhanced quad such as workstations and
flat package (QFPs) servers, disk drives,
central processing units
(CPUs), audio
telecommunications
products,
PowerSOP(R)................ 8-36 Higher-performance, Pagers, disk drives,
thermally-enhanced SOIC wireless telecommunications
package products, automotive
systems and industrial
products
</TABLE>
Advanced Leadframe Packages
Our advanced leadframe packages are similar in design to our traditional
leadframe packages. However, the advanced leadframe packages generally are
thinner and smaller, have more leads and have advanced thermal and electrical
characteristics.
The thin small outline packages (TSOPs), thin shrink small outline packages
(TSSOPs), and shrink small outline packages (SSOPs) are smaller than our
traditional small outline integrated circuit (SOIC) package. The thin quad flat
package (TQFP) is a smaller version of the metric quad flat package (MQFP). We
also offer power versions of these package types to dissipate heat generated by
high-powered semiconductor devices. We plan to continue to develop increasingly
smaller versions of these packages to keep pace with continually shrinking
semiconductor device sizes and demand for miniaturization of portable electronic
products.
The following table presents our advanced leadframe packages, including the
number of leads and the description of and end uses for each package format.
<TABLE>
<CAPTION>
NUMBER
PACKAGE FORMAT OF LEADS DESCRIPTIONS END USES
- -------------- -------- ------------ --------
<S> <C> <C> <C>
Thin Quad Flat Package --
TQFP..................... 32-176 Designed for lightweight, Laptop computers, desktop
portable electronics personal computers, disk
requiring broad performance drives, office equipment,
characteristics audio and video products
and telecommunications and
wireless telecommunications
products
Thin Small Outline
Package -- TSOP.......... 28-48 Package designed for high- Laptop computers, desktop
volume production of low personal computers, still
lead-count memory devices and video cameras, and
such as FLASH, SRAM and standard connections for
DRAM peripherals to computers
(PCMCIA)
Thin Shrink Small Outline
Package -- TSSOP......... 8-80 Smaller version of TSOP Disk drives, recordable
designed for logic and optical disks, audio and
analog devices and memory video products, consumer
devices such as FLASH, electronics and
SRAM, EPROM, EEPROM and telecommunications products
DRAM
</TABLE>
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<TABLE>
<CAPTION>
NUMBER
PACKAGE FORMAT OF LEADS DESCRIPTIONS END USES
- -------------- -------- ------------ --------
<S> <C> <C> <C>
Shrink Small Outline
Package -- SSOP.......... 8-56 Smallest of the SOP Pagers, disk drives,
packages designed for portable audio and video
portable products which products and wireless
require reduced size and telecommunications products
weight
MicroLeadframe(TM)......... 4-72 Package designed for low Telecommunications and
lead-count devices wireless telecommunications
requiring reduced size and products and personal
improved thermal and digital assistants (PDAs)
electrical performance
ePad(TM), ExposedPad(TM)... 8-208 Thermally and electrically- Pagers, disk drives and
enhanced TQFP and TSSOP wireless telecommunications
packages products
Multi-Chip Package -- MCP.. 8-44 Package designed to FLASH memory devices, audio
integrate two or more dice and video products,
to maximize their operating portable consumer
performance electronics,
telecommunications and
wireless telecommunications
products and electronic
automotive components
</TABLE>
Laminate Packages
The laminate family is our newest package offering. This family employs the
ball grid array design which utilizes a plastic or tape laminate substrate
rather than a leadframe substrate and places the electrical connections on the
bottom of the package rather than around the perimeter.
The ball grid array format was developed to address the need for higher
lead counts required by advanced semiconductor devices. As the number of leads
surrounding the package increased, packagers increased the proximity of the
leads to one another in an attempt to maintain the size of the package. The
nearness of one lead to another resulted in electrical shorting problems, and
required the development of increasingly sophisticated and expensive techniques
for producing circuit boards to accommodate the high number of leads.
The ball grid array format 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. For the highest lead
count devices, the ball grid array configuration can be manufactured less
expensively and requires less delicate handling at installation.
Our first package format in this family was the plastic ball grid array
(PBGA). We have subsequently designed or licensed additional ball grid array
package formats that have superior performance characteristics and features that
enable low-cost, high-volume manufacturing. These new laminate products include:
- SuperBGA(R), which includes a copper layer to dissipate heat and is
designed for low-profile, high-power applications;
- BGA(R), which is designed to be approximately the same size as the chip
and uses a thinner tape substrate rather than a plastic laminate
substrate; and
- ChipArray(R) BGA, which allows the package to be as small as 1.5 mm
larger than the chip itself.
We are currently designing and implementing extensions of existing ball
grid array packages, such as ChipArray(R) BGA, TapeSuperBGA(R), TapeArray(TM)
BGA and WaferScale Chip Scale Package, to further reduce package size and
increase manufacturing efficiency.
9
<PAGE> 11
The following table presents our laminate packages, including the number of
leads and the description of and end uses for each package format.
<TABLE>
<CAPTION>
NUMBER
PACKAGE FORMAT OF LEADS DESCRIPTION END USES
- -------------- -------- ----------- --------
<S> <C> <C> <C>
Plastic Ball Grid Array --
PBGA..................... 119-580 Ball grid array package Laptop computers, disk
designed for applications drives, video cameras,
which require high global positioning systems
performance (GPS), wireless
telecommunications products
and standard connections
for peripherals to
computers (PCMCIA)
SuperBGA(R)................ 168-600 Higher-performance, Laptop and palmtop
thermally-enhanced BGA computers, personal digital
package designed for assistants (PDAs), video
digital signal processors graphical user interfaces
(DSPs), application (video GUI), central
specific integrated (ASICs) processing units (CPUs)and
and microprocessors wireless telecommunications
products circuits
fleXBGA(R)................. 132-672 Low-profile package Laptop computers, disk
designed to support a drives, pagers, video
densely-packed ball grid products and wireless
array for high lead count telecommunications products
devices
Micro Ball Grid Array --
BGA(R)................... 8-100 Package approximately the Laptop and palmtop
size of the die designed computers, disk drives,
for applications which personal digital assistants
require small size and (PDAs), video products,
light weight such as memory portable consumer products
devices, including FLASH, and wireless telecommunica-
SRAM and Rambus DRAM, tions products
microprocessors, and
applications specific
integrated circuits (ASICs)
ChipArray(R) BGA........... 8-208 Extension of PBGA package Laptop and palmtop
designed for logic, analog computers, personal digital
and memory devices and assistants (PDAs), global
application specific positioning systems (GPS),
integrated circuits (ASICs) telecommunications and
wireless telecommunications
products
TapeSuperBGA(R)............ 256-696 Extension of SuperBGA(R) High-performance computers
package designed for high such as workstations and
lead count devices servers, data communication
products and internet
routers
TapeArray(TM) BGA.......... 48-256 Extension of fleXBGA(R) Palmtop computers, disk
package designed for logic, drives, personal digital
analog and memory devices assistants (PDAs), global
and application specific positioning systems (GPS),
integrated circuits (ASICs) digital consumer
electronics and wireless
telecommunications products
WaferScale Chip Scale
Package -- wsCSP(TM)..... 40-200 Extension of BGA(R) package Laptop and palmtop
designed for logic and computers, personal digital
memory devices and other assistants (PDAs) and
low lead counts devices telecommunications and
wireless telecommunications
products
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
NUMBER
PACKAGE FORMAT OF LEADS DESCRIPTION END USES
- -------------- -------- ----------- --------
<S> <C> <C> <C>
Flip Chip BGA.............. 36-1900 Package with latest High-performance computers
interconnect technology such as workstations and
that delivers improved servers, data
electrical performance to communications products and
devices requiring a large internet routers
number of leads in a small
package
Multi-Chip Package PBGA --
MCP PBGA................. 119-456 Extension of PBGA package Modems, wireless
designed to integrate two telecommunications products
or more logic, analog and and electronic automotive
memory devices and components
application specific
integrated circuits (ASICs)
to maximize their operating
performance
VisionPak(TM).............. 8-48 Ceramic ball grid array Bar code scanners, digital
package in or which still cameras, digital
photographic-quality glass video conferencing and
is custom mounted above the electronic toys
die
</TABLE>
Test Services
We also provide our customers with services to test the specifications of
semiconductor devices. We have the capability to test digital logic, analog and
mixed signal products. The combination of our test operations together with
ASI's test operations, which we will acquire when we acquire K1, K2 and K3,
comprises one of the largest independent test operations in the world. Although
test services accounted for only 4.7% and 5.2% of our net revenues and were
performed on only 14% and 17% of the total units shipped in 1998 and 1999,
respectively, we believe that our ability to provide both packaging and test
services at the same location provides us with a competitive advantage.
WAFER FABRICATION SERVICES
In January 1998, we entered into a supply agreement with ASI to market
wafer fabrication services provided by ASI's semiconductor wafer fabrication
facility. Using .25 micron and .18 micron CMOS process technology provided by
Texas Instruments, this facility currently has a capacity to produce 18,000
eight-inch wafers per month. ASI is in the process of expanding the capacity of
the facility to produce 30,000 wafers per month by the end of 2000. The wafer
fabrication facility primarily manufactures digital signal processors ("DSPs"),
application-specific integrated circuits ("ASICs") and other logic devices,
which are found in many advanced electronic products.
We plan to continue to focus our semiconductor technology development
efforts to serve the high-performance digital logic market. However, as
technological capability evolves and the need for new CMOS designs arises, we
anticipate adding embedded memory and special analog functionality to our core
CMOS technology.
We can provide a complete turnkey solution comprised of wafer fabrication,
packaging and test services. We believe that this will enable customers to
achieve faster time to market for new products and reduce manufacturing costs.
Agreements With ASI and Texas Instruments
Texas Instruments and our company have entered into a Manufacturing and
Purchase Agreement pursuant to which Texas Instruments has agreed to purchase
from us at least 40% of the capacity of ASI's wafer fabrication facility, and
under certain circumstances has the right to purchase 70% of the wafer
fabrication facility's capacity.
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<PAGE> 13
The Texas Instruments Manufacturing and Purchasing Agreement terminates on
December 31, 2007, unless it has been previously terminated. The agreement may
be terminated upon, among other things: (1) the consent of ASI, Texas
Instruments and our company, (2) a material breach by ASI, Texas Instruments or
our company, (3) the failure of ASI to protect Texas Instruments' intellectual
property and (4) a change of control, bankruptcy, liquidation or dissolution of
ASI. The agreement may also be terminated by ASI or Texas Instruments on two
years' notice if they cannot successfully negotiate an agreement to govern ASI's
use of Texas Instruments' next-generation CMOS process technology prior to
September 30, 2000. During any such two-year notice period, Texas Instruments
will only be obligated to purchase a minimum of 20% of the wafer fabrication
facility's capacity.
Under the Texas Instruments Technology Agreements, ASI has a license to use
Texas Instruments' technology only to provide wafer fabrication services to
Texas Instruments. For more information regarding the risks to our company of
this relationship and ASI's limited technology license, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Risk
Factors that May Affect Future Operating Performance" in Item 7 of this annual
report.
RESEARCH AND DEVELOPMENT
Our research and development efforts focus on developing new package
designs and improving the efficiency and capabilities of our existing production
processes. We believe that technology development is one of the key success
factors in the semiconductor packaging and test market and believe that we have
a distinct advantage in this area.
We employ approximately 125 persons in research and development activities.
In addition, we involve management and operations personnel in research and
development activities. In 1997, 1998 and 1999, we spent $8.5 million, $8.3
million and $11.4 million, respectively, on research and development. We expect
to continue to invest in research and development.
In addition to our internal development work and our co-development work
with ASI, we also work closely with our packaging equipment and material
suppliers in developing advanced processing capabilities and materials for use
in our production process. Currently, we are focusing on development programs
that extend the capability and applicability of the ball grid array design.
We are implementing new package designs by entering into technology
alliances and by licensing leading-edge package designs from others.
- We and Sharp Corporation have entered into a strategic alliance to
promote chip scale packaging with fleXBGA(R), a package which is also
only slightly larger than the chip itself. The size of this package is
ideal for portable electronic products, and the flexible tape substrate
enables the package to support a denser ball grid array configuration and
thus more complex semiconductor devices.
- We have licensed from Tessera, Inc. the technology for its BGA design, a
package which is only slightly larger than the chip itself. Rambus Inc.,
a fabless semiconductor company, has adopted the BGA(R) package as the
preferred package for their Rambus DRAM(R) (RDRAM(R)) designs. Rambus
Inc. has developed a technology that increases the speed of semiconductor
memory devices and has licensed this technology to leading DRAM
manufacturers.
- We have also licensed "flip chip" package design technology from LSI
Logic Corporation. Using flip chip technology, we design packages that
support the highest number of leads available because we attach the
input/output terminals on the chip directly to the leads on the substrate
thereby eliminating the need for delicate wire bonds. The flip-chip
package can support semiconductor devices with more than 1,000 leads.
MARKETING AND SALES
We sell our packaging and test services and wafer fabrication services to
our customers and support them through a network of international offices. To
better serve our customers, our offices are located near our
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<PAGE> 14
largest customers or near a concentration of several of our customers. Our
office locations include sites in the U.S. (Austin, Texas; Boise, Idaho;
Chandler, Arizona; Dallas, Texas; Santa Clara, California; and West Chester,
Pennsylvania), France, Singapore, Taiwan, the Philippines, Japan and Korea. We
have historically derived a substantial majority of our net revenues from
U.S.-based customers.
To provide comprehensive sales and customer service, we assign each of our
customers a direct team consisting of an account manager, a technical program
manager and one or more customer support representatives. We also typically
support our largest multinational customers from multiple offices.
The direct teams are closely supported by an extended staff of product
managers, process and reliability engineers, marketing and advertising
specialists, information systems technicians and factory personnel. Together,
these direct and extended teams deliver an array of services to our customers.
These services include: (1) providing information and expert advice on packaging
solutions and trends, (2) managing the start-up of specific packaging and test
programs, (3) providing a continuous flow of information to the customers
regarding products and programs in process and (4) researching and helping to
resolve technical and logistical issues.
We are implementing direct electronic links with our customers to enhance
communication and facilitate the flow of real-time engineering data and order
information. These links connect our customers to our sales and marketing
personnel worldwide and to our factories in the Philippines and in Korea
(including K1, K2 and K3 following our acquisition of these factories).
CUSTOMERS
We currently have more than 190 customers, and our customers include many
of the largest semiconductor companies in the world. The table below lists our
top 50 customers in 1999:
Adaptec, Inc.
Advanced Micro Devices, Inc.
Agilent Technologies
Alcatel Mietec
Altera Corporation
American Micro Systems, Inc.
Analog Devices, Inc.
Atmel Corporation
Cirrus Logic
Conexant
Cypress Semiconductor Corp.
Dallas Semiconductor
Ericsson Components AB
Fairchild Semiconductor Corporation
IC Works Inc.
Infineon Technologies AG
Information Storage Devices Inc.
Integrated Circuit Systems, Inc.
Integrated Device Technology, Inc.
Intel Corporation
International Business Machines Corp.
International Rectifier
Intersil Corporation
Lattice Semiconductor Corporation
Level One Communications, Inc.
LSI Logic Corporation
Lucent Technologies, Inc.
Maxim Integrated Circuits
Microchip Technology Inc.
Mitel Semiconductor
Motorola, Inc.
National Semiconductor Corp.
NEC Corporation Ltd.
NeoMagic Corporation
Nortel Networks
Nvidia Corporation
ON Semiconductor
Philips Electronics
R.F. Micro Devices
Robert Bosch GmbH
S3 Incorporated
Siera Semiconductor Corporation
Silicon Storage Technology, Inc.
ST Microelectronics PTE
Taiwan Semiconductor
Texas Instruments, Inc.
Toshiba
VTC Inc.
Xilinx, Inc.
Zilog Electronics
Our five largest packaging and test customers collectively accounted for
approximately 40.1%, 35.3% and 30.6% of our net revenues in 1997, 1998 and 1999,
respectively. We anticipate that, for the foreseeable future, our top five
customers will continue to account for a substantial percentage of our net
revenues. In addition,
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<PAGE> 15
during 1998 and 1999, we derived 7.4% and 15.3%, respectively of our net
revenues from wafer fabrication services, and we derived all of these revenues
from Texas Instruments.
MATERIALS AND EQUIPMENT
Our packaging operations depend upon obtaining adequate supplies of
materials and equipment on a timely basis. The principal materials used in our
packaging process are leadframes or laminate substrates, gold wire and molding
compound. We purchase materials based on customer orders, and our customers are
generally responsible for any unused materials in excess of the quantity that
they indicated that they would need.
We work closely with our primary material suppliers to insure that
materials are available and delivered on time. Moreover, we also negotiate
worldwide pricing agreements with our major suppliers to take advantage of the
scale of our operations. We are not dependent on any one supplier for a
substantial portion of our material requirements.
Our packaging operations and our expansion plans also depend on obtaining
adequate supplies of manufacturing equipment on a timely basis. We work closely
with major equipment suppliers to insure that equipment is delivered on time and
that the equipment meets our stringent performance specifications.
For a discussion of additional risks associated with our materials and
equipment suppliers, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risk Factors that May Affect Future
Operating Performance" in Item 7 of this annual report.
ENVIRONMENTAL MATTERS
For a discussion of the environmental issues and risks facing us, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Risk Factors that May Affect Future Operating
Performance -- Environmental Regulations" in Item 7 of this annual report.
COMPETITION
The independent semiconductor packaging and test market is very
competitive. This sector is comprised of approximately 40 companies.
We face substantial competition from established packaging and test service
providers primarily located in Asia, including companies with significant
manufacturing capacity, financial resources, research and development
operations, marketing and other capabilities. These companies include Advanced
Semiconductor Engineering, Inc., ASE Test Limited, ASAT Ltd., Hana
Microelectronics Public Co. Ltd., Astra International, Carsem Bhd., ChipPAC
Incorporated, Siliconware Precision Industries Co., Ltd. and Shinko Electric
Industries Co., Ltd. Such companies have also established relationships with
many large semiconductor companies that are current or potential customers of
our company. On a larger scale, we also compete with the internal semiconductor
packaging and test capabilities of many of our customers.
The principal elements of competition in the independent semiconductor
packaging market include: (1) breadth of package offering, (2) technical
competence, (3) new package design and implementation, (4) manufacturing yields,
(5) manufacturing cycle times, (6) customer service and (7) price. We believe
that we generally compete favorably with respect to each of these factors.
The independent wafer fabrication business is also highly competitive. Our
wafer fabrication services compete primarily with independent semiconductor
wafer foundries, including those of Chartered Semiconductor Manufacturing, Inc.,
Taiwan Semiconductor Manufacturing Company, Ltd. and United Microelectronics
Corporation. Each of these companies has significant manufacturing capacity,
financial resources, research and development operations, marketing and other
capabilities and has been operating for some time. We also expect to compete
with device manufacturers that provide semiconductor wafer fabrication facility
services for other semiconductor companies, such as LG Semicon Co., Ltd.,
Hitachi, Ltd., Toshiba Corp. and Winbond Electronics Corporation. Each of these
independent semiconductor wafer foundries, and many of
14
<PAGE> 16
these companies have also established relationships with many large
semiconductor companies that are current or potential customers of our company.
The principal elements of competition in the wafer fabrication facility
market include: (1) technical competence, (2) new semiconductor wafer design and
implementation, (3) manufacturing yields, (4) manufacturing cycle times, (5)
customer service and (6) price. As with the independent semiconductor packaging
market, we believe that we generally compete favorably with respect to each of
these factors.
INTELLECTUAL PROPERTY
We currently hold 68 U.S. patents, 35 of which are held jointly with ASI,
related to various semiconductor packaging technologies. These patents will
expire at various dates from 2012 through 2018. We also have 102 pending patent
applications and are preparing an additional 27 patent applications for filing.
With respect to development work undertaken jointly with ASI, we share
intellectual property rights with ASI under the terms of the supply agreements
between our company and ASI. The supply agreements provide for the
cross-licensing of intellectual property rights between our company and ASI. In
connection with the acquisition of K1, K2 and K3 from ASI we will acquire all of
ASI's patents, patent applications and other intellectual property rights
related to its packaging and testing business. We also enter into agreements
with other developers of packaging technology to license or otherwise obtain
certain process or packaging technologies.
We expect to continue to file patent applications when appropriate to
protect our proprietary technologies. However, we believe that our continued
success depends primarily on factors such as the technological skills and
innovation of our personnel rather than on our patents. We may need to enforce
our patents or other intellectual property rights or to defend our company
against claimed infringement of the rights of others through litigation, which
could result in substantial cost and diversion of our resources.
Although we are not currently a party to any material litigation, the
semiconductor industry is characterized by frequent claims regarding patent and
other intellectual property rights. If a third party were to bring a valid legal
claim against our company or ASI, we and ASI could be required to: (1)
discontinue the use of certain processes, (2) cease the manufacture, use, import
and sale of infringing products, (3) pay substantial damages, (4) develop
non-infringing technologies or (5) acquire licenses to the technology that we
had allegedly infringed.
EMPLOYEES
As of December 31, 1999, we had approximately 13,285 full-time employees.
Of these employees, 11,620 were engaged in manufacturing, 1,060 were engaged in
manufacturing support, 125 were engaged in research and development, 270 were
engaged in marketing and sales and 210 were engaged in finance, business
management and administration. Our employees are not represented by any
collective bargaining agreement, and we have never experienced a work stoppage.
We believe that our relations with our employees are good. In connection with
the acquisition of K1, K2 and K3, we expect to hire an additional 6,600
employees currently working at K1, K2 and K3. Certain of the employees at K1, K2
and K3 are members of a union, and all employees at these factories are subject
to collective bargaining agreements.
CORPORATE HISTORY
Amkor Technology Inc. was formed in September 1997 to consolidate the
ownership of the following interdependent companies which were involved in the
same business under the direction of common management (the "Reorganization"):
- AEI and its subsidiaries Amkor Receivables Corp., which purchases our
accounts receivable under an accounts receivable financing arrangement,
and Amkor Wafer Fabrication Services SARL, which provides various
technical support for CIL Limited's ("CIL") wafer fabrication services
customers in Europe and Asia;
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<PAGE> 17
- T.L. Limited ("TLL") and its subsidiary CIL, which markets our 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.
Subsequent to the Reorganization, we created additional subsidiaries and
reorganized the ownership structure of several of our subsidiaries.
OUR ACQUISITION OF ASI'S PACKAGING AND TEST BUSINESS AND INVESTMENT IN ASI
PROPOSED ACQUISITION
We have agreed with ASI, subject to certain conditions, to purchase ASI's
packaging and test business, which consists primarily of its K1, K2 and K3
factories. The purchase price for these assets will be approximately $950.0
million. The table below provides selected information about these factories:
<TABLE>
<CAPTION>
APPROXIMATE
FACTORY SIZE
FACTORY LOCATION EMPLOYEES (SQUARE FEET) SERVICES
- ------- -------- --------- ------------- --------
<S> <C> <C> <C> <C>
K1.................... Seoul, Korea 3,300 646,000 lead frame packaging and
package and process development
K2.................... Pucheon, Korea 1,800 264,000 lead frame and laminates
packaging services
K3.................... Pupyong, Korea 1,500 404,000 advanced lead frame packaging
and test services
</TABLE>
In connection with our acquisition of K1, K2 and K3, we will acquire all of
ASI's patents, patent applications and other intellectual property rights
related to its packaging and test business. We also plan to retain the
approximately 6,600 Korean employees currently working at K1, K2 and K3. We
intend to complete the acquisition during the second quarter of 2000.
PROPOSED INVESTMENT
In October 1999, we purchased 10 million shares of ASI's common stock at a
price of (Won)5,000 per share for approximately $41.6 million. As a result of
this investment and the conversion of ASI's debt to equity by ASI's creditor
banks, we now own approximately 18% of ASI's voting stock. We have also agreed
to make a $459.0 million additional investment in ASI, subject to certain
conditions. We have agreed to invest $309.0 million of this additional
investment at the time we acquire K1, K2 and K3, with the remaining $150.0
million to be invested in three installments: $30.0 million by June 30, 2000,
$60.0 million by August 31, 2000 and $60.0 million by October 31, 2000. However,
we have the right to accelerate this investment. Of this $459.0 million
investment, $109.0 million will be invested at a purchase price of (Won)8,000
per share and the remaining $350.0 million will be invested at (Won)18,000 per
share. As of February 28, 2000, the closing price of ASI's common stock on the
Korea Stock Exchange was (Won)10,100 per share. As of March 16, 2000, the
closing price of ASI's common stock on the Korea Stock Exchange was (Won)15,650.
Our investment will fulfill our prior obligation to invest $150.0 million in
ASI. Based upon an exchange rate of (Won)1,135 per $1.00 at December 31, 1999,
we would purchase a total of approximately 37.5 million shares for this $459.0
million investment in ASI. If we acquire this number of shares of ASI's common
stock, assuming ASI's creditor banks convert an additional (Won)150 billion
(approximately $132 million) of their ASI debt to equity in connection with our
acquisition and investment, we will own approximately 43% of ASI's outstanding
voting stock.
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<PAGE> 18
PROPOSED FINANCING
We intend to finance the purchase of K1, K2 and K3 and the investment in
ASI with the proceeds of an offering of $225.0 million convertible subordinated
notes, ($258.8 million inclusive of the exercised over-allotment option) our
proposed private placement of Series A preferred stock, approximately $750.0
million of new secured bank debt and cash on hand.
In November 1999, we secured a commitment from a group of institutional
investors to provide $410.0 million in equity financing for use in connection
with our proposed acquisition of K1, K2 and K3. If we consummate our acquisition
of K1, K2 and K3, we would issue to these investors a total of 2,050,000 shares
of Series A preferred stock, convertible into an aggregate of 20,500,000 shares
of our common stock. In addition, we would issue warrants for an aggregate of
3,895,000 shares of our common stock with a strike price of $27.50 per share to
the Series A preferred stock investors. These warrants would expire four years
after the date we issue them.
We expect to borrow $750.0 million under a new $850.0 million secured
credit facility, consisting of $650.0 million of term loans and $100.0 million
drawn under the $200.0 million revolving credit line included as part of this
credit facility. We are currently in the process of negotiating the terms of the
facility to be provided by a syndicate of institutional lenders. The initial
borrowing under the facility will be subject to the consummation of our proposed
acquisition of K1, K2 and K3 and other related transactions. The facility will
provide for amortization of the drawn amount over a five to five and one-half
year period and quarterly principal and interest payments. We will be required
to make mandatory prepayments under the facility out of a portion of any excess
cash flow, the net proceeds of any asset sales and the net proceeds of any
issuance of debt or equity securities, subject to certain exceptions. We expect
that the agreement governing the facility will include certain financial
covenants, as well as covenants restricting our ability to incur debt, pay
dividends, make certain investments and payments, and encumber or dispose of
assets. We expect that our obligations under the facility will be guaranteed by
certain of our subsidiaries and will be secured by a pledge of the domestic
assets of our company and our subsidiaries, a pledge of the shares of certain of
our subsidiaries and a pledge of certain intercompany indebtedness.
The closing of our proposed private placement of Series A preferred stock
and our proposed new secured bank financing is expected to take place
concurrently with, and is conditioned upon, the closing of our acquisition of
K1, K2 and K3 and our investment in ASI. We cannot assure you that any of these
transactions will occur. For information on the risks we face if these
transactions do not occur, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Risk Factors that May Affect
Future Operating Performance" in Item 7 of this annual report. If our proposed
acquisition is not consummated in all material respects by August 31, 2000,
holders of the new convertible subordinated notes will have the right to require
us to repurchase their notes.
RELATIONSHIP WITH ASI
ASI is a Korean company engaged primarily in providing semiconductor
packaging and test services and wafer fabrication services. ASI currently
operates three semiconductor packaging and test factories in Korea, K1, K2 and
K3, which we plan to acquire. ASI also operates a semiconductor wafer
fabrication facility in Korea. In addition, ASI has a number of direct and
indirect subsidiaries, including Anam Engineering and Construction Co., Ltd.,
which is currently subject to corporate reorganization proceedings in Korea. If
we complete our acquisition of K1, K2 and K3 from ASI, ASI's business will
consist primarily of, and ASI will derive substantially all of its revenues
from, the sale of wafer fabrication services to us. We, in turn, will continue
to derive all of our wafer fabrication revenues from wafer fabrication services
performed for us by ASI.
We have a long-standing relationship with ASI. ASI was founded in 1956 by
Mr. H. S. Kim, the father of Mr. James Kim, our Chairman and Chief Executive
Officer. Since January 1992, in addition to his other responsibilities, Mr.
James Kim has served as Chairman and a Director of ASI. For the years ended
December 31, 1997, 1998 and 1999, we derived 68%, 69%, and 60% of our net
revenues and 42%, 49% and 38% of our gross profit from sales of services
performed for us by ASI.
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<PAGE> 19
Under our current supply agreements with ASI, we have a first right to
substantially all of its packaging and test services and the exclusive right to
all of the output of its semiconductor wafer fabrication facility. In May 1999,
we purchased the K4 packaging and test factory from ASI for $575.0 million plus
the assumption of approximately $7.0 million of employee benefit liabilities.
Following our acquisition of K1, K2 and K3 from ASI, our supply agreement with
ASI relating to packaging and test services will terminate, and we expect to
continue to purchase all of ASI's semiconductor wafer output.
ASI DEBT RESTRUCTURING
ASI has been severely affected by the economic crisis in Korea beginning in
late 1997. ASI historically operated with a significant amount of debt relative
to its equity. The economic crisis in Korea led to sharply higher interest rates
and significantly reduced opportunities for refinancing maturing debts. Because
ASI maintained a substantial amount of short-term debt, its inability to
refinance this debt created a liquidity crisis for ASI. In addition to its own
leveraged financial position, ASI guarantees certain debt obligations of its
affiliates, many of which have encountered financial difficulties as a result of
the Korean economic crisis.
In October 1998, ASI announced that it had commenced negotiations with its
Korean creditor banks to enter into a debt restructuring arrangement known as a
"workout." ASI's workout was arranged under an accord among Korean creditor
banks to assist in the restructuring of Korean businesses and did not involve
the judicial system. The workout became effective in April 1999 and includes the
following arrangements:
- ASI was permitted to defer repayment on principal of ordinary loans until
December 31, 2003.
- ASI was permitted to defer repayment of principal under capital leases
until December 31, 1999, with payments of principal to resume under a
seven-year installment plan thereafter.
- ASI was permitted to defer the maturity of its won-denominated debentures
for an additional three-year term after scheduled maturity dates.
- ASI was permitted to make no interest payments on ordinary loans until
December 31, 1999.
- The creditor banks reduced interest rates on ASI's remaining outstanding
won-denominated ordinary loans to 10% or the prime rate of each creditor
bank, whichever was greater.
- ASI was given a grace period until December 31, 2003 against enforcement
of guarantees made by ASI for liabilities of ASI's affiliates. In
addition, interest was not to accrue on guaranteed obligations during
this period.
- For the duration of the workout, the creditor banks were to be entitled
to vote the ASI shares owned by Mr. James Kim and his family.
- The creditor banks agreed to convert (Won)250 billion (approximately $208
million) of their ASI debt into (1) equity in the amount of (Won)122.3
billion (approximately $102 million), (2) five-year non-interest bearing
convertible debt in the amount of (Won)108.1 billion (approximately $90
million) and (3) non-interest bearing loans in the amount of (Won)19.6
billion (approximately $16 million), provided that we made a $150.0
million equity investment in ASI.
In October 1999, the creditor banks converted (Won)98 billion
(approximately $82 million) of ASI debt held by them into ASI stock. As a
result, ASI's creditor banks now own approximately 36% of ASI's voting stock.
Also in October 1999, we made a (Won)50 billion (approximately $41.6 million)
equity investment in ASI, fulfilling the first installment of our commitment to
invest $150.0 million in ASI in connection with ASI's workout.
ASI is currently in negotiations with its Korean creditor banks to arrange
the termination of its workout in connection with our proposed acquisition of
the K1, K2 and K3 factories and our proposed investment in ASI. Specifically,
ASI plans to repay (Won)1,088 billion (approximately $959 million) of its
outstanding debt using the proceeds from its sale of K1, K2 and K3 and our
investment. ASI currently anticipates that its creditor banks will convert up to
an additional (Won)150 billion (approximately $132 million) of ASI's debt into
equity concurrent with our proposed acquisition. ASI is negotiating with its
creditor banks to obtain further
18
<PAGE> 20
concessions relating to its debt. Following the conversion of ASI's debt to
equity by ASI's creditor banks and our investment in ASI, ASI's creditor banks
will own approximately 34% of ASI's outstanding voting stock.
RELATIONSHIP WITH ASI FOLLOWING OUR ACQUISITION OF ASI'S PACKAGING AND TEST
BUSINESS AND OUR INVESTMENT IN ASI
If we complete our proposed acquisition of K1, K2 and K3 and our proposed
investment in ASI, we expect to continue to have certain contractual and other
business relationships with ASI, including under our wafer fabrication services
supply agreement with ASI. Under this supply agreement, we will continue to have
the exclusive right to all of the wafer output of ASI's wafer fabrication
facility. The supply agreement has a five-year term, expiring November 1, 2002,
and may be terminated by either party upon five years' written notice after
completion of the initial five year term. The supply agreement may also be
terminated upon breach or insolvency of either party. The supply agreement
generally provides for continued cooperation between our company and ASI in
research and development.
Concurrent with the completion of our proposed acquisition of K1, K2 and
K3, we will enter into a transition services agreement with ASI. Pursuant to
this agreement, we will provide many of the same services to ASI's wafer
fabrication business that had been provided by ASI's packaging and test business
prior to its acquisition by us, including human resources, accounting and
general administrative services and customer services.
Following our proposed investment in ASI and the anticipated conversion of
additional ASI debt to equity by ASI's creditor banks, we will own approximately
43% of ASI's outstanding voting stock. Accordingly, we will report ASI's
financial results in our financial statements through the equity method of
accounting. If ASI's results of operations are adversely affected for any
reason, our results of operations will suffer as well. Financial or other
problems affecting ASI could also lead to a complete loss of our investment in
ASI. In addition, under proposed changes in U.S. GAAP, we could be required to
consolidate ASI's financial results with ours. In such an event, adverse changes
in any line item of ASI's financial statements would adversely affect the
corresponding line items in our consolidated financial statements.
Our company and ASI will also continue to have close ties due to our
overlapping ownership and management. We expect that Mr. James Kim will continue
to serve as Chairman and as a Director of ASI and as our Chairman and Chief
Executive Officer. The Kim family currently beneficially owns approximately 59%
of our outstanding common stock and approximately 11% of ASI's voting stock. If
we complete our proposed private placement of Series A preferred stock, our
proposed investment in ASI and if ASI's creditor banks convert additional ASI
debt into equity, the Kim family will beneficially own approximately 51% of our
outstanding common and preferred voting stock and approximately 6% of ASI's
voting stock. Even though the Kim family's direct ownership of ASI and our
company will be reduced, we believe that the Kim family will continue to
exercise significant influence over our company, ASI and its affiliates.
We have also entered into agreements with ASI and Texas Instruments
relating to our wafer fabrication business. For information on these agreements,
see "Wafer Fabrication Services."
We may engage in other transactions with ASI from time to time that are
material to us. The indentures governing our senior subordinated notes, our
subordinated notes and our convertible subordinated notes, as well as the
agreements relating to our new secured bank debt, restrict our ability to enter
into transactions with ASI and other affiliates.
ITEM 2. PROPERTIES
We provide packaging and test services through our three factories in the
Philippines and our recently acquired factory in Korea. We source additional
packaging and test services from K1, K2 and K3 in Korea pursuant to a supply
agreement with ASI. We plan to acquire K1, K2 and K3 from ASI in the second
quarter of 2000. We also source wafer fabrication services from ASI's
semiconductor wafer fabrication facility located in Korea pursuant to another
supply agreement. In addition, we have a research and development facility at
19
<PAGE> 21
our Chandler, Arizona site. For information about our supply agreements with
ASI, see "Business -- Our Acquisition of ASI's Packaging and Test Business and
Investment in ASI."
We believe that total quality management is a vital component of our
advanced manufacturing capabilities. We have established a comprehensive quality
operating system designed to: (1) promote continuous improvements in our
products and (2) maximize manufacturing yields at high volume production without
sacrificing the highest quality standards. Each of our factories and each of
ASI's factories is ISO9002 and QS9000 certified. ISO9002 is a worldwide
manufacturing quality certification program administered by an independent
standards organization. QS9000 is a manufacturing quality certification program
administered by an independent standards organization that is used primarily by
U.S. automotive manufacturers. We believe that many of our customers prefer to
purchase from suppliers who are ISO9002 and QS9000 certified. In addition to
providing world-class manufacturing services, our factories in the Philippines
and Korea and ASI's factories in Korea provide purchasing, engineering and
customer service support.
The size, location, and manufacturing services provided by each of our
company's and ASI's factories, are set forth in the table below.
<TABLE>
<CAPTION>
APPROXIMATE
FACTORY SIZE
LOCATION (SQUARE FEET) SERVICES
-------- ------------- --------
<S> <C> <C>
OUR FACTORIES
Muntinlupa, Philippines(P1) 579,000 Packaging and test services
Packaging and process development
Muntinlupa, Philippines(P2) 115,000 Packaging services
Province of Laguna, Philippines(P3) 388,000 Packaging and test services
Kwangju, Korea(K4) 782,000 Packaging and test services
ASI'S FACTORIES
Seoul, Korea(K1)* 646,000 Packaging services
Package and process development
Pucheon, Korea(K2)* 264,000 Packaging services
Pupyong, Korea(K3)* 404,000 Packaging and test services
Pucheon, Korea 480,000 Wafer fabrication services
</TABLE>
- ---------------
* Proposed to be acquired by us in the second quarter of 2000.
Our operational headquarters is located in Chandler, Arizona, and our
administrative headquarters is located in West Chester, Pennsylvania. In
addition to an executive staff, the Chandler, Arizona campus houses: (1) sales
and customer service for the southwest region, (2) product management planning
and marketing and (3) a 121,000 square foot center for technical design and
research and development. The West Chester location houses finance and
accounting, legal, personnel administration and information systems, and serves
as a satellite sales office for our eastern sales region.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business we may be involved in legal proceedings
from time to time. As of the date of this annual report, there are no material
proceedings pending against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth fiscal quarter of the fiscal year ended December 31, 1999.
20
<PAGE> 22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the Nasdaq National Market under the symbol
"AMKR." Public trading of the common stock began on May 1, 1998. Prior to that,
there was no public market for our common stock. The following table sets forth,
for the periods indicated, the high and low sale price per share of our common
stock as quoted on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1998
Second Quarter (from May 1, 1998).................... $14.0000 $ 7.0000
Third Quarter........................................ 9.7500 3.2500
Fourth Quarter....................................... 10.8750 3.0000
1999
First Quarter........................................ 12.5625 7.1875
Second Quarter....................................... 10.6250 7.0938
Third Quarter........................................ 22.8750 9.1250
Fourth Quarter....................................... 29.5625 15.6250
</TABLE>
There were approximately 477 holders of record as of March 15, 2000 of our
Common Stock.
DIVIDEND POLICY
We currently expect to retain future earnings, if any, for use in the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future. In addition, our new secured bank debt
agreements and the indentures governing our senior, senior subordinated and
convertible subordinated notes restrict our ability to pay dividends.
RECENT SALES OF UNREGISTERED SECURITIES
On March 22, 2000, we issued $258.75 million of principal of 5% convertible
subordinated notes due 2007 to a group of initial purchasers led by Salomon
Smith Barney and S.G. Cowen & Company. The notes were issued in reliance on Rule
144A promulgated under the Securities Act of 1933, as amended. The notes will be
convertible into Amkor Common Stock at a conversion price of $57.34 per share.
The net proceeds of the offering will be used to partially fund the acquisition
of three semiconductor packaging factories from Anam Semiconductor, Inc.
21
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF AMKOR
We have derived the selected historical consolidated financial data
presented below for, and as of the end of, each of the years in the five-year
period ended December 31, 1999 from our consolidated financial statements.
Arthur Andersen LLP, independent public accountants, has audited the
consolidated financial statements as of December 31, 1998 and 1999 and for each
of the years in the three-year period ended December 31, 1999. Their report on
these consolidated financial statements, together with such consolidated
financial statements and the notes thereto, are included elsewhere in this
annual report. We have derived the selected consolidated financial data
presented below as of December 31, 1995, 1996 and 1997 and for the years ended
December 31, 1995 and 1996 from audited consolidated financial statements which
are not presented in this annual report. You should read the selected
consolidated financial data set forth below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and the related notes, included elsewhere
in this annual report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1995 1996 1997 1998 1999
-------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues.................................. $932,382 $1,171,001 $1,455,761 $1,567,983 $1,909,972
Cost of revenues -- including purchases from
ASI......................................... 783,335 1,022,078 1,242,669 1,307,150 1,577,226
-------- ---------- ---------- ---------- ----------
Gross profit.................................. 149,047 148,923 213,092 260,833 332,746
-------- ---------- ---------- ---------- ----------
Operating expenses:
Selling, general and administrative......... 55,459 66,625 103,726 119,846 145,233
Research and development.................... 8,733 10,930 8,525 8,251 11,436
-------- ---------- ---------- ---------- ----------
Total operating expenses............... 64,192 77,555 112,251 128,097 156,669
-------- ---------- ---------- ---------- ----------
Operating income.............................. 84,855 71,368 100,841 132,736 176,077
-------- ---------- ---------- ---------- ----------
Other (income) expense:
Interest expense, net....................... 9,797 22,245 32,241 18,005 45,364
Foreign currency (gain) loss................ 1,512 2,961 (835) 4,493 308
Other (income) expense, net(a).............. 6,523 3,150 8,429 9,503 25,117
-------- ---------- ---------- ---------- ----------
Total other (income) expense........... 17,832 28,356 39,835 32,001 70,789
-------- ---------- ---------- ---------- ----------
Income before income taxes, equity in income
(loss) of investees and minority interest... 67,023 43,012 61,006 100,735 105,288
Provision for income taxes(b)................. 6,384 7,876 7,078 24,716 26,600
Equity in income (loss) of investees(c)....... 2,808 (1,266) (17,291) -- (1,969)
Minority interest(d).......................... 1,515 948 (6,644) 559 --
-------- ---------- ---------- ---------- ----------
Net income(b)................................. $ 61,932 $ 32,922 $ 43,281 $ 75,460 $ 76,719
======== ========== ========== ========== ==========
Basic net income per common share............. $ .75 $ .40 $ .52 $ .71 $ .64
======== ========== ========== ========== ==========
Diluted net income per common share........... $ .75 $ .40 $ .52 $ .70 $ .63
======== ========== ========== ========== ==========
Pro Forma Data (Unaudited)(b):
Historical income before income taxes, equity
in income (loss) of ASI and minority
interest.................................... $ 67,023 $ 43,012 $ 61,006 $ 100,735
Pro forma provision for income taxes.......... 16,784 10,776 10,691 29,216
-------- ---------- ---------- ----------
Pro forma income before equity in income
(loss) of investees and minority interest... 50,239 32,236 50,315 71,519
Historical equity in income (loss) of
investees(c)................................ 2,808 (1,266) (17,291) --
Historical minority interest.................. 1,515 948 (6,644) 599
-------- ---------- ---------- ----------
Pro forma net income.......................... $ 51,532 $ 30,022 $ 39,668 $ 70,960
======== ========== ========== ==========
Basic pro forma net income per common share... $ .62 $ .36 $ .48 $ .67
======== ========== ========== ==========
Diluted pro forma net income per common
share....................................... $ .62 $ .36 $ .48 $ .66
======== ========== ========== ==========
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Shares used in computing basic pro forma net income
per common share.................................. 82,610 82,610 82,610 106,221 119,341
Shares used in computing pro forma diluted net
income per common share........................... 82,610 82,610 82,610 116,596 135,067
OTHER FINANCIAL DATA:
Depreciation and amortization....................... $ 26,614 $ 57,825 $ 81,864 $119,239 $180,332
Capital expenditures................................ 123,645 185,112 178,990 107,889 242,390
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 91,151 $ 49,664 $ 90,917 $ 227,587 $ 98,045
Short term investments............................. 0 881 2,521 1,000 136,595
Working capital (deficit).......................... 111,192 36,785 (38,219) 191,383 194,352
Total assets....................................... 626,379 804,864 855,592 1,003,597 1,755,089
Total long-term debt............................... 326,422 402,338 346,710 221,846 687,456
Total debt, including short-term borrowings and
current portion of long-term debt................ 411,542 594,151 514,027 260,503 693,921
Stockholders' equity............................... 45,289 45,812 90,875 490,361 737,741
</TABLE>
- ---------------
(a) In 1999 we recognized a pre-tax loss of $17.4 million as a result of the
early conversion of $153.6 million principal amount of our 5 3/4%
convertible subordinate notes due 2003.
(b) Prior to our reorganization in April 1998, our predecessor, AEI, elected to
be taxed as an S Corporation under the Internal Revenue Code of 1986 and
comparable state tax laws. As a result AEI did not recognize any provision
for federal income tax expense during the periods presented. The pro forma
provision for income taxes reflects the U.S. federal income taxes that would
have been recorded if AEI had been a C Corporation during these periods.
(c) In 1997, we recognized a loss of $17.3 million resulting principally from
the impairment of value of our prior investment in ASI, which we sold in
February, 1998.
(d) Represents ASI's 40% interest in the earnings of Amkor/Anam Pilipinas, Inc.
("AAP"), one of our subsidiaries in the Philippines. We purchased ASI's
interest in AAP with a portion of the proceeds from our initial public
offering in May 1998.
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<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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: (1) the
anticipated growth in the market for our products, (2) our anticipated capital
expenditures and financing needs, (3) our expected capacity utilization rates,
(4) our belief as to our future operating performance, (5) our proposed
acquisition of K1, K2 and K3 and our proposed investment in ASI, including the
financing of these transactions, (6) future won/dollar exchange rates, (7) the
future of our relationship with ASI and (8) other matters 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 that May Affect Future
Operating Performance" and "Business." The following discussion provides
information and analysis of our results of operations for the three years ended
December 31, 1999 and our liquidity and capital resources. You should read the
following discussion in conjunction with "Selected Historical Consolidated
Financial Data of Amkor" and our consolidated financial statements and the
related notes, included elsewhere in this annual report.
OVERVIEW
From 1995 to 1999, our net revenues increased from $932.4 million to
$1,910.0 million. We generate revenues primarily from the sale of semiconductor
packaging and test services. Historically we performed these services at our
three factories in the Philippines and subcontracted for additional services
with ASI which operated four packaging and test facilities in Korea. In May
1999, we acquired K4, one of ASI's packaging and test facilities, and we intend
to acquire ASI's remaining packaging and test facilities, K1, K2, and K3 during
the second quarter of 2000. Since 1998, we have also generated revenue by
marketing the wafer fabrication services performed by the wafer fabrication
facility owned by ASI. If we complete our proposed acquisition of K1, K2 and K3,
we will no longer depend upon ASI for packaging or test services, but we will
continue to market ASI's wafer fabrication services.
Historically, prices for our packaging and test services and wafer
fabrication services have declined over time. Beginning in 1997, a worldwide
slowdown in demand for semiconductor devices led to excess capacity and
increased competition. As a result, price declines in 1998 accelerated. From
1996 through 1999, we were able to partially offset the effect of price declines
by successfully developing and marketing new packages with higher prices, such
as advanced leadframe and laminate packages. We cannot assure you that we will
be able to offset any such price declines in the future. In addition, beginning
in the third quarter of 1999, demand for packaging and test services increased
significantly, which reduced the decline in average selling prices. You should
read "Business -- Packaging and Test Services" for more detailed descriptions of
our product offerings.
We depend on a small group of customers for a substantial portion of our
revenues. In 1997, 1998 and 1999, we derived 40.1%, 35.3% and 30.6%,
respectively, of our net revenues from sales to five packaging and test
customers, with 23.4%, 20.6% and 14.1% of our net revenues, respectively,
derived from sales to Intel Corporation. In addition, during 1998 and 1999, we
derived 7.4% and 15.3%, respectively, of our net revenues from wafer fabrication
services, and we derived substantially all of these revenues from Texas
Instruments.
Historically, our cost of revenues has consisted principally of: (1)
service charges paid to ASI for packaging and test services performed for us,
(2) costs of materials and (3) labor and other costs at our factories in the
Philippines and at K4 after our acquisition of that factory in May 1999. Service
charges paid to ASI and our gross margins on sales of services performed by ASI
have been set in accordance with our supply agreements with ASI, which provide
for periodic pricing adjustments based on changes in forecasted demand, product
mix, capacity utilization and fluctuations in exchange rates, as well as our
mutual long-term strategic interests. Fluctuations in service charges we pay to
ASI have historically had a significant effect on our gross margins. In
addition, our gross margins on sales of services performed by ASI have generally
been lower than our gross margins on sales of services performed by our
factories in the Philippines, but we have not borne any
24
<PAGE> 26
of ASI's fixed costs. If we complete our proposed acquisition of K1, K2 and K3
from ASI, we will bear all of the costs associated with these factories, but we
will no longer pay service charges to ASI for packaging and test services. We
will continue to incur costs of direct materials used in packages that we
produce for our customers. Because a portion of our costs at our factories in
the Philippines and Korea will remain fixed, increases or decreases in capacity
utilization rates may continue to have a significant effect on our gross profit.
The unit cost of packaging and test services generally decreases as fixed
charges, such as depreciation expense on our equipment, are allocated over a
larger number of units produced.
In order to meet customer demand for our laminate packages, we have made
significant investments to expand our capacity in the Philippines. In connection
with our newest factory in the Philippines, P3, in 1996 we expensed $15.5
million of pre-operating and start-up costs and in the first six months of 1997
we incurred $16.6 million of initial operating losses. This factory operated at
substantially less than full capacity during these periods while our customers
were completing qualification procedures for the production of laminate packages
at this factory. During the last six months of 1997 and in 1998 and in 1999, we
significantly increased utilization at P3 due to continued growth in demand for
laminate packages. As a result, P3 contributed positive gross margins throughout
1998 and 1999.
Relationship with ASI
Through our supply agreements with ASI, we historically have had a first
right to substantially all of the packaging and test services capacity of ASI
and the exclusive right to all of the wafer output of ASI's wafer fabrication
facility. During 1997, 1998 and 1999, we derived approximately 68%, 69% and 60%,
respectively, of our net revenues and approximately 42%, 49% and 38%,
respectively, of our gross profit from sales of services performed for us by
ASI. In addition, ASI has derived nearly all of its revenues from services sold
by us. Historically, ASI has directly sold packaging and test services in Japan
and Korea. In January 1998, we assumed the marketing rights for packaging and
test services in Japan from ASI, and we expect to assume marketing rights for
such services in Korea upon completion of our proposed acquisition of K1, K2 and
K3. In January 1998, we also began marketing wafer fabrication services provided
by ASI's new semiconductor wafer fabrication facility.
Upon completion of our proposed acquisition of K1, K2 and K3, we will no
longer receive any packaging and test services from ASI. However, we expect to
continue to have certain contractual and other business relationships with ASI,
primarily our wafer fabrication services supply agreement. Under this supply
agreement, we will continue to have the exclusive right to all of the wafer
output of ASI's wafer fabrication facility, and we expect to continue to
purchase all of ASI's wafer fabrication services. Furthermore, we will own
approximately 43% of ASI's outstanding voting stock after our investment in ASI
and the anticipated conversion of an additional (WON)150 billion (approximately
$132.0 million) of ASI's debt to equity by ASI's creditor banks. Accordingly, we
will report ASI's results in our financial statements through the equity method
of accounting. Our company and ASI will also continue to have close ties due to
our overlapping ownership and management.
For more information concerning our relationship with ASI, you should read
"Risk Factors that May Affect Future Operating Performance."
Financial Impact of Our Acquisition of K1, K2 and K3 and Investment in ASI on
Our Results of Operations
If we complete our proposed acquisition of K1, K2 and K3 and our proposed
investment in ASI, we expect there will be significant changes in our future
financial results. Because we already sell substantially all of the output of
K1, K2 and K3, there will not be a significant change in our revenues. We expect
our gross margin to increase significantly as the K1, K2 and K3 factories would
no longer be subject to our supply agreement with ASI. The factories that we
currently own operate with gross margins significantly higher than the margins
we achieve under our supply agreement with ASI. However, our operating expenses
will increase as we will absorb the research and development and general and
administrative expenses related to the operations of K1, K2 and K3. Our interest
expense will also increase due to the debt we will incur to finance our proposed
acquisition and investment. We expect our overall effective tax rate to decrease
due to the fact
25
<PAGE> 27
that the profits of K1, K2 and K3 will be subject to a tax holiday in Korea. The
tax holiday will apply to 100% of the profits of K1, K2 and K3 for seven years
and then to 50% of such profits for three additional years. Because of our
equity investment in ASI, we will be required to record our increased
proportionate share of ASI's net income, net of the amortization of goodwill
incurred in the acquisition of our equity interest in ASI.
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,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Net revenues................................................ 100.0% 100.0% 100.0%
Gross profit................................................ 14.6% 16.6% 17.4%
Operating income............................................ 6.9% 8.5% 9.2%
Income before income taxes, equity in income (loss) of
investees and minority interest........................... 4.2% 6.4% 5.5%
Net income.................................................. 3.0% 4.8% 4.0%
</TABLE>
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net Revenues. Net revenues increased $342.0 million, or 21.8%, to $1,910.0
million in 1999 from $1,568.0 million in 1998. Packaging and test net revenues
increased 11.4% to $1,617.2 million in 1999 from $1,452.3 million in 1998. For
the same one-year periods, wafer fabrication net revenues increased to $292.7
million from $115.7 million.
The increase in packaging and test net revenues was primarily attributable
to a significant increase in unit volumes, which more than offset significant
average selling price erosion across all product lines. The average selling
price erosion was most severe in the second half of 1998 and has slowed during
1999 due to increases in product demand and decreases in excess factory
capacity. Offsetting this erosion in average selling prices was an overall unit
volume increase of approximately 30%. Growth in demand for our services was
driven by our customers in the PC and telecommunications industries.
Particularly strong was the demand for packages used in cellular phones and
internet enabling equipment. In addition, changes in the mix of products we are
selling, to more advanced and laminate packages, also provided an offset to
overall price erosion. During 1999, advanced and laminate packages, which have
higher average selling prices than traditional leadframe products, accounted for
60.2% of packaging and test net revenues compared to 53.8% in 1998.
The significant increase in wafer fabrication net revenues represents the
production ramp-up of the wafer fabrication facility, which began operation in
January 1998 and did not commence producing at near full installed capacity
until the beginning of 1999. ASI plans to expand the capacity of the wafer
fabrication facility from 18,000 wafers to 22,000 wafers per month by the end of
the first quarter of 2000.
Gross Profit. Gross profit increased $71.9 million, or 27.6%, to $332.7
million, or 17.4% of net revenues, in 1999 from $260.8 million, or 16.6% of net
revenues, in 1998.
Gross margins were positively impacted by:
- Improved gross margin on the output of K4 following our acquisition of K4
in May 1999.
- Increasing unit volumes during the third and fourth quarter of 1999,
which permitted better absorption of our factories' substantial fixed
costs, resulting in a lower manufacturing cost per unit and improved
gross margins.
The positive impact on gross margins was partially offset by:
- Increasing contribution to total revenues from our low margin wafer
fabrication services business. In 1999 wafer fabrication services net
revenues represented 15.3% of total net revenues compared to 7.4%
26
<PAGE> 28
of total net revenues in 1998. In addition, beginning in 1999, our
contractual gross margin for this business under our supply agreement
with ASI was reduced to 10% from 15% in 1998; and
- Significant average selling price erosion across all product lines.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $25.4 million, or 21.2%, to $145.2 million, or
7.6% of net revenues, in 1999 from $119.8 million, or 7.6% of net revenues, in
1998. The increase in these costs was due to:
- Increased headcount and related personnel costs at our marketing, sales
and wafer fabrication departments;
- Increased headcount and related personnel costs at our P3 factory, which
continued to increase production capacity; and
- Increased costs related to the consolidation of K4 factory operations
during the second quarter of 1999 and general and administrative
expenses, including fees paid to ASI under the transition services
agreement.
Research and Development. Research and development expenses increased $3.2
million, or 38.6%, to $11.4 million, or 0.6% of net revenues, in 1999 from $8.3
million, or 0.5% of net revenues, in 1998. Increased research and development
expenses resulted from increased headcount and general development activities,
primarily the expansion of our Chandler, Arizona-based research facility.
Other (Income) Expense. Other expenses increased $38.8 million, or 121.2%,
to $70.8 million, or 3.7% of net revenues, in 1999 from $32.0 million, or 2.0%
of net revenues, in 1998. The net increase in other expenses was primarily a
result of:
- Increase in interest expense of $27.4 million. The increased interest
expense resulted from the May 1999 issuance of senior and senior
subordinated notes to fund the K4 acquisition, which more than offset the
decrease in interest expense resulting from the application of the
proceeds from our initial public offering in May 1998 against outstanding
debt;
- Decrease in foreign exchange losses of $4.2 million resulting from the
stabilization of the Philippine peso since the first quarter of 1998; and
- Increase in other expenses, which in 1999 included a $17.4 million
non-cash charge associated with the early conversion of $153.6 million of
our outstanding convertible subordinated notes in the fourth quarter.
Income Taxes. Our effective tax rate in 1999 and 1998 was 25.3% and 29.0%,
respectively (after giving effect to the pro forma adjustment for income taxes).
The decrease in the effective tax rate in 1999 was due to the higher operating
profits at our factories that operate with tax holidays.
We have structured our global operations to take advantage of lower tax
rates in certain countries and tax incentives extended to encourage investment.
The tax returns for open years are subject to changes upon final examination.
Changes in the mix of income from our foreign subsidiaries, expiration of tax
holidays and changes in tax laws and regulations could result in increased
effective tax rates for us.
Minority Interest. Minority interest represented ASI's ownership in the
consolidated net income of Amkor/Anam Pilipinas, Inc. ("AAP"). Accordingly,
until the second quarter of 1998, we recorded a minority interest expense in our
consolidated financial statements relating to the minority interest in the net
income of AAP. In the second quarter of 1998, we purchased ASI's 40% interest in
AAP and, as a result, we now own substantially all of the common stock of AAP.
The acquisition of the minority interest resulted in the elimination of the
minority interest liability and in additional goodwill amortization of
approximately $2.5 million per year.
27
<PAGE> 29
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net Revenues. Net revenues increased $112.2 million, or 7.7%, to $1,568.0
million in 1998 from $1,455.8 million in 1997. Packaging and test net revenues
were relatively unchanged in 1998 compared to 1997. However, net revenues from
wafer fabrication services have ramped up since operations began in January 1998
and accounted for substantially all of the increase in net revenues. In
addition, beginning in January 1998, we assumed marketing rights for packaging
and test services in Japan from ASI.
Total unit volumes increased during 1998 compared to 1997. This increase
was primarily due to increases in volumes of laminate packages, which more than
doubled compared to 1997. Our advanced leadframe packages also increased in
volume, but unit volumes for traditional leadframe packages declined. Although
traditional leadframe packages accounted for more than 65% of our total unit
volume for 1998, the shift to laminate packages significantly impacted revenues
because each laminate package had an average selling price significantly higher
than the average selling price of a traditional leadframe package. Laminate and
advanced leadframe packages accounted for 53.8% of packaging and test net
revenues in 1998 compared to 38.7% in 1997. This trend was consistent throughout
1998.
Gross Profit. Gross profit increased $47.7 million, or 22.4%, to $260.8
million in 1998 from $213.1 million in 1997. Gross margin improved to 16.6% in
1998 from 14.6% in 1997. The following factors contributed to higher gross
margins in 1998:
- Gross margins on packaging and test services provided by ASI improved as
a result of the supply agreements entered into in January 1998;
- Gross margins at P3, which incurred significant pre-operating and
start-up costs and initial operating losses in the first half of 1997,
improved primarily as a result of increased volumes and better absorption
of fixed costs; and
- Gross margins improved as a result of the positive impact from wafer
fabrication revenues during 1998 compared to no revenue from wafer
fabrication in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $16.1 million, or 15.5%, to $119.8 million in
1998 from $103.7 million in 1997. Selling, general and administrative expenses
as a percentage of net revenues increased to 7.6% in 1998 from 7.1% in 1997. The
increase was primarily due to: (1) higher administrative expenses at P3 as unit
volumes continued to increase and (2) costs related to wafer fabrication
services, which began in January 1998.
Research and Development Expenses. Research and development expenses
decreased $0.3 million, or 3.2%, to $8.3 million in 1998 from $8.5 million in
1997. Research and development expenses as a percentage of net revenues
decreased to 0.5% in 1998 from 0.6% in 1997.
Other (Income) Expense. Other (income) expense decreased $7.8 million to
$32.0 million in 1998 from $39.8 million in 1997. The decline was primarily due
to a reduction in net interest expense of $14.2 million to $18.0 million in 1998
from $32.2 million in 1997. We used a portion of the proceeds from our initial
public offering in May 1998 to repay much of our outstanding debt. Additionally,
we accumulated a significant cash balance. An increase in foreign exchange
losses, due to fluctuations in the Philippine peso, partly offset lower interest
expense.
Income Taxes. Our effective tax rate, after giving effect to the pro forma
adjustment for income taxes, was 29.0% in 1998 compared to an effective tax rate
of 17.5% in 1997. The lower effective tax rate in 1997 was due to the
recognition of deferred tax assets on currency losses for Philippine tax
reporting purposes, which are not recognized for financial reporting purposes.
This decrease was offset by increases in the effective rate resulting from
non-deductible losses at P3 where we have a tax holiday until the end of 2002.
To the extent P3 is profitable, our effective tax rate related to our operations
in the Philippines during this tax holiday will be less than the statutory rate
of 35% in the Philippines. In 1997 we recognized deferred tax benefits from
unrealized foreign exchange losses 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. These losses are not
recognized for financial reporting purposes because the U.S. dollar is our
functional
28
<PAGE> 30
currency. These losses will be realized for tax reporting purposes in the
Philippines 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. We concluded that it was more likely than
not that we could realize a portion of these tax benefits in the Philippines
within the three year loss carryforward period. We recorded a valuation
allowance for the remaining tax benefits where we could not reach such a
conclusion.
Equity in Income (Loss) of Investees. In 1997, we recognized a loss of
$17.3 million resulting principally from the impairment of value in our
investment in ASI. In February 1998, we disposed of our investment in ASI's
common stock.
Minority Interest. Minority interest represented ASI's ownership in the
consolidated net income of AAP, one of our subsidiaries in the Philippines.
During 1997, as a result of a settlement of an intercompany loan, which
otherwise had no effect on our combined pretax income, AAP reported a net loss
as a separate entity. Accordingly, we recorded a minority interest benefit in
our consolidated financial statements related to the minority interest in the
net loss.
In the second quarter of 1998, we purchased ASI's 40% interest in AAP, and,
as a result, we now own substantially all of the common stock of AAP. The
purchase of the minority interest resulted in the elimination of the minority
interest liability and goodwill amortization of approximately $2.5 million per
year.
QUARTERLY RESULTS
The table below sets forth unaudited consolidated financial data, including
as a percentage of net revenues, for the last eight fiscal quarters ended
December 31, 1999. Our results of operations have varied and may continue to
vary from quarter to quarter and are not necessarily indicative of the results
of any future period. In addition, in light of our recent growth, including as a
result of our acquisition of the K4 packaging and test factory from ASI in May
1999, we believe that you should not rely on period-to-period comparisons as an
indication of our future performance.
We believe that we have included in the amounts stated below all necessary
adjustments, consisting only of normal recurring adjustments, to present fairly
our selected quarterly data. You should read our selected quarterly data in
conjunction with our consolidated financial statements and the related notes,
included elsewhere in this annual report.
Our net revenues, gross profit and operating income 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 U.S., the
Philippines and Korea. Semiconductor companies in the U.S. generally reduce
their production during the holidays at the end of December which results in a
significant decrease in orders for packaging and test services during the first
two weeks of January. In addition, we typically close our factories in the
Philippines for holidays in January, and we and ASI close our factories in Korea
for holidays in February.
The semiconductor industry experienced a general slowdown during 1998. As a
result, our packaging and test net revenues decreased by 3.5% from the first
quarter of 1998 to the fourth quarter of 1998. The decrease in packaging and
test net revenue was offset by significant growth in net revenues from wafer
fabrication services. Net revenues from wafer fabrication services, which
represented less than 1% of net revenues in the first quarter of 1998, increased
to 16.4% of net revenues in the fourth quarter of 1998.
In May 1999 we purchased the K4 factory from ASI. The acquisition resulted
in improved gross margins due to the difference in margins between company-owned
factories and factory services provided by ASI under our supply agreement. To
purchase K4, we issued $625 million of senior and senior subordinated notes.
This has resulted in increased interest expense.
29
<PAGE> 31
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues...................... $371,733 $384,724 $386,718 $424,808 $419,957 $449,925 $501,816 $538,274
Cost of revenues -- including
purchases from ASI.............. 310,056 317,106 321,758 358,230 357,382 383,162 404,327 432,355
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit.................. 61,677 67,618 64,960 66,578 62,575 66,763 97,489 105,919
-------- -------- -------- -------- -------- -------- -------- --------
Operating expenses:
Selling, general and
administrative................ 28,715 28,939 30,017 32,175 30,106 35,017 40,376 39,734
Research and development........ 2,057 1,938 2,109 2,147 2,251 2,843 2,990 3,352
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses...... 30,772 30,877 32,126 34,322 32,357 37,860 43,366 43,086
-------- -------- -------- -------- -------- -------- -------- --------
Operating income.................. 30,905 36,741 32,834 32,256 30,218 28,903 54,123 62,833
-------- -------- -------- -------- -------- -------- -------- --------
Net income........................ $ 8,812 $ 26,119 $ 20,874 $ 19,655 $ 18,925 $ 11,520 $ 26,088 20,186
======== ======== ======== ======== ======== ======== ======== ========
Pro forma net income.............. $ 9,640 $ 20,791
======== ========
Basic net income per common
share........................... $ .11 $ .25 $ .18 $ .17 $ .16 $ .10 $ .22 $ .16
======== ======== ======== ======== ======== ======== ======== ========
Diluted net income per common
share........................... $ .11 $ .24 $ .17 $ .16 $ .16 $ .10 $ .21 $ .16
======== ======== ======== ======== ======== ======== ======== ========
Basic pro forma net income per
common share.................... $ .12 $ .20
======== ========
Diluted pro forma net income per
common share.................... $ .12 $ .19
======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues -- including
purchases from ASI.............. 83.4 82.4 83.2 84.3 85.1 85.2 80.6 80.3
------ ----- ------ ----- ------ ----- ------ -----
Gross profit.................. 16.6 17.6 16.8 15.7 14.9 14.8 19.4 19.7
------ ----- ------ ----- ------ ----- ------ -----
Operating expenses:
Selling, general and
administrative................ 7.7 7.5 7.8 7.6 7.2 7.8 8.0 7.4
Research and development........ 0.6 0.5 0.5 0.5 0.5 0.6 0.6 .6
------ ----- ------ ----- ------ ----- ------ -----
Total operating expenses...... 8.3 8.0 8.3 8.0 7.7 8.4 8.6 8.0
------ ----- ------ ----- ------ ----- ------ -----
Operating income.................. 8.3 9.6 8.5 7.6 7.2 6.4 10.8 11.7
------ ----- ------ ----- ------ ----- ------ -----
Net income........................ 2.4% 6.8% 5.4% 4.6% 4.5% 2.6% 5.2% 3.8%
------ ----- ------ ----- ------ ----- ------ -----
------ ----- ------ ----- ------ ----- ------ -----
Pro forma net income.............. 2.6% 5.4%
------ -----
------ -----
</TABLE>
Prior to our reorganization in April 1998, our predecessor, AEI, elected to
be taxed as an S Corporation under the Code and comparable state tax laws. As a
result, AEI did not recognize any provision for federal income tax expense from
January 1, 1994 through April 28, 1998. In accordance with applicable SEC
regulations, we have provided in our consolidated financial statements the pro
forma adjustments for income taxes (unaudited) to reflect the additional U.S.
federal income taxes which we would have recorded if AEI had been a C
Corporation during these periods.
Our operating results have varied significantly from period to period and
may continue to vary in the future due to a variety of factors. For more
information on the risks affecting our operating results, see the "Risk Factors
that May Affect Future Operating Performance."
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<PAGE> 32
LIQUIDITY AND CAPITAL RESOURCES
Our ongoing primary cash needs are for equipment purchases, factory
expansions, interest and principal payments on our debt and working capital, in
addition to our acquisitions and investments.
In February 2000, we reached an agreement with ASI to acquire K1, K2 and K3
for a purchase price of approximately $950.0 million and to make a $459.0
million additional investment in ASI. This agreement supersedes our remaining
commitment to invest $108.4 million in ASI, out of the total $150 million we
committed to invest. We intend to finance our proposed acquisition and
investment with the proceeds of an offering of $225.0 million convertible
subordinated notes ($258.8 million inclusive of the exercised over-allotment
option), our proposed $410.0 million equity financing, $750.0 million of new
secured bank debt and cash on hand. The new secured bank debt will be drawn from
a new $850.0 million secured bank facility which will provide for amortization
of the drawn amount over a five to five and one-half year period and quarterly
principal and interest payments. See "Business -- Our Acquisition of ASI's
Packaging and Test Business and Investment in ASI -- Proposed Financing."
In May 1998, we consummated our initial public offering of 35,250,000
shares of common stock and $207 million principal amount of convertible
subordinated notes due May 1, 2003. We used the net proceeds of approximately
$558 million primarily to repay approximately $264 million of short-term and
long-term debt and approximately $86 million of amounts due to Anam USA, Inc., a
wholly-owned financing subsidiary of ASI, and to purchase for $34 million ASI's
40% interest in AAP. The remaining amount of net proceeds was available for
capital expenditures and working capital.
On May 17, 1999 we completed an asset purchase of ASI's newest and largest
packaging and test factory, K4, excluding cash and cash equivalents, notes and
accounts receivables, intercompany accounts and existing claims against third
parties. The purchase price for K4 was $575 million, plus the assumption of
approximately $7 million of employee benefit liabilities. In conjunction with
our purchase of K4, we completed a private placement in May 1999 to raise $425
million in senior notes and $200 million in senior subordinated notes. The
senior notes mature in May 2006 and have a coupon rate of 9.25%. The senior
subordinated notes mature in 2009, and have a coupon rate of 10.5%. We are
required to pay interest semi-annually in May and November for all of the notes.
Under the terms of our trade receivables securitization agreement, a
commercial financial institution is committed to purchase, with limited
recourse, all right, title and interest in up to $100 million in eligible
receivables, as defined in the agreement. In connection with our proposed
incurrence of new secured bank debt for the proposed acquisition of K1, K2 and
K3 and the proposed investment in ASI, we plan to terminate this agreement.
We have invested significant amounts of capital to increase our packaging
and test services capacity. During the last three years we have constructed our
P3 factory, added capacity in our other factories in the Philippines and
constructed a new research and development facility in the U.S. In 1997, 1998
and 1999, we made capital expenditures of $179.0 million, $107.9 million and
$242.4 million, respectively. We intend to spend up to $400 million in
additional capital expenditures in 2000, primarily for the expansion of our
factories. We believe the increase in capital expenditures is necessary to
expand our capacity to meet the growth in demand we expect in 2000. If we
acquire the K1, K2 and K3 factories, we could incur significant additional
capital expenditures.
During the second quarter of 1999, we executed a letter with ASI committing
to make a $150 million equity investment in ASI. Our commitment required that we
invest this amount in installments of approximately $41 million in each of 1999,
2000 and 2001 and $27 million in 2002. In October 1999 we made our initial
investment in ASI. We purchased 10 million shares of common stock at price of
W5,000 per share, or approximately $41.6 million dollars. As a result of this
investment and the conversion of ASI's debt to equity by ASI's creditor banks,
we now own approximately 18% of ASI's voting stock. The remaining portion of
this commitment has been superseded by our new agreement to invest an additional
$459.0 million in ASI.
At December 31, 1999, our debt consisted of $625 million of senior and
senior subordinated notes, $6.5 million of borrowings classified as current
liabilities, $9.0 million of long-term debt and capital lease
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<PAGE> 33
obligations and $53.4 million of 5.75% convertible subordinated notes due 2003.
We had $85.6 million in borrowing facilities with a number of domestic and
foreign banks, of which $82.2 million remained unused. These facilities are
typically revolving lines of credit and working capital facilities that are
renewable annually and bear interest at rates ranging from 8.0% to 10.75%.
Long-term debt and capital lease obligations outstanding have various expiration
dates through April 2004 and bear interest at rates ranging from 5.8% to 13.8%.
Covenants in the agreements governing our new $850 million secured bank
facility, our existing $425 million of senior notes and $200 million of senior
subordinated notes and any future indebtedness may materially restrict our
operations, including our ability to incur debt, pay dividends, make certain
investments and payments and encumber or dispose of assets. In addition,
financial covenants contained in agreements relating to our existing and future
debt could lead to a default in the event our results of operations do not meet
our plans. A default under one debt instrument may also trigger cross-defaults
under our other debt instruments. An event of default under any debt instrument,
if not cured or waived, could have a material adverse effect on us.
Net cash provided by operating activities in 1997, 1998 and 1999 was $250.1
million, $238.0 million and $293.3 million, respectively. Net cash provided by
(used in) financing activities in 1997, 1998 and 1999 was $(16.0) million, $62.0
million and $573.9 million, respectively.
In the fourth quarter of 1999, the holders of our convertible subordinated
notes converted $153.6 million of such notes into 12.1 million shares of common
stock. In the fourth quarter 1999, we incurred a non-cash after-tax charge of
approximately $13.9 million representing the fair market value of the shares of
common stock issued in the conversion in excess of the shares required to be
issued, which represents a premium for early retirement. In the first quarter of
2000 we expect to incur a similar charge in the amount of $0.3 million.
Following our proposed acquisition of K1, K2 and K3 and our proposed
investment in ASI, we believe that our existing cash balances, available credit
lines, cash flow from operations and available equipment lease financing will be
sufficient to meet our projected capital expenditures, debt service, working
capital and other cash requirements for at least the next twelve months. We may
require capital sooner than currently expected. We cannot assure you that
additional financing will be available when we need it or, if available, that it
will be available on satisfactory terms. In addition, the terms of the senior
and senior subordinated notes sold by us in May 1999 significantly reduce our
ability to incur additional debt. Failure to obtain any such required additional
financing could have a material adverse effect on our company.
In connection with our wafer fabrication facility agreement with Texas
Instruments, our company and Texas Instruments agreed to revise certain payment
and other terms contained in the Texas Instruments Manufacturing and Purchase
Agreement. As part of the revision, Texas Instruments agreed to advance our
company $20 million in June 1998 and another $20 million in December 1998. These
advances represented prepayments of wafer fabrication facility services to be
provided in the fourth quarter of 1998 and first quarter of 1999, respectively.
We recorded these amounts as accrued expenses. In turn, we advanced these funds
to ASI as prepayment for fabrication facility service charges. We completely
offset the first $20 million advance to ASI against billings for wafer
fabrication services performed for us by ASI in the fourth quarter of 1998 and
offset the second $20 million advance to ASI against billings for wafer
fabrication services performed for us by ASI in the first quarter of 1999. Under
the terms of the revision to the Texas Instruments Manufacturing and Purchase
Agreement, we remain ultimately responsible for reimbursing Texas Instruments if
ASI fails to comply with the terms of the agreement.
Subchapter S Taxes and Distributions
Prior to our reorganization in April 1998, our predecessor, AEI, elected to
be taxed as an S Corporation under the Code and comparable state laws. As a
result, ASI did not recognize any provision for federal income tax expense prior
to April 28, 1998. Instead, up until the date the S Corporation status of AEI
terminated, Mr. and Mrs. James Kim and certain trusts established for the
benefit of other members of Mr. and Mrs. James Kim's family (the "Kim Family
Trusts") had been obligated to pay U.S. federal and certain state income taxes
on their allocable portion of the income of AEI. Under certain tax
indemnification agreements, we are
32
<PAGE> 34
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 April 28, 1998. The agreements in
turn provide that, under certain circumstances, we will indemnify such
stockholders if they are required to pay additional taxes or other amounts
attributable to taxable years for which AEI filed 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 $5.0 million and $33.1 million in 1997 and 1998, respectively. As
a result of the finalization of the AEI tax returns in 1999, approximately $3.3
million of the 1998 distributions will be refunded to our company.
YEAR 2000 ISSUES
We have been actively engaged in addressing year 2000 issues. These issues
occur because many currently installed computer systems and software products
are coded to accept only two digit entries in the date code field. As a result,
software that records only the last two digits of the calendar year may not be
able to distinguish whether "00" means 1900 or 2000. This may result in software
failures or the creation of erroneous results.
At the date of this annual report, our systems have not experienced any
year 2000 problems. We presently believe that the year 2000 problem will not
pose significant operational problems for our business and operations on a going
forward basis. While we have contingency plans in place for operational problems
which may still arise as a result of year 2000 problems, we cannot assure you
that the year 2000 problem will not pose significant operational problems or
have a material adverse effect on our business, financial condition and results
of operations in the future. Through the date of this annual report, costs
incurred for year 2000 compliance have not been material.
We are not aware of any material year 2000 problems encountered by our
suppliers to date but have not yet obtained confirmations from our suppliers
that they did not experience year 2000 problems. Accordingly, we cannot
determine whether our suppliers have experienced year 2000 problems that may
impact their ability to supply us with equipment and services. Further, we
cannot determine the state of their year 2000 readiness. We cannot assure you
that our suppliers will be successful in ensuring that their systems have been
and will continue to be or will be year 2000 compliant or that their failure to
do so will not harm our business.
MARKET RISK SENSITIVITY
Our company is exposed to market risks, primarily related to foreign
currency and interest rate fluctuations. In the normal course of business, we
employ established policies and procedures to manage the exposure to
fluctuations in foreign currency values and changes in interest rates.
Foreign Currency Risks
Our company's primary exposures to foreign currency fluctuations is
associated with Philippine peso-based transactions and related peso-based assets
and liabilities, as well as Korean-won based transactions and related won-based
assets and liabilities. The objective in managing this foreign currency exposure
is to minimize the risk through minimizing the level of activity and financial
instruments denominated in pesos and won. Although we have selectively hedged
some of our currency exposure through short-term (generally not more than 30 to
60 days) forward exchange contracts, the hedging activity to date has been
immaterial.
At December 31, 1999, the peso-based financial instruments primarily
consisted of cash, non-trade receivables, deferred tax assets and liabilities,
non-trade payables, accrued payroll, taxes and other expenses. Based on the
portfolio of peso-based assets at December 31, 1999, a 20% increase in the
Philippine peso to U.S. dollar exchange rate would result in a decrease of
approximately $3 million, in peso-based net assets.
At December 31, 1999, the won-based financial instruments primarily
consisted of cash, non-trade receivables, non-trade payables, accrued payroll,
taxes and other expenses. Based on the portfolio of won-
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<PAGE> 35
based assets at December 31, 1999, a 20% increase in the Korean won to U.S.
dollar exchange rate would result in a decrease of less than $1 million, in
won-based net assets.
Interest Rate Risks
Our company has interest rate risk with respect to our investment in cash
and cash equivalents, use of short-term borrowings and long-term debt, including
the $53.4 million of convertible subordinated notes, $425.0 million of senior
notes and $200.0 million of senior subordinated notes outstanding, and will have
such risk with respect to the new convertible subordinated notes. Overall, we
mitigate the interest rate risks by investing in short-term investments, which
are due on demand or carry a maturity date of less than three months. In
addition, both the short-term borrowings and long-term debt, excluding our
convertible subordinated notes, senior notes and senior subordinated notes, have
variable rates that reflect currently available terms and conditions for similar
borrowings. As the convertible subordinated notes, senior notes and senior
subordinated notes bear fixed rates of interest, the fair value of these
instruments fluctuate with market interest rates. The fair value of the
convertible subordinated notes is also impacted by the market price of our
common stock.
The table below presents the interest rates, maturity dates, principal cash
flows and fair value of our fixed rate debt as of December 31, 1999.
<TABLE>
<CAPTION>
FIXED
DEBT INTEREST RATE MATURITY DATE PRINCIPAL FAIR VALUE
- ---- ------------- ------------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Convertible Notes........................... 5.75% May 2003 $ 53,435 $115,420
Senior Notes................................ 9.25% May 2006 $425,000 $416,500
Senior Subordinated Notes................... 10.5% May 2009 $200,000 $199,000
</TABLE>
Based on our conservative policies with respect to investments in cash and
cash equivalents, use of variable rate debt, and the fact we currently intend to
repay upon maturity our senior notes, senior subordinated notes the convertible
subordinated notes (unless converted), we believe that the risk of potential
loss due to interest rate fluctuations is not material.
Equity Price Risks
Our outstanding convertible subordinated notes are convertible into common
stock at $13.50 per share. As stated above, we intend to repay our convertible
subordinated notes upon maturity, unless converted. If investors were to decide
to convert their convertible subordinated notes to common stock, there would be
no impact on our future earnings, other than a reduction in interest expense,
unless such conversion were induced by us.
RISK FACTORS THAT MAY AFFECT FUTURE OPERATING PERFORMANCE
DECLINING AVERAGE SELLING PRICES -- THE SEMICONDUCTOR INDUSTRY PLACES DOWNWARD
PRESSURE ON THE PRICES OF OUR PRODUCTS.
Historically, prices for our packaging and test services and wafer
fabrication services have declined over time. Beginning in 1997, a worldwide
slowdown in demand for semiconductor devices led to excess capacity and
increased competition. As a result, price declines in 1998 accelerated. We
expect that average selling prices for our packaging and test services will
continue to decline in the future. If we cannot reduce the cost of our packaging
and test services and wafer fabrication services to offset a decline in average
selling prices, our future operating results could suffer.
DEPENDENCE ON THE HIGHLY CYCLICAL SEMICONDUCTOR AND ELECTRONIC PRODUCTS
INDUSTRIES -- WE OPERATE IN VOLATILE INDUSTRIES, AND INDUSTRY DOWNTURNS HARM OUR
PERFORMANCE.
Our business is tied to market conditions in the semiconductor industry,
which is highly cyclical. Because our business is and will continue to be
dependent on the requirements of semiconductor companies for
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independent packaging, test and wafer fabrication services, any future downturn
in the semiconductor industry or any other industry that uses a significant
number of semiconductor devices, such as the personal computer industry, could
have a material adverse effect on our business. For example, our operating
results for 1998 were adversely affected by downturns in the semiconductor
market. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a detailed discussion of our operating results in
1998.
HIGH LEVERAGE AND RESTRICTIVE COVENANTS -- OUR SUBSTANTIAL INDEBTEDNESS COULD
ADVERSELY AFFECT THE FINANCIAL HEALTH OF OUR COMPANY AND COULD RESTRICT OUR
OPERATIONS.
We now have a significant amount of indebtedness, which will increase
substantially after the offering of $225.0 million convertible subordinated
notes ($258.8 million inclusive of the exercised over-allotment option and our
proposed incurrence of approximately $750.0 million of new secured bank debt.
Covenants in the agreements governing the approximately $750.0 million of
new secured bank debt (which will be drawn from a new $850.0 million credit
facility), our existing $425.0 million of senior notes and $200.0 million of
senior subordinated notes and any future indebtedness may materially restrict
our operations, including our ability to incur debt, pay dividends, make certain
investments and payments, and encumber or dispose of assets. In addition,
financial covenants contained in agreements relating to our existing and future
debt could lead to a default in the event our results of operations do not meet
our plans. A default under one debt instrument may also trigger cross-defaults
under our other debt instruments. An event of default under any debt instrument,
if not cured or waived, could have a material adverse effect on us.
Our substantial indebtedness could:
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures,
acquisitions, research and development and other general corporate
requirements;
- limit our ability to obtain additional financing;
- require us to dedicate a substantial portion of our cash flow from
operations to service payments on our debt;
- limit our flexibility to react to changes in our business and the
industry in which we operate; and
- place us at a competitive disadvantage to any of our competitors that
have less debt.
We cannot assure you that our business will generate cash in an amount
sufficient to enable us to service our debt or to fund our other liquidity
needs. In addition, we may need to refinance all or a portion of our debt on or
before maturity. We cannot assure you that we will be able to refinance any of
our debt on commercially reasonable terms or at all.
Despite current debt levels, the terms of the instruments governing our
debt do not prohibit us or our subsidiaries from incurring substantially more
debt. If new debt is added to our consolidated debt level, the related risks
that we now face could intensify.
RELATIONSHIP WITH ASI
We will report ASI's financial results in our financial statements, and if ASI
encounters financial difficulties, our financial performance could suffer.
If we complete our investment in ASI and ASI's creditor banks convert their
debt of ASI to equity, we will own approximately 43% of ASI's outstanding voting
stock. Accordingly, we will report ASI's financial results in our financial
statements through the equity method of accounting. If ASI's results of
operations are adversely affected for any reason (including as a result of
losses at its consolidated subsidiaries and equity investees), our results of
operations will suffer as well. Financial or other problems affecting ASI could
also lead to a complete loss of our investment in ASI. In addition, under
proposed changes to U.S. GAAP, we
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<PAGE> 37
could be required to consolidate ASI's financial results with ours. In such an
event, adverse changes in any line item of ASI's financial statements would
adversely affect the corresponding line items in our consolidated financial
statements.
Our wafer fabrication business may suffer if ASI reduces its operations or if
our relationship with ASI is disrupted.
Our wafer fabrication business depends on ASI providing wafer fabrication
services on a cost effective and timely basis. If ASI were to significantly
reduce or curtail its operations for any reason, or if our relationship with ASI
were to be disrupted for any reason, our wafer fabrication business would be
harmed. We may not be able to identify and qualify alternate suppliers of wafer
fabrication services quickly, if at all. In addition, we currently have no other
qualified third party suppliers of wafer fabrication services and do not have
any plans to qualify additional third party suppliers.
UNCERTAINTY REGARDING OUR PROPOSED TRANSACTIONS WITH ASI -- WE MAY NOT BE ABLE
TO COMPLETE OUR PROPOSED ACQUISITION OF K1, K2 AND K3 AND OUR OTHER PROPOSED
TRANSACTIONS WITH ASI ON THE TERMS DESCRIBED IN THIS ANNUAL REPORT, OR AT ALL,
WHICH MAY HARM OUR BUSINESS.
In 1999, we derived 45.0% of our net revenues and 29.5% of our gross profit
from sales of packaging and test services provided by ASI. If we complete our
proposed acquisition of K1, K2 and K3 from ASI, we will no longer be dependent
on ASI for packaging and test services. Our ability to consummate the proposed
acquisition of K1, K2 and K3 and other transactions related to that acquisition
is subject to a number of uncertainties, some of which are outside our control.
For example, the acquisition and our proposed investment in ASI are subject to
the approval of our stockholders and the shareholders of ASI (including the
Korean creditor banks of ASI), the completion of our proposed equity and secured
debt financings with third parties and Korean regulatory approvals. As a result,
we cannot assure you that we will be able to consummate these transactions on
the terms described in this annual report, or at all.
If we fail to complete our proposed acquisition of K1, K2 and K3, we will
remain dependent on ASI for packaging and test services and will be unable to
achieve any improvements in our results of operations that direct ownership of
these facilities may bring. In connection with ASI's workout arrangement with
its creditor banks, we may still be required to make an additional $108.4
million investment in ASI through 2002. If our proposed acquisition and
investment are not consummated, ASI will continue to have a substantial amount
of debt, as well as significant contingent liabilities under guarantees of
affiliate debt, and will remain subject to the workout arrangement with its
creditor banks. This in turn may adversely affect ASI's ability to continue to
provide us with the packaging and test services, as well as wafer fabrication
services, that we require for our business.
In addition, if our proposed acquisition of K1, K2 and K3 is not
consummated in all material respects by August 31, 2000, or should the asset
purchase agreement relating to that acquisition be terminated at any time prior
to such date, holders of the new convertible subordinated notes will have the
right to require us to redeem their notes at a premium to their principal
amount, plus accrued interest and liquidated damages.
POTENTIAL CONFLICTS OF INTEREST WITH ASI -- MEMBERS OF THE KIM FAMILY OWN
SUBSTANTIAL PORTIONS OF, AND HAVE ACTIVE MANAGEMENT ROLES IN, BOTH OUR COMPANY
AND ASI. THIS COULD LEAD TO CONFLICTS OF INTEREST IN OUR BUSINESS DEALINGS WITH
ASI.
Mr. James Kim, the founder of our company and currently our Chairman, Chief
Executive Officer and largest shareholder, is the eldest son of Mr. H.S. Kim,
the founder of ASI. Mr. H.S. Kim is currently the honorary Chairman and a
Director of ASI. Since January 1992, in addition to his other responsibilities,
Mr. James Kim has served as Chairman and a Director of ASI. The Kim family,
which collectively owned approximately 11% of the outstanding voting stock of
ASI as of February 29, 2000, significantly influences the management of ASI. Mr.
James Kim and members of his family beneficially own approximately 59% of our
outstanding common stock.
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In October 1999, we purchased 10 million shares of ASI's voting stock at a
price of (Won)5,000 per share for approximately $41.6 million. As a result of
this investment and the conversion of (Won)98 billion (approximately $82
million) of ASI debt to equity by ASI's creditor banks, we now own approximately
18% of ASI's voting stock. If we complete our proposed private placement of
Series A preferred stock and our proposed equity investment in ASI and ASI's
creditor banks convert up to an additional (Won)150 billion (approximately $132
million) of their ASI debt into common stock, our company will own approximately
43% of ASI's outstanding voting stock, and the Kim family's direct ownership of
ASI's and our outstanding common and preferred voting stock will be reduced to
approximately 6% and 51%, respectively. Even though the Kim family's ownership
of our company and ASI will be reduced, we believe that the Kim family will
continue to exercise significant influence over our company and ASI and its
affiliates. This could lead to conflicts of interest between our company and ASI
or its affiliates. You should read "Business -- Our Acquisition of ASI's
Packaging and Test Business and Investment in ASI" for more information on our
relationship with ASI.
ABSENCE OF BACKLOG -- OUR NET REVENUES IN ANY QUARTER DEPEND ON OUR CUSTOMERS'
DEMAND FOR PACKAGING AND TEST SERVICES IN THAT QUARTER, AND WE MAY NOT BE ABLE
TO ADJUST COSTS QUICKLY IF OUR CUSTOMERS' DEMAND FALLS SUDDENLY.
Our packaging and test business does not typically operate with any
material backlog. We expect that in the future our packaging and test net
revenues in any quarter will continue to be substantially dependent upon our
customers' demand in that quarter. None of our customers have committed to
purchase any amount of packaging or test services or to provide us with binding
forecasts of demand for packaging and test services for any period. In addition,
our customers could reduce, cancel or delay their purchases of packaging and
test services. Because a large portion of our costs is fixed and our expense
levels are based in part on our expectations of future revenues, we may be
unable to adjust costs in a timely manner to compensate for any revenue
shortfall.
CUSTOMER CONCENTRATION -- WE GENERATE A LARGE PERCENTAGE OF OUR NET REVENUES
FROM A SMALL GROUP OF CUSTOMERS WHO HAVE NO MINIMUM PURCHASE OBLIGATIONS.
We depend on a small group of customers for a substantial portion of our
net revenues. In 1997, 1998 and 1999, we derived 40.1%, 35.3% and 30.6%,
respectively, of our net revenues from sales to our five largest packaging and
test customers, with 23.4%, 20.6% and 14.1% of our net revenues, respectively,
derived from sales to Intel Corporation. In addition, during 1998 and 1999, we
derived 7.4% and 15.3%, respectively, of our net revenues from wafer fabrication
services, and we derived substantially all of these revenues from Texas
Instruments, Inc. Our ability to maintain close, satisfactory relationships with
these customers is important to the ongoing success and profitability of our
business. We expect that we will continue to be dependent upon a small number of
customers for a significant portion of our revenues in future periods.
For additional information regarding terms of our agreements with Texas
Instruments and ASI, including ASI's rights with respect to future transfers of
technology from Texas Instruments and Texas Instruments' obligations to buy
wafers from us, see "Business -- Wafer Fabrication Services."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS -- WE DEPEND ON OUR FACTORIES IN
KOREA AND THE PHILIPPINES. MANY OF OUR CUSTOMERS' OPERATIONS ARE ALSO LOCATED
OUTSIDE OF THE U.S.
We provide packaging and test services through our three factories located
in the Philippines and our one factory in Korea. We source additional packaging
and test services from the K1, K2 and K3 factories located in Korea which are
owned by ASI and which we intend to acquire. We also source wafer fabrication
services from a wafer fabrication facility located in Korea and owned by ASI. In
addition, many of our customers' operations are located outside the U.S. The
following are risks inherent in doing business internationally:
- regulatory limitations imposed by foreign governments;
- fluctuations in currency exchange rates;
- political risks;
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- disruptions or delays in shipments caused by customs brokers or
government agencies;
- unexpected changes in regulatory requirements, tariffs, customs, duties
and other trade barriers;
- difficulties in staffing and managing foreign operations; and
- potentially adverse tax consequences resulting from changes in tax laws.
In addition to the risks listed above, our operations in Korea and the
Philippines are subject to certain country-specific risks described below.
Risks Associated with Our Operations in Korea
Our operations in Korea, as well as ASI's operations, are subject to risks
inherent to operating in Korea. While our revenues in Korea will be denominated
in U.S. dollars, our labor costs and some of our operating costs will be
denominated in won. Substantially all of ASI's revenues and a significant
portion of its debt and capital lease obligations are denominated in U.S.
dollars, while its labor and some operating costs are denominated in won.
Fluctuations in the won-dollar exchange rate will affect both our company's and
ASI's financial results. When we make our investment in ASI and report ASI's
results in our financial statements using the equity method of accounting, our
financial results will be further affected by exchange rate fluctuations.
Beginning in late 1997 and continuing into 1998, Korea experienced a severe
foreign currency liquidity crisis that resulted in a significantly adverse
economic environment and a material depreciation in the value of the Korean won
relative to the U.S. dollar. The exchange rate as of December 31, 1996 was
(Won)844 to $1.00 as compared to (Won)1,695 to $1.00 as of December 31, 1997,
(Won)1,195 to $1.00 as of December 31, 1998, (Won)1,135 to $1.00 as of December
31, 1999 and (Won)1,132 to $1.00 as of February 29, 2000. The depreciation of
the won relative to the U.S. dollar increased the cost of importing goods and
services into Korea. In addition, the value in won of Korea's public and private
sector debt denominated in U.S. dollars and other foreign currencies also
increased significantly. These developments in turn led to sharply higher
domestic interest rates and reduced opportunities for refinancing or refunding
maturing debts. As a result of these difficulties, financial institutions in
Korea have limited their lending, particularly to highly leveraged companies.
Future economic instability in Korea could have a material adverse effect on our
company's and ASI's business and financial condition.
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. If the level of
tensions with North Korea increases or changes abruptly, both our company's and
ASI's businesses could be harmed.
Risks Associated with Our Operations in the Philippines
Although the political situation and the general state of the economy in
the Philippines have stabilized in recent years, each 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 led to
economic instability in the Philippines. Any future economic or political
disruptions or instability in the Philippines could have a material adverse
effect on our business.
Because the functional currency of our operations in the Philippines is the
U.S. dollar, we have recently benefited from cost reductions relating to
peso-denominated expenditures, primarily payroll costs. We believe that any
future devaluations of the Philippine peso will eventually lead to inflation in
the Philippines, which could offset any savings achieved to date.
RISKS ASSOCIATED WITH OUR PROPOSED ACQUISITION OF ASI'S PACKAGING AND TEST
BUSINESS -- THE ACQUISITION OF THIS BUSINESS REPRESENTS A MAJOR COMMITMENT OF
OUR CAPITAL AND MANAGEMENT RESOURCES.
We intend to conduct due diligence and obtain representations from ASI in
connection with our proposed acquisition of K1, K2 and K3. However, there may be
additional hidden or contingent liabilities of K1, K2 and K3, relating to
matters such as environmental problems, taxation, employee obligations,
fraudulent convey-
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ance and others, that will not have come to our attention prior to our
acquisition. If such liabilities exist, our business and financial performance
may suffer after the acquisition.
Our acquisition of ASI's packaging and test factories will require our
management to devote a significant portion of its resources to the maintenance
and operation of factories in Korea. We have limited experience in owning and
operating a business in Korea. It may take time for us to learn how to comply
with relevant Korean regulations, including tax, environmental and labor laws.
During the transition period in which we will integrate ASI's packaging and test
business into our company, our management may not have adequate time and
attention to devote to other aspects of our business, and those parts of our
business could suffer.
If the acquisition is completed, we plan to retain the approximately 6,600
Korean employees currently working in ASI's packaging and test business into our
workforce, and we may face cultural difficulties until we learn how to interact
with these new employees. If these employees become dissatisfied working for a
U.S. company, they may leave us. If we cannot find new employees to replace
departing ones, our new operations could suffer.
MANAGEMENT OF GROWTH -- WE FACE CHALLENGES AS WE INTEGRATE NEW AND DIVERSE
OPERATIONS AND TRY TO ATTRACT QUALIFIED EMPLOYEES TO SUPPORT OUR EXPANSION
PLANS.
We have experienced, and may continue to experience, growth in the scope
and complexity of our operations and in the number of our employees. This growth
has strained our managerial, financial, manufacturing and other resources.
Future acquisitions may result in inefficiencies as we integrate new operations
and manage geographically diverse operations.
In order to manage our growth, we must continue to implement additional
operating and financial controls and hire and train additional personnel. We
cannot assure you that we will continue to be successful in hiring and properly
training sufficient numbers of qualified personnel and in effectively managing
our growth. If we fail to: (1) properly manage growth, (2) improve our
operational, financial and management systems as we grow or (3) integrate new
factories and employees into our operations, our financial performance could be
materially adversely affected.
Our success depends to a significant extent upon the continued service of
our key senior management and technical personnel, any of whom would be
difficult to replace. In addition, in connection with our expansion plans, our
company and ASI will be required to increase the number of qualified engineers
and other employees at our respective factories in the Philippines and Korea.
Competition for qualified employees is intense, and our business could be
adversely affected by the loss of the services of any of our existing key
personnel. Our inability to attract, retain and motivate qualified new personnel
could have a material adverse effect on our business.
RISKS ASSOCIATED WITH OUR WAFER FABRICATION BUSINESS -- OUR WAFER FABRICATION
BUSINESS IS SUBSTANTIALLY DEPENDENT ON TEXAS INSTRUMENTS.
Our wafer fabrication business, which commenced operations in January 1998,
depends significantly upon Texas Instruments. An agreement with ASI and Texas
Instruments (the "Texas Instruments Manufacturing and Purchasing Agreement")
requires Texas Instruments to purchase from us at least 40% of the capacity of
ASI's wafer fabrication facility, and under certain circumstances, Texas
Instruments has the right to purchase from us up to 70% of this capacity. We
cannot assure you that Texas Instruments will meet its purchase obligations in
the future. If Texas Instruments fails to meet its purchase obligations, our
company's and ASI's businesses could be harmed. For example, Texas Instruments'
orders in the first half of 1998 were below required minimum purchase
commitments due to market conditions and issues encountered by Texas Instruments
in the transition of its products to new technology.
Texas Instruments has transferred certain of its complementary metal oxide
silicon ("CMOS") process technology to ASI, and ASI is dependent upon Texas
Instruments' assistance for developing other state-of-the-art wafer
manufacturing processes. In addition, ASI's technology agreements with Texas
Instruments (the "Texas Instruments Technology Agreements") only cover .25
micron and .18 micron CMOS process
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technology. Texas Instruments has not granted ASI a license under Texas
Instruments' patents to manufacture semiconductor wafers for third parties.
Moreover, Texas Instruments has no obligation to transfer any next-generation
technology to ASI. Our company's and ASI's businesses could be harmed if ASI
cannot obtain new technology on commercially reasonable terms or ASI's
relationship with Texas Instruments is disrupted for any reason.
DEPENDENCE ON MATERIALS AND EQUIPMENT SUPPLIERS -- OUR BUSINESS MAY SUFFER IF
THE COST OR SUPPLY OF MATERIALS OR EQUIPMENT ADVERSELY CHANGES.
We obtain from vendors the materials and equipment required for the
packaging and test services performed by our factories. We source most of our
materials, including critical materials such as leadframes and laminate
substrates, from a limited group of suppliers. Furthermore, we purchase all of
our materials on a purchase order basis and have no long-term contracts with any
of our suppliers. Our business may be harmed if we cannot obtain materials and
other supplies from our vendors: (1) in a timely manner, (2) in sufficient
quantities, (3) in acceptable quality and (4) at competitive prices.
RAPID TECHNOLOGICAL CHANGE -- OUR BUSINESS WILL SUFFER IF WE CANNOT KEEP UP WITH
TECHNOLOGICAL ADVANCES IN OUR INDUSTRY.
The complexity and breadth of both semiconductor packaging and test
services and wafer fabrication are rapidly changing. As a result, we expect that
we will need to offer more advanced package designs and new wafer fabrication
technology in order to respond to competitive industry conditions and customer
requirements. Our success depends upon the ability of our company and ASI to
develop and implement new manufacturing process and package design technologies.
The need to develop and maintain advanced packaging and wafer fabrication
capabilities and equipment could require significant research and development
and capital expenditures in future years. In addition, converting to new package
designs or process methodologies could result in delays in producing new package
types or advanced wafer designs that could adversely affect our ability to meet
customer orders.
Technological advances also typically lead to rapid and significant price
erosion and may make our existing products less competitive or our existing
inventories obsolete. If we cannot achieve advances in package design and wafer
fabrication technology or obtain access to advanced package designs and wafer
fabrication technology developed by others, our business could suffer.
COMPETITION -- WE MUST COMPETE AGAINST LARGE AND ESTABLISHED COMPETITORS IN BOTH
THE PACKAGING AND TEST BUSINESS AND THE WAFER FABRICATION BUSINESS.
The independent semiconductor packaging and test market is very
competitive. This sector is comprised of approximately 40 companies. We face
substantial competition from established packaging and test service providers
primarily located in Asia, including companies with significant manufacturing
capacity, financial resources, research and development operations, marketing
and other capabilities. Such companies have also established relationships with
many large semiconductor companies that are current or potential customers of
our company. On a larger scale, we also compete with the internal semiconductor
packaging and test capabilities of many of our customers.
The independent wafer fabrication business is also highly competitive. Our
wafer fabrication services compete primarily with independent semiconductor
wafer foundries, including those of Chartered Semiconductor Manufacturing, Inc.,
Taiwan Semiconductor Manufacturing Company, Ltd. and United Microelectronics
Corporation. Each of these companies has significant manufacturing capacity,
financial resources, research and development operations, marketing and other
capabilities and has been operating for some time. Many of these companies have
also established relationships with many large semiconductor companies that are
current or potential customers of our company. If we cannot compete successfully
in the future against existing or potential competitors, our operating results
would suffer.
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ENVIRONMENTAL REGULATIONS -- FUTURE ENVIRONMENTAL REGULATIONS COULD PLACE
ADDITIONAL BURDENS ON THE MANUFACTURING OPERATIONS OF OUR COMPANY OR ASI.
The semiconductor packaging process uses chemicals and gases and generates
byproducts that are subject to extensive governmental regulations. For example,
we produce liquid waste when silicon wafers are diced into chips with the aid of
diamond saws, then cooled with running water. 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 our company's and ASI's manufacturing
processes and on the factories occupied by our company and ASI.
Increasingly, public attention has focused on the environmental impact of
semiconductor manufacturing operations and the risk to neighbors of chemical
releases from such operations. In the future, applicable land use and
environmental regulations may: (1) impose upon our company the need for
additional capital equipment or other process requirements, (2) restrict our
company's ability to expand our respective operations, (3) subject our company
to liability or (4) cause our company to curtail our operations.
PROTECTION OF INTELLECTUAL PROPERTY -- WE MAY BECOME INVOLVED IN INTELLECTUAL
PROPERTY LITIGATION.
We currently hold 68 U.S. patents, and we also have 102 pending patents and
are preparing an additional 57 patent applications for filing. In connection
with our proposed acquisition of K1, K2 and K3 from ASI, we plan to acquire all
of ASI's patents, patent applications and other intellectual property rights
related to its packaging and test business. We expect to continue to file patent
applications when appropriate to protect our proprietary technologies, but we
cannot assure you that we will receive patents from pending or future
applications. In addition, any patents we obtain may be challenged, invalidated
or circumvented and may not provide meaningful protection or other commercial
advantage to us.
We may need to enforce our patents or other intellectual property rights or
to defend our company against claimed infringement of the rights of others
through litigation, which could result in substantial cost and diversion of our
resources. If we fail to obtain necessary licenses or if we face litigation
relating to patent infringement or other intellectual property matters, our
business could suffer.
Although we are not currently a party to any material litigation, the
semiconductor industry is characterized by frequent claims regarding patent and
other intellectual property rights. If any third party makes a valid claim
against our company or ASI, our company or ASI could be required to: (1)
discontinue the use of certain processes, (2) cease the manufacture, use, import
and sale of infringing products, (3) pay substantial damages, (4) develop
non-infringing technologies or (5) acquire licenses to the technology we had
allegedly infringed. Our business, financial condition and results of operations
could be materially and adversely affected by any of these negative
developments.
In addition, Texas Instruments has granted ASI very limited licenses under
the Texas Instruments Technology Agreements, including a license under Texas
Instruments' trade secret rights to use Texas Instruments' technology in
connection with ASI's provision of wafer fabrication services. However, Texas
Instruments has not granted ASI a license under Texas Instruments' patents to
manufacture semiconductor wafers for third parties. Furthermore, Texas
Instruments has reserved the right to bring infringement claims against
customers of our company or customers of ASI with respect to semiconductor
wafers purchased from our company or ASI. Such customers and others could in
turn subject our company or ASI to litigation in connection with the sale of
semiconductor wafers produced by ASI.
CONTINUED CONTROL BY EXISTING STOCKHOLDERS -- MR. JAMES KIM AND MEMBERS OF HIS
FAMILY CAN DETERMINE THE OUTCOME OF ALL MATTERS REQUIRING STOCKHOLDER APPROVAL.
As of February 29, 2000, Mr. James Kim and members of his family
beneficially owned approximately 59% of our outstanding common stock. Mr. James
Kim's family, acting together, will effectively control all
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matters submitted for approval by our stockholders. These matters include the
approval of the acquisition of K1, K2 and K3 and could include:
- the election of all of the members of our Board of Directors;
- proxy contests;
- approvals of transactions between our company and ASI or other entities
in which Mr. James Kim and members of his family have an interest,
including transactions which may involve a conflict of interest;
- mergers involving our company;
- tender offers; and
- open market purchase programs or other purchases of our common stock.
STOCK PRICE VOLATILITY
The trading price of our common stock has been and is likely to continue to
be highly volatile and could be subject to wide fluctuations in response to
factors such as:
- actual or anticipated quarter-to-quarter variations in operating results;
- announcements of technological innovations or new products and services
by Amkor or our competitors;
- general conditions in the semiconductor industry;
- changes in earnings estimates or recommendations by analysts;
- developments affecting ASI;
- or other events or factors, many of which are out of our control
In addition, the stock market in general, and the Nasdaq National Market
and the markets for technology companies in particular, have experienced extreme
price and volume fluctuations. This volatility has affected the market prices of
securities of companies like ours for that have often been unrelated or
disproportionate to the operating performance. These broad market fluctuations
may adversely affect the market price of our common stock.
OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD DELAY OR PREVENT A TAKEOVER.
Certain provisions of our Certificate of Incorporation, Bylaws and Delaware
law could make it more difficult for a third party to acquire us, even if that
change of control would be beneficial to our stockholders. For example, our
Board of Directors has the authority to issue up to 10,000,000 shares of
Preferred Stock with rights, preferences and privileges that could be superior
to Common Stock; this would make it more difficult for a potential acquiror to
obtain a majority of our voting stock. We are also subject to Section 203 of the
Delaware General Corporation Law, which prohibits us from entering into certain
"business combinations" with an "interested stockholder" for three years after
the transaction in which that person becomes an interested stockholder unless
the transaction were to be approved in a prescribed manner. This too could delay
or prevent a change of control that could be beneficial to our stockholders. In
addition, our Certificate of Incorporation does not provide for cumulative
voting. This provision, and other provisions of the Certificate of
Incorporation, our Bylaws and Delaware corporate law, may have the effect of
deterring hostile takeovers or delaying or preventing changes in control or our
management, including transactions in which stockholders might otherwise receive
a premium for their shares over then current market prices.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of information regarding quantitative and qualitative
disclosures about market risk, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Market Risk Sensitivity" in
Item 7 of this annual report.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
We present the information required by Item 8 of Form 10-K here in the
following order:
<TABLE>
<S> <C>
Report of Independent Public Accountants (Arthur Andersen
LLP)...................................................... 44
Consolidated Statements of Income -- Years ended December
31, 1997, 1998 and 1999................................... 45
Consolidated Balance Sheets -- December 31, 1998 and 1999... 46
Consolidated Statements of Stockholders' Equity -- Years
ended December 31, 1997, 1998 and 1999.................... 47
Consolidated Statements of Cash Flows -- Years ended
December 31, 1997, 1998 and 1999.......................... 48
Notes to Consolidated Financial Statements.................. 49
Report of Independent Accountants (Samil Accounting
Corporation) with respect to the 1999 Financial Statements
of Amkor Technology Korea, Inc. .......................... 76
Report of Independent Accountants (Samil Accounting
Corporation) with respect to the Financial Statement of
Anam Semiconductor, Inc. as of and for the years ended
December 31, 1999, 1998 and 1997.......................... 77
Independent Auditor's Report (Ahn Kwon & Co.) with respect
to the Financial Statements of Anam Engineering &
Construction Co., Ltd. as of and for the years ended
December 31, 1999, 1998 and 1997.......................... 79
Independent Auditor's Report (Siana Carr & O'Connor, LLP)
with respect to the Financial Statements of Anam USA, Inc.
as of December 31, 1999 and 1998 and for the three years
ended December 31, 1999................................... 80
Report of Independent Public Accountants (Arthur Anderson
LLP) with respect to Schedule II -- Valuation and
Qualifying Accounts....................................... 87
Schedule II -- Valuation and Qualifying Accounts............ 88
</TABLE>
43
<PAGE> 45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amkor Technology, Inc.:
We have audited the accompanying consolidated balance sheets of Amkor
Technology, Inc. and its subsidiaries as of December 31, 1998 and 1999, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1999. 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 did not audit the financial statements of Anam Semiconductor,
Inc. ("ASI") (See Note 3), the investment in which is reflected in the
accompanying 1997 and 1999 financial statements using the equity method of
accounting. The investment in ASI represents 2% of total assets at December 31,
1997 and 1999 and the equity in its net loss represents 29% and 2% of net income
before the equity in loss of investees in 1997 and 1999, respectively. In
addition, we did not audit the financial statements of Amkor Technology Korea,
Inc., ("ATK"), a wholly-owned subsidiary, which statements reflect total assets
and total operating income of 35% and 6%, respectively, of the related
consolidated totals in 1999. The statements of ASI and ATK were audited by other
auditors whose reports have been furnished to us and our opinion, insofar as it
relates to amounts included for ASI and ATK, is based solely on the reports of
the other auditors.
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, based upon our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Amkor Technology, Inc. and its
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
February 3, 2000
(except as discussed in Note 21 with respect to the Company's proposed
acquisition of ASI's packaging and test facilities and its investment in ASI, as
to which the date is February 28, 2000, and the related proposed financing, as
to which the date is March 16, 2000)
44
<PAGE> 46
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
NET REVENUES........................................... $1,455,761 $1,567,983 $1,909,972
COST OF REVENUES -- including purchases from ASI (Note
3)................................................... 1,242,669 1,307,150 1,577,226
---------- ---------- ----------
GROSS PROFIT........................................... 213,092 260,833 332,746
---------- ---------- ----------
OPERATING EXPENSES:
Selling, general and administrative.................. 103,726 119,846 145,233
Research and development............................. 8,525 8,251 11,436
---------- ---------- ----------
Total operating expenses.......................... 112,251 128,097 156,669
---------- ---------- ----------
OPERATING INCOME....................................... 100,841 132,736 176,077
---------- ---------- ----------
OTHER (INCOME) EXPENSE:
Interest expense, net................................ 32,241 18,005 45,364
Foreign currency (gain) loss......................... (835) 4,493 308
Other expense, net................................... 8,429 9,503 25,117
---------- ---------- ----------
Total other expense............................... 39,835 32,001 70,789
---------- ---------- ----------
INCOME BEFORE INCOME TAXES, EQUITY IN LOSS OF INVESTEES
AND MINORITY INTEREST................................ 61,006 100,735 105,288
PROVISION FOR INCOME TAXES............................. 7,078 24,716 26,600
EQUITY IN LOSS OF INVESTEES............................ (17,291) -- (1,969)
MINORITY INTEREST...................................... (6,644) 559 --
---------- ---------- ----------
NET INCOME............................................. $ 43,281 $ 75,460 $ 76,719
========== ========== ==========
PRO FORMA DATA (UNAUDITED):
Historical income before income taxes, equity in loss
of investees and minority interest................ $ 61,006 $ 100,735
Pro forma provision for income taxes................. 10,691 29,216
---------- ----------
Pro forma income before equity in loss of investees
and minority interest............................. 50,315 71,519
Historical equity in loss of investees............... (17,291) --
Historical minority interest......................... (6,644) 559
---------- ----------
Pro forma net income................................. $ 39,668 $ 70,960
========== ==========
PER SHARE DATA:
Basic net income per common share.................... $ .52 $ .71 $ .64
========== ========== ==========
Diluted net income per common share.................. $ .52 $ .70 $ .63
========== ========== ==========
Basic pro forma net income per common share
(unaudited)....................................... $ .48 $ .67
========== ==========
Diluted pro forma net income per common share
(unaudited)....................................... $ .48 $ .66
========== ==========
Shares used in computing basic (proforma for 1997
and 1998) net income per common share............. 82,610 106,221 119,341
========== ========== ==========
Shares used in computing diluted (proforma for 1997
and 1998) net income per common share............. 82,610 116,596 135,067
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
45
<PAGE> 47
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 227,587 $ 98,045
Short-term investments.................................... 1,000 136,595
Accounts receivable --
Trade, net of allowance for doubtful accounts of $5,952
and $2,443............................................ 109,243 157,281
Due from affiliates.................................... 25,990 6,278
Other.................................................. 5,900 6,469
Inventories............................................... 85,628 91,465
Other current assets...................................... 16,687 11,117
---------- ----------
Total current assets.............................. 472,035 507,250
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, net.......................... 416,111 859,768
---------- ----------
INVESTMENTS................................................. 25,476 63,672
---------- ----------
OTHER ASSETS:
Due from affiliates....................................... 28,885 27,858
Intangible assets......................................... 26,158 233,532
Other..................................................... 34,932 63,009
89,975 324,399
---------- ----------
Total assets...................................... $1,003,597 $1,755,089
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft............................................ $ 13,429 $ 16,209
Short-term borrowings and current portion of long-term
debt................................................... 38,657 6,465
Trade accounts payable.................................... 96,948 122,147
Due to affiliates......................................... 15,722 37,913
Accrued expenses.......................................... 77,004 88,577
Accrued income taxes...................................... 38,892 41,587
---------- ----------
Total current liabilities......................... 280,652 312,898
---------- ----------
LONG-TERM DEBT.............................................. 14,846 9,021
---------- ----------
SENIOR AND SENIOR SUBORDINATED NOTES........................ -- 625,000
---------- ----------
CONVERTIBLE SUBORDINATED NOTES.............................. 207,000 53,435
---------- ----------
OTHER NONCURRENT LIABILITIES................................ 10,738 16,994
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 17)
STOCKHOLDERS' EQUITY:
Common stock.............................................. 118 131
---------- ----------
Additional paid-in capital................................ 381,061 551,964
---------- ----------
Retained earnings......................................... 109,738 189,733
---------- ----------
Receivable from stockholder (Note 12)..................... -- (3,276)
---------- ----------
Accumulated Other Comprehensive Income:
Unrealized losses on investments....................... (556) (811)
---------- ----------
Total stockholders' equity........................ 490,361 737,741
---------- ----------
Total liabilities and stockholders' equity........ $1,003,597 $1,755,089
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
46
<PAGE> 48
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RECEIVABLE OTHER
COMMON PAID-IN RETAINED FROM COMPREHENSIVE COMPREHENSIVE
STOCK CAPITAL EARNINGS STOCKHOLDER INCOME TOTAL INCOME
------ ---------- -------- ----------- ------------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997............ $ 46 $ 16,770 $ 32,340 $ $(3,344) $ 45,812
Net income.......................... -- -- 43,281 -- -- 43,281 $43,281
Unrealized gains on investments..... -- -- -- -- 1,586 1,586 1,586
Currency translation adjustments.... -- -- -- -- 1,095 1,095 1,095
-------
Comprehensive income (Note 12)...... 45,962
-------
Distributions....................... -- -- (5,000) -- -- (5,000)
Change in division equity account... -- 4,101 -- -- -- 4,101
---- -------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1997.......... 46 20,871 70,621 -- (663) 90,875
Net income.......................... -- -- 75,460 -- -- 75,460 75,460
Unrealized losses on investments.... -- -- -- -- (556) (556) (556)
Currency translation adjustments,
reclassification for loss included
in net income..................... -- -- -- -- 663 663 663
-------
Comprehensive income (Note 12)...... -- -- -- -- -- -- 75,567
-------
Distributions....................... -- -- (33,100) -- -- (33,100)
Issuance of 35,250,000 common shares
in public offering, net........... 35 360,228 -- -- -- 360,263
Acquisition of AKI.................. (1) -- (3,243) -- -- (3,244)
Change in par value of stock in
connection with Company
Reorganization.................... 38 (38) -- -- -- --
---- -------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1998.......... 118 381,061 109,738 -- (556) 490,361
Net income.......................... -- -- 76,719 -- -- 76,719 76,719
Unrealized (losses) on investments,
net of tax........................ -- -- -- -- (255) (255) (255)
-------
Comprehensive income (Note 12)...... $76,464
-------
Issuance of stock through employee
stock purchase plan and stock
options........................... -- 3,875 -- -- -- 3,875
Receivable from Stockholder (Note
12)............................... -- -- 3,276 (3,276) -- --
Debt conversion (Note 9)............ 13 167,028 -- -- -- 167,041
---- -------- -------- ------- ------- --------
BALANCE AT DECEMBER 31, 1999.......... $131 $551,964 $189,733 $(3,276) $ (811) $737,741
==== ======== ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
47
<PAGE> 49
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------------------
1997 1998 1999
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 43,281 $ 75,460 $ 76,719
Adjustments to reconcile net income to net cash provided
by operating activities --
Depreciation and amortization........................... 81,864 118,022 176,866
Amortization of deferred debt issuance costs............ -- 1,217 3,466
Debt conversion expense................................. -- -- 17,381
Provision for accounts receivable....................... 3,490 1,719 (3,500)
Provision for excess and obsolete inventory............. 12,659 7,200 6,573
Deferred income taxes................................... (11,715) 1,250 9,418
Equity in loss of investees............................. 16,779 -- 4,591
(Gain) loss on sale of fixed assets and investments..... (239) 2,500 1,805
Minority interest....................................... (6,644) 559 --
Changes in assets and liabilities excluding effects of
acquisitions --
Accounts receivable..................................... (19,802) 4,742 (44,526)
Proceeds from sale/(repurchase of) accounts
receivable............................................ 90,700 (16,500) (2,700)
Other receivables....................................... 1,547 (1,021) (555)
Inventories............................................. (26,609) 23,042 (12,063)
Due to/from affiliates, net............................. (19,138) (11,117) 35,403
Other current assets.................................... (7,239) 6,709 1,601
Other non-current assets................................ 3,322 (8,061) (15,088)
Accounts payable........................................ 60,939 (12,489) 27,474
Accrued expenses........................................ 13,817 33,489 13,117
Accrued income taxes.................................... 14,130 11,924 2,695
Other long-term liabilities............................. (1,089) (685) (5,380)
----------- --------- ---------
Net cash provided by operating activities............. 250,053 237,960 293,297
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................ (178,990) (107,889) (242,390)
Acquisition of K4......................................... -- -- (575,000)
Acquisition of minority interest in AAP................... -- (33,750) --
Acquisition of AKI........................................ -- (3,244) --
Acquisition of AAPMC...................................... -- -- (2,109)
Sale of property, plant and equipment..................... 1,413 121 --
Proceeds from the sale/(purchase) of investments.......... (15,187) (18,550) (135,595)
Investment in ASI......................................... -- -- (41,638)
----------- --------- ---------
Net cash used in investing activities................. (192,764) (163,312) (996,732)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank overdrafts and short-term borrowings... 52,393 (173,565) (24,264)
Net proceeds from issuance of 35,250,000 common shares in
public offering......................................... -- 360,263 --
Proceeds from issuance of stock through employee stock
purchase plan and stock options......................... -- -- 3,875
Proceeds from issuance of Anam USA, Inc. debt............. 1,408,086 522,116 --
Payments of Anam USA, Inc. debt........................... (1,443,464) (658,029) --
Net proceeds from issuance of long-term debt.............. 11,389 203,170 603,569
Payments of long-term debt................................ (43,541) (158,833) (9,287)
Distributions to stockholders............................. (5,000) (33,100) --
Change in division equity account......................... 4,101 -- --
----------- --------- ---------
Net cash provided by (used in) financing activities... (16,036) 62,022 573,893
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 41,253 136,670 (129,542)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 49,664 90,917 227,587
----------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 90,917 $ 227,587 $ 98,045
=========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................ $ 37,070 $ 27,730 $ 45,500
Income taxes............................................ $ 3,022 $ 12,908 $ 13,734
</TABLE>
The accompanying notes are an integral part of these statements.
48
<PAGE> 50
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND DOLLAR PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Amkor
Technology, Inc. and its subsidiaries (the "Company"). All of the Company's
subsidiaries are wholly owned except for a small number of shares of each of the
Company's Philippine subsidiaries which are required to be owned by directors of
these companies pursuant to Philippine law.
The consolidated 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, as well as the Company's investment in Anam Semiconductor Inc.
("ASI") (see Note 7), are included in the consolidated financial statements
using the equity method of accounting.
Prior to the Reorganization (as defined below), the Company's financial
statements were presented on a combined basis as a result of common ownership
and business operations of all the Amkor Companies (as defined below), including
AK Industries, Inc. ("AKI"). The Reorganization was treated similar to a pooling
of interests as it represented an exchange of equity interests among companies
under common control, except for the acquisition of AKI which was accounted for
as a purchase transaction. The purchase price for the AKI stock, which
represented the fair value of those shares, approximated the book value of AKI.
Reorganization
Prior to the Reorganization (as defined herein) the combined financial
statements of Amkor Technology, Inc. ("ATI") and its subsidiaries and AKI and
its subsidiary included the accounts of the following based on the ownership
structure prior to the Reorganization (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 (a U.S. Corporation)
and Amkor Wafer Fabrication Services SARL (a French Limited Company)
("AWFS");
- 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 was owned
60% by TLL and 40% by ASI (which changed its name in 1998 from Anam
Industrial Co., Ltd.) (-- see Note 3), 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);
- The semiconductor packaging and test business unit of Chamterry
Enterprises, Ltd. ("Chamterry"). During 1997 Chamterry transferred its
customers to AEI and CIL and ceased operations of its semiconductor and
test business unit; and
- AKI (a U.S. Corporation) and its wholly-owned subsidiary, Amkor-Anam,
Inc. (a U.S. Corporation).
Prior to the Reorganization, all of the Amkor Companies were 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
was 40% owned by ASI and one third of AEI and all of AKI which were owned by
trusts established for the benefit of other members of Mr. James Kim's family
("Kim Family
49
<PAGE> 51
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Trusts"). The Amkor Companies were 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 was merged into
ATI. Amkor International Holdings ("AIH"), a Cayman Islands holding company,
became a wholly owned subsidiary of ATI. AIH was formed to hold the following
entities: First Amkor Caymans, Inc. ("FACI"), which was formed to hold AAAP, AAP
and its 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 was based
upon the relative amounts of stockholders' equity at December 31, 1997. On April
14, 1998, Mr. and Mrs. James Kim and the Kim Family Trusts received two-thirds
(9,746,760 shares) and one-third (4,873,380 shares) of the ATI common stock then
outstanding, respectively. On April 29, 1998, ATI issued 67,989,851 shares of
common stock, representing approximately 82% of its shares immediately after the
Reorganization, in exchange for all of the outstanding shares of AIH and its
subsidiaries. Of such shares, 27,528,234 shares and 36,376,617 shares were
gifted to Mr. and Mrs. James Kim and the Kim Family Trusts, respectively, such
that Mr. and Mrs. James Kim and the Kim Family Trusts owned 45.1% and 49.9%,
respectively, of the ATI common shares outstanding after the Reorganization.
Following such transactions the Founding Stockholders beneficially owned a
majority of the outstanding shares of ATI common stock. In addition, ATI
acquired all of the stock of AKI from the Kim Family Trusts for approximately
$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.
Nature of Operations
The Company provides semiconductor packaging and test services as well as
wafer fabrication services to semiconductor manufacturing and semiconductor
design companies located in strategic markets throughout the world. Such
services are provided by the Company and by ASI under a long-standing
arrangement (see Note 3). Approximately 68%, 67%, and 53% of the Company's
packaging and test revenues in 1997, 1998 and 1999, respectively, relate to the
packaging and test services provided by ASI. In addition, 100% of the Company's
wafer fabrication revenues relate to the wafer fabrication services provided by
ASI under a long-term agreement (see Note 3).
Concentrations of Credit Risk
Financial instruments, for which the Company is subject to credit risk,
consist principally of accounts receivable, cash and cash equivalents and
short-term investments. With respect to accounts receivable, the Company has
mitigated its credit risk by selling primarily to well established companies,
performing ongoing credit evaluations and making frequent contact with
customers.
During 1999, the Company has invested in high grade municipal bonds,
commercial loans and preferred stocks. These investments are classified in the
consolidated balance sheets either as cash and cash equivalents for securities
that have an underlying maturity date of less than three months, or as
short-term investments for securities that have an underlying maturity date in
excess of three months and are being held for trading purposes ("Trading
Securities"). As of December 31, 1999, the Company held approximately $137,000
in Trading Securities. These investments are carried at fair market value based
on market quotes and recent offerings of similar securities.
The Company has mitigated its credit risk with respect to cash and cash
equivalents, as well as Trading Securities, through diversification of its
portfolio of holdings into various money market accounts, U.S. treasury bonds,
federal mortgage backed securities, high grade municipal bonds, commercial loans
and preferred stocks. At December 31, 1998 and 1999, the Company maintained
approximately $35,000 and
50
<PAGE> 52
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$183,000, respectively, in high grade municipal bonds, commercial loans and
preferred stocks, with the largest individual investment balance of
approximately $10,000 and $12,000, respectively.
In addition, at December 31, 1998 and 1999, the Company maintained
approximately $29,000 and $11,000, respectively, in deposits and certificates of
deposits at foreign owned banks and approximately $4,000 and $13,000
respectively, in deposits at U.S. banks which exceeded federally insured limits,
of which, approximately $5,000 was maintained in one bank at December 31, 1999.
Significant Customers
The Company has a number of major customers in North America, Asia and
Europe. The Company's largest customer, Texas Instruments, Inc. ("TI"),
accounted for 16.5% of net revenues in 1999. Revenues for services provided to
TI prior to 1999 were less than 10%. In addition, the Company's second largest
customer, Intel Corporation, accounted for approximately 23.4%, 20.6% and 14.1%
of net revenues in 1997, 1998 and 1999, respectively. The Company's five largest
customers collectively accounted for 40.1%, 41.6%, and 43.6% of net revenues in
1997, 1998, and 1999, 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 historical results 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, dependence on the Company's relationship
with ASI (see Note 3), 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 the results of ASI
on an equity method of accounting basis.
Foreign Currency Translation
Substantially all of the Company's foreign subsidiaries and investee
companies 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 remeasurement and
from transactions denominated in foreign currencies are included in other
(income) expense. The cumulative translation adjustment reflected in accumulated
other comprehensive income in stockholders' equity in the consolidated balance
sheets related primarily to investments in unconsolidated companies which used
the local currency as the functional currency (see Note 7).
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, 1998 and 1999, trade accounts receivable represent the
Company's interest in receivables in excess of amounts purchased by banks under
an accounts receivable sale agreement (see
51
<PAGE> 53
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Note 4). Of the total net trade accounts receivable amount at December 31, 1998
and 1999, $22,488 and $36,880, respectively, relates to the trade accounts
receivable of CIL which were not sold under the accounts receivable sale
agreement.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally by using a moving average method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is
calculated by the straight-line method over the estimated useful lives of
depreciable assets. Accelerated methods are used for tax purposes. Depreciable
lives follow:
<TABLE>
<S> <C>
Buildings 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 $81,159, $116,424 and $158,938 for 1997, 1998
and 1999, respectively.
Intangible Assets
Intangible assets consist principally of goodwill. The Company recorded
goodwill representing the excess of cost over the recorded minority interest in
Amkor/Anam Pilipinas, Inc., one of its Philippine subsidiaries ("AAP"). In
addition, the Company recorded goodwill representing the excess of the cost over
the fair market value of the net assets acquired of ASI's packaging and test
business located in Kwangju, Korea ("K4") (See Note 3) and the excess of the
cost over the fair market value of the net assets acquired of Anam/Amkor
Precision Machine Company, Inc. ("AAPMC"), an affiliate of ASI. (See Note 18)
Goodwill is amortized on a straight-line basis over a period of ten years
which is the estimated future period to be benefited by the acquisitions. The
unamortized balance of goodwill at December 31, 1998 and 1999 was $24,596 and
$232,350, respectively.
Other Noncurrent Assets
Other noncurrent assets consist principally of deferred debt issuance
costs, security deposits, the cash surrender value of life insurance policies,
deferred income taxes and tax credits.
In connection with the $207,000 offering of Convertible Notes (see Note 2),
and the $625,000 offering of Senior and Senior Subordinated Notes (See Note 3)
the Company incurred approximately $30,500 of debt issuance costs which have
been deferred and are amortized and reflected as interest expense over the life
of the Notes.
Other Noncurrent Liabilities
Other noncurrent liabilities consist primarily of pension obligations and
noncurrent income taxes payable.
52
<PAGE> 54
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Compensation Plans
The Company accounts for its stock-based compensation plans in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, compensation cost for stock based plans is generally
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock. Disclosures required by Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock Based Compensation," are presented in
Note 14.
Income Taxes
The Company accounts for income taxes following the provisions of SFAS No.
109, "Accounting for Income Taxes," which requires the use of the liability
method. If it is more likely than not that some portion or all of a deferred tax
asset will not be realized, a valuation allowance is provided.
The Company reports certain income and expense items for income tax
purposes on a basis different from that reflected in the accompanying
consolidated financial statements. The principal differences relate to the
timing of the recognition of accrued expenses which are not deductible for
federal income tax purposes until paid, the use of accelerated methods of
depreciation for income tax purposes and unrecognized foreign exchange gains and
losses.
AEI, which was merged into ATI just prior to the Initial Public Offering
(See Note 2), 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 did not recognize U.S. federal corporate income taxes. Instead, the
stockholders of AEI were taxed on their proportionate share of AEI's taxable
income. Accordingly, no provision for U.S. federal income taxes was recorded for
AEI. The accompanying consolidated statements of income include an unaudited pro
forma adjustment to reflect income taxes which would have been recorded if AEI
had not been an S Corporation, based on the tax laws in effect during the
respective periods.
Just prior to the Initial Public Offering (see Note 2), AEI terminated its
S Corporation status at which point the profits of AEI became subject to federal
and state income taxes at the corporate level.
Revenue Recognition and Risk of Loss
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. Accordingly, the cost of the customer-supplied materials is not included
in the consolidated financial statements. Risk of loss for the Company's
packaging costs passes upon completion of the packaging process. The Company
generally records revenues upon shipment of packaged semiconductors to its
customers. The Company records wafer fabrication services revenues upon shipment
of completed wafers to its customers.
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.
53
<PAGE> 55
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded on the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000. Early adoption at the beginning of any quarter
after issuance is permitted, but cannot be applied retroactively. The provisions
of the statement must be applied to derivative instruments and certain
derivative instruments embedded in hybrid contracts that were issued, acquired,
or substantively modified after December 31, 1997, or December 31, 1998, as
selected at the transition date.
The Company believes that the impact of adopting SFAS No. 133 on its
financial statements will not be material and has not determined the timing of
adoption.
Reclassifications
Certain previously reported amounts have been reclassified to conform with
the current presentation.
2. INITIAL PUBLIC OFFERING
On May 6, 1998, the Company completed its Initial Public Offering of
30,000,000 shares of its common stock at a price to the public of $11.00 per
share and $180,000 aggregate principal amount of Convertible Notes ("Initial
Public Offering"). Also, on May 8, 1998, the Company sold 5,250,000 additional
shares of its common stock and $27,000 additional principal amounts of
Convertible Notes in conjunction with the underwriters' over-allotment options.
The net proceeds were approximately $558,121, after deducting the underwriter
discounts and offering expenses. The convertible notes 1) are convertible into
the Company's common stock at $13.50 per share; 2) are callable in certain
circumstances after three years; 3) are unsecured and subordinate to senior
debt; 4) carry a coupon rate of 5 3/4%; and 5) mature at the end of five years.
Approximately $264,000 of the proceeds were used to reduce short-term and
long-term borrowings. Approximately $86,000 of the proceeds were used to reduce
amounts due to Anam USA, Inc., ASI's wholly owned financing subsidiary ("AUSA").
Approximately $34,000 of the proceeds was used to purchase ASI's 40% interest in
AAP (see Note 18.) In connection with the Offerings, one existing stockholder
sold approximately 5,000,000 of his shares.
3. RELATIONSHIP WITH ANAM SEMICONDUCTOR INC.
In December 1999 the Company announced that it was in discussions with ASI
to purchase it's three remaining packaging and test factories, known as K1, K2
and K3 combined with an additional equity investment in ASI. In February 2000,
the Company announced that it had reached an agreement with ASI to purchase K1,
K2 and K3 for $950,000 and committed to make an additional equity investment in
ASI of approximately $459,000. The commitment to make this equity investment
supersedes the existing commitment to ASI to purchase $150,000 in equity,
previously agreed to as part of the terms of ASI's Workout (as defined below)
excluding the $41,600 already invested in October 1999. The Company expects to
complete the purchase of K1, K2 and K3 and investment in ASI during the second
quarter of 2000. To complete the transaction with ASI, the Company intends to
use existing cash and raise approximately $750,000 in secured bank debt,
$410,000 in private equity financing and $225,000 in convertible subordinated
notes. If we make the additional $459,000 investment in the common stock of ASI
and the Creditor banks convert (Won)150 billion
54
<PAGE> 56
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(approximately $132,000) of debt to common stock of ASI, the Company's and the
Creditor banks' ownership in ASI voting stock will be approximately 43% and 34%,
respectively.
If the transaction with ASI is completed as described above, ASI will
emerge from its Workout with its Korean Creditor Banks. ASI has indicated that
they expect the net proceeds from the sale of K1, K2 and K3 and our additional
equity investment to be used to repay a substantial amount of debt, provide
funding to expand the capacity of their wafer foundry and provide general
working capital.
In October 1999, the Company acquired 10,000,000 shares of ASI common stock
for approximately $41,600 ((Won)50,000,000,000) representing the Company's first
installment of its commitment to invest in ASI over a four year period in
connection with ASI's Workout. The remaining portion of the obligation will be
canceled under the terms of the agreement to purchase K1, K2 and K3. The Company
owns 18% of ASI's common stock and members of the Kim family own 11%. As a
result of this ownership, and the relationship with ASI, the Company follows the
equity method of accounting for its investment in ASI.
Because the Company and ASI have reached agreement on terms to purchase K1,
K2 and K3, ASI's consolidated financial statements have been prepared to reflect
the packaging and test operations of ASI as discontinued operations. If the
Company is successful in acquiring K1, K2 and K3 and making our planned
additional equity investment in ASI, ASI will exit from the Workout program.
The following summary of consolidated financial information pertaining to
ASI for 1997, 1998 and 1999, reflecting the packaging and test operations of ASI
as discontinued operations, was derived from the consolidated financial
statements of ASI.
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
SUMMARY INCOME STATEMENT INFORMATION:
Sales.......................................... $ 406,937 $ 221,098 $ 285,925
Income (loss)from continuing operations........ $ (102,039) $ (957,165) $ (169,759)
Net income (loss).............................. $ 41,430 $ (847,533) $ 109,865
SUMMARY BALANCE SHEET INFORMATION:
Total assets................................... $2,922,114 $1,878,950 $1,487,469
Total liabilities.............................. $2,662,612 $2,477,323 $1,785,219
</TABLE>
On May 17, 1999, the Company purchased certain assets and liabilities of
ASI's packaging and test business located in Kwangju, Korea ("K4"). The purchase
price for K4 was $575,000 in cash plus the assumption of approximately $7,000 of
employee benefit liabilities. The acquisition was accounted for as a purchase.
Accordingly, the results of K4 have been included in the accompanying
consolidated financial statements since the date of acquisition. The purchase
price of $582,000 was allocated to the fair value of the assets acquired,
principally property plant and equipment, of approximately $358,000 and
liabilities assumed of approximately $7,000. Goodwill resulting from the
transaction of approximately $223,000 will be amortized on a straight line basis
over a 10 year period, and is included in intangible assets in the Company's
consolidated balance sheets at December 31, 1999.
This acquisition was financed through a private placement completed by the
Company in May 1999 which raised approximately $603,600, net of debt issuance
costs of $21,400, through the issuance of $425,000 of senior notes and $200,000
in senior subordinated notes. The senior notes mature in May 2006 and have a
coupon rate of 9.25%. The senior subordinated notes mature in May 2009 and have
a coupon rate of 10.50%. The Company is required to pay interest semi-annually
in May and November for all of the notes. Subsequent to the purchase of K4 and
payment of related offering costs, the Company had approximately $29,714 of
proceeds remaining for working capital. The debt issuance costs have been
deferred and are included, net of amortization, in other non-current assets in
the Company's consolidated balance sheet at December 31, 1999. These deferred
costs are amortized over the life of the related notes.
55
<PAGE> 57
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the acquisition of K4, the Company has entered into a
transition services agreement with ASI. Pursuant to this agreement, ASI will
continue to provide many of the same non-manufacturing related services to K4
that it provided prior to the acquisition, including transportation and
shipping, human resources, and accounting and general administrative services.
The Company has incurred approximately $5,800 of costs during the year ended
December 31, 1999 for the services provided under this agreement. In addition,
the Company has also entered into an intellectual property license agreement
with ASI that was effective upon the closing of the acquisition.
To encourage the investment in K4, the Korean government has granted a tax
holiday on K4's operations. The tax holiday expires ten years after the earlier
of the first year K4 has taxable income or five years.
The following table displays unaudited pro forma consolidated results of
operations as though the acquisition of K4 had occurred as of the beginning of
the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Net revenues................................................ $1,577,594 $1,913,201
Net income.................................................. $ 18,119 $ 62,388
Pro forma net income........................................ $ 13,619
Basic net income per common share........................... $ .17 $ .52
Diluted net income per common share......................... $ .17 $ .52
Basic pro forma net income per common share................. $ .13
Diluted pro forma net income per common share............... $ .13
</TABLE>
The pro forma results include adjustments for goodwill amortization,
depreciation, interest expense on debt issued to finance the purchase of K4, and
income taxes. The pro forma results are not necessarily indicative of the
results the Company would actually have achieved if the acquisition had been
completed as of the beginning of each of the periods presented, nor are they
necessarily indicative of future consolidated results.
In 1997, 1998, and 1999, approximately 68%, 67% and 53%, respectively, of
the Company's packaging and test revenues as well as 100% of the Company's wafer
fabrication revenues in 1998 and 1999 (see Note 1) were derived from services
performed for the Company by ASI. By the terms of a long-standing agreement, the
Company has been responsible for marketing and selling ASI's semiconductor
packaging and test services, except to customers in Korea and Japan to whom ASI
has historically sold such services directly. During 1998, the Company became
responsible for marketing and selling ASI's semiconductor packaging and test
services to the majority of ASI's customers in Japan. The Company has worked
closely with ASI in developing new technologies and products. Effective January
1, 1998, the Company entered into five-year supply agreements with ASI giving
the Company the first right to market and sell substantially all of ASI's
packaging and test services and the exclusive right to market and sell all of
the wafer output of ASI's new wafer foundry, both of which have negotiable
pricing terms. These agreements are cancellable by either party upon five years
prior written notice at any time after the fifth anniversary of the effective
date. The Company's business, financial condition and operating results have
been and will continue to be significantly dependent on the ability of ASI to
effectively provide the contracted services on a cost-efficient and timely
basis. The termination of the Company's relationship with ASI for any reason, or
any material adverse change in ASI'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.
56
<PAGE> 58
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1999, ASI was contingently liable under guarantees in
respect of debt of its non-consolidated subsidiaries and affiliates in the
aggregate amount of approximately $322 million.
Prior to the Initial Public Offering, (see Note 2), the Company 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
ASI. The Company currently does not depend on such financing arrangements.
ASI's business has been severely affected by the economic crisis in Korea.
ASI has traditionally operated with a significant amount of debt relative to its
equity and has contractually guaranteed the debt obligations of certain
affiliates and subsidiaries. These significant uncertainties may affect ASI's
future operations and its ability to maintain or refinance certain debt
obligations as they mature. ASI's plans to address these matters, which are
disclosed in ASI's financial statements, include entering into the Korean
financial restructuring program known as "Workout" in October 1998.
The Workout program is the result of an accord among Korean financial
institutions to assist in the restructuring of Korean business enterprises. This
process involves negotiation between the related banks and ASI, and does not
involve the judicial system. The Workout process also does not impact debts
outstanding with trade creditors, including balances due to/or from the Company.
ASI's operations have continued uninterrupted during the process, and we expect
ASI's operations to continue uninterrupted for the duration of the process.
The Workout as approved by the creditor banks in February 1999 contains the
following relief provisions for ASI:
- The creditor banks will allow ASI to defer repayment on principal of
ordinary loans until December 31, 2003. After December 31, 2003, bank
loans with repayment terms will be payable through readjustment of
repayment schedules on the basis of the repayment period as of October
24, 1998. For loans without repayment terms the schedule to repay
principal amounts will be determined by ASI and the creditor banks at the
end of such period.
- The creditor banks will allow ASI to defer repayment of principal under
capital leases until December 31, 1999, with payments of principal to
resume under a 7 year installment plan thereafter.
- The creditor banks will allow ASI to roll over the maturity of its
Won-denominated debentures held by the creditor banks for an additional
three year term after currently scheduled maturity dates.
- The creditor banks will allow ASI to make no interest payments on
ordinary loans until December 31, 1999. The creditor banks will add
accrued interest to the principal amounts of these loans every three
months.
- The creditor banks will reduce interest rates on ASI's remaining
outstanding Won-denominated ordinary bank loans to 10% or the prime rate
of each creditor bank, whichever is greater. This would reduce ASI's
weighted average interest rate from 12.9% before the Workout to 10.5%
after the Workout.
- The creditor banks will give ASI a five year grace period until December
31, 2003 against enforcement of guarantees made by ASI for liabilities of
ASI's affiliates. In addition, interest will not accrue on guaranteed
obligations during the five year period.
- The creditor banks will provide to ASI a short-term loan of W50 billion
at the prime rate plus 1%, to be repaid with proceeds from the sale of
K4.
- The creditor banks will convert (Won)250 billion ($208,000, using the
December 31, 1998 exchange rate of (Won)1,207 to $1.00) of ASI debt held
by the creditor banks into: (1) (Won)122.3 billion ($102,000 using the
December 31, 1998 exchange rate) in equity shares of ASI, (2) (Won)108.1
billion ($90,000 using the
57
<PAGE> 59
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1998 exchange rate) in five-year non-interest bearing
convertible debt and (3) (Won)19.6 billion ($16,000) in non-interest bearing
loans. The conversion would take place in installments over four years and
at a conversion rate equal to (Won)5,000 per share, the par value of ASI's
common stock. In order for the initial conversion of debt to take place in
accordance with the terms of the Workout, ASI will have to undergo a
series of corporate actions, including a reverse stock split to bring the
fair market value of its equity shares to a price at least equal to the
par value of such shares. The creditor banks would time their conversions
of ASI debt to coincide with equity investments made in ASI by a
third-party foreign investor company, in the aggregate amount of $150,000
over a four year period.
The conversion of debt by the creditor banks was contingent on the
Company's commitment to invest $150,000 in ASI equity over a four-year period.
The Company has agreed to make an investment of $41,000 in 1999 and, assuming
certain additional conditions are met, invest an additional $109,000 between
years 2000 and 2002. As a result of the commitment to invest, ASI agreed to
reduce the K4 purchase price from $607,000 to $582,000. The Company's commitment
to ASI's creditor banks committing to an investment in ASI is contingent upon
the continuation of the Workout plan as approved, the continued effectiveness of
the Supply Agreements with ASI and coordination of proposed equity investments
with the conversion by the creditor banks of their ASI debt to equity. The
commitment letter provides that upon meeting these conditions, the Company would
invest $41,000 in 1999, 2000, and 2001 with a final investment of $27,000 in
2002. The Company would purchase the ASI shares at (Won)5,000 per share. Since
the commitment is in U.S. dollars, the number of shares the Company would
purchase will vary based on the exchange rate of Korean won to U.S. dollars.
Assuming the creditor banks and ASI finalize and implement the Workout
under its original terms, the relative equity of ownership of ASI among the
creditor banks, the Kim family and the Company would be approximately 45%, 6%
and 32%, respectively (assuming an exchange rate of (Won)1,135 to $1.00 and
without any future sales of ASI stock by these parties).
The creditor banks have the right to terminate the Workout if ASI fails to
meet the conditions of the Workout, which includes conditions related to ASI's
financial performance. The Company believes that if the Workout is not finalized
by the creditor banks and ASI or if the creditor banks subsequently terminate
the Workout, the debt relief afforded to ASI pursuant to the Workout would be
terminated, and the creditor banks could reinstate and enforce the original
terms of ASI's debt, including accelerating ASI's obligations. If this were to
occur, ASI's and the Company's businesses could be harmed.
There can be no assurance that ASI will be able to satisfy the terms of the
proposed Workout agreement. Any inability of ASI to comply with the terms of the
proposed Workout agreement, generate cash flow from operations sufficient to
fund its capital expenditures and other working capital and liquidity
requirements could have a material adverse effect on ASI's ability to continue
to provide services and otherwise fulfill its obligations to the Company. The
ultimate outcome of these uncertainties cannot be determined presently and ASI's
financial statements do not include any adjustments that might result from these
uncertainties.
4. 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 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
58
<PAGE> 60
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
receivable at the same discount to the Purchasers. The Agreement is structured
as a three year facility subject to annual renewals based upon the mutual
consent of the Company and purchasers.
The Agreement was renewed effective December 30, 1998 and December 29, 1999
with the next renewal date scheduled March 29, 2000. ASI had guaranteed the
Company's obligations under the agreement (See Note 3), however, ASI was
released from its obligations as guarantor effective December 30, 1998.
Proceeds, net of reduction in selected accounts receivable from the sale of
receivables were $84,400 in 1997 which has decreased by $12,900 and $2,200
during 1998 and 1999, respectively, due to a further reduction in selected
accounts receivable. Losses on receivables sold under the Agreement were
approximately $2,414, $4,693 and $4,280 in 1997, 1998 and 1999, respectively,
and are included in other expense, net. As of December 31, 1998 and 1999,
approximately $2,700 and $2,200, respectively, are included in current
liabilities for amounts to be refunded to the Purchasers as a result of a
reduction in selected accounts receivable.
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 and Korea, or at ASI on a
consignment basis. Components of inventories follow:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Raw materials and purchased components................... $77,351 $81,379
Work-in-process.......................................... 8,277 10,086
------- -------
$85,628 $91,465
======= =======
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
-------- ----------
<S> <C> <C>
Land................................................. $ 2,346 $ 38,349
Buildings and improvements........................... 142,252 303,077
Machinery and equipment.............................. 534,314 883,057
Furniture, fixtures and other equipment.............. 40,502 52,866
Construction in progress............................. 8,282 47,393
-------- ----------
727,696 1,324,742
Less -- Accumulated depreciation and amortization.... 311,585 464,974
-------- ----------
$416,111 $ 859,768
======== ==========
</TABLE>
59
<PAGE> 61
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INVESTMENTS
The Company's investments include investments in affiliated companies which
provide services to the Company (see Note 3) and certain other technology based
companies. Investments are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Equity Investment in ASI (18% at December 31, 1999)...... $ -- $39,927
Other Equity Investments (20%-50% owned)
Taiwan Semiconductor Technology Corporation............ 20,052 18,456
Other.................................................. 738 860
------- -------
Total other equity investments...................... 20,790 19,316
------- -------
Available for Sale....................................... 4,686 4,429
------- -------
$25,476 $63,672
======= =======
</TABLE>
In October, 1999, the Company acquired 10,000,000 shares of ASI common
stock for approximately $41,600 ((Won)50,000,000,000) representing the Company's
first installment of its planned investments in ASI over a four year period in
connection with ASI's Workout (see Note 3).
In 1997, the Company recognized a loss of $17,291, resulting principally
from the impairment of value of its investment in ASI as well as the Company's
equity in loss of ASI for the year ended December 31, 1997. The amount of the
impairment loss was determined based upon the market value of the ASI shares on
the Korean Stock Exchange on February 16, 1998, the date that the Company sold
its investment in ASI common stock to AK Investments, Inc., an entity owned by
James J. Kim. In exchange for the shares, AK Investments, Inc. assumed $13,863
of the Company's long-term borrowings from AUSA.
The following summary of consolidated financial information pertaining to
ASI for 1997 was derived from the consolidated financial statements (see Note
3). No amounts are presented for 1998 as the investment was sold in February
1998.
<TABLE>
<CAPTION>
1997
----------
<S> <C>
SUMMARY INCOME STATEMENT INFORMATION:
Sales....................................................... $ 406,937
Net income.................................................. $ 41,430
SUMMARY BALANCE SHEET INFORMATION:
Total assets................................................ $2,922,114
Total liabilities........................................... $2,662,612
</TABLE>
On October 21, 1998, the Company announced that it entered into a joint
venture, Taiwan Semiconductor Technology Corporation ("TSTC"), with Taiwan
Semiconductor Manufacturing Corporation, Acer Inc., United Test Center and
Chinfon Semiconductor & Technology Company. TSTC, which commenced operations in
1999, provides independent advanced integrated circuit ("IC") packaging services
primarily for the Taiwan market and Taiwan foundry output. The Company has
committed to invest an estimated total of $40,000 in TSTC. In October 1998, the
Company invested $10,000 as part of the second round of joint venture financing.
In December 1998, the Company purchased additional TSTC shares from ASI for
$10,000 which represented ASI's investment as part of the joint venture's
initial round of financing in which ATI did not participate. ASI did not
participate in the joint venture's second round of financing. No capital
contributions were required during 1999. As of December 31, 1999 the Company
owns approximately a 25%
60
<PAGE> 62
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest in TSTC and accordingly, the Company's investment in TSTC is accounted
for using the equity method of accounting.
8. SHORT-TERM CREDIT FACILITIES
At December 31, 1998 and 1999, 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 10% to 11% at December 31, 1999). For 1998 and
1999, the weighted average interest rate on these borrowings was 11.9% and
11.7%, respectively. The unused portion of lines of credit was approximately
$82,000 at December 31, 1999.
9. DEBT
Following is a summary of the Company's short-term borrowings and long-term
debt:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Short-term borrowings (see Note 8).......................... $ 30,430 $ 3,386
Senior notes, 9.25%, due May 2006 (See Note 3).............. -- 425,000
Senior subordinated notes, 10.5%, due May 2009 (See Note
3)........................................................ -- 200,000
Convertible subordinated notes, 5.75%, due May 2003 (See
Note 2)................................................... 207,000 53,435
Note payable, interest at bank's prime (8.8% at December 31,
1999), due in installments with balance due April 2004.... 12,747 11,472
Note payable, interest at LIBOR plus annual spread (10.25%
at December 31, 1998), due in installments with balance
due November 1999......................................... 7,000 --
Other, primarily capital lease obligations and other debt... 3,326 628
-------- --------
260,503 693,921
Less -- Short-term borrowings and current portion of
long-term debt............................................ (38,657) (6,465)
-------- --------
$221,846 $687,456
======== ========
</TABLE>
In the fourth quarter of 1999, the Company completed an early conversion of
convertible subordinated notes. As a result, the Company exchanged 12.1 million
shares of the Company's common stock for $153,565 of the Company's convertible
notes. The fair value of the shares of common stock issued in the exchanges in
excess of the shares required for conversion was $17,381, and was expensed
during the fourth quarter of 1999. This amount is included in other expense in
the accompanying consolidated statements of income.
Interest expense related to short-term borrowings and long-term debt is
presented net of interest income of $5,752, $9,072, and $19,905 in 1997, 1998
and 1999, respectively, in the accompanying consolidated statements of income.
The $53,435 of convertible notes mature in May 2003, the $425,000 of senior
notes mature in May 2006 and the $200,000 of senior subordinated notes mature in
May 2009. The senior notes and senior subordinated notes contain certain
covenants that could restrict the Company's ability and the ability of the
Company's subsidiaries to: incur additional indebtedness; pay dividends,
repurchase stock, prepay subordinate debt and make investments and other
restricted payments; create restrictions on the ability of the Company's
subsidiaries to pay dividends or make other payments; engage in sale and
leaseback transactions; create liens; enter into transactions with affiliates;
and sell assets or merge with or into other companies. These covenants are
subject to certain exceptions. The Company was in compliance with these
covenants as of December 31,
61
<PAGE> 63
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1999. The principal payments required under other long-term debt borrowings at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
2000............................................... $ 3,079
2001............................................... 2,647
2002............................................... 2,549
2003............................................... 2,549
2004............................................... 1,276
Thereafter......................................... --
-------
Total......................................... $12,100
=======
</TABLE>
10. EMPLOYEE BENEFIT PLANS
U.S. Defined Contribution Plan
ATI has a defined contribution benefit plan covering substantially all U.S.
employees. Employees can contribute up to 13% of salary to the plan and ATI
matches 75% of the employee's contributions up to a defined maximum on an annual
basis. The expense for this plan was $959, $1,394 and $1,828 in 1997, 1998 and
1999, respectively.
Philippine Pension Plan
The Company's Philippine subsidiaries sponsor a defined benefit plan that
covers substantially all employees who are not covered by statutory plans.
Charges to expense are based upon costs computed by independent actuaries.
During 1998, the Company adopted SFAS No. 132 "Employers' Disclosures about
Pensions and Other Postretirement Benefits." The provisions of SFAS No. 132
revise employers' disclosures about pensions and other postretirement benefit
plans. It does not change the measurement or recognition of this plan.
The components of net periodic pension cost for the Company's Philippine
defined benefit plan are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------ ------ -------
<S> <C> <C> <C>
Service cost of current period.......................... $1,274 $1,618 $ 2,153
Interest cost on projected benefit obligation........... 957 1,209 1,563
Expected return on plan assets.......................... (534) (879) (1,083)
Amortization of transition obligation and actuarial
gains/losses.......................................... 81 79 137
------ ------ -------
Total pension expense.............................. $1,778 $2,027 $ 2,770
====== ====== =======
</TABLE>
It is the Company's policy to make contributions sufficient to meet the
minimum contributions required by law and regulation.
62
<PAGE> 64
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the funded status of the Company's
Philippine defined benefit pension plan and the related changes in the projected
benefit obligation and plan assets:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Change in projected benefit obligation:
Projected benefit obligation at beginning of year......... $10,428 $13,567
Service cost.............................................. 1,618 2,153
Interest cost............................................. 1,209 1,563
Actuarial loss/(gain)..................................... 194 (356)
Foreign exchange(gain)/loss............................... 348 (388)
Benefits paid............................................. (230) (1,155)
------- -------
Projected benefit obligation at end of year............... 13,567 15,384
------- -------
Change in plan assets:
Fair value of plan assets at beginning of year............ 6,614 8,204
Actual return on plan assets.............................. (461) 2,107
Employer contribution..................................... 2,137 1,748
Foreign exchange (gain)/loss.............................. 144 (235)
Benefits paid............................................. (230) (1,155)
------- -------
Fair value of plan assets at end of year.................. 8,204 10,669
------- -------
Funded status:
Projected benefit obligation in excess of plan assets..... 5,363 4,715
Unrecognized actuarial loss............................... (2,546) (1,011)
Unrecognized transition obligation........................ (906) (826)
------- -------
Accrued pension costs..................................... $ 1,911 $ 2,878
======= =======
</TABLE>
The discount rate used in determining the projected benefit obligation was
12% as of December 31, 1998 and 1999. The rates of increase in future
compensation levels was 11% as of December 31, 1998 and 1999. The expected
long-term rate of return on plan assets was 12% as of December 31, 1998 and
1999. These rates reflect economic and market conditions in the Philippines.
The fair value of plan assets include an investment in our Company's common
stock of approximately $2,800 at December 31, 1999.
63
<PAGE> 65
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. 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,
---------------------------------
1997 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Current:
Federal............................................ $ 16,126 $18,316 $ 9,928
State.............................................. 2,639 4,426 1,746
Foreign............................................ 28 724 5,508
-------- ------- -------
18,793 23,466 17,182
-------- ------- -------
Deferred:
Federal............................................ (4,991) 282 532
Foreign............................................ (6,724) 968 8,886
-------- ------- -------
(11,715) 1,250 9,418
-------- ------- -------
Total provision................................. $ 7,078 $24,716 $26,600
======== ======= =======
</TABLE>
The reconciliation between the taxes payable based upon the U.S. federal
statutory income tax rate and the recorded provision follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Federal statutory rate.............................. $ 21,352 $35,257 $ 36,162
State taxes, net of federal benefit................. 1,285 2,877 2,028
S Corp. status of AEI through April 28, 1998........ (3,613) (4,500) --
Deferred taxes established at termination of S Corp.
status of AEI..................................... -- (1,954) --
Income of foreign subsidiaries subject to tax
holiday........................................... (5,106) (9,129) (14,860)
Foreign exchange (losses)/gains recognized for
income taxes...................................... (21,147) 12,602 8,023
Change in valuation allowance....................... 22,000 (8,079) (11,084)
Difference in rates on foreign subsidiaries......... (7,693) (3,377) (630)
Goodwill and other permanent differences............ -- 1,019 6,961
-------- ------- --------
Total.......................................... $ 7,078 $24,716 $ 26,600
======== ======= ========
</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. AAAP has a tax holiday in the Philippines which expires at the end
of 2002. Foreign exchange (losses)/gains recognized for income taxes relate to
unrecognized net foreign exchange (losses)/gains on U.S. dollar denominated
monetary assets and liabilities. These (losses)/gains, 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 net 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. These assets decreased in 1998 and 1999 as they were realized for
Philippine tax reporting purposes. 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
64
<PAGE> 66
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
three years. During 1999, AAP reversed a valuation allowance established in
prior years for a portion of the related deferred tax assets. During 1999, AAP
realized all foreign net operating loss carryforwards established in 1998. In
addition, minimum corporate income tax credits of $1,182 reversed to offset
current foreign tax obligations.
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
Deferred tax assets (liabilities):
Retirement benefits............................... $ 816 $ 1,038 $ 463
Other accrued liabilities......................... 100 4,571 2,579
Receivables....................................... 227 1,717 523
Inventories....................................... 6,509 2,583 3,892
Property, plant and equipment..................... -- (2,139) (2,539)
Unrealized foreign exchange losses................ 37,447 15,805 480
Unrealized foreign exchange gains................. (9,084) (3,530) (2,175)
Loss on sale of investment in ASI................. -- 1,620 1,620
Net foreign operating loss carryforward........... -- 3,646 --
Minimum corporate income tax...................... -- 1,182 --
Equity in earnings of investees................... -- -- 1,148
Other............................................. (2) 191 191
-------- -------- -------
Net deferred tax asset............................ 36,013 26,684 6,182
Valuation allowance............................... (22,000) (13,921) (2,837)
-------- -------- -------
Net deferred tax asset............................ $ 14,013 $ 12,763 $ 3,345
======== ======== =======
</TABLE>
Non-U.S. income before taxes and minority interest of the Company was
approximately $33,000, $54,000 and $74,000 in 1997, 1998 and 1999, respectively.
The company does not pay or record U.S. income taxes on the undistributed
earnings of its foreign subsidiaries as long as those earnings are permanently
reinvested in the companies that produced them. These cumulative undistributed
earnings are included in consolidated retained earnings on the balance sheet and
amounted to approximately $112,000 as of December 31, 1999. An estimated $27,000
in U.S. income and foreign withholding taxes would be due if these earnings were
remitted as dividends.
At December 31, 1998 and 1999 current deferred tax assets of $9,838 and
$5,793, respectively, are included in other current assets and noncurrent
deferred tax assets of $2,925 and $2,324, respectively, are included in other
assets in the consolidated balance sheet. The Company's net deferred tax assets
include amounts which, in the opinion of management, are more likely than not to
be realizable through future taxable income. In addition, at December 31, 1999,
noncurrent deferred tax liabilities of $4,772 are included in other noncurrent
liabilities in the consolidated balance sheet.
The Company's tax returns have been examined through 1995 in the
Philippines and through 1994 in the U.S. The tax returns for open years are
subject to changes upon final examination. 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.
65
<PAGE> 67
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. STOCKHOLDERS' EQUITY
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 (see Note 1), the Company has authorized 500,000,000 shares of
$.001 par value common stock, of which 117,860,000 and 130,659,772 were issued
and outstanding at December 31, 1998 and 1999, respectively. In addition, the
Company has authorized 10,000,000 shares of $.001 par value preferred stock,
designated as Series A.
At the date of the Reorganization consolidated retained earnings included
$3,243 related to AKI. This amount is reflected as a reduction in retained
earnings in 1998 as a result of the purchase of AKI by the Company.
The receivable from stockholder included in stockholders equity represents
the balance due from Mr. & Mrs. Kim and the Kim Family Trusts related to the
finalization of AEI's tax returns (See Note 11).
Changes in the division equity account reflected in the consolidated
statement of stockholders' equity represent the net cash flows resulting from
the operations of the Chamterry semiconductor packaging and test business for
1997. 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.
The line items included in other comprehensive income, prior to 1999, as
presented in the consolidated statements of stockholders' equity, relate to S
Corporation activity prior to 1998. Accordingly, the related amounts reflected
in other comprehensive income and accumulated other comprehensive income in the
consolidated statements of stockholders' equity and the consolidated balance
sheets are net of taxes at an effective tax rate of 0%. Unrealized losses on
investments during 1998 and 1999 have been tax effected at the applicable
statutory rates.
13. EARNINGS PER SHARE
Net income per common share was calculated by dividing net income and 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 1)
and the Initial Public Offering (see Note 2).
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which
requires dual presentation of basic and diluted earnings per share ("EPS") on
the face of the income statement. Basic 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. Both
the Company's basic and diluted as well as the Company's basic pro forma and
diluted pro forma per share amounts are the same for the year ended December 31,
1997. The Company's basic and diluted per share amounts for the years ended
December 31, 1998 and 1999 as well as the Company's basic proforma and diluted
proforma per share amounts for the year ended December 31, 1998 are calculated
as follows:
<TABLE>
<CAPTION>
WEIGHTED
EARNINGS AVERAGE SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- -------------- ---------
<S> <C> <C> <C>
Earnings per Share -- Year Ended December 31,
1998
Basic earnings per share..................... $75,460 106,221,000 $0.71
Impact of Convertible Notes.................. 5,672 10,334,000
Dilutive effect of options................... -- 41,000
------- ----------- -----
Diluted earnings per share................... $81,132 116,596,000 $0.70
======= =========== =====
</TABLE>
66
<PAGE> 68
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
WEIGHTED
EARNINGS AVERAGE SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- -------------- ---------
<S> <C> <C> <C>
Pro forma Earnings per Share -- Year Ended
December 31, 1998 (unaudited)
Basic pro forma earnings per share........... $70,960 106,221,000 $0.67
Impact of Convertible Notes.................. 5,672 10,334,000
Dilutive effect of options................... -- 41,000
------- ----------- -----
Diluted pro forma earnings per share......... $76,632 116,596,000 $0.66
======= =========== =====
Earnings per Share -- Year Ended December 31,
1999
Basic earnings per share..................... $76,719 119,341,000 $0.64
Impact of Convertible Notes.................. 8,249 14,228,000
Dilutive effect of options................... -- 1,498,000
------- ----------- -----
Diluted earnings per share................... $84,968 135,067,000 $0.63
======= =========== =====
</TABLE>
14. STOCK COMPENSATION PLANS
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 was
approved by the Company's stockholders in April 1998. 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.
Generally, the Director Plan provides for an initial grant of options to
purchase 15,000 shares of Common Stock to each new non-employee director of the
Company (an "Outside Director") when 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 was 94% of the Initial Public Offering price per share
of Common Stock in the Initial Public Offering. The term of each option is ten
years and each option granted to an Outside Director vests over a three year
period. The Director Plan will terminate in January 2008 unless sooner
terminated by the Board of Directors. As of December 31, 1999, there were 90,000
options outstanding under the Director Plan.
1998 Stock Plan. The Company's 1998 Stock Plan (the "1998 Plan") generally
provides for the grant to employees, directors and consultants of stock options
and stock purchase rights. The 1998 Plan was adopted by the Board of Directors
in January 1998 and was approved by the Company's stockholders in April 1998.
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.
Unless determined otherwise by the Board of Directors or a committee
appointed by the Board of Directors, options and stock purchase rights granted
under the 1998 Plan are not transferable by the optionee. Generally, the
exercise price of all 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. In general,
the options granted will vest over a four year period and the term of the
options granted under the 1998 Plan may not exceed ten years. As of December 31,
1999, there were 4,775,098 options outstanding under the 1998 Plan.
1998 Stock Option Plan for French Employees. The 1998 Stock Option Plan
for French Employees (the "French Plan") was approved by the Board of Directors
in April 1998. Unless terminated sooner, the French Plan will continue in
existence for 5 years. The French Plan provides for the granting of options to
67
<PAGE> 69
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
employees of the Company's French subsidiaries (the "French Subsidiaries"). A
total of 250,000 shares of Common Stock have been reserved for issuance under
the French Plan plus an annual increase to be added on each anniversary date of
the adoption of the French Plan. In general, stock options granted under the
French Plan vest over a four year period, the exercise price for each option
granted under the French Plan shall be 100% of the fair market value of the
shares of Common Stock on the date the option is granted and the maximum term of
the option must not exceed ten years. Shares subject to the options granted
under the French Plan may not be transferred, assigned or hypothecated in any
manner other than by will or the laws of descent or distribution before the date
which is five years after the date of grant. As of December 31, 1999, there were
200,450 options outstanding under the French Plan.
A summary of the status of the Company's stock option plans follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER EXERCISE PRICE
OF SHARES PER SHARE
--------- ----------------
<S> <C> <C>
Balance at January 1, 1998....................... -- $ --
Granted.......................................... 3,974,200 $10.01
Exercised........................................ -- $ --
Cancelled........................................ 150,300 $11.00
--------- ------
Balance at December 31, 1998..................... 3,823,900 $ 9.97
--------- ------
Exercisable at December 31, 1998................. -- $ --
========= ======
Balance at January 1, 1999....................... 3,823,900 $ 9.97
Granted.......................................... 1,468,450 $10.62
Exercised........................................ 75,534 $10.49
Cancelled........................................ 151,268 $ 9.91
--------- ------
Balance at December 31, 1999..................... 5,065,548 $10.15
--------- ------
Exercisable at December 31, 1999................. 1,363,644 $ 9.82
========= ======
</TABLE>
Significant option groups outstanding at December 31, 1999 and the related
weighted average exercise price and remaining contractual life information are
as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------- -------------------- WEIGHTED
WEIGHTED WEIGHTED AVERAGE
AVERAGE AVERAGE REMAINING
SHARES PRICE SHARES PRICE LIFE (YEARS)
--------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Options with Exercise Price of:
$16.56 - $28.25................... 223,950 $18.73 -- -- 9.79
$10.00 - $11.00................... 3,035,405 $10.98 1,148,538 $11.00 8.37
$8.06 - $9.63..................... 1,083,050 $ 9.06 10,000 $ 9.14 9.33
$5.66 - $7.97..................... 723,143 $ 5.67 205,106 $ 5.66 8.85
--------- ------ --------- ------ ----
Options outstanding at December 31,
1999.............................. 5,065,548 1,363,644
========= =========
</TABLE>
68
<PAGE> 70
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the weighted average fair value of options at grant date
granted during the year ended December 31, 1998 and 1999 follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE WEIGHTED AVERAGE
NUMBER EXERCISE PRICE GRANT DATE
OF SHARES PER SHARE FAIR VALUES
--------- ---------------- ----------------
<S> <C> <C> <C>
Options granted during 1998:
Options whose exercise price is greater
than the market price on grant date..... 42,600 $11.00 $2.22
--------- ------ -----
Options whose exercise price equals market
price on grant date..................... 3,901,600 $ 9.99 $4.31
--------- ------ -----
Options whose exercise price is less than
the market price on grant date.......... 30,000 $10.34 $4.97
========= ====== =====
Options granted during 1999:
Options whose exercise price equals market
price on grant date..................... 1,468,450 $10.62 $6.33
========= ====== =====
</TABLE>
In order to calculate the fair value of stock options at date of grant, the
Company used the Black-Scholes option pricing model. The following assumptions
were used: expected option term -- 4 years, stock price volatility factor -- 47%
and 75% for 1998 and 1999 respectively, dividend yield -- 0%, and risk free
interest rate -- 5.38% and 5.52% for 1998 and 1999, respectively.
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 was approved by the stockholders in April 1998. 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. 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 payday. The
initial offering period began on October 1, 1998 with a seven-month offering
period. All subsequent offering periods will be consecutive six-month periods
beginning on May 1, 1999, subject to change by the Board of Directors. 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 offering period. The purchase price of the Common Stock under the Purchase
Plan will be equal to 85% of the lesser of 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.
The Purchase Plan will terminate in January 2008, unless sooner terminated by
the Board of Directors.
Under the Purchase Plan, for the offering periods ending April 30, 1999 and
October 31, 1999, the Company sold 399,310 and 187,445 shares, respectively. In
addition, the Company has withheld $540 through payroll deductions as of
December 31, 1999. The fair market value per share of the Company's common stock
was $4.56 on October 1, 1998, the start date of the first offering period, $9.53
on May 1, 1999 and $21.31 on November 1, 1999. The fair values of the purchase
rights granted for the offering periods beginning October 1, 1998, May 1, 1999
and November 1, 1999 were $1.29, $3.21, and $6.99 respectively, which was
estimated using the Black Scholes option pricing model with the following
assumptions: expected option term -- 7 months for the offering period beginning
October 1, 1998 and 6 months for the other offering periods; stock price
volatility factor -- 47% and 75% for the offering period beginning October 1,
1998 and the other offering
69
<PAGE> 71
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
periods, respectively; dividend yield for all offering periods -0%; risk-free
interest rate -5.38% and 5.52% for the offering period beginning October 1, 1998
and the other offering periods, respectively.
The Company accounts for its stock compensation plans as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations. Accordingly, no compensation cost
has been recognized in the Consolidated Statements of Income. Had the Company
recorded compensation expense for its stock compensation plans, as provided by
SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's reported
net income and basic and diluted earnings per share, which reflects pro forma
adjustments for income taxes for 1997 and 1998 (see Note 20), would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net Income:
As reported................................. $39,668 $70,960 $76,719
Pro forma................................... $39,668 $69,313 $72,033
Earnings per share:
Basic:
As reported.............................. $ 0.48 $ 0.67 $ 0.64
Pro forma................................ $ 0.48 $ 0.65 $ 0.60
Diluted:
As reported.............................. $ 0.48 $ 0.66 $ 0.63
Pro forma................................ $ 0.48 $ 0.64 $ 0.59
</TABLE>
15. RELATED-PARTY TRANSACTIONS
At December 31, 1997, the Company owned 8.1% of the outstanding stock of
ASI (see Note 7), and ASI owned 40% of AAP. On February 16, 1998, the Company
sold its investment in ASI common stock for $13,863 to AK Investments, Inc.
based on the market value of ASI shares on the Korean Stock Exchange. On June 1,
1998 the Company purchased ASI's interest in AAP for approximately $34,000 (see
Note 18).
The Company previously met a significant portion of its financing from
financing arrangements provided by AUSA. A majority of the amount due to AUSA
represented outstanding amounts under financing obtained by AUSA for the benefit
of the Company with the balance representing payables to AUSA for packaging and
test service charges and wafer fabrication service charges from ASI. Based on
guarantees provided by ASI, AUSA obtained for the benefit of the Company a
continuous series of short-term financing arrangements which generally were less
than six months in duration, and typically were 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 were significant. Purchases from ASI
through AUSA were $527,858, $573,791 and $714,475 for 1997, 1998 and 1999,
respectively. Charges from AUSA for interest and bank charges were $6,002,
$2,215 and $1,416 for 1997, 1998 and 1999, respectively. Excluding the $20,000
balance due from ASI at December 31, 1998 for prepaid wafer foundry service
charges (see discussion below), the net amounts payable to ASI and AUSA were
$8,357 and $28,301 at December 31, 1998 and 1999, respectively.
To facilitate capacity expansion for new product lines, certain customers
advanced the Company funds to purchase certain equipment to fulfill such
customers forecasts. In certain cases, the customer has requested that the
equipment be installed in the ASI factories. In these cases, the Company
receives funds from the customer and advances the funds to ASI. ASI in turn
purchases the necessary equipment. ASI repays the Company through a reduction of
the monthly processing charges related to the customer product being assembled.
The Company will reduce its obligation to the customer through a reduction in
the accounts
70
<PAGE> 72
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
receivable, due from the customer, at the time services are billed. As of
December 31, 1998 and 1999 this amount was approximately $2,600 and $1,141,
respectively.
On August 1, 1997, the Company sold its equity investment in Anam
Semiconductor & Technology Co., Ltd. ("AST"), an affiliate of ASI, and certain
investments and notes receivable from companies unrelated to the semiconductor
packaging and test business to AK Investments, Inc., 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, 1998 and 1999 was $59 and $0, respectively.
The Company utilizes AST as a key supplier of leadframes. Historically, the
Company has paid AST for these services on net 30-day terms. Effective at the
end of July 1998, the Company changed its payment policy from net 30-days, to
paid-in advance. Accordingly the Company now pays for its materials before
shipment. This change in payment policy resulted in an advance to AST which is
reflected in the current portion of Due from Affiliate. As of December 31, 1998
and 1999, the balance paid in advance to AST was approximately $3,500 and
$1,500, respectively. Payments to AST were approximately $26,000, $32,500 and
$33,000 during 1997, 1998 and 1999, respectively.
Anam Engineering and Construction, an affiliate of ASI, built the packaging
facility for AAAP in the Philippines. Payments to Anam Engineering and
Construction were $3,844, $869 and $3,881 in 1997, 1998 and 1999, respectively.
Anam Precision Equipment and Anam Instruments manufacture certain equipment used
by the Philippine operations. Payments to Anam Precision Equipment and Anam
Instruments were $4,211, $10,272 and $14,610 in 1997, 1998 and 1999,
respectively.
A principal stockholder of the Company has extended guarantees on behalf of
the Company in the amount of $91,000 and $16,000 at December 31, 1998 and 1999,
respectively. Also in 1997, a company controlled by this stockholder purchased
investments in the amount of $49,740 (see Note 7).
The Company leases office space in West Chester, Pennsylvania 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) represented the carrying value to the stockholders. Amounts
paid for these leases in 1997, 1998 and 1999 were $1,458, $1,118 and $1,140,
respectively.
At December 31, 1998 and 1999, the Company had net balances due from
affiliates other than ASI and AUSA of $27,510 and $24,524, respectively.
Realization of these balances is dependent upon the ability of the affiliates to
repay the amounts due. In management's opinion, these receivables are recorded
at the net realizable value.
16. 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.
71
<PAGE> 73
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying amounts reported in the balance sheet for short-term
investments, due from affiliates, other accounts receivable, due to affiliates,
accrued expenses and accrued income taxes approximate fair value due to the
short-term nature of these instruments. The methods and assumptions used to
estimate the fair value of other significant classes of financial instruments is
set forth below:
Cash and Cash Equivalents. Cash and cash equivalents are due on
demand or carry a maturity date of less than three months when purchased.
The carrying amount of these financial instruments is a reasonable estimate
of fair value.
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. Long-term debt balances 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.
Senior Notes. The fair value of these financial instruments at
December 31, 1999 is estimated to be $416,500 based on available market
quotes.
Senior Subordinated Notes. The fair value of these financial
instruments at December 31, 1999 is estimated to be $199,000 based on
available market quotes.
Convertible Subordinated Notes. The fair value of these financial
instruments at December 31, 1999 is estimated to be $115,420 based on
available market quotes.
17. 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, either individually or in the aggregate, to which the Company
is a party will have a material adverse effect on the Company's financial
condition or results of operations.
The Company is currently engaged in negotiations regarding amounts due
under a technology license agreement with a third party. To date, this dispute
has not involved the judicial systems. The Company has accrued its estimate of
amounts due under this agreement. However, depending on the results of the
negotiations, the ultimate amount payable could be less than the amount accrued
or exceed the amount accrued by up to $7,700.
Net future minimum lease payments under operating leases that have initial
or remaining noncancelable lease terms in excess of one year at December 31,
1999, are:
<TABLE>
<S> <C>
2000...................................................... $ 9,736
2001...................................................... 8,633
2002...................................................... 5,966
2003...................................................... 5,139
2004...................................................... 3,940
Thereafter................................................ 77,312
--------
Total (net of minimum sublease income of $3,862)..... $110,726
========
</TABLE>
72
<PAGE> 74
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense, net of sublease income of $366, $575 and $578 for 1997, 1998
and 1999, respectively, amounted to $6,709, $7,751 and $10,443 for 1997, 1998
and 1999, respectively.
The Company has various purchase commitments for materials, supplies and
capital equipment incidental to the ordinary conduct of business. As of December
31, 1999 the Company had commitments for capital equipment of approximately
$48,524. In the aggregate, such commitments are not at prices in excess of
current market.
18. ACQUISITIONS
On July 1, 1999, the Company acquired the stock of AAPMC for $3,800, which
was paid to ASI during June 1999. AAPMC supplies machine tooling used by the
Company at its Philippine operations. As an interim step to this acquisition,
during April 1999, the Company assumed and repaid $5,700 of AAPMC's debt. The
acquisition was financed through available working capital and was accounted for
as a purchase. Accordingly, the results of AAPMC have been included in the
accompanying consolidated financial statements since the date of acquisition and
goodwill of approximately $2,000 was recorded as of the date of acquisition and
will be amortized on a straight line basis over a ten year period. Goodwill, net
of amortization, is included in intangible assets in the Company's consolidated
balance sheets at December 31, 1999. The historical operating results of AAPMC
are not material in relation to the Company's operating results.
On June 1, 1998, the Company purchased ASI's 40% interest in AAP for
$33,750. The acquisition was accounted for using the purchase method of
accounting which resulted in the elimination of the minority interest liability
reflected on the consolidated balance sheet and the recording of approximately
$23,910 of goodwill which is being amortized over 10 years.
19. SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," during the fourth quarter of 1998. The
Company has identified two reportable segments (packaging and test services and
wafer fabrication services) that are managed separately because the services
provided by each segment require different technology and marketing strategies.
Packaging and test services: Through its three factories located in the
Philippines, its Korean Factory, K4, as well as the three ASI factories in
Korea, under contract, the Company offers a complete and integrated set of
packaging and test services including IC packaging design, leadframe and
substrate design, IC package assembly, final testing, burn-in, reliability
testing and thermal and electrical characterization.
Wafer fabrication services: Through its wafer fabrication services
division, the Company provides marketing, engineering, and support services for
ASI's deep submicron CMOS foundry, under a long-term supply agreement.
Sales to Intel Corporation for packaging and test accounted for
approximately $340,000, $324,000 and $269,000 for the years ended December 31,
1997, 1998 and 1999, respectively. In addition, TI accounted for approximately
$25,000 of packaging and test revenues and $291,000 of wafer fabrication service
revenues during the year ended December 31, 1999. Revenues for services provided
to TI prior to 1999 were less than 10% of total revenue.
The accounting policies for segment reporting are the same as those
described in Note 1 of Notes to Consolidated Financial Statements. The Company
evaluates its operating segments based on operating income.
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes the
elimination of inter-segment balances and corporate assets
73
<PAGE> 75
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which include cash and cash equivalents, non-operating balances due from
affiliates, investment in ASI and TSTC (see Note 6) and other investments.
<TABLE>
<CAPTION>
PACKAGING WAFER
AND TEST FABRICATION OTHER TOTAL
---------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Net Revenues.............................. $1,617,235 $292,737 $ -- $1,909,972
Gross Profit.............................. $ 303,467 $ 29,279 $ -- $ 332,746
Operating Income.......................... $ 158,283 $ 17,794 $ -- $ 176,077
Depreciation and Amortization............. $ 178,771 $ 1,561 $ -- $ 180,332
Capital Expenditures...................... $ 603,173 $ 2,536 $ -- $ 605,709
Total Assets.............................. $1,391,105 $ 37,011 $326,973 $1,755,089
Year ended December 31, 1998:
Net Revenues.............................. $1,452,285 $115,698 $ -- $1,567,983
Gross Profit.............................. $ 243,479 $ 17,354 $ -- $ 260,833
Operating Income.......................... $ 124,462 $ 8,274 $ -- $ 132,736
Depreciation and Amortization............. $ 118,676 $ 563 $ -- $ 119,239
Capital Expenditures...................... $ 102,142 $ 5,747 $ -- $ 107,889
Total Assets.............................. $ 655,695 $ 65,941 $281,961 $1,003,597
Year ended December 31, 1997:
Net Revenues.............................. $1,455,761 $ -- $ -- $1,455,761
Gross Profit.............................. $ 213,092 $ -- $ -- $ 213,092
Operating Income.......................... $ 104,903 $ (4,062) $ -- $ 100,841
Depreciation and Amortization............. $ 81,770 $ 94 $ -- $ 81,864
Capital Expenditures...................... $ 176,858 $ 2,132 $ -- $ 178,990
Total Assets.............................. $ 703,662 $ 2,068 $149,862 $ 855,592
</TABLE>
The following table presents net revenues by country based on the location
of the customer:
<TABLE>
<CAPTION>
NET REVENUES
--------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
United States.................................. $1,050,048 $1,124,764 $1,316,147
Foreign countries.............................. 405,713 443,219 593,826
---------- ---------- ----------
Consolidated................................... $1,455,761 $1,567,983 $1,909,972
========== ========== ==========
</TABLE>
The following table presents property, plant and equipment based on the
location of the asset:
<TABLE>
<CAPTION>
PROPERTY, PLANT AND EQUIPMENT
--------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
United States...................................... $ 37,845 $ 48,851 $ 48,438
Philippines........................................ 388,653 366,717 448,644
Korea.............................................. -- -- 362,144
Other foreign countries............................ 563 543 542
-------- -------- --------
Consolidated....................................... $427,061 $416,111 $859,768
======== ======== ========
</TABLE>
74
<PAGE> 76
AMKOR TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following supplementary information presents net revenues allocated by
product family for the packaging and test segment:
<TABLE>
<CAPTION>
NET REVENUES
--------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Traditional Leadframe.......................... $ 833,527 $ 603,222 $ 559,563
Advanced Leadframe............................. 311,988 342,866 412,395
Laminates...................................... 251,257 438,034 561,181
Test and Other................................. 58,989 68,163 84,096
---------- ---------- ----------
Consolidated................................... $1,455,761 $1,452,285 $1,617,235
========== ========== ==========
</TABLE>
20. PRO FORMA ADJUSTMENTS (UNAUDITED)
Statement of Income
Pro forma adjustments are presented for 1997 and 1998 to reflect a
provision for income taxes as if AEI had not been an S Corporation for all of
the periods presented. Pro forma net income per common share is based on the
weighted average number of shares outstanding as if the Reorganization had
occurred at the beginning of the period presented.
21. SUBSEQUENT EVENT
On February 28, 2000 the company announced a definitive agreement with ASI
to acquire ASI's three remaining packaging and test facilities and to make
additional equity investments in ASI. On March 16, 2000, the Company agreed to
privately place $225,000 aggregate principal amount (excluding any
over-allotments) of 5% convertible subordinated notes due 2007. The notes will
be convertible into the Company's common stock at a conversion price of $57.34
per share. The Company intends to finance the remainder of the purchase price
and investment with $750,000 of secured bank debt under an $850,000 bank credit
facility, $410,000 of Series A Preferred Stock and existing cash and short-term
investments. See Note 3.
75
<PAGE> 77
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
Amkor Technology Korea, Inc.
We have audited the accompanying balance sheet of Amkor Technology Korea,
Inc. (the "Company") as of December 31, 1999, and the related statements of
operations, stockholder's equity, and cash flows for the period from February 19
(date of incorporation) to December 31, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Amkor Technology Korea, Inc.
as of December 31, 1999, and the results of its operations and its cash flows
for the period from February 19 (date of incorporation) to December 31, 1999 in
conformity with generally accepted accounting principles in the United States of
America.
/s/ SAMIL ACCOUNTING CORPORATION
Seoul, Korea
January 15, 2000
76
<PAGE> 78
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Anam Semiconductor, Inc.
We have audited the accompanying consolidated balance sheets of Anam
Semiconductor, Inc. and its subsidiaries (the "Company") as of December 31, 1999
and 1998 and the related consolidated statements of operations, stockholders'
deficit and cash flows for each of the three years in the period ended December
31, 1999 as prepared under generally accepted accounting principles in the
United States of America. 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 did not audit 1) the financial
statements of Anam Engineering and Construction Co., Ltd. ("Anam Construction"),
the investment in which is reflected in the consolidated financial statements
referred to above using the equity method of accounting in 1999 and 1998 and
consolidated in 1997, and 2) the financial statements of Anam USA, Inc, ("Anam
USA") a wholly owned subsidiary. The financial statements of Anam Construction
reflect total revenues of $ 387,946 thousand for the year ended December 31,
1997. The Company's net investment in Anam Construction was $0 at December 31,
1999 and 1998 and the equity in its net loss were $29,937 and $56,884 in 1999
and 1998. The financial statements of Anam USA reflect total assets of $124,442
thousand and $235,343 thousand at December 31, 1999 and 1998, respectively, and
total revenues of $715,756 thousand, $576,130 thousand and $544,148 thousand for
the years ended December 31, 1999, 1998 and 1997, respectively. Those statements
referred to above were audited by other auditors whose reports thereon have been
furnished to us, and our opinion expressed herein, insofar as it relates to the
amounts included for Anam Construction and Anam USA, is based solely on the
report of the other auditors. The report of the auditor of Anam Construction
contained an informative disclosure paragraph relating to uncertainties about
Anam Construction's ability to continue as a going concern.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. 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 the management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Anam Semiconductor, Inc. and its
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations, stockholders' deficit and their cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles in the United States of America.
As discussed in Note 3 to the accompanying financial statements, Anam
Semiconductor, Inc.'s revenues are generated primarily from semiconductor
packaging and test services provided to Amkor Technology Inc. ("Amkor") pursuant
to supply agreements. As described in Note 30 to the accompanying financial
statements, on May 17, 1999, Anam Semiconductor, Inc. has sold to Amkor all the
assets of one of the four its packaging and test facilities located in Kwangju
city, the Republic of Korea ("K4"). As described in Note 31 to the accompanying
financial statements, on February 28, 2000, Anam Semiconductor, Inc. made a
decision to sell to Amkor all of the remaining operating assets related to the
remaining three packaging and testing facilities excluding K2 land in accordance
with the approval of a board of directors' meeting.
As discussed in Note 4 to the accompanying financial statements, the
operations of the Anam Semiconductor, Inc. and its affiliates in the Republic of
Korea, have been significantly affected, and may continue to be affected for the
foreseeable future, by the general adverse economic condition in the Republic of
Korea and in the Asia Pacific region.
As more fully described in Note 5 to the accompanying financial statements,
on October 23, 1998, Anam Semiconductor, Inc. entered into the Korean financial
restructuring program known as the "Workout
77
<PAGE> 79
Program". The Workout Program is the result of an accord among financial
institutions to assist in the restructuring of Korean business enterprises and
does not involve the judicial system. On February 23, 1999, Anam Semiconductor,
Inc. was granted certain economic concessions through the Workout Program which
was approved by its creditors committee.
/s/ SAMIL ACCOUNTING CORPORATION
--------------------------------------
Seoul, Korea
February 28, 2000
78
<PAGE> 80
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Anam Engineering & Construction Co., Ltd.
Seoul, Korea
We have audited the consolidated balance sheets of Anam Engineering &
Construction Co., Ltd. and its subsidiary as of December 31, 1999, 1998 and
1997, the related consolidated statements of operations, shareholders' deficit,
and cash flows for the years then ended, all expressed in Korean Won (not
separately included herein). 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 auditing standards generally
accepted in the United States of America. 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, such consolidated financial statements (not separately
included herein) present fairly, in all material respects, the financial
position of Anam Engineering & Construction Co., Ltd. and its subsidiary as of
December 31, 1999, 1998 and 1997, the results of their operations, the changes
in their shareholders' deficit and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 1, the Company has filed a voluntary petition for
reorganization under the Corporate Reorganization Act in the Republic of Korea.
The financial statements do not purport to reflect or provide for the
consequences of the bankruptcy proceedings. In particular, such financial
statements do not purport to show (a) as to assets, their realizable value on a
liquidation basis or their availability to satisfy liabilities; (b) as to
prepetition liabilities, the amounts that may be allowed for claims or
contingencies, or the status and priority thereof; (c) as to stockholder
accounts, the effect of any changes that may be made in the capitalization of
the Company; or (d) as to operations, the effect of any changes that may be made
in its business.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1, the Company's recurring
losses from operations, negative working capital, and shareholders' capital
deficiency raise substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are also discussed in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ AHN KWON & CO.
--------------------------------------
February 9, 2000
79
<PAGE> 81
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Anam USA, Inc.
West Chester, Pennsylvania
We have audited the balance sheets of Anam USA Inc. (a Pennsylvania
Corporation and a wholly-owned subsidiary of Anam Semiconductor, Inc., Seoul,
ROK) (ASI) as of December 31, 1999 and 1998 and the related statements of
income, stockholder's equity and cash flows for each of the three years in the
period ended December 31, 1999 (not separately included herein). 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 (not separately
included herein) present fairly, in all material respects, the financial
position of Anam USA, Inc. as of December 31, 1999 and 1998 and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
All of the Company's outstanding notes payable and letters of credit are
guaranteed by ASI. ASI has a significant amount of debt relative to its equity.
ASI's business has been significantly affected by the economic crisis in Korea.
In October 23, 1998, ASI entered into a Korean financial restructuring program
known as "Workout Program." On February 23, 1999, ASI was granted certain
economic concessions through the Workout Program which was approved by the
Korean Financial Supervisory Committee. The effects of the "Workout Program" and
its impact on the Company are disclosed in Note 5.
/s/ SIANA CARR & O'CONNOR, LLP
--------------------------------------
January 31, 2000
80
<PAGE> 82
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
Reference is made to the information regarding our directors and officers
under the heading "Directors and Officers" in our proxy statement for the 2000
annual meeting of stockholders, which information is hereby incorporated by
reference.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires a company's
officers and directors, and persons who own more than ten percent of a
registered class of the company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or 5 with the Securities
and Exchange Commission (the "SEC") and the National Association of Securities
Dealers, Inc. Such officers, directors and ten-percent stockholders are also
required by SEC rules to furnish the company with copies of all forms that they
file pursuant to Section 16(a). Based solely on our review of the copies of such
forms received by us, or written representations from certain reporting persons
that no other reports were required for such persons, we believe that all
Section 16(a) filing requirements applicable to our officers, directors and
ten-percent stockholders were complied with in a timely fashion.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information regarding executive compensation
appearing under the heading "Executive Compensation" in our proxy statement for
the 2000 annual meeting of stockholders, which information is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information regarding security ownership under the
heading "Security Ownership of Certain Beneficial Owners and Management" in our
proxy statement for the 2000 annual meeting of stockholders, which information
is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information regarding relationships and related
transactions under the heading "Certain Relationships and Related Transactions"
in our proxy statement for the 2000 annual meeting of stockholders, which
information is hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)Financial Statements and Financial Statement Schedules. The financial
statements and schedule filed as part of this Annual Report on Form 10-K are
listed in the index under Item 8.
81
<PAGE> 83
(b) REPORTS ON FORM 8-K
We filed with the Securities and Exchange Commission the following reports
on Form 8-K during the fourth quarter of the fiscal year ended December 31,
1999:
Current Report on Form 8-K dated October 26, 1999 (filed November 12,
1999), as amended on December 7, 1999 related to the completion of a $41.6
million investment in Anam Semiconductor, Inc. on October 28, 1999 and a press
release dated October 26, 1999 announcing our financial results for the third
quarter ended September 30, 1999.
Current Report on Form 8-K dated November 29, 1999 (filed November 30,
1999) related to a press release issued November 29, 1999 announcing that Amkor
entered into negotiations with Anam Semiconductor, Inc. to acquire its three
remaining packaging and test facilities, known as K1, K2 and K3, located in
Korea.
(c) EXHIBITS
<TABLE>
<C> <S>
2.1 Letter of Commitment by and between Amkor Technology, Inc.
and Anam Semiconductor, Inc., dated April 9, 1999.(4)
3.1 Certificate of Incorporation.(1)
3.2 Certificate of Correction to Certificate of
Incorporation.(2)
3.3 Restated Bylaws.(2)
4.1 Specimen Common Stock Certificate.(1)
4.2 Convertible Subordinated Notes Indenture dated as of May 6,
1998 between the Registrant and State Street Bank and Trust
Company, including form of 5 3/4% Convertible Subordinated
Notes due 2003.(1)
4.3 Senior Notes Indenture dated as of May 6, 1999 between the
Registrant and State Street Bank and Trust Company,
including form of 9 1/4% Senior Note Due 2006.(5)
4.4 Senior Subordinated Notes Indenture dated as of May 6, 1999
between the Registrant and State Street Bank and Trust
Company, including form of 10 1/2% Senior Subordinated Note
Due 2009.(5)
4.5 Convertible Subordinated Notes Indenture dated as of March
22, 2000 between the Registrant and State Street Bank and
Trust Company, including form of 5% Convertible Subordinated
Notes due 2007.
4.6 Registration Agreement between the Registrant and the
Initial Purchasers named therein dated as of March 22, 2000.
10.1 Form of Indemnification Agreement for directors and
officers.(1)
10.2 1998 Stock Plan and form of agreement thereunder.(1)
10.3 Receivables Purchase Agreement between Amkor Electronics,
Inc. and Amkor Receivables Corp., dated June 20, 1997.(1)
10.4 Form of Tax Indemnification Agreement between Amkor
Technology, Inc., Amkor Electronics, Inc. and certain
stockholders of Amkor Technology, Inc.(1)
10.8 Commercial Office Lease between Chandler Corporate Center
Phase II, G.P. and Amkor Electronics, Inc., dated September
6, 1993.(1)
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.(1)
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.(1)
10.11 Contract of Lease between Corinthian Commercial Corporation
and Amkor/Anam Pilipinas Inc., dated October 1, 1990.(1)
</TABLE>
82
<PAGE> 84
<TABLE>
<C> <S>
10.12 Contract of Lease between Salcedo Sunvar Realty Corporation
and Automated Microelectronics, Inc., dated May 6, 1994.(1)
10.13 Lease Contract between AAP Realty Corporation and Amkor/Anam
Advanced Packaging, Inc., dated November 6, 1996.(1)
10.14 Immunity Agreement between Amkor Electronics, Inc. and
Motorola, Inc., dated June 30, 1993.(1)
10.15 Assembly Agreement between Amkor Electronics, Inc. and Intel
Corporation, dated July 17, 1991.(1)
10.16 1998 Director Option Plan and form of agreement
thereunder.(1)
10.17 1998 Employee Stock Purchase Plan.(1)
10.18 Amendment No. 1 dated December 31, 1998 to the Receivables
Purchase Agreement between Amkor Electronics, Inc. and Amkor
Receivables Corp., dated June 20, 1997.(3)
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.(1)
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.(1)
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.(1)
10.22 Manufacturing and Purchase Agreement between Texas
Instruments Incorporated, Anam Industrial Co., Ltd. and
Amkor Electronics, Inc., dated as of January 1, 1998.(1)
10.23 1998 Stock Option Plan for French Employees.(1)
10.24 Loan Agreement between Amkor Electronics, Inc. and John
Boruch dated January 30, 1998.(3)
10.25 Shareholders Agreement, dated April 10, 1998, by and among
Amkor Electronics, Inc., Anam Industrial Co. Ltd., Scientek
International Investment Co. Ltd., Chinfon Semiconductor &
Technology Co., Ltd., Taiwan Semiconductor Manufacturing
Company Ltd., and Acer Incorporated.+
10.26 Technical Assistance Agreement, dated as of January 1, 1998
between Texas Instruments Incorporated and Anam Industrial
Co., Ltd.+
10.27 Intellectual Property Transfer and License Agreement by and
between Amkor Technology, Inc. and Anam Semiconductor,
Inc.(6)
10.28 Transition Services Agreement by and between Amkor
Technology, Inc. and Anam Semiconductor, Inc.(6)
21.1 List of Subsidiaries of the Registrant.(3)
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Samil Accounting Corporation.
23.3 Consent of Ahn Kwon & Co.
23.4 Consent of Siana Carr & O'Connor, LLP.
27.1 Financial Data Schedule.
99.1 Translation of the Principle Terms of the ASI Workout.(3)
</TABLE>
- ---------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 filed October 6, 1997, as amended (File No. 333-37235).
(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 filed August 26, 1998, as amended (File No. 333-49645).
83
<PAGE> 85
(3) Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 31, 1999, as amended.
(4) Incorporated by reference to the Company's Report on Form 8-K dated April
21, 1999, as amended.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
filed May 17, 1999.
(6) Incorporated by reference to the Company's Report on Form 8-K dated October
26, 1999.
+ Confidential Treatment requested as to certain portions of this exhibit.
84
<PAGE> 86
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report on Form
10-K to be signed, on its behalf by the undersigned, thereunto duly authorized.
AMKOR TECHNOLOGY, INC.
By: /s/ JAMES J. KIM
------------------------------------
James J. Kim
Chairman and Chief Executive Officer
Date: March 29, 2000
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James J. Kim and Kenneth Joyce, and each
of them, his attorneys-in-fact, and agents, each with the power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Report on Form 10-K, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and conforming all that said
attorneys-in-fact and agents of any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ JAMES J. KIM Chief Executive Officer and March 29, 2000
- --------------------------------------------------- Chairman
James J. Kim
/s/ JOHN N. BORUCH President and Director March 29, 2000
- ---------------------------------------------------
John N. Boruch
/s/ KENNETH JOYCE Chief Financial Officer March 29, 2000
- --------------------------------------------------- (Principal Financial and
Kenneth Joyce Accounting Officer)
/s/ WINSTON J. CHURCHILL Director March 29, 2000
- ---------------------------------------------------
Winston J. Churchill
/s/ THOMAS D. GEORGE Director March 29, 2000
- ---------------------------------------------------
Thomas D. George
</TABLE>
85
<PAGE> 87
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ GREGORY K. HINCKLEY Director March 29, 2000
- ---------------------------------------------------
Gregory K. Hinckley
/s/ JOHN B. NEFF Director March 29, 2000
- ---------------------------------------------------
John B. Neff
</TABLE>
86
<PAGE> 88
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amkor Technology, Inc.:
We have audited in accordance with generally accepted auditing standards,
the Consolidated Financial Statements of Amkor Technology, Inc. and its
subsidiaries included in this Form 10-K and have issued our report thereon dated
February 3, 2000 (except as discussed in Note 21 with respect to the Company's
proposed acquisition of ASI's packaging and test facilities and its investment
in ASI, as to which the date is February 28, 2000, and the related proposed
financing, as to which the date is March 16, 2000). Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule listed in the index above is the responsibility of the
Company's management and is presented for the purpose of complying with the
Securities an Exchange Commission's 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
Philadelphia, Pennsylvania
February 3, 2000 (except as discussed in Note 21 with respect to the Company's
proposed acquisition of ASI's packaging and test facilities and its investment
in ASI, as to which the date is February 28, 2000, and the related proposed
financing, as to which the date is March 16, 2000)
87
<PAGE> 89
AMKOR TECHNOLOGY, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED
BEGINNING TO BALANCE AT
OF PERIOD EXPENSE WRITE-OFFS OTHER END OF PERIOD
---------- --------- ---------- ----- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful accounts...... $1,179 $ 3,490 $(435) -- $4,234
Year ended December 31, 1998:
Allowance for doubtful accounts...... $4,234 $ 1,720 $ (2) -- $5,952
Year ended December 31, 1999:
Allowance for doubtful accounts...... $5,952 $(3,500) $ (9) -- $2,443
</TABLE>
88
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<C> <S> <C>
2.1 Letter of Commitment by and between Amkor Technology, Inc.
and Anam Semiconductor, Inc., dated April 9, 1999.(4).......
3.1 Certificate of Incorporation.(1)............................
3.2 Certificate of Correction to Certificate of
Incorporation.(2)...........................................
3.3 Restated Bylaws.(2).........................................
4.1 Specimen Common Stock Certificate.(1).......................
4.2 Convertible Subordinated Notes Indenture dated as of May 6,
1998 between the Registrant and State Street Bank and Trust
Company, including form of 5 3/4% Convertible Subordinated
Notes due 2003.(1)..........................................
4.3 Senior Notes Indenture dated as of May 6, 1999 between the
Registrant and State Street Bank and Trust Company,
including form of 9 1/4% Senior Note Due 2006.(5)...........
4.4 Senior Subordinated Notes Indenture dated as of May 6, 1999
between the Registrant and State Street Bank and Trust
Company, including form of 10 1/2% Senior Subordinated Note
Due 2009.(5)................................................
4.5 Convertible Subordinated Notes Indenture dated as of March
22, 2000 between the Registrant and State Street Bank and
Trust Company, including form of 5% Convertible Subordinated
Notes due 2007. ............................................
4.6 Registration Agreement between the Registrant and the
Initial Purchasers named therein dated as of March 22,
2000. ......................................................
10.1 Form of Indemnification Agreement for directors and
officers.(1)................................................
10.2 1998 Stock Plan and form of agreement thereunder.(1)........
10.3 Receivables Purchase Agreement between Amkor Electronics,
Inc. and Amkor Receivables Corp., dated June 20, 1997.(1)...
10.4 Form of Tax Indemnification Agreement between Amkor
Technology, Inc., Amkor Electronics, Inc. and certain
stockholders of Amkor Technology, Inc.(1)...................
10.8 Commercial Office Lease between Chandler Corporate Center
Phase II, G.P. and Amkor Electronics, Inc., dated September
6, 1993.(1).................................................
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.(1)...................................
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.(1).....................................
10.11 Contract of Lease between Corinthian Commercial Corporation
and Amkor/Anam Pilipinas Inc., dated October 1, 1990.(1)....
10.12 Contract of Lease between Salcedo Sunvar Realty Corporation
and Automated Microelectronics, Inc., dated May 6,
1994.(1)....................................................
10.13 Lease Contract between AAP Realty Corporation and Amkor/Anam
Advanced Packaging, Inc., dated November 6, 1996.(1)........
10.14 Immunity Agreement between Amkor Electronics, Inc. and
Motorola, Inc., dated June 30, 1993.(1).....................
10.15 Assembly Agreement between Amkor Electronics, Inc. and Intel
Corporation, dated July 17, 1991.(1)........................
10.16 1998 Director Option Plan and form of agreement
thereunder.(1)..............................................
10.17 1998 Employee Stock Purchase Plan.(1).......................
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<C> <S> <C>
10.18 Amendment No. 1 dated December 31, 1998 to the Receivables
Purchase Agreement between Amkor Electronics, Inc. and Amkor
Receivables Corp., dated June 20, 1997.(3)..................
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.(1).................................................
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.(1).............................
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.(1)....................................................
10.22 Manufacturing and Purchase Agreement between Texas
Instruments Incorporated, Anam Industrial Co., Ltd. and
Amkor Electronics, Inc., dated as of January 1, 1998.(1)....
10.23 1998 Stock Option Plan for French Employees.(1)
10.24 Loan Agreement between Amkor Electronics, Inc. and John
Boruch dated January 30, 1998.(3)...........................
10.25 Shareholders Agreement, dated April 10, 1998, by and among
Amkor Electronics, Inc., Anam Industrial Co. Ltd., Scientek
International Investment Co. Ltd., Chinfon Semiconductor &
Technology Co., Ltd., Taiwan Semiconductor Manufacturing
Company Ltd., and Acer Incorporated.+.......................
10.26 Technical Assistance Agreement, dated as of January 1, 1998
between Texas Instruments Incorporated and Anam Industrial
Co., Ltd.+..................................................
10.27 Intellectual Property Transfer and License Agreement by and
between Amkor Technology, Inc. and Anam Semiconductor,
Inc.(6).....................................................
10.28 Transition Services Agreement by and between Amkor
Technology, Inc. and Anam Semiconductor, Inc.(6)............
21.1 List of Subsidiaries of the Registrant.(3)..................
23.1 Consent of Arthur Andersen LLP..............................
23.2 Consent of Samil Accounting Corporation.....................
23.3 Consent of Ahn Kwon & Co....................................
23.4 Consent of Siana Carr & O'Connor, LLP. .....................
27.1 Financial Data Schedule. ...................................
99.1 Translation of the Principle Terms of the ASI Workout.(3)...
</TABLE>
- ---------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-1 filed October 6, 1997, as amended (File No. 333-37235).
(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 filed August 26, 1998, as amended (File No. 333-49645).
(3) Incorporated by reference to the Company's Annual Report on Form 10-K filed
March 31, 1999, as amended.
(4) Incorporated by reference to the Company's Report on Form 8-K dated April
21, 1999, as amended.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
filed May 17, 1999.
(6) Incorporated by reference to the Company's Report on Form 8-K dated October
26, 1999.
+ Confidential Treatment requested as to certain portions of this exhibit.
<PAGE> 1
EXHIBIT 4.5
AMKOR TECHNOLOGY, INC.
AND
----------------
STATE STREET BANK AND TRUST COMPANY
AS TRUSTEE
----------------
$225,000,000
5% Convertible Subordinated Notes due 2007*
----------------
INDENTURE
Dated as of March 22, 2000
- ----------
* Plus an over-allotment option to purchase up to $33,750,000 principal
amount of 5% Convertible Subordinated Notes due 2007.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 Definitions................................................................................................ 1
SECTION 1.01 Definitions......................................................................... 1
SECTION 1.02 Other Definitions................................................................... 8
SECTION 1.03 Incorporation by Reference of Trust Indenture Act................................... 9
SECTION 1.04 Rules of Construction............................................................... 9
ARTICLE 2 The Convertible Subordinated Notes......................................................................... 10
SECTION 2.01 Form and Dating..................................................................... 10
SECTION 2.02 Execution and Authentication........................................................ 11
SECTION 2.03 Registrar, Paying Agent and Conversion Agent........................................ 12
SECTION 2.04 Paying Agent To Hold Money in Trust................................................. 12
SECTION 2.05 Holder Lists........................................................................ 13
SECTION 2.06 Transfer and Exchange............................................................... 13
SECTION 2.07 Replacement Convertible Subordinated Notes.......................................... 16
SECTION 2.08 Outstanding Convertible Subordinated Notes.......................................... 17
SECTION 2.09 When Treasury Convertible Subordinated Notes Disregarded............................ 18
SECTION 2.10 Temporary Convertible Subordinated Notes............................................ 18
SECTION 2.11 Cancellation........................................................................ 19
SECTION 2.12 Defaulted Interest.................................................................. 19
SECTION 2.13 CUSIP Number........................................................................ 19
SECTION 2.14 Regulation S........................................................................ 19
ARTICLE 3 Redemption................................................................................................. 20
SECTION 3.01 Optional Redemption................................................................. 20
SECTION 3.02 Notices to Trustee.................................................................. 20
SECTION 3.03 Selection of Convertible Subordinated Notes To Be Redeemed.......................... 20
SECTION 3.04 Notice of Redemption................................................................ 21
SECTION 3.05 Effect of Notice of Redemption...................................................... 22
SECTION 3.06 Deposit of Redemption Price......................................................... 22
SECTION 3.07 Convertible Subordinated Notes Redeemed in Part..................................... 23
SECTION 3.08 Conversion Arrangement on Call for Redemption....................................... 23
ARTICLE 4 Covenants.................................................................................................. 24
SECTION 4.01 Payment of Convertible Subordinated Notes........................................... 24
SECTION 4.02 Commission Reports.................................................................. 24
SECTION 4.03 Compliance Certificate.............................................................. 24
SECTION 4.04 Maintenance of Office or Agency..................................................... 25
SECTION 4.05 Continued Existence................................................................. 25
SECTION 4.06 Repurchase Upon Designated Event.................................................... 25
SECTION 4.07 Appointments to Fill Vacancies in Trustee's Office.................................. 28
SECTION 4.08 Stay, Extension and Usury Laws...................................................... 28
</TABLE>
-ii-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 4.09 Repurchase Upon Related Transactions Event.......................................... 28
SECTION 4.10 Taxes............................................................................... 30
SECTION 4.11 Cash Maintenance.................................................................... 31
ARTICLE 5 Successors................................................................................................. 31
SECTION 5.01 When the Company May Merge, Etc..................................................... 31
SECTION 5.02 Successor Corporation Substituted................................................... 32
SECTION 5.03 Purchase Option on Change of Control................................................ 32
ARTICLE 6 Defaults and Remedies...................................................................................... 32
SECTION 6.01 Events of Default................................................................... 32
SECTION 6.02 Acceleration........................................................................ 34
SECTION 6.03 Other Remedies...................................................................... 35
SECTION 6.04 Waiver of Past Defaults............................................................. 35
SECTION 6.05 Control by Majority................................................................. 36
SECTION 6.06 Limitation on Suits................................................................. 36
SECTION 6.07 Rights of Holders To Receive Payment................................................ 36
SECTION 6.08 Collection Suit by Trustee.......................................................... 37
SECTION 6.09 Trustee May File Proofs of Claim.................................................... 37
SECTION 6.10 Priorities.......................................................................... 37
SECTION 6.11 Undertaking for Costs............................................................... 38
ARTICLE 7 The Trustee................................................................................................ 38
SECTION 7.01 Duties of the Trustee............................................................... 38
SECTION 7.02 Rights of the Trustee............................................................... 39
SECTION 7.03 Individual Rights of the Trustee.................................................... 40
SECTION 7.04 Trustee's Disclaimer................................................................ 41
SECTION 7.05 Notice of Defaults.................................................................. 41
SECTION 7.06 Reports by the Trustee to Holders................................................... 41
SECTION 7.07 Compensation and Indemnity.......................................................... 41
SECTION 7.08 Replacement of the Trustee.......................................................... 42
SECTION 7.09 Successor Trustee by Merger, etc.................................................... 44
SECTION 7.10 Eligibility, Disqualification....................................................... 44
SECTION 7.11 Preferential Collection of Claims Against Company................................... 44
ARTICLE 8 Satisfaction and Discharge of Indenture.................................................................... 44
SECTION 8.01 Discharge of Indenture.............................................................. 44
SECTION 8.02 Deposited Monies to be Held in Trust by Trustee..................................... 45
SECTION 8.03 Paying Agent to Repay Monies Held................................................... 45
SECTION 8.04 Return of Unclaimed Monies.......................................................... 45
</TABLE>
-iii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 8.05 Reinstatement....................................................................... 45
ARTICLE 9 Amendments................................................................................................. 46
SECTION 9.01 Without the Consent of Holders...................................................... 46
SECTION 9.02 With the Consent of Holders......................................................... 47
SECTION 9.03 Compliance with the Trust Indenture Act............................................. 48
SECTION 9.04 Revocation and Effect of Consents................................................... 48
SECTION 9.05 Notation on or Exchange of Convertible Subordinated Notes........................... 49
SECTION 9.06 Trustee Protected................................................................... 49
ARTICLE 10 General Provisions........................................................................................ 49
SECTION 10.01 Trust Indenture Act Controls........................................................ 49
SECTION 10.02 Notices............................................................................. 49
SECTION 10.03 Communication by Holders With Other Holders......................................... 50
SECTION 10.04 Certificate and Opinion as to Conditions Precedent.................................. 50
SECTION 10.05 Statements Required in Certificate or Opinion....................................... 51
SECTION 10.06 Rules by Trustee and Agents......................................................... 51
SECTION 10.07 Legal Holidays...................................................................... 51
SECTION 10.08 No Recourse Against Others.......................................................... 52
SECTION 10.09 Counterparts........................................................................ 52
SECTION 10.10 Other Provisions.................................................................... 52
SECTION 10.11 Governing Law....................................................................... 53
SECTION 10.12 No Adverse Interpretation of Other Agreements....................................... 53
SECTION 10.13 Successors.......................................................................... 53
SECTION 10.14 Severability........................................................................ 53
SECTION 10.15 Table of Contents, Headings, Etc.................................................... 53
ARTICLE 11 Subordination............................................................................................. 53
SECTION 11.01 Agreement to Subordinate............................................................ 53
SECTION 11.02 Liquidation; Dissolution; Bankruptcy................................................ 54
SECTION 11.03 Default on Senior Debt and/or Designated Senior Debt................................ 54
SECTION 11.04 Acceleration of Convertible Subordinated Notes...................................... 55
SECTION 11.05 When Distribution Must Be Paid Over................................................. 55
SECTION 11.06 Notice by Company................................................................... 56
SECTION 11.07 Subrogation......................................................................... 56
SECTION 11.08 Relative Rights..................................................................... 56
SECTION 11.09 Subordination May Not Be Impaired by Company........................................ 57
SECTION 11.10 Distribution or Notice to Representative............................................ 57
SECTION 11.11 Rights of Trustee and Paying Agent.................................................. 57
SECTION 11.12 Authorization to Effect Subordination............................................... 58
</TABLE>
-iv-
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 11.13 Article Applicable to Paying Agents................................................. 58
SECTION 11.14 Senior Debt Entitled to Rely........................................................ 58
SECTION 11.15 Permitted Payments.................................................................. 58
ARTICLE 12 Conversion of Convertible Subordinated Notes.............................................................. 59
SECTION 12.01 Right to Convert.................................................................... 59
SECTION 12.02 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends................................. 59
SECTION 12.03 Cash Payments in Lieu of Fractional Shares.......................................... 61
SECTION 12.04 Conversion Price.................................................................... 61
SECTION 12.05 Adjustment of Conversion Price...................................................... 61
SECTION 12.06 Effect of Reclassification, Consolidation, Merger or Sale........................... 70
SECTION 12.07 Taxes on Shares Issued.............................................................. 71
SECTION 12.08 Reservation of Shares; Shares to Be Fully Paid; Listing of Common Stock............. 71
SECTION 12.09 Responsibility of Trustee........................................................... 72
SECTION 12.10 Notice to Holders Prior to Certain Actions.......................................... 72
SECTION 12.11 Restriction on Common Stock Issuable Upon Conversion................................ 73
</TABLE>
-v-
<PAGE> 6
THIS INDENTURE, dated as of March 22, 2000, 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 5% Convertible Subordinated Notes due 2007 (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.
"Agent Member" means any member of, or participant in, the Depositary.
<PAGE> 7
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein,
the rules and procedures of the Depositary for such Global Security to
the extent applicable to such transaction and as in effect from time to
time.
"ASI" means Anam Semiconductor, Inc.
"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, 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
2
<PAGE> 8
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 5% Convertible Subordinated
Notes due 2007 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 Securities, 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 Securities (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.
"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.)
3
<PAGE> 9
"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 Security" means a Convertible Subordinated Note that is
registered in the Register.
"Global Securities Legend" means the legend labeled as such and that is
set forth in Exhibit A hereto.
"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 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.
"Initial Purchasers" means Salomon Smith Barney Inc., SG Cowen
Securities Corporation, Deutsche Bank Securities Inc., FleetBoston Robertson
Stephens Inc., Prudential Securities
4
<PAGE> 10
Incorporated, Thomas Weisel Partners LLC, Banc of America Securities LLC, CIBC
Oppenheimer Corp. and Soundview Technology Group, Inc.
"Interest Payment Date" means March 15 and September 15 of each year.
"Issue Date" means the date on which Convertible Subordinated Notes are
first issued and authenticated under this Indenture.
"Liquidated Damages" has the meaning specified in paragraph 18 of the
form of Convertible Subordinated Note which is attached as Exhibit A hereto.
"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 March 15, 2007.
"Note Custodian" means State Street Bank and Trust Company, as
custodian with respect to any Global Security, 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 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 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
5
<PAGE> 11
(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).
"Put Expiration Date" means the earlier of (i) to the extent such date
does not occur after August 31, 2000, the date the Related Transactions are
consummated in all material respects, and (ii) 30 days following the Related
Transactions Payment Date.
"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.
"Registration Agreement" means the Registration Agreement relating to
the Convertible Subordinated Notes and Common Stock issuable upon conversion of
such Convertible Subordinated Notes dated March 22, 2000, between the Company
and the Initial Purchasers, as such agreement may be amended, modified or
supplemented from time to time.
"Regular Record Date" means the March 1 or September 1 immediately
preceding each Interest Payment Date.
"Related Agreement" means the asset purchase agreement between ASI and
the Company dated as of January 14, 2000 relating to the Related Transactions,
as such agreement may be amended or restated from time to time.
"Related Transactions" means the acquisition by the Company or any of
its subsidiaries from ASI of three of ASI's facilities known as K1, K2 and K3.
"Related Transactions Event" shall have the meaning given thereto in
Section 4.09.
"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.
"Restricted Common Stock Legend" means the legend labeled as such and
that is set forth in Exhibit D hereto.
6
<PAGE> 12
"Restricted Securities Legend" means the legend labeled as such and
that is set forth in Exhibit A hereto.
"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 (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.
"Shelf Registration Statement " shall have the meaning set forth in the
Registration Agreement.
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.
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<PAGE> 13
"Trustee" means the party named as such above until a successor replaces it in
accordance with the applicable provisions of this Indenture and thereafter means
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
"Current Market Price"................................................................................... 12.05
"closing price".......................................................................................... 12.05
"Conversion Agent"....................................................................................... 2.03
"Custodian".............................................................................................. 6.01
"Definitive Securities".................................................................................. 2.01
"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
"Related Transactions Offer"............................................................................. 4.09
"Related Transactions Offer Termination Date"............................................................ 4.09
</TABLE>
8
<PAGE> 14
<TABLE>
<S> <C>
"Related Transactions Payment"........................................................................... 4.09
"Related Transactions Payment Date"...................................................................... 4.09
"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.
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.
9
<PAGE> 15
ARTICLE 2
THE CONVERTIBLE SUBORDINATED NOTES
SECTION 2.01 Form and Dating.
(a) GLOBAL SECURITIES. The Convertible Subordinated Notes are
being offered and sold by the Company pursuant to a Purchase Agreement relating
to the Convertible Subordinated Notes, dated March 16, 2000, among the Company
and the Initial Purchasers (the "Purchase Agreement").
Convertible Subordinated Notes offered and sold (i) in reliance on
Regulation S under the Securities Act ("Regulation S") or (ii) to "qualified
institutional buyers" as defined in Rule 144A ("QIBs") in reliance on Rule 144A
under the Securities Act ("Rule 144A"), each as provided in the Purchase
Agreement, shall be issued in the form of one or more permanent global
securities in definitive, fully registered form without interest coupons with
the Global Securities Legend and Restricted Securities Legend set forth in
Exhibit A hereto (each, a "Global Security"). Any Global Security shall be
deposited on behalf of the purchasers of the Convertible Subordinated Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or a nominee of the
Depositary for the accounts of participants in the Depositary (and, in the case
of Convertible Subordinated Notes held in accordance with Regulation S,
registered with the Depositary for the accounts of designated agents holding on
behalf of the Euroclear System ("Euroclear") or Clearstream Banking, societe
anonyme ("Clearstream")), duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of a Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee and the Depositary or its nominee as hereinafter
provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.01(b) shall apply only to a
Global Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b) and the written order of the Company, authenticate and
deliver initially one or more Global Securities that (i) shall be registered in
the name of Cede & Co. or other nominee of such Depositary and (ii) shall be
delivered by the Trustee to such Depositary or pursuant to such Depositary's
instructions or held by the Trustee as custodian for the Depositary pursuant to
a FAST Balance Certificate Agreement between the Depositary and the Trustee.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Security, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from
10
<PAGE> 16
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices of such Depositary governing the
exercise of the rights of a holder of a beneficial interest in any Global
Security.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations and Instructions to Participants" of Cedel shall be applicable to
interests in any Global Securities that are held by participants through
Euroclear or Cedel. The Trustee shall have no obligation to notify holders of
any such procedures or to monitor or enforce compliance with the same.
(c) DEFINITIVE SECURITIES. Except as provided in Section 2.06 and
2.10, owners of beneficial interests in Global Securities will not be entitled
to receive physical delivery of certificated Convertible Subordinated Notes in
definitive form. Purchasers of Securities who are not QIBs and did not purchase
Convertible Subordinated Notes sold in reliance on Regulation S under the
Securities Act (referred to herein as the "Non-Global Purchasers") will receive
certificated Convertible Subordinated Notes in definitive form bearing the
Restricted Securities Legend set forth in Exhibit A hereto ("Definitive
Securities"). Definitive Securities will bear the Restricted Securities Legend
set forth on Exhibit A unless removed in accordance with Section 2.06(b).
SECTION 2.02 Execution and Authentication.
One Officer 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 $225,000,000 (plus up to
$33,750,000 aggregate principal amount of Convertible Subordinated Notes that
may be sold by the Company pursuant to the over-allotment option granted
pursuant to the Purchase Agreement). Purchasers. 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.
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<PAGE> 17
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 The Trustee 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 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 (including Liquidated Damages) 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.
12
<PAGE> 18
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.
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 or Section 4.09.
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.
(a) Notwithstanding any provision to the contrary herein, so long
as a Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, or of any
beneficial interest therein, shall only be made in accordance with Sections
2.01(b) and 2.10 and this Section 2.06(a); provided, however, that beneficial
interests in a Global Security may be transferred to persons who take delivery
thereof in the form of a beneficial interest in the Global Security in
accordance with the transfer restrictions set forth under the heading "Notice to
Investors" in the Offering Memorandum and, if applicable, in the Restricted
Securities Legend.
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Except for transfers or exchanges made in accordance with paragraphs
(i) through (iv) of this Section 2.06(a) and Section 2.10, transfers of a Global
Security shall be limited to transfers of such Global Security in whole, but not
in part, to nominees of the Depositary or to a successor of the Depositary or
such successor's nominee.
(i) GLOBAL SECURITY TO DEFINITIVE SECURITY. If an owner of a
beneficial interest in a Global Security deposited with the Depositary or with
the Trustee as custodian for the Depositary wishes at any time to transfer its
interest in such Global Security to a Person who is required to take delivery
thereof in the form of a Definitive Security, such owner may, subject to the
rules and procedures of Euroclear or Clearstream, if applicable, and the
Depositary, cause the exchange of such interest for one or more Definitive
Securities of any authorized denomination or denominations and of the same
aggregate principal amount. Upon receipt by the Registrar of (1) instructions
from Euroclear or Clearstream, if applicable, and the Depositary directing the
Trustee to authenticate and deliver one or more Definitive Securities of the
same aggregate principal amount as the beneficial interest in the Global
Security to be exchanged, such instructions to contain the name or names of the
designated transferee or transferees, the authorized denomination or
denominations of the Definitive Securities to be so issued and appropriate
delivery instructions, (2) a certificate substantially in the form of Exhibit B
attached hereto given by the owner of such beneficial interest, (3) a
certificate substantially in the form of Exhibit C attached hereto given by the
person acquiring the Definitive Securities for which such interest is being
exchanged, to the effect set forth therein, and (4) such other certifications or
other information and, in the case of transfers pursuant to Rule 144 under the
Securities Act, legal opinions as the Company may reasonably require to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act,
then Euroclear or Clearstream, if applicable, or the Registrar, as the case may
be, will instruct the Depositary to reduce or cause to be reduced such Global
Security by the aggregate principal amount of the beneficial interest therein to
be exchanged and to debit or cause to be debited from the account of the Person
making such transfer the beneficial interest in the Global Security that is
being transferred, and concurrently with such reduction and debit the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Definitive Securities of the same aggregate principal amount in accordance with
the instructions referred to above.
(ii) DEFINITIVE SECURITY TO DEFINITIVE SECURITY. If a holder of a
Definitive Security wishes at any time to transfer such Definitive Security (or
portion thereof) to a Person who is required to take delivery thereof in the
form of a Definitive Security, such holder may, subject to the restrictions on
transfer set forth herein and in such Definitive Security, cause the transfer of
such Definitive Security (or any portion thereof in a principal amount equal to
an authorized denomination) to such transferee. Upon receipt by the Registrar of
(1) such Definitive Security, duly endorsed as provided herein, (2) instructions
from such holder directing the Trustee to authenticate and deliver one or more
Definitive Securities of the same aggregate principal amount as the Definitive
Security (or portion thereof) to be transferred, such instructions to contain
the name or names of the designated transferee or transferees, the authorized
denomination or denominations of the Definitive Securities to be so issued and
appropriate delivery instructions, (3) a certificate from the holder of the
Definitive Security to be transferred in substantially the form of Exhibit B
attached
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hereto, (4) a certificate substantially in the form of Exhibit C attached hereto
given by the person acquiring the Definitive Securities (or portion thereof), to
the effect set forth therein, and (5) such other certifications or other
information and, in the case of transfers pursuant to Rule 144 under the
Securities Act, legal opinions as the Company may reasonably require to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act,
then the Registrar, shall cancel or cause to be canceled such Definitive
Security and concurrently therewith, the Company shall execute, and the Trustee
shall authenticate and deliver, one or more Definitive Securities in the
appropriate aggregate principal amount, in accordance with the instructions
referred to above and, if only a portion of a Definitive Security is transferred
as aforesaid, concurrently therewith Company shall execute and the Trustee shall
authenticate and deliver to the transferor a Definitive Security in a principal
amount equal to the principal amount which has not been transferred. A holder of
a Definitive Security may at any time exchange such Definitive Security for one
or more Definitive Securities of other authorized denominations and in the same
aggregate principal amount and registered in the same name by delivering such
Definitive Security, duly endorsed as provided herein, to the Trustee together
with instructions directing the Trustee to authenticate and deliver one or more
Definitive Securities in the same aggregate principal amount and registered in
the same name as the Definitive Security to be exchanged, and the Registrar
thereupon shall cancel or caused to be canceled such Definitive Security and
concurrently therewith the Company shall execute and Trustee shall authenticate
and deliver, one or more Definitive Securities in the same aggregate principal
amount and registered in the same name as the Definitive Security being
exchanged.
(iii) DEFINITIVE SECURITY TO GLOBAL SECURITY. If a holder of a
Definitive Security wishes at any time to transfer such Definitive Security (or
portion thereof) to a Person who is not required to take delivery thereof in the
form of a Definitive Security, such holder shall, subject to the restrictions on
transfer set forth herein and in such Definitive Security and the rules of the
Depositary and Euroclear and Clearstream, as applicable, cause the exchange of
such Definitive Security for a beneficial interest in the Global Security. Upon
receipt by the Registrar of (1) such Definitive Security, duly endorsed as
provided herein, (2) instructions from such holder directing the Trustee to
increase the aggregate principal amount of the Global Security deposited with
the Depository or with the Trustee as custodian for the Depository by the same
aggregate principal amount at maturity as the Definitive Security to be
exchanged, such instructions to contain the name or names of a member of, or
participant in, the Depository that is designated as the transferee, the account
of such member or participant and other appropriate delivery instructions, (3)
the assignment form on the back of the Definitive Security completed in full
(certifying in effect that such transfer complies with Rule 144A or Regulation S
under the Securities Act or is otherwise being made to a Person who is not
required to take delivery of the Convertible Subordinated Notes in the form of a
Definitive Security) and (4) such other certifications or other information and,
in the case of transfers pursuant to Rule 144 under the Securities Act, legal
opinions as the Company may reasonably require to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act, then the Trustee shall
cancel or cause to be canceled such Definitive Security and concurrently
therewith shall increase the aggregate principal amount of the Global Security
by the same aggregate principal amount as the Definitive Security canceled.
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(iv) OTHER EXCHANGES. In the event that a Global Security is exchanged
for Convertible Subordinated Notes in definitive registered form pursuant to
Section 2.10 prior to the effectiveness of a Shelf Registration Statement with
respect to such Convertible Subordinated Notes, such Convertible Subordinated
Notes may be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of clauses (ii) and (iii) above
(including the certification requirements intended to ensure that such transfers
comply with Rule 144A or Regulation S under the Securities Act, as the case may
be) and such other procedures as may from time to time be adopted by the
Company.
(b) Except in connection with a Shelf Registration Statement
contemplated by and in accordance with the terms of the Registration Agreement,
if Convertible Subordinated Notes are issued upon the registration of transfer,
exchange or replacement of Convertible Subordinated Notes bearing a Restricted
Securities Legend, or if a request is made to remove such a Restrictive
Securities Legend on Convertible Subordinated Notes, the Convertible
Subordinated Notes so issued shall bear the Restricted Securities Legend, or a
Restricted Securities Legend shall not be removed, as the case may be, unless
there is delivered to the Company such satisfactory evidence, which, in the case
of a transfer made pursuant to Rule 144 under the Securities Act, may include an
opinion of counsel given in accordance with the laws in the State of New York,
as may be reasonably required by the Company, that neither the legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under
the Securities Act or that such Convertible Subordinated Notes are not
"restricted" within the meaning of Rule 144 under the Securities Act. Upon
provision to the Company of such satisfactory evidence, the Trustee, at the
written direction of the Company, shall authenticate and deliver Convertible
Subordinated Notes that do not bear the legend. The Company shall not otherwise
be entitled to require the delivery of a legal opinion in connection with any
transfer or exchange of Securities.
(c) Neither the Trustee nor any Agent shall have any
responsibility for any actions taken or not taken by the Depositary.
(d) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Convertible Subordinated Notes (including any transfers between
or among Depositary's participants or beneficial owners of interests in any
Global Security) other than to require delivery of such certificates and other
documentation as is expressly required by, and to do so if and when expressly
required by, the terms of this Indenture and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
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
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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 Section 4.09 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 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
(and Liquidated Damages, if any) on them ceases to accrue.
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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.
(a) 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 for temporary
Convertible Subordinated Notes and shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Convertible Subordinated Notes in exchange for
temporary Convertible Subordinated Notes.
(b) Except for transfers made in accordance with Section 2.06(a),
a Global Security deposited with the Depositary or with the Trustee as custodian
for the Depositary pursuant to Section 2.01 shall be transferred to the
beneficial owners thereof in the form of certificated Convertible Subordinated
Notes in definitive form only if such transfer complies with Section 2.06 and
(i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Security or if at any time such
Depositary ceases to be a "clearing agency" registered under the Exchange Act
and a successor Depositary is not appointed by the Company within 90 days of
such notice, or (ii) an Event of Default has occurred and is continuing.
(c) Any Global Security or interest thereon that is transferable
to the beneficial owners thereof in the form of certificated Convertible
Subordinated Notes in definitive form shall, if held by the Depository, be
surrendered by the Depositary to the Trustee, without charge, and the Trustee
shall authenticate and deliver, upon such transfer of each portion of such
Global Security, an equal aggregate principal amount of Convertible Subordinated
Notes of authorized denominations in the form of certificated Convertible
Subordinated Notes in definitive form. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any Convertible
Subordinated Notes in the form of certificated Convertible Subordinated Notes in
definitive form delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.06(b), bear the Restricted
Securities Legend set forth in Exhibit A hereto.
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(d) Prior to any transfer pursuant to Section 2.10(b), the
registered holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a holder is entitled to take under this
Indenture or the Convertible Subordinated Notes.
(e) The Company will make available to the Trustee a reasonable
supply of certificated Convertible Subordinated Notes in definitive form without
interest coupons.
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 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.
SECTION 2.14 Regulation S.
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The Company agrees that it will refuse to register any transfer of
Convertible Subordinated Notes or any shares of Common Stock issued upon
conversion of Convertible Subordinated Notes that is not made in accordance with
the provisions of Regulation S under the Securities Act, pursuant to a
registration statement which has been declared effective under the Securities
Act or pursuant to an available exemption from the registration requirements of
the Securities Act; provided that the provisions of this paragraph shall not be
applicable to any Convertible Subordinated Notes which do not bear a Restricted
Securities Legend or to any shares of Common Stock evidenced by certificates
which do not bear a Restricted Common Stock Legend.
ARTICLE 3
REDEMPTION
SECTION 3.01 Optional and Provisional 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 and 30 in the case of a Provisional Redemption (as
defined in Paragraph 5 of the Convertible Subordinated Notes)) 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
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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.
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 (30 in the case of a Provisional Redemption) 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 and Liquidated Damages, if applicable, 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
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the redemption price or 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 and Liquidated Damages, if any, 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 accrued interest (including Liquidated
Damages) on all Convertible Subordinated Notes to be
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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 and Liquidated Damages, if
applicable, 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, or
portions thereof, 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 8.4, 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, or portions thereof,
except the right to receive the Redemption price thereof and unpaid interest and
Liquidated Damages, if any, 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 and Liquidated
Damages, if any, 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 and Liquidated Damages, if any, 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 and Liquidated Damages, if any, 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 amount
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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 (including
Liquidated Damages) 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 and the Related
Transactions 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 (including
Liquidated Damages), the redemption price and the Designated Event Payment or
the Related Transactions 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 (including Liquidated Damages) 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 and Liquidated Damages, if any, to, but excluding, the Designated Event
Payment Date (as defined below).
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
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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 and Liquidated Damages, if applicable,
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 and Liquidated
Damages, if applicable, on the Designated Event Payment Date and no further
interest or Liquidated Damages 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 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;
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(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 and Liquidated
Damages, if any, 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 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
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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 Repurchase Upon Related Transactions Event.
If the Related Transactions are not consummated in all material
respects by August 31, 2000, or should the Related Agreement be terminated at
any time prior to such date (a "Related Transactions Event"), the Company shall
notify the holders of Convertible Subordinated Notes in writing of such
occurrence and shall make an offer (the "Related Transactions Offer") to
repurchase all Convertible Subordinated Notes then outstanding at a repurchase
price in cash (the "Related Transactions Payment") equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to, but excluding, the Related Transactions Payment Date (as
defined below).
Notice of a Related Transactions 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 10 days after
the occurrence of the Related Transactions Event 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 Related Transactions Offer shall remain open until a
specified date (the "Related Transactions Offer Termination Date") which is at
least 30 business days from the
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date such notice is mailed. During the period specified in such notice,
beneficial holders of Convertible Subordinated Notes may elect to tender their
Convertible Subordinated Notes in whole, but not in part, in exchange for cash
(it being understood that the Depository and any direct or indirect participants
who hold interests in Convertible Subordinated Notes on behalf of beneficial
holders may tender their Convertible Subordinated Notes in part to reflect
elections to redeem in whole by some but not all of the beneficial holders of
Convertible Subordinated Notes held through such direct or indirect participant
in the Depository or the Depository). 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 "Related Transactions Payment Date")
which shall be no earlier than five business days after the applicable Related
Transactions Offer Termination Date and no later than 40 days after the
applicable Related Transactions Event.
The notice, which shall govern the terms of the Related Transactions
Offer, shall include such disclosures as are required by law and shall state:
(a) that a Related Transactions Offer is being made pursuant to
this Section 4.09 and that all Convertible Subordinated Notes will be accepted
for payment;
(b) the Related Transactions Payment for each Convertible
Subordinated Note, the Related Transactions Offer Termination Date and the
Related Transactions Payment Date;
(c) that any Convertible Subordinated Note not accepted for
payment will continue to accrue interest and Liquidated Damages, if applicable,
in accordance with the terms thereof;
(d) that, unless the Company defaults on making the Related
Transactions Payment, any Convertible Subordinated Note accepted for payment
pursuant to the Related Transactions Offer shall cease to accrue interest and
Liquidated Damages, if applicable, on the Related Transactions Payment Date and
no further interest or Liquidated Damages shall accrue on or after such date;
(e) that holders electing to have Convertible Subordinated Notes
repurchased pursuant to a Related Transactions 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
Related Transactions Offer Termination Date and must complete any form letter of
transmittal proposed by the Company and acceptable to the Trustee and the Paying
Agent;
(f) 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 Related Transactions Offer Termination
Date, a facsimile transmission or letter setting 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;
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(g) that holders may elect to tender their Convertible
Subordinated Notes in the Related Transactions Offer in whole, but not in part;
(h) the instructions that holders must follow in order to tender
their Convertible Subordinated Notes; and
(i) that in the case of a Related Transactions Offer Termination
Date that is also an interest payment date, the interest payment and Liquidated
Damages, if any, 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 Related Transactions Offer Termination Date.
On the Related Transactions Offer Termination Date the Company shall
(i) accept for payment all Convertible Subordinated Notes properly tendered
pursuant to the Related Transactions Offer, (ii) deposit with the Paying Agent
money sufficient to pay the Related Transactions Payment with respect to all
Convertible Subordinated Notes 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 tendered to and accepted for
payment by the Company. On the Related Transactions Payment Date, the Paying
Agent shall mail or deliver to the holders of Convertible Subordinated Notes so
accepted, the Related Transactions Payment. Any Convertible Subordinated Notes
not so accepted shall be promptly mailed or delivered by the Company to the
holder thereof.
In the event that, after the Related Payment Redemption Date, less than
10% of the aggregate principal amount of the Convertible Subordinated Notes
remain outstanding, the Company may, at its option, redeem the remaining
Convertible Subordinated Notes, in whole, but not in part, at a price equal to
the Related Transaction Payment, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date fixed for their redemption by the Company (such
date to be a date no later than 30 days following the Related Transactions
Payment Date). The provisions of Sections 3.02, 3.04, 3.05 and 3.06 shall apply
to any such redemption.
The Related Transactions 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.
If the Related Transactions occur on or prior to August 31, 2000, the
Company shall furnish to the Trustee an Officers' Certificate specifying the
occurrence of such event.
SECTION 4.10 Taxes.
The Company shall, and shall cause each of its subsidiaries to, pay
prior to delinquency all taxes, assessments and government levies; provided,
however, that the Company shall not be required to pay or cause to be paid any
such tax, assessment or levy (A) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company and its subsidiaries
taken as a
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whole, or (B) if the amount, applicability or validity is being contested in
good faith by appropriate proceedings.
SECTION 4.11 Cash Maintenance.
During the period from the Issue Date to and including the Put
Expiration Date, the Company shall maintain cash and cash equivalents in an
aggregate amount equal to or greater than 103% of the aggregate principal amount
of the outstanding Convertible Subordinated Notes.
ARTICLE 5
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 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 and Liquidated Damages, if any, on all of the Convertible Subordinated
Notes and the performance of every covenant of the Convertible Subordinated
Notes and this Indenture and the Registration Agreement 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 penultimate
paragraph of Section 4.06 and conversion rights in accordance with Section 12.06
to the extent required by such Sections;
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(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.
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
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(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 or Liquidated Damages on the
Convertible Subordinated Notes when due (including any interest or Liquidated
Damages payable in connection with a repurchase pursuant to Section 4.06 or in
connection 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 clauses (d) and (e) 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 or the Related Transactions 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 comply with Section 4.11 or to provide
timely notice of any Designated Event in accordance with Section 4.06 or any
Related Transactions Event in accordance with Section 4.09; 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:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
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(iii) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors;
(v) 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 willful 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 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
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
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Trustee, by written notice to the Company, or the holders of at least 25% in
aggregate 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 and Liquidated
Damages, if any, 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 and Liquidated Damages, if any, 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 and Liquidated
Damages, if any, 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 and Liquidated Damages, if any, 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 or Liquidated Damages, if applicable, 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 or Liquidated Damages,
if applicable, on the Convertible Subordinated Notes (other than the non-payment
of principal of and premium, if any, and interest and Liquidated Damages, if
any, 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
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or amended without the consent of all holders of Convertible 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.
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
and Liquidated Damages, if any, on the Convertible Subordinated Note, on or
after the respective due dates expressed in the Convertible Subordinated
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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 and Liquidated Damages, if any, remaining unpaid on the
Convertible Subordinated Notes and interest on overdue principal and interest
and Liquidated Damages, if any, 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 and Liquidated Damages, if any, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Convertible Subordinated Notes for principal,
premium, if any, and interest and Liquidated Damages, if any,
respectively; and
Fourth: to the Company.
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Except as otherwise provided in Section 2.012, 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
(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.
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(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
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 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.
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(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 willful misconduct
(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
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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 or Liquidated
Damages, if any, 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 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.
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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 willful
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 and Liquidated Damages, if any, on Convertible
Subordinated 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
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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 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.
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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
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 and
Liquidated Damages, if any, 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,
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(ii) rights hereunder of holders of Convertible Subordinated Notes to receive
payments of principal of and premium, if any, and interest, and Liquidated
Damages, if any, 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 Liquidated Damages, if any, and premium, if any.
SECTION 8.03 Paying Agent to Repay Monies Held.
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 (including Liquidated Damages) 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 (including
Liquidated Damages) 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.
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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 (including
Liquidated Damages) 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:
(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
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(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):
(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, or Liquidated Damages 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 or Liquidated Damages 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 or
Liquidated Damages 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 or Liquidated Damages on the Convertible Subordinated Notes;
(g) waive a redemption payment with respect to any Convertible
Subordinated Notes;
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(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.
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.
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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.
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.
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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.
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
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(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.
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 March 1 of each year. The first
reporting date is the March 1 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
Facsimile: (610) 431-9967
Telephone: (610) 431-9600
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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.
5% Convertible Notes due 2007)
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.
ARTICLE 11
SUBORDINATION
SECTION 11.01 Agreement to Subordinate.
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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 and Liquidated Damages, if any, 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; 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, as their interests may
appear.
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 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
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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.
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 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.
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
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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 willful misconduct or gross
negligence of the Trustee.
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 (including
Liquidated Damages) on the Convertible Subordinated Notes in accordance with
their terms;
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(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 (including Liquidated Damages) on a Convertible Subordinated Note on
the due date, the failure is still a Default or Event of Default.
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.
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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 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.
SECTION 11.15 Permitted Payments.
Notwithstanding anything to the contrary in this Article 11, the
holders of Convertible Subordinated Notes may receive and retain at any time on
or prior to the Maturity Date (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.
SECTION 11.16 Seniority Prior to Put Expiration Date.
Notwithstanding anything to the contrary in this Article 11, on or
prior to the Put Expiration Date, the Convertible Subordinated Notes shall be
senior debt of the Company and shall rank equally
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in right of payment to all of the Company's existing and future unsecured Senior
Debt and senior in right of payment to all of the Company's existing and future
debt that provides that it is subordinated to the Convertible Subordinated
Notes. Without limiting the generality of the foregoing, payments made by the
Company to repurchase Convertible Subordinated Notes pursuant to a Related
Transactions Offer shall not be subordinated in right of payment to the prior
payment of Senior Debt.
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 or the Related
Transactions 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
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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 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.
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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 (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
and Liquidated Damages, if any, 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 or Liquidated Damages, if applicable, 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 or Liquidated Damages, if
applicable, 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 and Liquidated Damages, if any,
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
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Common Stock outstanding at the close of business on the Record Date (as defined
in Section 12.05(g)) 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.
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;
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(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
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)).
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(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 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
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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 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.
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(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 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.
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(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.
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.
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(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 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
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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,
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
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<PAGE> 76
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.
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
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<PAGE> 77
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 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
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<PAGE> 78
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;
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.
SECTION 12.11 Restriction on Common Stock Issuable Upon Conversion
(a) Shares of Common Stock to be issued upon conversion of
Convertible Subordinated Notes prior to the effectiveness of a Shelf
Registration Statement shall be physically delivered in certificated form to the
holders converting such Securities and the certificate representing such shares
of Common Stock shall bear the Restricted Common Stock Legend unless removed in
accordance with section 12.11(c).
(b) If (i) shares of Common Stock to be issued upon conversion of a
Convertible Subordinated Note prior to the effectiveness of a Shelf Registration
Statement are to be registered in a name other than that of the holder of such
Convertible Subordinated Note or (ii) shares of Common Stock represented by a
certificate bearing the Restricted Common Stock Legend are transferred
subsequently by such holder, then, unless the Shelf Registration Statement has
become effective and such shares are being transferred pursuant to the Shelf
Registration Statement, the holder must deliver to the transfer agent for the
Common Stock a certificate in substantially the form of Exhibit E as to
compliance with the restrictions on transfer applicable to such shares of Common
Stock and neither the transfer agent nor the registrar for the Common Stock
shall be required to register any transfer of such Common Stock not so
accompanied by a properly completed certificate.
(c) Except in connection with a Shelf Registration Statement, if
certificates representing shares of Common Stock are issued upon the
registration of transfer, exchange or replacement of any other certificate
representing shares of Common Stock bearing the Restricted Common Stock Legend,
or if a request is made to remove such Restricted Common Stock Legend from
certificates representing shares of Common Stock, the certificates so issued
shall bear the Restricted Common Stock Legend, or the Restricted Common Stock
Legend shall not be removed,
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<PAGE> 79
as the case may be, unless there is delivered to the Company such satisfactory
evidence, which, in the case of a transfer made pursuant to Rule 144 under the
Securities Act, may include an opinion of counsel pursuant to the laws in the
State of New York, as may be reasonably required by the Company, that neither
the legend nor the restrictions on transfer set forth therein are required to
ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144
or Regulation S under the Securities Act or that such shares of Common Stock are
securities that are not "restricted" within the meaning of Rule 144 under the
Securities Act. Upon provision to the Company of such reasonably satisfactory
evidence, the Company shall cause the transfer agent for the Common Stock to
countersign and deliver certificates representing shares of Common Stock that do
not bear the legend.
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<PAGE> 80
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 /s/ Kenneth Joyce
------------------------------------
Name: Kenneth T. Joyce
Title: Chief Financial Officer
STATE STREET BANK AND TRUST COMPANY
By /s/ Michael D'Angelo
------------------------------------
Name: Michael D'Angelo
Title: Vice President
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<PAGE> 81
EXHIBIT A
(Face of Security)
[Global Securities Legend]
[The following legend shall appear on the face of each Global Security:
THIS CONVERTIBLE SUBORDINATED NOTE IS A GLOBAL SECURITY 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 Security
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 SECURITY 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.]
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT
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THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO
THE SECOND ANNIVERSARY OF THE ISSUE HEREOF (OR ANY PREDECESSOR SECURITY HEREOF)
OR (Y) BY ANY HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144
UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) IN AN OFFSHORE TRANSACTION
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (4) TO AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION AND THAT, PRIOR TO
SUCH TRANSFER, DELIVERS TO THE COMPANY AND THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER MAY BE
OBTAINED FROM THE TRUSTEE), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT
OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS
AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER OR (2) AN INSTITUTIONAL ACCREDITED INVESTOR AND THAT IT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3)
NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN
ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2) OF RULE 902 UNDER)
REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE THE HOLDER HEREOF WILL NOT,
DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS WITH REGARD TO THIS
SECURITY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY EXCEPT AS
PERMITTED BY THE SECURITIES ACT.
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<PAGE> 83
No. _______ $ _________
CUSIP ______*
AMKOR TECHNOLOGY, INC.
5% CONVERTIBLE SUBORDINATED NOTE DUE 2007
promises to pay to
or registered assigns,
the principal sum of Dollars on March 15, 2007
Interest Payment Dates: March 15 and September 15, commencing September 15, 2000
Regular Record Dates: March 1 and September 1
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 Title:
Dated:
(SEAL)
- -------------------------------
*Global Security: 031652 AF7
Definitive Security: 031652 AG5
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<PAGE> 84
(Back of Security)
AMKOR TECHNOLOGY, INC.
5% CONVERTIBLE SUBORDINATED NOTE DUE 2007
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 March 15 and September 15 of each year,
beginning September 15, 2000. 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 March 22, 2000. Interest
(including any Liquidated Damages) 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 (and Liquidated
Damages, if any) 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 March 1 or September 1 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 (and Liquidated Damages,
if any) 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 (including
Liquidated Damages, if any) 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 (including Liquidated Damages, if any)
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 March 22, 2000 (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 $225,000,000 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 $33,750,000.
Capitalized terms not defined below have the same meaning as is given to them in
the Indenture.
5. OPTIONAL AND PROVISIONAL REDEMPTION. On or after March 20, 2003, 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 twelve
month period beginning March 15 of each year indicated (March 20, 2003 through
March 14, 2004, in the case of the first such year) plus accrued and unpaid
interest (and Liquidated Damages, if any) to, but excluding, the date fixed for
redemption:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2003........................................................ 102.857%
2004........................................................ 102.143%
2005........................................................ 101.429%
2006........................................................ 100.714%
</TABLE>
and 100% at March 15, 2007.
After September 20, 2001 and prior to March 20, 2003, the Company may
redeem the Convertible Subordinated Notes at the Company's option in whole or in
part (in any integral multiple of $1,000), at any time from time to time (a
"Provisional Redemption") at a redemption price equal to 103.571% of the
principal amount of the Convertible Subordinated Notes redeemed plus accrued and
unpaid interest (including Liquidated Damages), if any, to but excluding the
date of redemption (the "Provisional Redemption Date") if the closing price of
the Common Stock has equaled or exceeded 150% of the Conversion Price then in
effect for at least 20 trading days within a period of 30 consecutive trading
days prior to the date of mailing of the notice of Provisional Redemption (the
"Notice Date").
Upon any such Provisional Redemption, the Company shall make an
additional payment in cash (the "Make-Whole Payment") with respect to the
Convertible Subordinated Notes called for
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redemption in an amount equal to the present value of the aggregate value of the
interest payments and Liquidated Damages, if any, that would thereafter have
been payable on the Convertible Subordinated Notes from the Provisional
Redemption Date to but excluding March 20, 2003 (the "Additional Period"). The
present value will be calculated by the Company (which determination shall be
conclusive absent manifest error) using the bond equivalent yield on U.S.
Treasury notes or bills having a term nearest in length to that of the
Additional Period as of the day immediately preceding Notice Date. The Company
shall make the Make-Whole Payment on all Convertible Subordinated Notes called
for Provisional Redemption, including those Convertible Subordinated Notes
converted into Common Stock between the Notice Date and the Provisional
Redemption Date.
Notice of redemption will be mailed by first class mail at least 15
days (in the case of a Provisional Redemption at least 30 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 basis by lot or by any other
method that the Trustee considers fair and appropriate. On and after the
redemption date, interest (and Liquidated Damages, if any) 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 (and Liquidated Damages, if any) 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 (and Liquidated
Damages, if any) 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. RELATED TRANSACTIONS EVENT. Upon a Related Transactions Event, the
Company shall make a Related Transactions 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 (and Liquidated Damages, if any) to, but excluding, the date of
repurchase, such offer to be made as provided in the Indenture. To accept the
Related Transactions Offer, the holder hereof must comply with the terms
thereof, including surrendering this Convertible Subordinated Note, with the
"Option of Holder to Elect Repurchase"
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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
Related Transactions Offer mailed to holders as provided in the Indenture, prior
to termination of the Related Transactions Offer.
8. SUBORDINATION. The Company's payment of the principal of, premium,
if any, and interest (including Liquidated Damages, if any) 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 (including
Liquidated Damages, if any) 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.
9. 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.
10. PERSONS DEEMED OWNERS. The registered holder of a Convertible
Subordinated Note may be treated as its owner for all purposes.
11. 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
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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, or
Liquidated Damages 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
or Liquidated Damages 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 or Liquidated Damages 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 or Liquidated Damages 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)), 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.
12. 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 or Liquidated Damages 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 or the Related Transactions 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 maintain cash and cash equivalents in accordance with the Indenture
or to provide timely notice of a
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Designated Event or a Related Transactions 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 and Liquidated Damages, if any,
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 or Liquidated Damages, if applicable) if it determines that
withholding notice is in their interests. The Company must furnish annual
compliance certificates to the Trustee.
13. 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.
14. 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.
15. AUTHENTICATION. This Convertible Subordinated Note shall not be
valid until authenticated by the manual signature of the Trustee or an
authenticating agent.
16. 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.
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17. 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 the Maturity Date (or in case this Convertible Subordinated Note or any
portion hereof 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 $57.34 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 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 and Liquidated
Damages, if any, 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 or
Liquidated Damages 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.
18. REGISTRATION AGREEMENT. The holder of this Convertible Subordinated
Note is entitled to the benefits of a Registration Agreement, dated March 22,
2000, between the Company and the Initial Purchasers (the "Registration
Agreement"). Pursuant to the Registration Agreement the Company has agreed for
the benefit of the holders of the Convertible Subordinated Notes and the Common
Stock issued and issuable upon conversion of the Convertible Subordinated Notes,
that
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(i) it will, at its cost, within 90 days after the Issue Date, file a shelf
registration statement (the "Shelf Registration Statement") with the Securities
and Exchange Commission (the "Commission") with respect to resales of the
Convertible Subordinated Notes and the Common Stock issuable upon conversion
thereof, (ii) the Company will use its best efforts to cause such Shelf
Registration Statement to be declared effective by the Commission under the
Securities Act within 180 days after the Issue Date and (iii) the Company will
keep such Shelf Registration Statement continuously effective under the
Securities Act until the earliest of (a) the second anniversary of the Issue
Date or, if later, the second anniversary of the last date on which any
Convertible Subordinated Notes are issued upon exercise of the Initial
Purchasers' over-allotment option, (b) the date on which the Convertible
Subordinated Notes or the Common Stock issuable upon conversion thereof may be
sold to Persons who are not "affiliates" (as defined in Rule 144) of the Company
pursuant to paragraph (k) of Rule 144 (or any successor provision) promulgated
by the Commission under the Securities Act, (c) the date as of which the
Convertible Subordinated Notes or the Common Stock issuable upon conversion
thereof have been transferred pursuant to Rule 144 under the Securities Act (or
any similar provision then in force) and (d) the date as of which all the
Convertible Subordinated Notes or the Common Stock issuable upon conversion
thereof have been sold pursuant to such Shelf Registration Statement.
If the Shelf Registration Statement (i) is not filed with the
Commission on or prior to 90 days, or has not been declared effective by the
Commission within 180 days, after the Issue Date or (ii) is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
immediately by a replacement shelf registration statement filed and declared
effective) or cease to be usable (including, without limitation, as a result of
a Suspension Period as defined below) for the offer and sale of Transfer
Restricted Securities (as defined below) for a period of time (including any
Suspension Period) which shall exceed 60 days in the aggregate in any 12-month
period during the period beginning on the Issue Date and ending on the second
anniversary of the Issue Date or, if later, the second anniversary of the last
date on which any Convertible Subordinated Notes are issued upon exercise of the
Initial Purchasers' over-allotment option (each such event referred to in
clauses (i) and (ii) being referred to herein as a "Registration Default"), the
Company will pay liquidated damages ("Liquidated Damages") to each holder of
Transfer Restricted Securities which has complied with its obligations under the
Registration Agreement. The amount of Liquidated Damages payable during any
period in which a Registration Default shall have occurred and be continuing is
that amount which is equal to one-quarter of one percent (25 basis points) per
annum per $1,000 principal amount of Securities and $2.50 per annum per 17.4398
shares of Common Stock (subject to adjustment from time to time in the event of
a stock split, stock recombination, stock dividend and the like) constituting
Transfer Restricted Securities for the first 90 days during which a Registration
Default has occurred and is continuing and one-half of one percent (50 basis
points) per annum per $1,000 principal amount of Securities and $5.00 per annum
per 17.4398 shares of Common Stock (subject to adjustment as set forth above)
constituting Transfer Restricted Securities for any additional days during which
such Registration Default has occurred and is continuing. The Company will pay
all accrued Liquidated Damages by wire transfer of immediately available funds
or by federal funds check on each Damages Payment Date (as defined in the
Registration Agreement), and Liquidated Damages will be calculated on the basis
of a 360-day year
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consisting of twelve 30-day months. Following the cure of a Registration
Default, Liquidated Damages will cease to accrue with respect to such
Registration Default.
"Transfer Restricted Securities" means each Convertible Subordinated
Note and each share of Common Stock issued on conversion thereof until the date
on which such Convertible Subordinated Note or share, as the case may be, (i)
has been transferred pursuant to the Shelf Registration Statement or another
registration statement covering such Convertible Subordinated Note or share
which has been filed with the Commission pursuant to the Securities Act, in
either case after such registration statement has become and while such
registration statement is effective under the Securities Act, (ii) has been
transferred pursuant to Rule 144 under the Securities Act (or any similar
provision then in force), or (iii) may be sold or transferred pursuant to Rule
144(k) under the Securities Act (or any similar provision then in force).
Pursuant to the Registration Agreement, the Company may suspend the use
of the prospectus which is a part of the Shelf Registration Statement for a
period not to exceed 30 days in any three-month period or for three periods not
to exceed an aggregate of 90 days in any twelve-month period under certain
circumstances (each, a "Suspension Period"); provided that the existence of a
Suspension Period will not prevent the occurrence of a Registration Default or
otherwise limit the obligation of the Company to pay Liquidated Damages.
The above description of certain provisions of the Registration
Agreement is qualified by reference to, and is subject in its entirety to, the
more complete description thereof contained in the Registration Agreement.
The Company will furnish to any holder upon written request and without
charge a copy of the Indenture and the Registration Agreement. Requests may be
made to: Corporate Secretary, Amkor Technology, Inc., 1345 Enterprise Drive,
West Chester, PA 19380.
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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, Liquidated Damages 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):
______________________________________
(Name)
______________________________________
(Street Address)
______________________________________
(City, State and Zip Code)
Signature Guarantee:___________________________
_______________________________________________
_______________________________________________
_______________________________________________
Signature(s)
Principal amount to be converted (if less than all):
$___,000
_______________________________________________________
Social Security or other Taxpayer Identification Number
[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).]
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ASSIGNMENT FORM
To assign this Convertible Subordinated Note, fill in the form below:
(I) or (we) assign and transfer this Convertible Subordinated Note to
___________________________________________________
(Insert assignee's social security or tax I.D. no.)
___________________________________________________
___________________________________________________
___________________________________________________
(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.
Your Signature: ______________________________________________
(Sign exactly as your name appears on the
other side of this Convertible Subordinated Note)
Date: __________________________
Medallion Signature Guarantee: _________________________________
[FOR INCLUSION ONLY IF THIS CONVERTIBLE SUBORDINATED NOTE BEARS A RESTRICTED
SECURITIES LEGEND] In connection with any transfer of any of the Convertible
Subordinated Notes evidenced by this certificate which are "restricted
securities" (as defined in Rule 144 (or any successor thereto) under the
Securities Act), the undersigned confirms that such Convertible Subordinated
Notes are being transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
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(3) [ ] pursuant to and in compliance with Regulation S under the
Securities Act of 1933; or
(4) [ ] to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act
of 1933) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the
form of which letter can be obtained from the Trustee); or
(5) [ ] pursuant to an exemption from registration under the
Securities Act of 1933 provided by Rule 144 thereunder.
Unless one of the boxes is checked, the Registrar will refuse to
register any of the Convertible Subordinated Notes evidenced by this
certificate in the name of any person other than the registered holder
thereof; provided, however, that if box (3), (4) or (5) is checked, the
Trustee may require, prior to registering any such transfer of the
Convertible Subordinated Notes, such certifications and other
information, and if box (5) is checked such legal opinions, as the
Company has reasonably requested in writing, by delivery to the Trustee
of a standing letter of instruction, to confirm that such transfer is
being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of
1933; provided that this paragraph shall not be applicable to any
Convertible Subordinated Notes which are not "restricted securities"
(as defined in Rule 144 (or any successor thereto) under the Securities
Act).
Your Signature: ______________________________________________
(Sign exactly as your name appears on the
other side of this Convertible Subordinated Note)
Date: __________________________
Medallion Signature Guarantee: _________________________________
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OPTION OF HOLDER TO ELECT REPURCHASE
If you wish to have this Convertible Subordinated Note repurchased by
the Company pursuant to Section 4.06 or 4.09 of the Indenture, as the case may
be, 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)
Medallion Signature Guarantee:
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EXHIBIT B
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM GLOBAL SECURITY OR DEFINITIVE SECURITY
TO DEFINITIVE SECURITY
(Transfers pursuant to ss. 2.06(a)(i) or ss. 2.06(a)(ii) of the Indenture)
State Street Bank and Trust Company, as Registrar
Attn: Corporate Trust Department
Re: Amkor Technology, Inc. 5% Convertible Subordinated Notes
Due 2007 (the "Convertible Subordinated Notes)
Reference is hereby made to the Indenture dated as of March 22, 2000
(the "Indenture") between Amkor Technology, Inc. and State Street Bank and Trust
Company, as Trustee. Capitalized terms used but not defined herein shall have
the meanings given them in the Indenture.
This letter relates to U.S. $__________ aggregate principal amount of
Convertible Subordinated Notes which are held [in the form of a [Definitive]
[Global Security (CUSIP No. _____________)]* in the name of [name of transferor]
(the "Transferor") to effect the transfer of the Convertible Subordinated Notes.
In connection with such request, and in respect of such Convertible
Subordinated Notes, the Transferor does hereby certify that such Convertible
Subordinated Notes are being transferred in accordance with (i) the transfer
restrictions set forth in the Convertible Subordinated Notes and the Indenture
and (ii) to a transferee that the Transferor reasonably believes is an
institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the U.S. Securities Act of 1933, as amended) (an
"Institutional Accredited Investor") which is acquiring such Convertible
Subordinated Notes for its own account or for one or more accounts, each of
which is an Institutional Accredited Investors, over which it exercises sole
investment discretion and (iii) in accordance with applicable securities laws of
any state of the United States.
[Name of Transferor],
By:
Name:
Title:
Dated:
- --------------------
*Insert, if appropriate.
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EXHIBIT C
FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE
(Transfers pursuant to ss. 2.06(a)(i) and ss. 2.06(a)(ii))
State Street Bank and Trust Company, as Registrar
Attn: Corporate Trust Department
Re: Amkor Technology, Inc. 5% Convertible Subordinated Notes
Due 2007 (the "Convertible Subordinated Notes")
Reference is hereby made to the Indenture dated as of March 22, 2000
(the "Indenture") between Amkor Technology, Inc., a Delaware corporation (the
"Company"), and State Street Bank and Trust Company, as Trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings given them
in the Indenture.
In connection with our proposed purchase of $___________________
aggregate principal amount of the Convertible Subordinated Notes, which are
convertible into shares of common stock ("Common Stock") of the Company, we
confirm that:
We understand that the Convertible Subordinated Notes and the Common Stock
issuable upon conversion thereof have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and may not be sold except as
permitted in the following sentence. We understand and agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated, (x)
that such Convertible Subordinated Notes are being transferred to us in a
transaction not involving any public offering within the meaning of the
Securities Act, (y) that if we should resell, pledge or otherwise transfer any
such Convertible Subordinated Notes or any shares of Common Stock issuable upon
conversion thereof prior to the later of (I) the expiration of the holding
period under Rule 144(k) (or any successor thereto) under the Securities Act
which is applicable to such Convertible Subordinated Notes or shares of Common
Stock, as the case may be, or (II) within three months after we cease to be an
affiliate (within the meaning of Rule 144 under the Securities Act) of the
Company, such Convertible Subordinated Notes or the Common Stock issuable upon
conversion thereof may be resold, pledged or transferred only (i) to the
Company, (ii) so long as such Convertible Subordinated Notes are eligible for
resale pursuant to Rule 144A under the Securities Act ("Rule 144A"), to a person
whom we reasonably believe is a "qualified institutional buyer" (as defined in
Rule 144A) ("QIB") that purchases for its own account or for the account of a
QIB to whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A (as indicated by the box checked by the transferor on the
Assignment Form on the reverse of the certificate for the Convertible
Subordinated Notes), it being understood that the Common Stock is not eligible
for resale pursuant to Rule 144A, (iii) in an offshore transaction (as defined
in Regulation S under the Securities Act) in accordance with Regulation S under
the Securities Act (as indicated by the box checked by the transferor on the
Assignment Form on the reverse of the certificate for the Convertible
Subordinated Notes or on a comparable Assignment Form for the Common Stock
issuable upon conversion thereof), (iv) to an institution that is an
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"accredited investor" as defined in Rule 501 (a) (1), (2), (3) or (7) under the
Securities Act (an "Institutional Accredited Investor") (as indicated by the box
checked by the transferor on the Assignment Form on the reverse of the
certificate for the Convertible Subordinated Notes or on a comparable Assignment
Form for the Common Stock issuable upon conversion thereof) that is acquiring
the securities for its own account or for the account of one or more other
Institutional Accredited Investors over which it exercises sole investment
discretion and that prior to such transfer, delivers a signed letter to the
Company and the Trustee (or the transfer agent in the case of Common Stock
issuable upon conversion thereof) certifying that it and each such account is
such an Institutional Accredited Investor and is acquiring the Convertible
Subordinated Notes or the Common Stock issuable upon conversion thereof for
investment purposes and not for distribution and agreeing to the restrictions on
transfer of the Convertible Subordinated Notes or the Common Stock issuable upon
conversion thereof, (v) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 (if applicable) under the Securities Act (as
indicated by the box checked transferor on the Assignment Form on the reverse of
the certificate for the Convertible Subordinated Notes or a comparable
Assignment Form for the Common Stock issuable upon conversion thereof), or (vi)
pursuant to an effective registration statement under the Securities Act, in
each case in accordance with any applicable securities laws of any state of the
United States, and we will notify any purchaser of the Convertible Subordinated
Notes or the Common Stock issuable upon conversion thereof from us of the above
resale restrictions, if then applicable. We further understand that in
connection with any transfer of the Convertible Subordinated Notes or the Common
Stock issuable upon conversion thereof (other than a transfer pursuant to clause
(vi) above) by us that the Company and the Trustee (or the transfer agent in the
case of Common Stock issuable upon conversion thereof) may request, and if so
requested we will furnish, such certificates and other information and, in the
case of a transfer pursuant to clause (v) above, a legal opinion as they may
reasonably require to confirm that any such transfer complies with the foregoing
restrictions. Finally, we understand that in any case we will not directly or
indirectly engage in any hedging transactions with regard to the Convertible
Subordinated Notes or the Common Stock issuable upon conversion of the
Convertible Subordinated Notes except as permitted by the Securities Act.
2. We are able to fend for ourselves in connection with our purchase of
the Convertible Subordinated Notes, we have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Convertible Subordinated Notes, and we and any
accounts for which we are acting are each able to bear the economic risk of our
or its investment and can afford the complete loss of such investment.
3. We understand that the Company and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations, agreements and
warranties and we agree that if any of the acknowledgments, representations,
agreements or warranties made or deemed to have been made by us by our purchase
of the Convertible Subordinated Notes, for our own account or for one or more
accounts as to each of which we exercise sole investment discretion, are no
longer accurate, we shall promptly notify the Company.
4. With respect to the certificates representing Convertible
Subordinated Notes we are purchasing, we understand that such certificates will
be in definitive registered form and that the
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notification requirement referred to in 1 above requires that, until the
expiration of the holding period with respect to sales of the Convertible
Subordinated Notes under clause (k) of Rule 144 under the Securities Act, such
Convertible Subordinated Notes will bear a legend substantially to the following
effect:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE EXPIRATION OF THE
SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO)
OR (Y) BY ANY HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144
UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) IN AN OFFSHORE TRANSACTION
(AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT, (4) TO AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION AND THAT, PRIOR TO
SUCH TRANSFER, DELIVERS TO THE COMPANY AND THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER MAY BE
OBTAINED FROM THE TRUSTEE), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT
OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS
AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER OR (2) AN INSTITUTIONAL ACCREDITED INVESTOR AND THAT IT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3)
NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN
ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2) OF RULE 902 UNDER)
REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE THE HOLDER HEREOF WILL NOT,
DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS WITH REGARD TO THIS
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<PAGE> 101
SECURITY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY EXCEPT AS
PERMITTED BY THE SECURITIES ACT."
5. With respect to certificates representing shares of Common Stock
issuable upon conversion of the Convertible Subordinated Notes, we understand
that the notification requirement referred to in 1 above requires that, until
the expiration of the holding period with respect to sales of such Common Stock
under clause (k) of Rule 144 under the Securities Act, such certificates will
bear a legend substantially to the effect set forth as Exhibit D to the
Indenture and that a copy of such legend may be obtained from the Trustee.
6. We are acquiring the Convertible Subordinated Notes purchased by us
for investment purposes, and not for distribution, for our own account or for
one or more accounts as to each of which we exercise sole investment discretion
and we are and each such account is an Institutional Accredited Investor.
7. You and the Company are entitled to rely on this letter and you and
the Company are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
(Name of Purchaser)
By:
Dated:
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<PAGE> 102
EXHIBIT D
FORM OF RESTRICTED COMMON STOCK LEGEND
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE EXPIRATION OF THE
SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO)
OR (Y) BY ANY HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144
UNDER THE SECURITIES ACT) OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE, OTHER THAN (1) TO THE
COMPANY, (2) IN AN OFFSHORE TRANSACTION (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (3) TO
AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED
INVESTOR") THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND THAT, PRIOR TO SUCH TRANSFER, DELIVERS TO THE COMPANY AND THE
TRANSFER AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE
FORM OF WHICH LETTER MAY BE OBTAINED FROM THE COMPANY OR THE TRANSFER AGENT),
(4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES
FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) AN INSTITUTIONAL ACCREDITED
INVESTOR AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT
FOR DISTRIBUTION OR (2) NOT A U.S. PERSON AND IS OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH
(k)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. IN ANY CASE THE
HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING
TRANSACTION WITH REGARD TO THIS SECURITY EXCEPT AS PERMITTED BY THE SECURITIES
ACT."
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EXHIBIT E
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
OF RESTRICTED COMMON STOCK
(Transfers pursuant to ss. 12.11(c) of the Indenture)
[NAME AND ADDRESS OF COMMON STOCK TRANSFER AGENT]
Re: Amkor Technology, Inc. 5% Convertible Subordinated Notes
Due 2007 (the "Convertible Subordinated Notes")
Reference is hereby made to the Indenture dated as of March 22, 2000
(the "Indenture") between Amkor Technology, Inc. and State Street Bank and Trust
Company, as Trustee. Capitalized terms used but not defined herein shall have
the meanings given them in the Indenture.
This letter relates to _________ shares of Common Stock represented by
the accompanying certificate(s) that were issued upon conversion of Convertible
Subordinated Notes and which are held in the name of [name of transferor] (the
"Transferor") to effect the transfer of such Common Stock.
In connection with the transfer of such shares of Common Stock, the
undersigned confirms that such shares of Common Stock are being transferred:
CHECK ONE BOX BELOW
(1) [ ] to the Company; or
(2) [ ] pursuant to and in compliance with Regulation S under the
Securities Act of 1933; or
(3) [ ] to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act
of 1933) that has furnished to the transfer agent a signed
letter containing certain representations and agreements
(the form of which letter can be obtained from the Company
or transfer agent); or
(4) [ ] pursuant to an exemption from registration under the
Securities Act of 1933 provided by Rule 144 thereunder.
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<PAGE> 104
Unless one of the boxes is checked, the transfer agent will refuse to
register any of the Common Stock evidenced by this certificate in the name of
any person other than the registered holder thereof; provided, however, that if
box (2), (3) or (4) is checked, the transfer agent may require, prior to
registering any such transfer of the Common Stock such certifications and other
information, and if box (4) is checked such legal opinions, as the Company has
reasonably requested in writing, by delivery to the transfer agent of a standing
letter of instruction, to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933.
[Name of Transferor],
By
Name:
Title:
Dated:
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<PAGE> 1
Exhibit 4.6
AMKOR TECHNOLOGY, INC.
5% Convertible Subordinated Notes due 2007
REGISTRATION AGREEMENT
New York, New York
March 22, 2000
Salomon Smith Barney Inc.
As Representative of the Initial Purchasers Named in
Schedule I to the Purchase Agreement (as defined below)
388 Greenwich Street
New York, New York 10003
Ladies and Gentlemen:
Amkor Technology, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell (such issuance and sale, the "Initial Placement") to
the several parties named in Schedule I to the Purchase Agreement (the "Initial
Purchasers") for whom you (the "Representative") are acting as representative,
upon the terms set forth in a purchase agreement dated March 16, 2000 (the
"Purchase Agreement"), $225,000,000 aggregate principal amount (plus up to an
additional $33,750,000 aggregate principal amount to cover over-allotments, if
any) of its 5% Convertible Subordinated Notes due 2007 (the "Securities"). The
Securities will be convertible into shares of Common Stock (as defined herein),
at the conversion price set forth in the Offering Memorandum (as defined
herein), as the same may be adjusted from time to time pursuant to the Indenture
(as defined herein) referred to below. As an inducement to you to enter into the
Purchase Agreement and in satisfaction of a condition to your obligations
thereunder, the Company agrees with you, (i) for your benefit and (ii) for the
benefit of the holders from time to time of the Securities and the Common Stock
issuable upon conversion of the Securities (including you), as follows:
1. Definitions. Capitalized terms used herein without definition shall
have the respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized terms shall have the following
meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
"Affiliate" of any specified person means any other person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control
<PAGE> 2
with"), as used with respect to any person, shall mean the possession, directly
or indirectly, of the power either (a) to direct or cause the direction of the
management or policies of such person, whether in the case of each of (a) and
(b), through the ownership of voting securities or by agreement or otherwise or
(b) to vote 10% or more of the securities having ordinary voting power for the
election of director of such person.
"Business Day" has the meaning set forth in the Indenture.
"Closing Date" means March 22, 2000.
"Common Stock" means the common stock, par value $.001 per share, of
the Company, as it exists on the date of this Agreement and any other shares of
capital stock or other securities of the Company into which such Common Stock
may be reclassified or changed, together with any and all other securities which
may from time to time be issuable upon conversion of Securities.
"Damages Payment Date" means, with respect to the Securities or the
Common Stock issuable upon conversion thereof, as applicable, each Interest
Payment Date; and in the event that any Security, or portion thereof, is called
for redemption or surrendered for purchase by the Company and not withdrawn
pursuant to a Designated Event Offer (as defined in the Indenture), a
Provisional Redemption (as defined in the Indenture) or a Special Event
Redemption (as defined in the Indenture), the relevant redemption date,
Designated Event Payment Date (as defined in the Indenture), Provisional
Redemption Date (as defined in the Indenture) or Special Redemption Date (as
defined in the Indenture) as the case may be, shall also be a Damages Payment
Date with respect to such Security, or portion thereof, unless the Indenture
provides that accrued and unpaid interest on the Security (or portion thereof)
to be redeemed or repurchased, as the case may be, is to be paid to the person
who was the Holder thereof on a record date prior to such redemption date,
Provisional Redemption Date, Special Redemption Date or Designated Event Payment
Date, as the case may be, in which case the Damages Payment Date shall be the
date on which interest is payable to such Record Holder.
"Default Rate" means the rate of interest payable with respect to
overdue amounts on the Securities pursuant to Section 4.01 of the Indenture.
"DTC" has the meaning set forth in Section 3(k) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Final Maturity Date" means March 15, 2007.
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<PAGE> 3
"Holder" means a person who is a holder or beneficial owner (including
the Initial Purchasers) of any Securities or shares of Common Stock issued upon
conversion of Securities; provided that, unless otherwise expressly stated
herein, only registered holders of Securities or Common Stock issued on
conversion thereof shall be counted for purposes of calculating any proportion
of holders entitled to take any action or give notice pursuant to this
Agreement.
"Indenture" means the Indenture relating to the Securities dated as of
March 22, 2000, between the Company and State Street Bank and Trust Company, as
trustee, as the same may be amended from time to time in accordance with the
terms thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Initial Purchasers" has the meaning set forth in the preamble hereto.
"Interest Payment Date" shall mean each September 15 and March 15.
"Liquidated Damages" has the meaning set forth in Section 2(e) hereof.
"Majority Holders" means the Holders of a majority of the then
outstanding aggregate principal amount of Securities registered under a Shelf
Registration Statement; provided that Holders of Common Stock issued upon
conversion of Securities shall be deemed to be Holders of the aggregate
principal amount of Securities from which such Common Stock was converted; and
provided, further, that Securities or Common Stock which have been sold or
otherwise transferred pursuant to the Shelf Registration Statement shall not be
included in the calculation of Majority Holders.
"Majority Underwriting Holders" means, with respect to any Underwritten
Offering, the Holders of a majority of the then outstanding aggregate principal
amount of Securities registered under any Shelf Registration Statement whose
Securities are or are to be included in such Underwritten Offering; provided
that Holders of Common Stock issued upon conversion of Securities shall be
deemed to be Holders of the aggregate principal amount of Securities from which
such Common Stock was converted.
"Managing Underwriters" means the Underwriter or Underwriters that
shall administer an Underwritten Offering.
"NASD" has the meaning set forth in Section 3(i) hereof.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Exhibit A
hereto.
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<PAGE> 4
"Offering Memorandum" means the Final Memorandum as defined in the
Purchase Agreement.
"Person" and "person" have the meaning set forth in the Indenture.
"Prospectus" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or Common Stock issuable upon
conversion thereof covered by such Shelf Registration Statement, and all
amendments and supplements to such prospectus, including all documents
incorporated or deemed to be incorporated by reference in such prospectus.
"Purchase Agreement" has the meaning set forth in the preamble hereto.
"Record Holder" means (i) with respect to any Damages Payment Date
which occurs on an Interest Payment Date, each person who is registered on the
books of the registrar as the holder of Securities at the close of business on
the record date with respect to such Interest Payment Date and (ii) with respect
to any Damages Payment Date relating to the Common Stock issued upon conversion
thereof, each person who is a holder of record of such Common Stock fifteen days
prior to the Damages Payment Date.
"Registration Default" has the meaning set forth in Section 2(e)
hereof.
"Representative" has the meaning set forth in the preamble thereto.
"Rule 144" means Rule 144 (or any successor provision) under the Act.
"SEC" means the Securities and Exchange Commission.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to Section
2 hereof.
"Shelf Registration Period" has the meaning set forth in Section 2(c)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
of the Company pursuant to the provisions of Section 2 hereof which covers all
of the Securities and the Common Stock issuable upon conversion thereof, as
applicable, on Form S-3 or on another appropriate form for an offering to be
made on a delayed or continuous basis pursuant to Rule 415 under the Act, or any
similar rule that may be adopted by the SEC,
4
<PAGE> 5
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all documents incorporated or deemed to be
incorporated by reference therein.
"Suspension Period" has the meaning set forth in Section 2(d) hereof.
"Transfer Restricted Securities" means each Security and each share of
Common Stock issuable or issued upon conversion thereof until the date on which
such Security or share of Common Stock, as the case may be, (i) has been
transferred pursuant to the Shelf Registration Statement or another registration
statement covering such Security or share of Common Stock which has been filed
with the SEC pursuant to the Act, in either case after such registration
statement has become effective and while such registration statement is
effective under the Act, (ii) has been transferred pursuant to Rule 144 under
the Act (or any similar provision then in force) or (iii) may be sold or
transferred pursuant to Rule 144(k) under the Act (or any successor provision
then in force).
"Trustee" means the trustee with respect to the Securities under the
Indenture.
"Underwriter" means any underwriter of Securities or Common Stock
issuable upon conversion thereof in connection with an offering thereof under a
Shelf Registration Statement.
"Underwritten Offering" means an offering in which the Securities or
Common Stock issued upon conversion thereof are sold to an Underwriter or with
the assistance of an Underwriter for reoffering to the public.
All references in this Agreement to financial statements and schedules
and other information which is "contained", "included", or "stated" in the Shelf
Registration Statement, any preliminary Prospectus or Prospectus (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
or deemed to be incorporated by reference in such Shelf Registration Statement,
preliminary Prospectus or Prospectus, as the case may be; and all references in
this Agreement to amendments or supplements to the Shelf Registration Statement,
any preliminary Prospectus or Prospectus shall be deemed to mean and include the
filing of any document under the Exchange Act, after the date of such Shelf
Registration Statement, preliminary Prospectus or Prospectus, as the case may
be, which is incorporated or deemed to be incorporated by reference therein.
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<PAGE> 6
2. Shelf Registration Statement.
(a) The Company shall prepare and, not later than 90 days following the
Closing Date, shall file with the SEC a Shelf Registration Statement with
respect to resales of the Securities and the Common Stock issuable upon
conversion thereof by the Holders from time to time in accordance with the
methods of distribution elected by such Holders and set forth in such Shelf
Registration Statement and thereafter shall use its best efforts to cause such
Shelf Registration Statement to be declared effective under the Act within 180
days after the Closing Date; provided that if any Securities are issued upon
exercise of the over-allotment option granted to the Initial Purchasers in the
Purchase Agreement and the date on which such Securities are issued occurs after
the Closing Date, the Company will take such steps, prior to the effective date
of the Shelf Registration Statement, to ensure that such Securities and Common
Stock issuable upon conversion thereof are included in the Shelf Registration
Statement on the same terms as the Securities issued on the Closing Date. The
Company shall supplement or amend the Shelf Registration Statement if required
by the rules, regulations or instructions applicable to the registration form
used by the Company for the Shelf Registration Statement, if required by the
Act, the Exchange Act or the SEC.
(b) (1) Not less than 30 calendar days prior to the effectiveness of
the Shelf Registration Statement, the Company shall mail the Notice and
Questionnaire to the Holders of Securities and Common Stock issued upon
conversion thereof. No Holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement, and no Holder shall be
entitled to use the Prospectus forming a part thereof for resales of Securities
or Common Stock issued upon conversion thereof at any time, unless such Holder
has returned a completed and signed Notice and Questionnaire to the Company by
the deadline for responses set forth therein; provided, however, that Holders of
Securities or Common Stock issued upon conversion thereof shall have at least 20
calendar days from the date on which the Notice and Questionnaire is first
mailed to such Holders to return a completed and signed Notice and Questionnaire
to the Company.
(2) After the Shelf Registration Statement has become
effective, the Company shall, upon the request of any Holder of Securities or
Common Stock issued or issuable upon conversion thereof that has not returned a
completed Notice and Questionnaire, promptly send a Notice and Questionnaire to
such Holder. The Company shall not be required to take any action to name such
Holder as a selling securityholder in the Shelf Registration Statement or to
enable such Holder to use the Prospectus forming a part thereof for resales of
Securities or Common Stock issued or issuable upon conversion thereof until such
Holder has returned a completed and signed Notice and Questionnaire to the
Company, whereupon the Company will be required to take such action.
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<PAGE> 7
(c) The Company shall keep the Shelf Registration Statement
continuously effective under the Act in order to permit the Prospectus forming a
part thereof to be usable by all Holders until the earliest of (i) the second
anniversary of the Closing Date or, if later, the second anniversary of the last
date on which any Securities are issued upon exercise of the Initial Purchasers'
over-allotment option, (ii) the date on which all the Securities and Common
Stock issued or issuable upon conversion thereof may be sold by non-affiliates
("affiliates" for such purpose having the meaning set forth in Rule 144) of the
Company pursuant to paragraph (k) of Rule 144 (or any successor provision)
promulgated by the SEC under the Act, (iii) the date as of which all the
Securities and Common Stock issued or issuable upon conversion thereof have been
transferred pursuant to Rule 144 under the Securities Act (or any similar
provision then in force) and (iv) such date as of which all the Securities and
the Common Stock issued or issuable upon conversion thereof have been sold
pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company will, subject to
Section 2(d), prepare and file with the SEC such amendments and post-effective
amendments to the Shelf Registration Statement as may be necessary to keep the
Shelf Registration Statement continuously effective for the Shelf Registration
Period; subject to Section 2(d), cause the related Prospectus to be supplemented
by any required supplement, and as so supplemented to be filed pursuant to Rule
424 (or any similar provisions then in force) under the Act; and, comply in all
material respects with the provisions of the Act with respect to the disposition
of all securities covered by the Shelf Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Shelf Registration Statement as so amended or
such Prospectus as so supplemented.
(d) The Company may suspend the use of the Prospectus for a period not
to exceed 30 days in any three-month period or for three periods not to exceed
an aggregate of 90 days in any 12-month period (the "Suspension Period") for
valid business reasons, to be determined by the Company in its sole reasonable
judgment (not including avoidance of the Company's obligations hereunder),
including, without limitation, the acquisition or divestiture of assets, public
filings with the SEC, pending corporate developments and similar events;
provided that the Company promptly thereafter complies with the requirements of
Section 3(j) hereof, if applicable; provided, that the existence of a Suspension
Period will not prevent the occurrence of a Registration Default or otherwise
limit the obligation of the Company to pay Liquidated Damages. The Company shall
provide notice to the Holders of a Suspension Period as required under Section
3(c)(1)(iv) hereof.
(e) If (i) the Shelf Registration Statement is not filed with the SEC
on or prior to 90 days after the Closing Date, (ii) the Shelf Registration
Statement has not been declared effective by the SEC within 180 days after the
Closing Date, or (iii) the Shelf Registration Statement is filed and declared
effective but shall thereafter cease to be
7
<PAGE> 8
effective (without being succeeded immediately by a replacement shelf
registration statement filed and declared effective) or usable (including as a
result of a Suspension Period) for the offer and sale of Transfer Restricted
Securities for a period of time (including any Suspension Period) which shall
exceed 60 days in the aggregate in any 12-month period during the period
beginning on the Closing Date and ending on the second anniversary of the
Closing Date or, if later, the second anniversary of the last date on which any
Securities are issued upon exercise of the Initial Purchasers' over-allotment
option (each such event referred to in clauses (i) through (iii), a
"Registration Default"), the Company will pay liquidated damages ("Liquidated
Damages") to each Holder of Transfer Restricted Securities who has complied with
such Holder's obligations under this Agreement. The amount of Liquidated Damages
payable during any period in which a Registration Default has occurred and is
continuing is the amount which is equal to one-quarter of one percent (25 basis
points) per annum per $1,000 principal amount of Securities and $2.50 per annum
per 17.4398 shares of Common Stock (subject to adjustment in the event of a
stock split, stock recombination, stock dividend and the like) constituting
Transfer Restricted Securities for the first 90 days during which a Registration
Default has occurred and is continuing and one-half of one percent (50 basis
points) per annum per $1,000 principal amount of Securities and $5.00 per annum
per 17.4398 shares of Common Stock (subject to adjustment as set forth above)
constituting Transfer Restricted Securities for any additional days during which
a Registration Default has occurred and is continuing (in each case subject to
further adjustment from time to time in the event of a stock split, stock
recombination, stock dividend and the like), it being understood that all
calculations pursuant to this and the preceding sentence shall be carried out to
five decimals. Following the cure of all Registration Defaults, Liquidated
Damages will cease to accrue with respect to such Registration Default. All
accrued Liquidated Damages shall be paid by wire transfer of immediately
available funds or by federal funds check by the Company on each Damages Payment
Date and Liquidated Damages will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. In the event that any Liquidated Damages are
not paid when due, then to the extent permitted by law, such overdue Liquidated
Damages, if any, shall bear interest until paid at the Default Rate, compounded
semi-annually. The parties hereto agree that the Liquidated Damages provided for
in this Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders by reason of a Registration Default.
(f) All of the Company's obligations (including, without limitation,
the obligation to pay Liquidated Damages) set forth in the preceding paragraph
which are outstanding or exist with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
(g) Immediately upon the occurrence or the termination of a
Registration Default, the Company shall give the Trustee, in the case of notice
with respect to the
8
<PAGE> 9
Securities, and the transfer and paying agent for the Common Stock, in the case
of notice with respect to Common Stock issued or issuable upon conversion
thereof, notice of such commencement or termination, of the obligation to pay
Liquidated Damages with regard to the Securities and Common Stock and the amount
thereof and of the event giving rise to such commencement or termination (such
notice to be contained in an Officers' Certificate (as such term is defined in
the Indenture)), and prior to receipt of such Officers' Certificate the Trustee
and such transfer and paying agent shall be entitled to assume that no such
commencement or termination has occurred, as the case may be.
(h) All Securities which are redeemed, purchased or otherwise acquired
by the Company or any of its subsidiaries or affiliates (as defined in Rule 144
(or any successor provision) under the Act) prior to the Final Maturity Date
shall be delivered to the Trustee for cancellation and the Company may not hold
or resell such Securities or issue any new Securities to replace any such
Securities or any Securities that any Holder has converted pursuant to the
Indenture. All shares of Common Stock issued upon conversion of the Securities
which are repurchased or otherwise acquired by the Company or any of its
subsidiaries or affiliates (as defined in Rule 144 (or any successor provision)
under the Act) at any time while such shares are "restricted securities" within
the meaning of Rule 144 shall not be resold or otherwise transferred except
pursuant to a registration statement which has been declared effective under the
Act.
3. Registration Procedures. In connection with any Shelf Registration
Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing
thereof with the SEC, a copy of any Shelf Registration Statement, and
each amendment thereof (excluding amendments caused by the filing by
the Company with the SEC of a report required by the Exchange Act), a
copy of any Prospectus, and each amendment or supplement, if any, to
the Prospectus included therein and shall use its reasonable efforts to
reflect in each such document, when so filed with the SEC, such
comments as Salomon Smith Barney Inc. reasonably may propose. Salomon
Smith Barney Inc. shall promptly furnish to the Company any comments it
may have to such documents mentioned in the foregoing sentence.
(b) The Company shall ensure that (i) any Shelf Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto comply in all material
respects with the Act and the rules and regulations thereunder, (ii)
any 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 forming part of any Shelf Registration Statement, and any
amendment
9
<PAGE> 10
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 therein, in light of the circumstances under
which they were made, not misleading; provided that the Company makes
no representation or agreement with respect to information with respect
to you, any Underwriter or any Holder required to be included in any
Shelf Registration or Prospectus pursuant to the Act or the rules and
regulations thereunder and which information is included therein in
reliance upon and in conformity with information furnished to the
Company in writing by you, any Underwriter or any such Holder.
(c) (1) The Company, as promptly as reasonably practicable,
shall advise you and each Holder that has returned a completed and
signed Notice and Questionnaire to the Company and, if requested by you
or any such Holder, confirm such advice in writing:
(i) when a Shelf Registration Statement and any
amendment thereto has been filed with the SEC and when the
Shelf Registration Statement or any post-effective amendment
thereto has become effective;
(ii) of any request by the SEC for amendments or
supplements to the Shelf Registration Statement or the
Prospectus or for additional information;
(iii) of the determination by the Company that a
post-effective amendment to the Shelf Registration Statement
would be appropriate; and
(iv) of the commencement or termination of any
Suspension Period.
(2) The Company shall advise you and each Holder that
has returned a completed and signed Notice and Questionnaire to the
Company and, if requested by you or any such Holder, confirm such
advice in writing:
(i) of the issuance by the SEC of any stop order
suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that
purpose;
(ii) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Securities included in any Shelf
Registration Statement for sale in any jurisdiction or the
initiation or threat of any proceeding for such purpose; and
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<PAGE> 11
(iii) of the suspension of the use of the Prospectus
pursuant to Section 2(d) hereof or of the happening of any
event that requires the making of any changes in the Shelf
Registration Statement or the Prospectus so that, as of such
date, the statements therein are not misleading and the Shelf
Registration Statement or the Prospectus, as the case may be,
does not include 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 (in the case of the
Prospectus, in light of the circumstances under which they
were made) not misleading (which advice shall be accompanied
by an instruction to suspend the use of the Prospectus until
the requisite changes have been made).
(d) The Company shall use its reasonable best efforts to
obtain the withdrawal of any order suspending the effectiveness of any
Shelf Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the
Securities for offer or sale in any jurisdiction at the earliest
possible time.
(e) The Company shall furnish to each Holder of Securities and
the Common Stock issued upon conversion thereof included within the
coverage of any Shelf Registration Statement, without charge, at least
one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and,
if the Holder so requests in writing, all exhibits (including those
incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities or the Common Stock issued upon
conversion thereof included within the coverage of any Shelf
Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such
Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and, except during the continuance
of any Suspension Period, the Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the
Securities or the Common Stock issued upon conversion thereof covered
by the Prospectus or any amendment or supplement thereto.
(g) Prior to any offering of Securities or the Common Stock
issued upon conversion thereof pursuant to any Shelf Registration
Statement, the Company shall register or qualify or cooperate with the
Holders of Securities and the Common Stock issued upon conversion
thereof included therein and their respective counsel in connection
with the registration or qualification (or
11
<PAGE> 12
exemption from such registration or qualification) of such Securities
or Common Stock for offer and sale, as the case may be, under the
securities or blue sky laws of such jurisdictions as any such Holders
reasonably request 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 Securities and the Common Stock issued upon
conversion thereof covered by such Shelf Registration Statement;
provided, however, that the Company will not be required to (A) qualify
generally to do business as a foreign corporation or as a dealer in
securities in any jurisdiction where it is not then so qualified or to
(B) 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) The Company shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing
Securities or the Common Stock issued upon conversion thereof to be
sold pursuant to any Shelf Registration Statement free of any
restrictive legends and in such denominations and registered in such
names as Holders may request prior to sales of Securities or the Common
Stock issued upon conversion thereof pursuant to such Shelf
Registration Statement.
(i) Subject to the exceptions contained in (A) and (B) of
subsection (g) hereof, the Company shall use its best efforts to cause
the Securities and Common Stock issued upon conversion thereof covered
by the applicable Shelf Registration Statement to be registered with or
approved by such other federal, state and local governmental agencies
or authorities, and self-regulatory organizations in the United States
as may be necessary to enable the Holders to consummate the disposition
of such Securities and Common Stock issued upon conversion thereof as
contemplated by the Shelf Registration Statement; without limitation to
the foregoing, the Company shall make all filings and provide all such
information as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the offering
under the Shelf Registration Statement of the Securities and Common
Stock issued upon conversion thereof (including, without limitation,
such as may be required by NASD Rule 2710 or 2720), and shall cooperate
with each Holder in connection with any filings required to be made
with the NASD by such Holder in that regard.
(j) Upon the occurrence of any event contemplated by paragraph
3(c)(2)(iii) above and subject to Section 3(a) hereof, the Company
shall promptly prepare and file with the SEC a post-effective amendment
to any Shelf Registration Statement or an amendment or supplement to
the related Prospectus or any document incorporated therein by
reference or file a document which is
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<PAGE> 13
incorporated or deemed to be incorporated by reference in such Shelf
Registration Statement or Prospectus, as the case may be, so that, as
thereafter delivered to purchasers of the Securities or the Common
Stock issued upon conversion thereof included therein, the Shelf
Registration Statement and the Prospectus, in each case as then amended
or supplemented, will not include an 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 (in the case of
the Prospectus in light of the circumstances under which they were
made) not misleading and in the case of a post-effective amendment, use
reasonable efforts to cause it to become effective as promptly as
practicable; provided that the Company's obligations under this
paragraph (j) shall be suspended if the Company has suspended the use
of the Prospectus in accordance with Section 2(d) hereof and given
notice of such suspension to Holders, it being understood that the
Company's obligations under this Subsection (j) shall be automatically
reinstated at the end of such Suspension Period.
(k) The Company shall use its reasonable best efforts to cause
The Depository Trust Company ("DTC") on the first Business Day
following the effective date of any Shelf Registration Statement
hereunder or as soon as possible thereafter to remove (i) from any
existing CUSIP number assigned to the Securities any designation
indicating that the Securities are "restricted securities", which
efforts shall include delivery to DTC of a letter executed by the
Company substantially in the form of Exhibit B hereto and (ii) any
other stop or restriction on DTC's system with respect to the
Securities. In the event the Company is unable to cause DTC to take
actions described in the immediately preceding sentence, the Company
shall take such actions as Salomon Smith Barney Inc. may reasonably
request to provide, as soon as practicable, a CUSIP number for the
Securities registered under such Shelf Registration Statement and to
cause such CUSIP number to be assigned to such Securities (or to the
maximum aggregate principal amount of the Securities to which such
number may be assigned). Upon compliance with the foregoing
requirements of this Section 3(k), the Company shall provide the
Trustee with global certificates for such Securities in a form eligible
for deposit with DTC.
(l) The Company shall use its best efforts to comply with all
applicable rules and regulations of the SEC and shall make generally
available to its security holders as soon as practicable but in any
event not later than 15 months after (i) the effective date of the
applicable Shelf Registration Statement, (ii) the effective date of
each post-effective amendment to any Shelf Registration Statement, and
(iii) the date of each filing by the Company with the SEC of an Annual
Report on Form 10-K that is incorporated by reference or deemed to be
incorporated by reference in the Shelf Registration Statement, an
earnings
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<PAGE> 14
statement satisfying the provisions of Section 11(a) of the Act and
Rule 158 promulgated by the SEC thereunder.
(m) The Company shall use reasonable efforts to cause the
Indenture to be qualified under the TIA (as defined in the Indenture)
in a timely manner.
(n) The Company shall cause all Common Stock issued or
issuable upon conversion of the Securities to be listed on each
securities exchange or quotation system on which the Common Stock is
then listed no later than the date the applicable Shelf Registration
Statement is declared effective and, in connection therewith, to make
such filings as may be required under the Exchange Act and to have such
filings declared effective as and when required thereunder.
(o) The Company may require each Holder of Securities or the
Common Stock issued upon conversion thereof to be sold pursuant to any
Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of such Securities or Common
Stock sought by the Notice and Questionnaire and such additional
information as may, from time to time, be required by the Act and the
rules and regulations promulgated thereunder, and the obligations of
the Company to any Holder hereunder shall be expressly conditioned on
the compliance of such Holder with such request.
(p) The Company shall, if reasonably requested, use reasonable
efforts to promptly incorporate in a Prospectus supplement or
post-effective amendment to a Shelf Registration Statement (i) such
information as the Majority Holders provide or, if the Securities or
Common Stock are being sold in an Underwritten Offering, as the
Managing Underwriters or the Majority Underwriting Holders reasonably
agree should be included therein and provide to the Company in writing
for inclusion in the Shelf Registration Statement or Prospectus, and
(ii) such information as a Holder may provide from time to time to the
Company in writing for inclusion in a Prospectus or any Shelf
Registration Statement concerning such Holder and the distribution of
such Holder's Securities and Common Stock and, in either case, shall
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after being notified in
writing of the matters to be incorporated in such Prospectus supplement
or post-effective amendment, provided that the Company shall not be
required to take any action under this Section 3(p) that is not, in the
reasonable opinion of counsel for the Company, in compliance with
applicable law.
(q) The Company shall enter into such customary agreements
(including underwriting agreements) and take all other appropriate
actions as may be reasonably requested in order to expedite or
facilitate the registration or the
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<PAGE> 15
disposition of the Securities or the Common Stock issued or issuable
upon conversion thereof, and in connection therewith, if an
underwriting agreement is entered into, cause the same to contain
indemnification and contribution provisions and procedures no less
favorable than those set forth in Section 5 (or such other reasonable
and customary provisions and procedures acceptable to the Majority
Underwriting Holders and the Managing Underwriters, if any, with
respect to all parties to be indemnified pursuant to Section 5). The
plan of distribution in the Shelf Registration Statement and the
Prospectus included therein shall permit resales of the Securities or
Common Stock issuable upon conversion thereof to be made by selling
security holders through underwriters, brokers and dealers, and shall
also include such other information as Salomon Smith Barney Inc. may
reasonably request.
(r) The Company shall (i) make reasonably available for
inspection by any Underwriter participating in any disposition pursuant
to such Shelf Registration Statement, and any attorney, accountant or
other agent retained by any such Underwriter all relevant financial and
other records, pertinent corporate documents and properties of the
Company and its subsidiaries as is customary for due diligence
examinations in connection with public offerings; (ii) cause the
Company's officers, directors and employees to supply all relevant
information reasonably requested by any such Underwriter, attorney,
accountant or agent in connection with any such Shelf Registration
Statement as is customary for similar due diligence examinations;
provided, however, that any information that is designated in writing
by the Company, in its sole discretion, as confidential at the time of
delivery of such information shall be kept confidential by the Holders
or any such Underwriter, attorney, accountant or agent, unless
disclosure thereof is made in connection with a court, administrative
or regulatory proceeding or required by law, or such information has
become available to the public generally through the Company or through
a third party without an accompanying obligation of confidentiality;
provided, further, that if the foregoing inspection and information
gathering specified in subsections (i) and (ii) would, in the Company's
reasonable judgment, disrupt the Company's conduct of business, such
inspections and information gathering shall be coordinated on behalf of
the Holders and the other parties entitled thereto by one counsel
designated by or on behalf of the Majority Holders (or, in the case of
an Underwritten Offering, the Majority Underwriting Holders and the
Managing Underwriters); (iii) deliver a letter, addressed to the
Holders of Securities and Common Stock issued upon conversion thereof
and the Underwriters, if any, in which the Company shall make such
representations and warranties in form, substance and scope as are
customarily made by issuers to Underwriters; (iv) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions,
in form, scope and substance, shall be reasonably satisfactory to the
Managing Underwriters, if
15
<PAGE> 16
any) addressed to each selling Holder and the Underwriters, if any,
covering such matters as are customarily covered in opinions requested
in public offerings; (v) obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial
data are, or are required to be, included in the Shelf Registration
Statement), addressed to each selling Holder of Securities and Common
Stock issued upon conversion thereof registered thereunder (provided
such Holder furnishes the accountants, prior to the date such "cold
comfort" letter is required to be delivered, with such representations
as the accountants customarily require in similar situations) and the
Underwriters, if any, in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
primary underwritten offerings; and (vi) deliver such documents and
certificates as may be reasonably requested by the Majority Holders or,
in the case of an Underwritten Offering, the Majority Underwriting
Holders, and the Managing Underwriters, if any, including those to
evidence compliance with Section 3(j) and with any customary conditions
contained in the underwriting agreement or other agreement entered into
by the Company. The foregoing actions set forth in clauses (iii), (iv),
(v) and (vi) of this Section 3(r) shall be performed at (A) the
effectiveness of such Shelf Registration Statement and each
post-effective amendment thereto and (B) each closing under any
underwriting or similar agreement as and to the extent required
thereunder.
(s) Each Holder agrees that, upon receipt of notice of the
happening of an event described in Sections 3(c)(1)(ii) through and
including 3(c)(1)(iv) and Sections 3(c)(2)(i) through and including
3(c)(2)(iii), each Holder shall forthwith discontinue (and shall cause
its agents and representatives to discontinue) disposition of the
Securities and the Common Stock issuable upon conversion thereof and
will not resume disposition of such Securities or the Common Stock
until such Holder has received copies of an amended or supplemented
Prospectus contemplated by Section 3(j) hereof, or until such Holder is
advised in writing by the Company that the use of the Prospectus may be
resumed or that the relevant Suspension Period has been terminated, as
the case may be, provided that, the foregoing shall not prevent the
sale, transfer or other disposition of Securities or Common Stock
issuable upon conversion thereof by a Holder in a transaction which is
exempt from, or not subject to, the registration requirements of the
Act, so long as such Holder does not and is not required to deliver the
applicable Prospectus or Shelf Registration Statement in connection
with such sale, transfer or other disposition, as the case may be; and
provided, further, that the provisions of this paragraph (s) shall not
prevent the occurrence of a Registration Default or otherwise limit the
obligation of the Company to pay Liquidated Damages.
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<PAGE> 17
4. Registration Expenses. The Company shall bear all expenses incurred
in connection with the performance of its obligations under Sections 2 and 3
hereof and shall reimburse the Holders for the reasonable fees and disbursements
of one firm or counsel designated by the Majority Holders to act as counsel for
the Holders in connection therewith. Notwithstanding the provisions of this
Section 4, each Holder shall bear the expense of any broker's commission, agency
fee or Underwriter's discount or commission.
5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Holder of Securities and each Holder of Common Stock issued upon
conversion thereof covered by any Shelf Registration Statement
(including the Initial Purchasers), the directors, officers, employees
and agents of each such Holder and each person who controls any such
Holder 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 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 Shelf Registration Statement as originally filed or in
any amendment thereof, or in any preliminary Prospectus or Prospectus,
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, in the light of the circumstances under which they
were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company 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 (A) 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 such Holder or any Initial Purchaser specifically for
inclusion therein, (B) use of a Shelf Registration Statement or the
related Prospectus during a period when a stop order has been issued in
respect of such Shelf Registration or any proceedings for that purpose
have been initiated or use of a Prospectus when use of such Prospectus
has been suspended pursuant to Section 2(d) or Section 3(s); provided,
further, in each case, that Holders received prior notice of such stop
order, initiation of proceedings or suspension, or (C) if the Holder
fails to deliver a Prospectus, as
17
<PAGE> 18
then amended or supplemented, provided that the Company shall have
delivered to such Holder such Prospectus, as then amended or
supplemented. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Holder of Securities or Common Stock issued upon
conversion thereof covered by a Shelf Registration Statement (including
the Initial Purchasers) severally and not jointly agrees to indemnify
and hold harmless (i) the Company, (ii) each of its directors, (iii)
each of its officers and (iv) each person who controls the Company
within the meaning of either the Act or the Exchange Act to the same
extent as the foregoing indemnity from the Company to each such Holder,
but only with reference to written information relating to such Holder
furnished to the Company by or on behalf of such Holder specifically
for inclusion in the documents referred to in the foregoing indemnity.
This indemnity agreement will be in addition to any liability which any
such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 5 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 5, notify the indemnifying party
in writing of the commencement thereof; but the failure so to notify
the indemnifying party will not relieve it from 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. 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 reasonably
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
separate counsel (including local counsel), and the indemnifying party
shall bear the reasonable fees, costs and expenses of such separate
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
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<PAGE> 19
reasonably 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 to employ separate counsel at the
expense of the indemnifying party. Notwithstanding the foregoing, the
indemnifying party shall not, in the connection with any one action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate counsel (in addition to one separate
local counsel) at any time for the indemnified party or parties, unless
(x) the employment of more than one counsel has been authorized in
writing by the indemnifying party or parties or (y) a conflict or
potential conflict exists or may exist (based on advice of counsel to
an indemnified party) between such indemnified party and any other
indemnified parties or (z) an indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it that are different from or in addition to those
available to the other indemnified parties, in each of which cases the
indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels. Neither an
indemnifying party nor an indemnified party will, without the prior
written consent of the other 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 such other
parties are actual or potential parties to such claim or action) unless
such settlement, compromise or consent includes an unconditional
release of such other parties 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 5 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party,
shall have an obligation 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"), as incurred, to which such indemnified party
may be subject in such proportion as is appropriate to reflect the
relative benefits received by such indemnifying party, on the one hand,
and such indemnified party, on the other hand, from the Initial
Placement and any sales of Securities under the Shelf Registration
Statement; provided, however, that in no case shall the Initial
Purchasers be responsible, in the aggregate, for any amount in excess
of the purchase discount or commission applicable to the Securities, as
set forth in the Purchase Agreement. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such
proportion as is appropriate to reflect not only such
19
<PAGE> 20
relative benefits but also the relative fault of such indemnifying
party, on the one hand, and such indemnified party, on the other hand,
in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Relative
fault shall be determined by reference to whether any untrue statement
or omission or alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one hand, or by
the indemnified party, on the other hand. The parties 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 5, each person who controls a Holder within the meaning of
either the Act or the Exchange Act and each director, officer, employee
and agent of such Holder shall have the same rights to contribution as
such Holder, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each officer of the
Company and each director of the Company shall have the same rights to
contribution as the Company, and each person who controls an
Underwriter within the meaning of either the Act or the Exchange Act
and each officer and director of each Underwriter shall have the same
rights to contribution as such Underwriter, subject in each case to the
applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 5 will remain in full force
and effect, regardless of any investigation made by or on behalf of any
Holder, any Underwriter or the Company or any of the officers,
directors or controlling persons referred to in Section 5 hereof, and
will survive the sale by a Holder of Securities or shares of Common
Stock covered by a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into nor shall it, on or after the date hereof,
enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
qualified, 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 the Majority Holders;
provided that with respect to any matter that
20
<PAGE> 21
directly or indirectly affects the rights of the Initial Purchasers
hereunder, the Company shall obtain the written consent of each of the
Initial Purchasers against which such amendment, qualification,
supplement, waiver or consent is to be effective. Notwithstanding the
foregoing (except the foregoing proviso), a waiver or consent to
departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Securities or Common
Stock are being sold pursuant to a Shelf Registration Statement and
that does not directly or indirectly affect the rights of other Holders
may be given by the Majority Holders, determined on the basis of
Securities or Common Stock issued upon conversion thereof being sold
rather than registered under such Shelf Registration Statement.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telecopier, or air courier guaranteeing overnight
delivery:
(1) if to you, initially at the address set forth in the
Purchase Agreement;
(2) if to any other Holder, at the most current address given
by such Holder to the Company in accordance with the provisions of this
Section 6(c), which address initially is, with respect to each Holder,
the address of such Holder maintained by the Registrar under the
Indenture or, in the case of Common Stock, the address maintained by
the registrar of the Common Stock, with a copy in like manner to
Salomon Smith Barney Inc.; and
(3) if to the Company, initially at its address set forth in
the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received, if delivered by hand or air courier, and when sent, if sent
by first-class mail or telecopier.
The Initial Purchasers or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Company thereto, subsequent Holders. The Company hereby agrees to extend the
benefits of this Agreement to any Holder and Underwriter and any such Holder and
Underwriter may specifically enforce the provisions of this Agreement as if an
original party hereto. In the event that any other person shall succeed to the
Company under the Indenture as provided in Article VII
21
<PAGE> 22
thereof, then such successor shall enter into an agreement, in form and
substance reasonably satisfactory to the Initial Purchasers, whereby such
successor shall assume all of the Company's obligations under this Agreement.
(e) Counterparts. 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.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN SAID STATE, WITHOUT REGARD, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TO THE CONFLICTS OF LAW RULES THEREOF.
(h) Severability. In the event that any one of more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
or the Common Stock issuable upon conversion thereof is required hereunder,
Securities or the Common Stock issued upon conversion thereof held by the
Company or its Affiliates (other than subsequent Holders of Securities or the
Common Stock issued upon conversion thereof if such subsequent Holders are
deemed to be Affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
22
<PAGE> 23
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
AMKOR TECHNOLOGY, INC.
/s/ Kenneth Joyce
--------------------------------------------
Name: Kenneth T. Joyce
Title: Chief Financial Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
SALOMON SMITH BARNEY INC.
By /s/ Kevin S. Tice
--------------------------------
Name: Kevin S. Tice
Title: Managing Director
For itself and the other Initial
Purchasers named in Schedule I to the
Purchase Agreement.
23
<PAGE> 24
EXHIBIT A
Amkor Technology, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
Reference is hereby made to the Registration Agreement (the
"Registration Agreement") between Amkor Technology, Inc., a Delaware corporation
(the "Company"), and the Initial Purchasers named therein. Pursuant to the
Registration Agreement, the Company has filed or will file with the United
States Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3 (the "Shelf Registration Statement") for the registration
and resale under Rule 415 of the Securities Act of 1933, as amended (the
"Securities Act"), of the Company's 5% Convertible Subordinated Notes due 2007
(the "Securities"), and the shares of the Company's common stock, par value
$.001 per share (the "Common Stock"), issuable upon conversion thereof. A copy
of the Registration Agreement is attached hereto. All capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the
Registration Agreement.
Each holder and beneficial owner of Transfer Restricted Securities is
entitled to have its Transfer Restricted Securities included in the Shelf
Registration Statement. In order to have Transfer Restricted Securities included
in the Shelf Registration Statement, this Notice of Registration Statement and
Selling Securityholder Questionnaire ("Notice and Questionnaire") must be
completed, executed and delivered to the Company's counsel at the following
address, for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]: [NAME AND ADDRESS OF
COUNSEL]. Holders or beneficial owners of Transfer Restricted Securities who do
not complete, execute and return this Notice and Questionnaire by such date (i)
will not be named as selling securityholders in the Shelf Registration Statement
and (ii) may not use the Prospectus forming a part thereof for resales of
Transfer Restricted Securities, subject, however, to the Company's obligations
under Section 2(b)(2) of the Registration Agreement.
A-1
<PAGE> 25
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Transfer Restricted Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not being named as a selling securityholder in the Shelf
Registration Statement and related Prospectus.
ELECTION
The undersigned (the "Selling Securityholder") hereby elects to include
in the Shelf Registration Statement the Transfer Restricted Securities held or
beneficially owned by it and listed below in Item (3)(b). The undersigned, by
signing and returning this Notice and Questionnaire, agrees to be bound with
respect to such Transfer Restricted Securities by the terms and conditions of
this Notice and Questionnaire and the Registration Agreement, including, without
limitation, the indemnification set forth in Section 5 of the Registration
Agreement, as if the undersigned Selling Securityholder were an original party
thereto.
QUESTIONNAIRE
(1) (a) Full legal name of Selling Securityholder:
(b) Full legal name of registered holder (if not the same as in (a)
above) of Transfer Restricted Securities listed in (3) below (if the Transfer
Restricted Securities are held through a broker-dealer or other third party and,
as a result, you do not know the legal name of the registered holder, please
complete Item (1)(c) below):
(c) Full legal name of broker-dealer or other third party through which
Transfer Restricted Securities listed in (3) below are held:
(2) Address for notices to Selling Securityholder:
Telephone:
Fax:
Contact Person:
A-2
<PAGE> 26
(3) Beneficial ownership of Transfer Restricted Securities.
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities or shares of Common Stock which constitute
Transfer Restricted Securities.
(a) Principal amount of Securities constituting Transfer Restricted
Securities beneficially owned:
Number of shares of Common Stock, if any, constituting Transfer
Restricted Securities (include only shares of Common Stock which have actually
been issued, not shares issuable upon future conversion of Securities):
The undersigned also may be deemed to beneficially own such number of
shares of Common Stock as may be issued from time to time upon conversion of the
Securities listed in Item (3)(a) above.
(b) Principal amount of Securities and number of shares of outstanding
Common Stock constituting Transfer Restricted Securities which the undersigned
wishes to be included in the Shelf Registration Statement:
Unless otherwise indicated in the space provided below, all Securities,
all shares of Common Stock listed in response to Item (3)(a) above, and all
shares of Common Stock issuable upon conversion of the Securities listed in
response to Item (3)(b)above, will be included in the Shelf Registration
Statement. If the undersigned does not wish all such Securities or shares of
Common Stock to be so included, please indicate below the number of such shares
to be included:
(4) Beneficial ownership of other securities of the Company:
Except as set forth below in this item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any shares of Common
Stock or any other securities of the Company, other than Securities and shares
of Common Stock listed above in Item (3).
State any exceptions here:
A-3
<PAGE> 27
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any
of its officers, directors or 5% or greater stockholders has held any position
or office or has had any other material relationship with the Company (or its
predecessors or affiliates)during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Transfer Restricted Securities listed above in Item
(3) only as follows (if at all): Such Transfer Restricted Securities may be sold
from time to time by the undersigned Selling Securityholder (i) to or through
underwriters, brokers or dealers; (ii) directly to one or more other purchasers;
(iii) through agents on a best-efforts basis or otherwise; or (iv) through a
combination of any such methods of sale. Such Transfer Restricted Securities may
be sold from time to time in one or more transactions at a fixed price or
prices, which may be changed, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, at varying prices determined
at the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Transfer
Restricted Securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or services or in the over-the-counter market, or (iv) through the writing of
options. In connection with sales of the Transfer Restricted Securities or
otherwise, the Selling Securityholder may enter into hedging transactions with
brokers-dealers or others, which may in turn engage in short sales of the
Transfer Restricted Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Transfer Restricted Securities
short and deliver Transfer Restricted Securities to close out such short
positions, or loan or pledge Transfer Restricted Securities to brokers-dealers
or others that in turn may sell such securities. The Selling Securityholder may
pledge or grant a security interest in some or all of the Transfer Restricted
Securities owned by it and, if it defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the Transfer
Restricted Securities from time to time pursuant to the Prospectus. The Selling
Securityholder also may transfer and donate shares in other circumstances in
which case the transferees, donees, pledgees or other successors in interest
will be the selling stockholders for purposes of the Prospectus. The Selling
Securityholder may sell short the Common Stock and may deliver the Prospectus
A-4
<PAGE> 28
in connection with such short sales and use the shares covered by the Prospectus
to cover such short sales.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, particularly Regulation M and the prospectus delivery
requirements under the Securities Act.
In the event that the Selling Securityholder transfers all or any
portion of the Transfer Restricted Securities listed in Item (3) above after the
date on which such information is provided to the Company (other than a
transaction as a result of which such securities shall no longer be Transfer
Restricted Securities), the Selling Securityholder agrees to notify the
transferees at the time of the transfer of its rights and obligations under this
Notice and Questionnaire and the Registration Agreement.
By signing below, the Selling Securityholder consents to the disclosure
of the information contained herein in its answers to Items (1) through (6)
above and the inclusion of such information in the Shelf Registration Statement
and related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.
The Selling Securityholder agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration Statement
remains in effect. All notices hereunder and pursuant to the Registration
Agreement shall be made in writing, by hand-delivery, first-class mail, or air
courier guaranteeing overnight delivery as follows:
Amkor Technology, Inc.
1345 Enterprise Drive
West Chester, PA 19380
Attention: Ken Joyce
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall be
binding on, shall inure to the
A-5
<PAGE> 29
benefit of and shall be enforceable by the respective successors, heirs,
personal representatives, and assigns of the Company and the Selling
Securityholder (with respect to the Transfer Restricted Securities beneficially
owned by such Selling Securityholder and listed in Item (3)(b) above). This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York.
A-6
<PAGE> 30
IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
Dated:
Selling Securityholder
(Print/type full legal name of beneficial
owner of Transfer Restricted Securities).
By:
-------------------------------------
Name:
Title:
A-7
<PAGE> 31
EXHIBIT B
FORM OF LETTER TO BE PROVIDED BY ISSUER TO
THE DEPOSITORY TRUST COMPANY
The Depository Trust Company
55 Water Street
New York, NY 10041
Re: 5% Convertible Subordinated Notes due 2007(the "Securities")
of Amkor Technology, Inc.
Ladies and Gentlemen:
Please be advised that the Securities and Exchange Commission has
declared effective a Registration Statement on Form S-3 under the Securities Act
of 1933, as amended, with regard to all of the Securities referenced above. Any
restrictions on the CUSIP designation are no longer appropriate and may be
removed. I understand that upon receipt of this letter, DTC will remove any stop
or restriction on its system with respect to this issue.
As always, please do not hesitate to call if we can be of further
assistance.
Very truly yours,
By:
Authorized Officer
B-1
<PAGE> 1
EXHIBIT 21.1
A LIST OF OUR SUBSIDIARIES
A. Amkor Receivables Corp., a Delaware corporation;
B. Wafer Fabrication Services SARL, a corporation organized under the laws of
France;
C. Guardian Assets, Inc., a Delaware corporation, and its wholly owned
subsidiaries:
1. Amkor Technology Euroservices SARL, a corporation organized under the
laws of France;
2. AK Industries, Inc., and its wholly owned subsidiary, Amkor Technology
Inventory Co., each a Texas corporation;
3. Amkor Technology Japan, KK, A Corporation Organized under the laws
of Japan (Incorporated 07/23/99)
4. Amkor International Holdings, a corporation organized under the laws
of the British Cayman Islands, and its wholly owned subsidiary:
(a) First Amkor Caymans, Inc., a corporation organized under the laws
of the British Cayman Islands, and its wholly owned subsidiaries:
(i) Second Amkor Caymans, Inc., a corporation organized under
the laws of the British Cayman Islands;
(ii) P-Four, Inc., and its subsidiary
(A) (60% ownership) Amkor/Anam Advanced Packaging, Inc.,
both of which are corporations organized under the laws
of the Philippines;
(B) 60% ownership of Amkor/Anam Pilipinas Inc., organized
under the laws of the Philippines from FACI in 1999 by
P-Four (40% ownership by CIL, Limited) - effective
05/11/99
(iii) T.L. Limited, a corporation organized under the laws of the
British Cayman Islands, and its subsidiaries:
(A) C.I.L. Limited (100% wholly owned), a corporation
organized under the laws of the British Cayman Islands;
(1) AT Korea (100% wholly owned), a corporation
organized under the laws of the Republic of Korea;
(2) Amkor/Anam Advanced Packaging, Inc. (40%
ownership by Amkor/Anam Advanced Packaging, Inc.
and 60% ownership by P-Four, Inc.) a corporation
organized under the laws of the Philippines.
a. Amkor Anama Precision Machine Corporation, a
corporation organized under the laws of
Philippines-effective 07/01/99
(3) 40% ownership Amkor/Anam Pilipinas Inc., a
corporation organized under the laws of the
Philippines, from FACI in 1999 by CIL, Limited (60%
ownership by P-Four, Inc.) - effective 05/11/99
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated February 3, 2000 (except as discussed in Note 21 with respect to
the Company's proposed acquisition of ASI's packaging and test facilities and
its investment in ASI, as to which the date is February 28, 2000, and the
related proposed financing, as to which the date is March 16, 2000) included in
this Form 10-K, into the Company's previously filed Form S-8 Registration
Statements File Numbers 333-62891 and 333-86161.
/s/ Arthur Andersen LLP
Philadelphia, Pennsylvania
March 27, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-62891 and No. 333-86161) of Amkor Technology,
Inc. of our following reports which appear in the Annual Report on Form 10-K of
Amkor Technology, Inc.:
- dated February 28, 2000 relating to the consolidated financial statements
of Anam Semiconductor, Inc. and its subsidiaries;
- dated January 15, 2000 relating to the financial statements of the Amkor
Technology Korea, Inc.
/s/ Samil Accounting Corporation
Seoul, Korea
March 27, 2000
<PAGE> 1
EXHIBIT 23.3
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
Annual Report on Form 10-K by Amkor Technology, Inc.
/s/ Ahn Kwon & Co.
- --------------------
Ahn Kwon & Co.
Seoul, Korea
March 28, 2000
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of the Amkor
Technology, Inc. Annual Report on Form 10-K.
/s/ Siana Carr & O'Connor, LLP
- ----------------------------------
Siana Carr & O'Connor, LLP
Paoli, Pennsylvania
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 98,045
<SECURITIES> 136,595
<RECEIVABLES> 159,724
<ALLOWANCES> 2,443
<INVENTORY> 91,465
<CURRENT-ASSETS> 507,250
<PP&E> 1,324,742
<DEPRECIATION> 464,974
<TOTAL-ASSETS> 1,755,089
<CURRENT-LIABILITIES> 312,898
<BONDS> 678,435
0
0
<COMMON> 131
<OTHER-SE> 737,610
<TOTAL-LIABILITY-AND-EQUITY> 1,755,089
<SALES> 1,909,972
<TOTAL-REVENUES> 1,909,972
<CGS> 1,577,226
<TOTAL-COSTS> 1,733,895
<OTHER-EXPENSES> 70,789
<LOSS-PROVISION> (3,500)
<INTEREST-EXPENSE> 45,364
<INCOME-PRETAX> 105,288
<INCOME-TAX> 26,600
<INCOME-CONTINUING> 76,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,719
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.63
</TABLE>
